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Sunday, June 5, 2011

A Delicate Balance.. - Spencer

Week 3 reading includes a piece by Peter F. Drucker entitled, Lessons for Successful Non-Profit Governance. Were it not for a single position with which I cannot agree, I’d advise this concise and eminently readable work as required reading for all new NPO board members. I’ll get to my major hang-up in a minute.

The crux of Drucker’s argument is that, although most don’t, NPO boards and their paid, executive leaders should operate as a team to ensure success. Effective leadership, even if dispersed, is even more critical to NPOs than to private enterprises. Drucker maintains that there are three reasons for this disparity: 1) NPOs don’t necessarily operate with a clear, monetary bottom line. Sure, they can’t be in the red for very long or they will cease to exist. However, there is value attached to the services provided which must be monetized and factored into the equation as an output, leading us to the next reason: 2) NPOs must provide a clear definition of the results (e.g. – monetized outputs or ultimate outcomes) that equate to success. For-profit enterprises can survive, at least for a time, through measurement of the financial bottom line alone. 3) NPOs don’t “own” the money that they use. It is a borrowed resource, and any “profits” belong not to the NPO, but to the public, and should be managed in the best interest of the public entity. The Board/CEO management team are simply trustees.

Drucker goes on to posit the undeniable need for both accountability (in mission, results, resource allocation and productivity), and a clear process and structure for discharging these responsibilities. Where it gets interesting is in the obligatory dance between the board and management…

I tend to like Drucker’s analogy to the NPO Board / CEO relationship as that of a double bridge team. Now, let’s be clear – I have no earthly idea how to play bridge. My card game skills are based in poker with an occasional foray into hearts or spades. However, Drucker makes it clear that each member of a two person bridge team must play to his/her strengths and his/her partner’s weakness. In other words, I’ll be strong where you are weak and vice versa. This is particularly applicable in the more discrete relationship between the CEO and Chairman of the board. Here, we get to the heart of the delicate balance of both real and perceived power. Either the CEO or the Chairman can be the point of the spear. In my experience, the determining factors include tradition, personality type of the Chairman, and/or - to a lesser degree – a predetermined, written organizational structure. The CEO can’t pick the chairman – he/she must work with who ends up in the seat. In many unfortunate cases, the chairman chooses to be the point of the spear on positive, can’t fail projects. Then, when the tough, unpopular decisions must be made, the CEO is hustled to the front lines and handed a pocket knife and paper plate for a shield. This is, of course, what the CEO is paid for. However, in a healthy, productive relationship, selflessness rules on both sides and credit is given where credit is due. In any event, the CEO must be flexible. Drucker points to an example of one CEO which had survived 4 chairman over 11 years. Each had differing strengths, weaknesses and leadership styles. The (apparently very good) CEO recognized and plugged the holes left by her bridge partner in each “game”, demonstrating flexibility and true leadership.

I felt it interesting that Drucker discussed the Board’s propensity and even duty to meddle. Most authors skip around that topic, using such words as “board involvement” or “sub committees.” I prefer the term meddle. Let’s call it what it is. The fact is, boards need to get their hands dirty. A good CEO will leverage this interest into productivity, rather than view it as a threat. There is a line in the sand though – At some point, productive meddling can become micro management, which is not a productive tactic. Healthy relationships between the Board and CEO are built on a foundation of accountability structure and a certain amount of earned, mutual trust.

To wrap up, I’ll get back to my central disagreement with Drucker. He maintains that the Board and the CEO must function as equals. (p.10) In my opinion, this is a recipe for disaster. Somebody has to ultimately be in charge. Drucker points out that the CEO should be given the duty of effective governance of the NPO. Management? Absolutely. Governance? Absolutely not.


Drucker, Peter F. Lessons for Successful Nonprofit Governance. Nonprofit Management and Leadership, vol. 1, no. 1, Fall 1990 p.7-14.

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