The New Future of Governance

Linda C. Crompton
President & CEO
BoardSource
Washington, DC

Though the economy may be stabilizing, there is no going back to business as usual for the nonprofit sector. Going forward requires us to envision a different future for our organizations. But only those boards that are willing to transform themselves will succeed in transforming their organizations.

Much has been written about the dire state of the financial landscape in which most nonprofits are operating today. Conjecture about increasing regulation is at an all-time high, and expectations for boards to perform are equally high, despite the fact that nonprofit board members are not, for the most part, paid for their efforts. The well-documented "leadership gap," initially fueled by the demographic bulge of baby boomers retiring from their positions, now seems destined to be exacerbated by the disillusionment and apprehension of those who remain or are coming up through the system.

Given all this, it is not surprising that, here at BoardSource, we are constantly being asked to predict the future, as if our work handily provides us with a crystal ball. Every week brings new questions – "What should we, as board members, be doing now?" "How do we provide the right kind of leadership to our organization, given the difficulties management has just keeping the doors open?" And, perhaps most important, "How do we transform our organization to create a successful new future in the face of so many challenges?"

We have found these questions so compelling that we established the theme for our 2009 BoardSource Leadership Forum – "Leading Change in the Emerging Economy" – around them, recognizing that the answers will be found not in the words of experts but in wide-ranging dialogue and debate. And, in the spirit of encouraging generative thinking, as recommended in our popular publication, Governance as Leadership, we proffer the view that, despite the hardship and extra work involved, there is opportunity in these trying times. While it is tempting to focus only on survival and to hope for a fast return to the world we knew, that would close off all other possibilities. As Dov Seidman, the chief executive of an ethics training consultancy, recently wrote in BusinessWeek, "If we return to business as usual too quickly, we will miss the opportunity to create the new habits of thought and behavior that we need to build sustainable economic growth."

In fact, we at BoardSource would take this one step further and suggest that returning to "business as usual" is an illusory option. The scientific theory of entropy tells us that our former operating environment is changing – indeed, has changed – and is already behind us. New forces have emerged: the new administration’s emphasis on volunteerism, which has catalyzed a national service movement; the impact of the next generation not just in that movement but across the sector in a dozen different ways; the creation of whole new entities, such as L3Cs, as recipients of philanthropic dollars; and the well-documented sea change toward greater direct involvement that is sweeping through the philanthropic world. All of these are changing how the nonprofit world will function and be structured and will, of course, have major implications for the role of the boards within that world.

Because the board is the main entity responsible for supervising and guiding the work of the organization, and good governance is the mechanism that enables the board to be successful in designing the organization’s future, it is the board that must transform itself in order to transform the organization and, indeed, society itself. There has never been a greater need for revitalizing the role of boards and for establishing a new framework for board leadership and never a more urgent time to do it. Today, we issue an invitation to board members and aspiring board members to commit to "transformative governance." The time to embrace it is now.

Transformative governance means engaging in breakthrough thinking that embraces emerging trends and developments and asking the question, "What does this mean for governance?" It means applying new ways of thinking to the principles of governance that have withstood the test of time and expanding the definition of governance to include the elements of leading an organization that is a piece of a whole rather than an end in itself.

For 21 years, BoardSource has consistently been at the forefront of original thinking on governance, particularly in applying that thinking to produce practical, accessible tools and services used by hundreds of thousands of nonprofit organizations across the country. We intend to continue to grow in our understanding of how boards can govern more effectively and to share our knowledge with board leaders across the spectrum of the nonprofit sector. Transformative governance builds on that framework to expand how board members see their roles and how their organizations enact their missions in this new environment.

To begin to understand that environment, we must first understand that no single board is able to deal with the complexity and scale of the problems now faced by the nonprofit sector. They are too great. As David Renz puts it, the future is no longer "the networked organization" but rather "the organization as network." ("Reframing Governance," The Nonprofit Quarterly, Winter 2006.) Instead of a myriad of institutions all operating in isolation from, and often in competition with, each other, the new landscape is likely to resemble a honeycomb with allied entities that share resources.

Leading effectively in this type of environment requires the kind of ability and skill sets demonstrated by younger generations proficient in social networking from an early age. It will be a challenge to others. "Old" sources of power, such as having control over information, quickly disappear when that information becomes largely free. Similarly, "oldstyle" organizations and boards built on mutual back scratching will be replaced by dynamic new groups committed to sharing power and knowledge in order to make a contribution to the whole. Innovative mergers and partnerships are likely to become the rule rather than the exception, requiring cross-sector and multifaceted communication skills from their boards. A focus on individual mission and survival, so urgent over the past few months, will gradually give way to a shared vision of a more coordinated, effective, and sustainable future.

To achieve this, we need board members who are able and committed to rising to this challenge. In this new environment, any board that is homogenous in an ethnic, gender, or generational sense will be at an enormous disadvantage. The speed of new developments in the philanthropic, communication, and other spheres will demand decision makers who can anticipate and interpret those trends. Viewing grantees, members, or other stakeholders through a single lens risks instant irrelevance. While it has long been recognized that boards must be more reflective of their various constituencies, there has been very little real progress in this direction.

Rather than wait for the invitation to sit as a lone young person or person of color on an otherwise homogenous board, we know that younger generations are impatiently forming their own organizations and boards and are inclined to view ideas such as investments in human capital, for- and nonprofit blending of financial instruments, and innovative ways to communicate and raise funds as normal and uncontroversial. The kind of mass collaboration made possible by the Internet and demonstrated in the recent presidential election can easily create new forms of relationships, including Web-based networks, which will, in turn, create new forms of governance. Without access or involvement in these kinds of innovations, boards, and their organizations along with them, quickly become isolated and then sidelined.

Dramatic leadership from board chairs and their fellow board members is urgently needed, beginning with the recognition that governance is a performance issue. Earlier definitions that focused on legal and fiduciary requirements still apply, but while compliance and oversight remain essential responsibilities, they are only a starting point. Being prepared to ask the tough questions – whether they concern the rigor of an investment policy or the adequacy of strategic direction being provided to the organization – is key, despite the tendency in human behavior toward resigned acceptance of the status quo. If the problems faced by nonprofits today are indeed systemic and structural rather than cyclical and self-correcting (which growing evidence of high levels of unemployment, for example, suggest that they are), then this is the level of thinking that will be required of any board intent on creating new models and solutions. Establishing a culture of inquiry and then continually ensuring that it remains alive and well in board and management discussions will likely be the single most important responsibility of a board chair in the future.

Undertaking the work that lies ahead for nonprofit boards is not for the faint hearted, though the individuals who take on these responsibilities have never fit this description. The challenges to be faced are numerous – we need to have more diversity and inclusiveness at the board table and to accept that our past view of the world will not be restored. The future is going to require massive changes in how our nonprofits operate, resulting in more mergers, dissolutions, and the formation of new types of entities. All will need to be part of a larger whole with greater capacity to resolve our mounting societal problems, regardless of the consequences for individual organizations.

It has recently been said that what the world has experienced over the past 15 months is not so much a financial crisis as a crisis of meaning. Stepping back and widening the context for discussions about recovery in the sector makes it clear that the most rewarding work to undertake over the next few years will be guiding nonprofit organizations to a more sustainable and effective future. And, through transformative governance, the board will lead the movement toward a transformed nonprofit sector.

VOID THE FUTURE ALREADY WRITTEN

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Leaders need to approach problems from a new angle — one that is counterintuitive at first glance.

For every problem, there is a future that’s already been written about it. This future includes people’s assumptions, hopes, fears, resignation, cynicism, and "lessons learned" through past experience. It goes beyond what they expect to happen, hope will happen, or think might happen. This future lives at a gut level. We know it will happen, whether we can give words to it or not. We call this the "default future." And all of us live as if that future is preordained. We live into our default futures, unaware that by doing so we are making them come about.

The solution to our problems requires a new kind of leadership, one in which people rewrite the future together. Leaders can take five specific actions to construct a future that causes them and others to live into it:

• Invite people to articulate the default future. Doing so reduces its impact.
• Ask yourself and others, do we really want this default future?
• If not, begin to speculate with others on what future would inspire action for everyone and address the concerns of everyone involved.
• Allow people to struggle with whether they are aligned with this new future or not. If not, ask them for a proposal that inspires them and others.
• Work until people say, "This speaks for me!" and they commit to it.

Leadership that rewrites the future gets to the heart of performance. The result is not fixing one problem at a time but transforming situations, leading to unprecedented results.

By Steve Zaffron, author of The Three Laws of Performance: Rewriting the Future of Your Organization and Your Life. Zaffron spoke at the 2009 BoardSource Leadership Forum on November 20.

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References

• Nancy Axelrod, Culture of Inquiry: Healthy Debate in the Boardroom (BoardSouce 2007).
• Debbe Kennedy, "How to Put Our Differences to Work" Leader to Leader

Reprinted from the November/December 2009 edition of Board Member, Volume 18, Issue 6. For more information, call 1-877-892-6273 or e-mail BoardSource. BoardSource © 2010. Text may not be reproduced without written permission from BoardSource.