Learning Organization

What are the key elements of effective governance? Good governance requires that several basic fundamental criteria be in place. First, a clear sense of purpose, or strategic direction, needs to be developed for the organization. In the absence of a clearly articulated objective, it is difficult for cohesive policies or processes to be developed that all participants - board and management, alike - can understand and buy into. The absence of a strategic direction will leave the goals of the organization subject to any and all individual interpretations - from management personnel to board members. As well, heterogeneous views will be all the more difficult to address and manage when no clear-cut vision is presented.

A second requirement for effective governance is to identify areas of responsibility. Thirty years ago, many boards were 'operational', meaning board members carried out some or all of the day-to-day duties of the organization. Today, particularly in the for-profit corporate world, many popular governance models (for example, the Carver model) suggest that a Board's role is solely to set direction and 'govern' the organization, while management's role is to carry that direction out through daily activities. While this model may be successful in for-profit organizations, where the objective is tangible and specific in terms of profit margins or sales targets, it may not be practical for non-profit boards, whose objectives are often more intangible. Especially in organizations where the objective is less defined, as with advocacy or policy advancement, this model can perhaps make it difficult for board members to measure success without knowing or understanding how the activities engaged in are intended to accomplish the organization's objective - particularly when the objectives are not cut and dried. In these types of organizations, there is clearly a risk of encountering the agency problem - the board may set policy, but will the agent (management) engage the organization in activities that are meeting that direction? The agency problem can become particularly problematic in the absence of: (1) clearly defined roles and responsibilities of both board and management that are understood, supported and adhered to; and (2) effective monitoring of both management and the board's own activities.

Underlying these two criteria is a third component - a commitment to using the governance system as a way of getting at good policies and activities, rather than as a way of benefiting certain groups or maintaining the status quo. By their nature, boards are fluid. Whether positions are filled by appointment or turned over in the normal course of a democratic process, board members will come and go. However, to maintain a healthy organization it is necessary that continuing members continually recreate a culture in which the welfare of the entire group is kept clearly in mind.

So why is it, then, that even in instances where senior management has been with an organization for some time that the board and management fall out of line with one another? Is it the case that there has not been a clearly developed and articulated strategic direction for the organization to work toward? Are the roles and responsibilities of board and management not clearly defined? Or is it the case that perhaps those roles are developed in the context of a model that will not best serve the purpose of achieving the organization's objectives? Do non-profit organizations need to adopt a hybrid model of governance, one that allows board members to take more 'ownership' in the function of the organization, without becoming too ingrained in the day-to-day operations?