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Governance as leadership Reframing the work of noprofit boards - Ñhait R.

Chait R. , Teylor B.E. Governance as leadership Reframing the work of noprofit boards - Wiley publishing , 2005. - 226 p.
ISBN 0-471-68420-1
Download (direct link): governanceasleadership2005.pdf
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exhibit 7.3 communities of practice
Leadership Transition. (Generative mode) Upon the appointment of a new president from outside the organization, the trustees of a large university considered how the board could be most helpful in the transition. Initial suggestions were to familiarize the presidentdesignate with the organization’s budget, personnel, and structure (Type I). Then, some trustees recommended that the Executive Committee meet with the new CEO to review the strategic plan and “backlogged” priorities (Type II). In the end, the board decided that the most useful step would be to have all trustees and the CEO meet for three hours to discuss, based on personal experience or second-
WORKING CAPITAL THAT MAKES GOVERNANCE WORK 145
hand accounts, the most (and least) effective ways for a new executive to enter an organization from the outside and “take charge.” The upshot was a well-advised new CEO and an entire board better acquainted with the meaning and constraints of a university presidency, and more appreciative of the challenges of the office.
Development. (Strategic mode) The leadership of an organization that envisioned a capital campaign on the horizon was concerned that not all board members understood the elements of an effective program to engage stakeholders and promote philanthropic support. The Advancement Committee asked three trustees to serve on a panel, facilitated by a fourth, to talk with the board about their involvement in successful campaigns with other nonprofits. The topics included how their skills were put to use, the most valuable lesson or best practice they learned, what motivates giving, and the responsibilities they shouldered. The result was that a board, where trustees previously had different levels of familiarity and expertise with advancement, now had a shared understanding of building volunteer relationships, setting funding priorities, and conducting a campaign.
Financial Oversight. (Fiduciary mode) The board of a religiously sponsored nonprofit included many members without a financial background. As a result, relatively few trustees contributed to discussions about the organization’s financial performance. In order to narrow the knowledge gap and expand participation, the trustees instituted a “Finances 101” refresher seminar, conducted by board members, just prior to receipt of the outside auditor’s report. Now every member of the board, throughout the year, has a level of financial literacy sufficient to participate in fiduciary discussions about budgets, audits, and resource allocation.
Intellectual capital increases as more trustees understand more together. In turn, the organization profits far more from a knowledgeable board than from a loose federation of knowledgeable trustees. As a mental exercise, the board should periodically review an intellectual capital balance sheet that records what all trustees know now that some or all did not know—say,
146 GOVERNANCE AS LEADERSHIP
a year ago—about what the organization values and expresses; what constituents seek and experience; what the organization does and does not do, might or should do; and what works, what does not, and why. The threshold question then becomes not “What does one make of all this?” but “What do all make of this?”
reputaTionaL capitaL
Reputational capital, the ultimate intangible asset, can be converted into real value when “the power of a good reputation is harnessed to improve the relationships on which successful business depends” (Jackson, 2004).2 Whether reflected in stock price or the premium offered to acquire a company, reputation enhances a company’s power to price products, attract clients, and recruit personnel. A tarnished reputation, by comparison, can be lethal.
The same principles apply to nonprofits, only more so. The services and products nonprofits offer are purchased largely on faith rather than on empirical qualities or demonstrable outcomes. Consumers and donors depend heavily on the reputation of the college, clinic, or charity to make choices, whereas reputation has almost no effect on the purchase of commodities like light bulbs, eggs, and gasoline.This explains why these products frequently retail as generics or private labels. The brand name and, by extension, the reputation of the manufacturer barely matter. In contrast, it is virtually impossible to imagine a successful generic nonprofit. Armed with a strong reputation,
2Corporate balance sheets assign tangible worth to goodwill as the market value of a company’s shares beyond the liquidation value of its assets.
WORKING CAPITAL THAT MAKES GOVERNANCE WORK 147
a nonprofit will be favorably positioned to access capital markets, recruit talented staff, attract capable trustees, and engender public support. Reputation may not be everything, but whatever occupies second place ranks far behind.
Mindful of the value of reputation, nonprofits employ various techniques to enhance relationships with critical constituencies—for example, improve performance and quality, especially as perceived by critical constituencies; obtain professional accreditation or certification; assure transparency; recruit noteworthy personnel; seek positive publicity; and mount image campaigns. However, remarkably few nonprofits leverage the board’s reputational capital into substantial value for the organization.
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