orgwonk-blog

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Governing Boards: Here’s One Reason Not to Weep About WannaCry

Convincing social sector governing boards to recruit directors with deep expertise in information technologies can be a tough sell. With the exception, perhaps, of organizations focused on technology, it just isn’t top of mind for many boards. 

Finance, marketing, fundraising, law--these are the areas of expertise most coveted by boards of directors. At best, board-level knowledge of new technologies and the associated threats and opportunities is considered a nice-to-have, a second-tier, on-the-horizon concern to be addressed only after trustees with more desired skills are seated. At worst, it’s a topic for one-time discussion among the advisory council and senior management. 

That was before WannaCry. The new ransomware terrorizing users of outdated and pirated Microsoft software has put paid to this notion, and in the long run, we’re all better for it.  

As major businesses, hospitals, and others stare into the monitors of hundreds of thousands of captive computers and weigh the risk of paying for their freedom, governing boards are presented with a compelling case for bringing technology expertise into the boardroom. 

Here are three levers that technology-aware boards can pull to help their organizations steer clear of technology crises. 

Funding. Governing boards can allocate funds for the regular purchase and maintenance of software and other technologies. Boards should also provide for an appropriate level of in-house or retained outside support, as well as ample funding for employee training. 

Policy. Boards own policy. Governing boards should ensure development, implementation, and regular review of policy for installing, updating, and monitoring technology. Policy should also be in place for backing up data and responding to emergency threats and security breaches.

Oversight and accountability. Removed from the day-to-day management of the organization, boards enforce policy and hold management accountability by receiving regular reports on performance and policy compliance. Boards should also work with the CEO to incorporate technology into annual CEO performance reviews, organizational goal-setting, and long-term strategic planning.    

Of course, boards need not have a dedicated technology professional in order to do the work of funding, policymaking, and oversight. While each director is expected to contribute a unique perspective, insight, or skill-set, all are called upon to provide for the general upkeep of the organization. Caring about technology, then, is the responsibility of every board member. The same can be said of fundraising expertise. 

Having a director with a background in technology, however, can sure help. By championing technology-use, advocating for resources, and tilting the mirror toward board and management blind spots, technology-steeped directors help boards treat technology as the critical resource it is.  

WannaCry has opened our eyes to just how much damage can be done when boards fail to invest in planning, managing, and monitoring around information technologies. And this, at least, is nothing to cry about. 

[orgwonk-blog]

Is it Time to Revisit CEO Tenure Limits?

During the 2016 presidential campaign, Donald Trump made it clear that he favors term limits for members of Congress. With precedent long-established on the presidential level, Americans appear to back him; senators and representatives, not so much. A public debate is sure to ensue. 

Likely of less interest to the public, but no less contentious is the question of term limits for board directors and CEOs in the corporate sector. 

On the board level, the debate over term limits has roiled for years, typically fomented by investors and shareholder activists. Four years ago, GE shareholders voted down a proposal to impose 15-year term limits for board members. With the decision, GE directors continue to serve unlimited one-year terms.

While the decision of GE’s shareholders came as no surprise--according to Spencer Stuart, only 13 S&P 500 companies (3%) set explicit term limits for their non-executive directors--term limits continue to be considered governance best practice.  

There is less agreement around the efficacy of capping CEO tenure. In an essay titled “Why Not a CEO Term Limit?” Cornell Law Professor Charles Whitehead argues that there is an inverse relationship between CEO longevity and board independence. In other words, the longer a CEO stays, the weaker the board, resulting over time in underperformance and loss of company value. 

This challenge is further complicated among founder-CEOs who, according to Harvard Business School’s Noam Wasserman, early on, make decisions that result in their either retaining control over the board and compromising growth potential or relinquishing power to outsiders and growing company value. Founder-CEOs who make decisions that lead to company success are more likely to find themselves unqualified to lead their growing firm. In other words, founder-CEOs are often damned if they do and damned if they don’t, making tenure limits, perhaps, even more compelling. 

While few organizations limit CEO tenure, some do. The MacArthur Foundation, for example, enforces term limits for trustees, the president, and program officers. Trustees are held to three four-year terms, presidents to a ten-year term, program directors to two five-year terms, and program officers to three three-year terms.

Many more organizations, however, do not limit CEO tenure and for a number of reasons. For one, with some notable exceptions, CEOs do not often stick around beyond ten years. In 2014, the average S&P 500 CEO had a tenure of 7.4 years, and 6.0 at the median. College and university presidents serve an average of eight and a half years. It’s unclear what the average CEO tenure is among non-university nonprofit corporations, but it appears to be somewhere between six and twelve years. 

Also, with the power to release a CEO for poor performance, many boards may consider term limits arbitrary and unnecessary. Boards already have the power to release a CEO. Some boards worry that term limits will create a revolving door of leadership, prematurely forcing out high-performing executives. Still other boards have never considered the possibility of limiting CEO tenure.  

Time will tell if debate around congressional term limits will reignite discussion about CEO tenure. With Trump--known among supporters as the CEO of government--beating the drums for government as corporation, I would not be surprised if there is an equal and opposite interest in what corporations can borrow from government.  

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Size Matters

When it comes to optimal governing board size in the social sector, the jury’s out. I am unaware of and do not recommend a definitive range. Board size depends on the organization. There are, however, some considerations to keep in mind.

Compliance is Not Enough 

First, one thing is clear: the minimally mandated board size is rarely adequate. For example, the Colorado Nonprofit Act requires nonprofits have a board of at least one director. This is fine for purposes of the articles of incorporation, but hardly sufficient for true governance.

Boards should be large enough to:

Be independent of the CEO. This is especially important for founder-led organizations, which are often governed by small, insular, CEO-recruited boards that are overly deferential to and dependent upon management. Boards are responsible for oversight, not rubber-stamping. 

Have credibility among stakeholders. Donors, members of the public, and others trust organizations with millions of taxpayer and private dollars. When functioning effectively, larger boards offer the assurance of greater internal control, transparency, and accountability.   

Be diverse. With more director seats available, larger boards have greater opportunity to recruit members with diverse professional expertise, opinions, and backgrounds. Of course, board diversity is only as valuable as the board is inclusive.

Support an effective committee structure. The work of a board is done in committee. Charter school boards, for example, typically have at least three standing committees, but when boards are too small, most of the directors serve on most of the committees creating inefficiencies and eventually disengagement.

Attract high-performing, high net-worth, and high-profile individuals. Individuals seek volunteer board opportunities that not only connect them with a powerful mission, but also offer an opportunity for building a legacy, reinforcing their public reputation, ‘giving back’ in significant and visible ways, and linking them with other individuals who wish to do the same. Simply put, larger boards have greater gravitational pull, generally, and especially among high net-worth individuals.   

There are limits, however, to the benefits of adding new board members. For example, charter school boards exceeding 15 members, often experience diminishing returns. Boards should be small enough to:

Be manageable. Coordinating the work of a governing board is difficult. Scheduling full board and committee meetings, ensuring full participation, facilitating the kind of deep dialog necessary for boards to do generative and strategic--not just fiduciary--work are all complicated by an over-sized board. 

Foster engagement. Large governing boards often rely on a small circle of influential and active directors to get work done. This can get out of hand when the board’s inner circle--typically comprised of the executive committee--effectively locks out outside voices and stifles engagement.

#board #governance #nonproft #highereducation #charter school #charter schools #college #university

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It’s Culture: Why Morehouse is Still in the Woods

How old boy culture Chokes progress, corrupts, digs in Has Morehouse learned yet? #haiku

We learned late last week that Morehouse College is making some changes in the wake of a leadership crisis that threatened to sink the president and prompted students to file a temporary restraining order against the board.

In a statement released Friday, the board announced two major decisions: immediate replacement of President John Wilson by COO William Taggart and installation of new board officers, to include the stepping down of Board Chair Robert Davidson. Additional reforms were unspecified, but appear to include amendment of the bylaws.  

This all comes after the Root published a detailed and well-documented account of the case by Michael Harriot. In it were references and links to two independent assessments of the board--one prepared by the Association of Governing Boards and the other by independent consultant Keith Eigel.  

As with many institutional meltdowns, the big story at Morehouse is one of a dysfunctional leadership culture. After observing the board for more than twenty months, Eigel reported in a strongly-worded memo that "This clique culture, more than any other factor, contributes to the dysfunction in key relationships that puts Morehouse realizing her potential at risk." Ironically, the board’s frayed culture may have been the primary driver behind the action it took last week to resolve the crisis: throwing out the president with the chairperson.  

The AGB and Eigel were united in concluding that the most critical and worrisome relationship at Morehouse was that between the chair and president. The AGB called it, “a recipe for failure.” Both were also in agreement that the chairperson was largely to blame, micro-managing and actively obstructing the president, carrying out board business in a manner contradictory to the bylaws and governance best practice, and whipping up resistance to change. 

The AGB and Eigel recommended retaining the president who, despite having some flat spots, was in their view, an asset to the college and the right person for the job. The AGB went so far as to say, “Changing presidential leadership at this point is exactly the wrong recipe for Morehouse.” The AGB further suggested that the college begin searching for a successor for the chairperson. Yet, both the chairperson and president are out.

Could this be a case of the board cutting off its nose to spite its face? Has the board’s deference to the chairperson--a prominent alumnus and popular ‘old boy’--deprived the college of the leadership it needs most?

In addition to advising around personnel and relationships, the AGB and Eigel recommended changes to policy and practice that will be critical to improving governance and leadership at Morehouse. These will be of no use, however, within an organizational culture that values clubbiness and personal allegiances over the best interests of the college. 

By removing the chairperson only at the expense of the president, the Morehouse board may have delayed the institutional transformation critical to the college’s future. The college has already become an essential case study in fiduciary oversight gone amuck. Let's hope it does not also become a sad lesson in missed opportunity. 

#morehouse #governance #nonprofit #highered #board #leadership

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Five Points About Leadership

I once sat on the board of an organization dedicated to preparing young people for leadership. We recruited talented university students from varied socio-economic backgrounds for training, enrichment activities, and internships in Washington, DC. My five years of service were some of the most fulfilling of my career.    

Running a leadership program forced me to rethink a lot of my assumptions about leaders--who they are, how they behave, and how they are groomed. For example, in our early years, we targeted students with an interest in government and business--fields popularly associated with leadership. The leaders we envisioned were gregarious, opinionated, decisive, sharply-dressed, high-talking young apprentices to the art of power. We taught them how to make speeches, to network, and to exude executive presence.  

Not excluded, but certainly not central to our vision, were students of the arts and humanities, those of a decidedly more reserved nature, and students disinclined to public displays of influence, persuasion, and dominance. This left me conflicted. As Susan Cain speculates, could not the world’s next great leader be a quiet poet?

As a board, we spent hours discussing our position on leadership--its traits and how to test for them. These were vigorous and healthy debates that, I believe, advanced the organization and our mission. Although, I’m not sure that we resolved the matter, our conversations did spark the following ideas for me:  

At some point in life, everyone must follow and everyone must lead. This is balanced and good. 

Some people gravitate toward leading, some toward following. The former are “leaders.” Under the right circumstances and controls, leaders will show themselves. They will find something--no matter how large or small--to lead.

Leaders are evenly distributed across humanity. This is nature. No type of human--e.g. man, woman, black, white, gay, straight, disabled, nondisabled--has a greater capacity for or claim on leadership. No discipline is devoid of leaders. A leadership that lacks the diversity of its followers is an indicator of something gone awry. 

Leadership is a commitment, a sacrifice, an enormous (often burdensome) responsibility. It is an honor, but not a reward; it is service. Good and effective leaders deserve our support and respect, and maybe, our sympathy.  

Finally, we cannot train people to BECOME leaders; rather, we must train ourselves to better identify those who tend to lead and help them, and others, to lead and to follow better. 

What are your thoughts about leadership?

#leadership #youth #training

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Leading Into Diversity and Inclusion

A few years ago, I worked with an aspiring young CEO struggling to find his way as a leader. Keen on launching an education startup in inner city Chicago, he had difficulty reconciling his identity as an affluent white male with that of the low-income, African American community he sought to serve.

Issues of diversity, inclusion, class, and privilege--powerful forces acting upon his target market--were foreign and intimidating for him. He worried that he did not, and could not, have the perspective, experience, and insight to be an effective and credible leader in that environment. And as he fretted over his own perceived inadequacies, he projected the same onto members of the surrounding community, insisting that they would be unable to accept him as a leader. His discomfort with difference was raw and difficult to witness. His solution? Identify a woman of color to serve on his board. This young entrepreneur eventually decided that he wasn’t ready for leadership.

I continue to learn from this young man’s failed first attempt at leadership and from other conversations with new and seasoned CEOs. Here are three lessons:

1. Embrace the responsibility. No leader gets a “free pass” when it comes to diversity and inclusion. Study after study after study have concluded that the best teams are diverse and that they perform optimally when they are inclusive--internally and externally. The know-how to build and lead an organization’s best team within complicated social, political, and resource environments is an essential leadership skill; it’s not optional. Leading into diversity and inclusion is the CEO’s responsibility, even if she delegates day-to-day management.  

2. Pre-empt the crisis. The surest way for a CEO to place himself in the hot seat is to wait for a crisis to find him unprepared. We all know the kinds of problems of which I speak: the insensitive employee comments, the all-white male engineering team that designs a facial recognition product that fails to identify people of color as human, the fraternity that hosts parties in blackface.

We’ve seen how unprepared organizations react to crises related to diversity and inclusion. One recent study found that nonprofits typically respond by taking action on the individual level--disciplining offenders and mandating sensitivity training, for example. Two additional studies concluded that universities tend to paper over incidents with public relations strategy. Few organizations convert crises into the kind of transformation that can prevent future crises. Even fewer attempt organizational change before problems strike.

Rather than wait for a crisis, CEOs can begin now to strengthen their organizations’s diversity and inclusion muscles. They can start by acknowledging that their team will be its best and do its best work if it is diverse and inclusive. They can then work with their team to visualize their organizational ideal. How should their diverse team look? How will it communicate with each other and with the CEO? How does the team interact with customers and the community? How, specifically, will diversity and inclusion be reflected in every aspect of the team’s work? CEOs should work with their teams to set target outcomes and work backward, just as diligently as they would with any other strategy. 

3. Engage the team. It goes without saying that a CEO’s team is their greatest asset. CEOs should actively engage their team--all of it--in defining and living the organization’s vision for diversity and inclusion.  

It’s not the CEO’s job to have all of the answers--no one knows it all--or to get it all right, all the time. It is the CEO’s job to drive development of an organizational vision for diversity and inclusion, to model this vision, and to see that it is infused throughout the organization.  

#diversity #inclusion #leadership

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Because Some Conflict is Good

New research points to a correlation between the quality of corporate governance and how board members are recruited. 

The study, by Solange Charas, found that boards govern more effectively when they recruit members who do not have personal relationships with current directors. In fact, seventy percent of directors on high-performing boards were “strangers” when they joined. This is because boards of strangers display higher levels of “cognitive conflict,” which stimulates conversation and engagement and has a positive impact on decision-making.