Thousands of Albertans serve as governors of nonprofit organizations. About 19,000 nonprofit organizations provide a multitude of services throughout the province. Coming forward to serve as a director on a board of a nonprofit is a significant and challenging volunteer opportunity that can have a number of benefits for the volunteer, for the nonprofit, and for the community. However, recent research by the Institute for Nonprofit Studies at Mount Royal College in Calgary, Alberta, suggests that most of these well intentioned governors do not really understand what it means to be a governor.
The Global Governance Model shown in the figure represents three distinct dimensions of governance. What most governors are familiar with as governance is limited to the legal and regulatory requirements associated with fiduciary governance. For a small number, the strategic dimension of governance takes place once per year at the annual board strategic planning retreat. It is exceptionally rare for a board to be aware of, much less engage in, the final and most compelling dimension of governance — generative governance.
As the pressure increases on boards to be ever more accountable, especially in areas associated with fiscal oversight, an equal pressure needs to come from the board to maintain integrity with the full spectrum of their governance responsibilities. Following changes in the private and public sectors in the post-Enron world, ever more robust bookkeeping and audit requirements by funders as well as regulatory authorities are grabbing the attention of governors. No one is suggesting that the nonprofit sector should not be accountable at this level; however, just as private companies must continue to pay attention to the needs and interests of their shareholders, so must nonprofit organizations pay attention to those whose interests they serve. Nonprofit boards feel pushed by funders (especially government departments) to spend nearly all of their time ensuring that their financial affairs are in order. This has taken place at a time when the nonprofit sector itself needs significant transformation if it is to remain intact and available to the millions of Canadians who rely on it for services, support, education, culture, health care, and recreation.
The Global Governance Model contains coloured circles representing the organizational and community perspectives that each governor brings to the board table. At the fiduciary level of governance, the dominant perspective held by governors is that of the nonprofit (e.g., is the nonprofit compliant with its legal responsibilities, or, are proper controls and monitoring in place?) At the strategic level of governance, the board looks to the world beyond the boundaries of the nonprofit, creates a planning horizon with external stakeholders in mind, and tests its goals and objectives against a desired future state for the organization. Most of the attention given by governors remains affixed to the vested interests of the nonprofit itself.
The situation changes significantly at the generative level of governance. Here, board members give full expression to the community interests and reflect on how the nonprofit can fulfil a meaningful and relevant role in the community. Two situations exemplify the need for boards of directors to practise all three dimensions of governance. First, consider that most governors believe that their organizations exist as the means by which a community end is produced. Typically, this is understood as the nonprofit organization being the deliverer of services to people who need them in the community. The belief is that the flow of resources is from the nonprofit to those in the community. In fact, the lack of attention to the full range of governance responsibilities has produced a situation where the nonprofit consumes the very people it is supposed to be serving. As funding for human services has become attached to clients, nonprofits compete to draw clients to them, not for the benefit of the client, but rather for the benefit of the organization. The more clients a nonprofit can bring to it, the more money it receives and the more sustainable it appears to be. Boards of directors that I have spoken to are shocked to realize that somehow instead of being in service to clients, they now see clients as a means to secure funding and therefore the future of the organization. While funders have undoubtedly played a major role in this flip, governors focused on the bottom line let the very principles upon which they are founded erode to the point that there is no discomfort in placing organizational sustainability on the backs of some of the most vulnerable in our communities. A board that developed its capacity for generative governance would at the very least have been aware of and able to debate the consequences of such a philosophical shift.
Second, consider that there are significant indications that as it is currently structured, Canada’s nonprofit sector is not sustainable. Premised on Elizabethan perspectives rooted in the 1600s, little has changed to shift the nonprofit sector away from being the place for off-loaded government responsibilities. With successive waves of extensive government dumping of social services from the 1980s to the present, coupled with cuts to the funding available to provide those services, the financial situation for most of the nonprofit sector is dire. A booming economy across the country and especially in Alberta has generated a human resource crisis exemplified by some nonprofit agencies having upwards of 60% frontline staff turnover and vacancy rates topping 40%. Operating costs have soared while funders claw back line items covering such expenses. A basic issue is that in this environment of restricted resources, the idea of stand-alone nonprofit organizations has concretized at the board level. Governors work to ensure that their agency is one of the ones left standing in what will inevitably be a classic case of survival of the fittest. Governors, however, could begin to contemplate generative ideas such as new consolidated structures that preserve the diversity and ingenuity of the sector while trimming redundant administrative practices. In Calgary, a group of roughly 45 nonprofit agencies providing services to adults with developmental disabilities is engaged in just these kinds of conversations at the board level and senior management level and are doing so with the participation of the provincial government funder.
The scenarios above underscore the importance of an expanded understanding of governance. As the world becomes ever more global and interconnections and systems of interdependence are brought into being, governors have a fundamental role to play. As stewards of charitable and often public resources, governors must attend to their fiduciary, strategic, and generative governance roles and responsibilities. Ensuring that a community good is created with the charitable assets under their stewardship is a continuing role. What is changing is the scope of undertakings now beginning to be acknowledged as a vital part of the governance role. People join boards of directors because they are passionate about the cause and want to see their community become a better place, as the mission is carried out. A more robust understanding of governance injects that passion and community focus into board rooms now buried in financial micromanagement. Making governance more robust will result in much improved boards of directors, better nonprofit organizations, and better communities.
About Keith Seel
