Increasing Business’s Responsibility for Preparing Leaders for Service in the Not-for-Profit Sector

Every year millions of employees in businesses volunteer in the not-for-profit sector. Their contributions of time, talent, and money help to perpetuate voluntary action on behalf of the common good, a practice that is unique to American culture. The programs and services offered by thousands of organizations exist because of this generosity of spirit and service provided by volunteers. Many businesses understand the importance of contributing to the not-for-profit sector, not just monetarily, but also through providing time for employees to assist with specific projects or to serve on boards. It is the latter voluntary activity that I believe needs special attention from the business sector.

The rash of unethical behavior recently uncovered in corporations has also occurred in the not-for-profit sector. As a result, the public's concern about the ethical trustworthiness of our institutions has been heightened. Businesses have begun to address issues of governance and ethics in the workplace. The attention to such issues needs to extend to the not-for-profit sector and the leadership role businesses have in it.

Going Beyond Giving Money

The not-for-profit sector is the fastest growing sector in the United States, and accounts for $1.2 billion or 10% of our gross national product. There are more than one million not-for-profits in existence and every year over 100,000 new organizations are created. The sheer size and economic impact of the sector are sufficient factors to warrant serious attention. Furthermore, the impact these intermediate entities have on the quality of community life makes it imperative for the business sector to focus much more of its philanthropic resources on the development of effective and ethical governance.

Giving money solely for the support of direct service programs is necessary for an organization's survival but no sufficient. Without investing resources in the education and development of those who volunteer for service on the board, the long-term impact is questionable. Responsible philanthropy contributes tangible resources and supports processes that ensure the effectiveness, legitimacy, trust, and performance of the organization.

You Wouldn't Let This Happen in Your Business

Few businesses would ever allow any individual new to their company to make immediate, critical decisions about its long-term future without a period of education and training. They would not be permitted to set the strategic direction without being given time to learn about the business and gain some experience. Effective businesses strive to have the best people in positions of leadership. They do not permit individuals who lack a knowledge and understanding of their organization's history and its core values to lead a significant change effort or strategic vision.

So why is it then, that this standard is forgotten when businesses offer and encourage their employees to volunteer for not-for-profit board service? Few of the prerequisites for upward mobility and leadership that are expected of those within their companies are applied to the selection and preparation of volunteers for board service.

Some may argue that there are valid reasons for this. Perhaps there is an assumption that volunteers will receive the training needed from the organization with which they will be volunteering. Some may think that giving grants and offering the time of smart, accomplished professionals is sufficient. It might also be assumed that competency and success in the business sector automatically transfers to competency and success in the not-for-profit sector.

However, the reality is that very few not-for-profits have adequate funds or take adequate time for in-depth board education. Many offer orientations that are little more than perfunctory reviews of Bylaws, Articles of Incorporation, and budgets. While this information is important, it is missing the information that shapes and forms ethical culture and leadership of any organization. These orientations lack the depth of education needed to help the board become knowledgeable about the organization's history and culture, its core values, and the publics it serves.

A Waste of Time You Say?

The time needed to shape and mold a board into a trustworthy competent governance group, able to understand its significant role and function as a body of leaders, is far too short. Why? Some reasons given are that it involves “soft” skills or “warm and fuzzy” activities – shorthand words for “a waste of time.” This reasoning has pervaded too many business leaders on not-for-profit boards and can easily lead organizations into a state of historical amnesia and mission drift – the ground making for unethical practices.

Craig Dykstra states, “Trustees create and recreate the fundamental moral practices that form and shape organizations.” In doing so, trustees lay the foundation for the programs and services to those whom the organization touches and affects the whole community. This is a special form of leadership that acknowledges the need for moral practice and ethical behavior in carrying out governance responsibilities.
 
Businesses have an important stake in the way not-for-profits are governed, not only because their employees populate so many of these boards, but because they too influence the quality of community life. While maximizing profits will always be important to business, the social and economic well being of its community must also be of primary interest. So I ask, is taking the time to educate board members to create ethical leaders and ensure the quality of community life a waste of time?

Businesses Role in the Community

The social and economic well being of community can be effectively addressed by businesses if they invest in the depth education of their employees who volunteer for the important role of trusteeship on a board. Imagine the impact businesses could make if they provided or sponsored onsite and offsite training to employees so that their voluntary service to the greater community could begin with both competence and care! What a difference businesses could make in their communities if they would provide such support and depth education for trusteeship.

What would depth education of employees include? It should involve the following eight elements.

1. Know the history of the organization.
   Trustees are responsible for knowing the history of an organization, including both the formal and informal stories. They must be able to communicate organizational purpose and trustworthiness. The capacity to tell the organization's story is important and is greatly enhanced when told through the “little stories” – those stories that convey the effect the organization has on the lives of those it serves.
   
   
2. Be tethered to the core values of the organization.
   “Tethered” conveys both connection and restraint. To be tethered to core values means that the organization's actions and activities are congruent with its core values. Trustees evaluate the alignment between core values and what the organization does. They ensure that the organization doesn't experience “mission drift.” All organizations must adapt in order to survive. The strategies and tasks to achieve their goals and objectives will, and should, change, but the core values remain constant; they are the DNA of the organization.
   
   
3. Attend to all of the organization's publics.
   Caring and effective boards focus on those who are directly served by an organization. They are very aware of client needs, and because needs change, they position the organization to be responsive to changing needs. They are well aware that they are in relationship with other organizations and individuals who impact their capacity to serve direct clients; i.e., funders, other organizations, etc. Effective boards also understand that they have an additional sphere of connectedness and communication with a larger community, and work to minimize the organization's isolation and maximize its public prominence and support.
   
   
4. Evaluate the progress and performance of both the executive and the board.
   Boards are usually skilled at evaluating the executive, but lack experience and expertise in self-evaluation. David Smith, author of “Entrusted,” identifies three major responsibilities of boards: fiduciary, care for the common good, and being a community of conversation.
   • The fiduciary principle is manifested in the trustees' special relationship and loyalty to the purpose for which the organization was created.
     
     
   • The principle of the common good is reflected in the board's adherence to action that is “rightly constrained by social morality.” This principle helps to mediate the tendency to operate in isolation, protects against arrogance or paternalism in the exercise of duties, and enables accountability and responsiveness in a larger environment of conflicting values and competing claims in which a board's understanding of what is true can be tested.
     
     
   • The third principle of being a community of interpretation means that the boardroom must be the place where past and future, and loyalty to purpose and the common good are reconciled. It must be a place where trustees take seriously their responsibility to be the co-architects of organizational identity and monitors of the organization's mission.
     
     They must engage in depth conversation in which the mission is examined and its application modified in light of changing needs and changing times. Both those who adhere to a literal interpretation of the mission and those who want only current reality to shape their decisions will fail in their trusteeship of the organization.
     
     
5. Oversee the financial operation as if it is your own business.
   The trustees must be well informed about the financial resources and condition of the organization. They are responsible for establishing the broad parameters and guiding principles for the staff's development and implementation of the budget and the business plan. They must monitor the financial operations as well as the programs and assume responsibility for obtaining the funds necessary to carry out the agreed upon goals.
   
   
6. Compose a board that is representative of the whole community.
   A good board will include members from diverse backgrounds, and the core criteria for membership will not be compromised. Board members must all share a sense of the common good, and have demonstrated a willingness to work together to ensure the organizations fiscal health and longevity.
   
   
7. Remember the guiding vision.
   Effective boards know there is something much greater than any one task or individual member. Returning to the vision that gave birth to an organization reminds the board of this and reconnects them to what is at the heart of their organization. Acknowledging the heart helps trustees re-imagine the future and bring about change that inspires creativity and commitment.
   
   
8. Celebrate what is good and be honest about what is not.
   Take time to recognize the accomplishments of the organization and those who helped to make them possible. It is so easy to get caught up in day-to-day activities that we neglect the importance of taking time to appreciate the efforts of those on staff and in volunteer capacities.
   
   Constructive change and progress is predicated on an honest and accurate assessment of reality. It is impossible to change what cannot be acknowledged. Repressing what we see and think can undermine the organization and the effectiveness of the board. When we refuse to acknowledge or accept our own limitations, we project them onto others, making them responsible for what happens. This inability to take responsibility will not empower an organization. Acknowledging what is not working can evoke the energy to change and revitalize an organization.

Summary

The business sector's financial and leadership contributions to the not-for-profit sector are notable. They help to strengthen our communities and create environments that are attractive and giving to diverse populations. However, more involvement from the business sector is needed to ensure the continuation of these benefits. Investing in the depth education of employees for board service would have a positive impact on the performance of the not-for profit sector and on the culture and performance of a business.

While the intent of most volunteers is to do good not harm, the lack of adequate support for depth education and preparation for board leadership can inadvertently lead to unethical and irresponsible behavior. Smart businesses are not only profitable they are community-minded, and they invest in ensuring ethical behavior. They retain the public's trust. Their contributions to the leadership in the not-for-profit sector can assist in the development of competent, responsible and ethical behavior. This is just good business.

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Author: Katherine Tyler Scott
From Leading Ideas, newsletter of Trustee Leadership Development (TLD). Used with permission of TLD.

Katherine Tyler Scott is a Co-Founder and Managing Partner of Ki ThoughtBridge and author of several publications on governance leadership.

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