More Than a Board: Nonprofit Governance as an Organizational System

Through my experience working in and for nonprofits, I have come to find that the function of governance can be easily reduced to "the board." The board is the highest governing authority (most of the time). The board hires and evaluates the CEO. The board approves the budget. The board sets the strategic direction. The board and its members are liable if the organization is caught in illegal actions or severe controversy.

Not to sound like Jan Brady, but sometimes I find myself thinking "Board, Board, Board... why is everyone talking about the Board?"

This is not to say I believe boards are unimportant. On the contrary, I take very seriously the essential role governing bodies play to ensure the overall health and vitality of a nonprofit. I also know it's a role that, if undervalued or neglected, could become ineffectual to the point of negatively impacting the organization. That is why groups like BoardSource exist: to develop great best practice resources for nonprofit leaders and CEOs to help them navigate the board's roles and responsibilities.

Board and CEO-centered best practice literature is important, but to say that it’s all an organization needs to invest in a healthy governance structure would be greatly limiting. Rather, nonprofits can benefit from viewing governance with a wider lens and recognizing it as a broader system that involves a fairly expansive group of actors -- including members, volunteers, staff and other stakeholders.

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Of course, taking a systems approach to understanding governance is nothing new. Twenty-seven years ago, the seminal Cadbury Report in Great Britain defined corporate governance as, “the system by which companies are directed and controlled (Cadbury, 1992).” Granted, this report was primarily speaking of for-profit entities, but the overall definition is completely applicable to nonprofits. In fact, later on, nonprofit governance researcher Chris Cornforth expanded the definition by describing governance as "systems and processes concerned with ensuring the overall direction, control and accountability of an organization (Cornforth, 2014)."

Notice how neither of these definitions name the board specifically as the defining characteristic of governance. Personally, I'm a bit partial to Cornforth's definition because he acknowledges governance as made up of many components. When we break down what those components are, it becomes easier to see the complex web of processes and institutions that make up a governance system.

Again, this is not to say that the board isn't an essential component. While it's a given that the board has the "governing authority", as a body it is still subject to and responsible for policies and processes that also serve to govern and protect the operational integrity of the organization. It’s like the board is the hub of a great wheel and the spokes consist of several elements that empower the wheel to turn. They typically include:

  • Governing Documents (i.e. Articles of Incorporation, Bylaws, Board Resolutions) 
  • Board & Advisory Committees 
  • Policies and Board Actions 
  • Meetings and Assemblies 
  • Elections and Appointments 
  • Board Development and Succession Planning 
  • Executive Delegation and Oversight 
  • Strategic Planning
  • Financial Oversight 
  • Corporate Filings and Enabling Resolutions 

Each of the elements listed above represent distinct processes, many of which come with their own management challenges. What's more, addressing those management challenges will typically require the engagement of a whole host of people, beyond those most directly affiliated with the board. One of the most obvious examples is the involvement of accountants and controllers in the completion of financial reports, audits and form-990s. Budget development and strategic planning are usually all-hands-on-deck kinds of processes. Committees are often managed in a decentralized manner, where members and volunteers interface with department heads and subject matter experts.


I believe that everyone involved in the governance system should understand how their individual contributions impact the whole; how the functionality of one component impacts the overall integrity of how the organization is governed. In essence, adopting a more expansive view of governance can provide nonprofits with a mental model to recognize interconnected processes and manage complexity. Granted, complexity can be difficult to navigate, especially if your organization has limited staff (or even no staff). But the more a nonprofit can look at the components of governance and recognize how they influence and impact various corners of the organization, the better equipped its members, staff and leaders will be to institute practices that keep the system sustainable and transparent.

As someone who has spent most of her career working in nonprofits and staffing boards, I have come to appreciate the need for solid, sustainable management systems for governance. However, it’s worth noting that none of these systems are going to look exactly alike because no organizations' governance structures or board cultures are exactly alike. This is where nonprofits should be encouraged to cultivate realistic processes that take the organization's unique circumstances into account while still adhering to best practices and legal requirements. When these processes work well, the board is better empowered to do its job - to provide strategic direction, ensure resources and oversee the performance and integrity of the organization.


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References:

Cadbury, et al (1992) Report of the Committee on the Financial Aspects of Corporate Governance; London: Gee and Co. Ltd. p.14

Cornforth, C. (2014). Nonprofit governance research: The need for innovative perspectives and approaches. In C. Cornforth, & W. Brown, Nonprofit Governance: Innovative Perspectives and Approaches; New York: Routledge, pp. 1-14.

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Rachel Miller-Bleich, MA, CAE, a nonprofit governance consultant, is Principal & Owner of MillerBleich Consulting, LLC. Learn more at www.millerbleichconsulting.com 



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