Financial leadership for government and non-profit boards: Part 2
Real financial leadership by governing boards requires connecting the money to the mission and clear delineation of board and staff roles.
In Financial leadership for government and non-profit boards: Part 1, we outlined three key points from a presentation by three faculty of the Midwest Center for Nonprofit Leadership at UMKC, and described in more detail the first point, fiduciary oversight.
Gioia spoke of the need to “…view the nonprofit business, (and I would add governmental units) as an interdependent set of programs and activities.” Mission and money are interdependent. Strong programs and strong infrastructure are interdependent. Financial accountability and transparency are interdependent. Public trust and transparency are interdependent. I could go on, but you get the picture. Our tendency to manage pieces of the organization independently fails to properly recognize the impacts of each part of the organization on other parts. One key element of my MBA experience at MSU was the use of case studies. This learning technique really drives home the reality of the interdependent nature of organizations. True financial leadership requires that this interdependence be considered in the development of every policy, and in the execution of every decision. Boards and executives must continually collaborate to keep money and mission in sync.
The third key element of true financial leadership is that both the board and management must carry out their respective roles well, and resist the temptation to do the job of the other. We talk a lot about problems with boards “micromanaging” their managers, but when either the board or management spends their time doing the job of the other, it is at the expense of fulfilling their own role well. It is important to point out each does a better job carrying out its role when the two work collaboratively together. Bowman points out that, “…Managers are in constant communication with clientele and thus have insights regarding the impact of policy changes on mission fulfillment.” Managers also need to understand the thought processes used by the board in creation of policy in order to carry them out effectively.
The chart above, taken from Gioia’s presentation, gives a clear delineation of the roles of both the board and management. In my nearly 19 years with Michigan State University Extension and 10 years of experience working with boards elsewhere, nearly all of the board members I have met have at one time or another either worked in management roles or owned their own business. They often understand much more about the management roles than they do the leadership roles of developing long term vision and strategy, and writing policy which enables management and staff to achieve the mission. It is no wonder they often slip into the management role. Each board, whether nonprofit or governmental, needs a plan, a model, to keep them focused on their role in financial leadership, and total organizational leadership as well. Renz summarized the research regarding such models this way, “A thoughtful, well developed model is effective, it’s less important which one.”