Four Key Governance Questions NPO Directors Should Ask
The December 2017 McKinsey Quarterly recently published an article, “The four questions to ask when serving on a non-profit board”. The article reported on results of a 2015 survey on Non-Profit Organization (NPO) governance that concluded that many NPO board members were not very experienced and were not engaged in their work. Additionally, more than two-thirds of directors said their organization had faced one or more serious governance-related problems over the years.
These findings are supported by our own observations at OTUS Group in our work with numerous NPO’s over many years. We have found that many NPO organizations struggle with board governance, and as a result many non-profit boards are under-delivering. The article states that an important reason for this is that directors often are reluctant to ask questions for fear of appearing uninformed. Directors must overcome the fear of asking questions, and be prepared to keep asking questions until they get good answers to their questions.
McKinsey suggests there are four crucial questions that should be asked by directors of all NPO’s:
1. Are we succumbing to mission creep?
There is often temptation to stray from mission due to compelling funding opportunities. NPO’s must be careful to stick to their core competencies. Board members should review their NPO’s mission every three to five years as part of the strategic planning process, to ensure their understanding and commitment to the mission.
2. How is our ‘theory of change’ informing our strategy?
In other words, how does an NPO’s work achieve its mission? The organization needs a clear understanding of the activities that will help achieve the mission. For any planned activity, board members should ask, “how will this activity bring about the intended results?”
3. How are we evaluating our impact?
There must be regular measurement of outcomes, including the efficiency and effectiveness of the NPO’s programs. The organization should be able to demonstrate a clear link between its programs and their impact on beneficiaries.
4. Do we have the right ‘fuel’ to drive our organization?
NPO’s require the right people, organization and funding to operate. Board members should have relevant professional expertise and experience. They should have the talent, time and energy to help the NPO achieve its mission, and the ability and willingness to help raise money. Highly effective employees should be compensated appropriately so they can be retained, and under performing employees should be removed.
If you are a director of a NPO, it is critical that you ask these tough questions and be fully engaged in the organization’s mission. As the article states, directors need to probe, nudge, and prod to make sure the organization achieves its full potential.
If you would like to find out more about how you can reduce risk, improve operating efficiency, reduce costs and strengthen your organization, please contact me at 613-727-1230 ext. 212 or firstname.lastname@example.org
Richard MacNeill, FCPA, FCMA, CMC, Dipl. T. is a partner at OTUS Group, a team of advisors to business, government and not-for-profit organizations.