A Problem-Based Approach to Governance
Effective organizations have effective governance structures. There is no one right model that fits all organizations. This article discusses a field-validated, data-driven, process for associations to identify problems with their current governance structure and also to develop their own solutions to those problems.
Procedures for Governance Evaluation and Redesign
While many organizations attempt to remodel their structure—few succeed. The fault lies not with the individuals but with the general approach typically used. Some organizations attempt to engage in the process without outside help. Such groups are seldom effective in looking objectively at what is broken and what needs fixing. And, there is no shortage of ideas of how to re-structure. The problem is that there is not often agreement among those offering suggestions.
Other organizations engage the services of an outside consultant. The consultants carefully study the organization and then offer a variety of recommendations to address the issues they have discovered. Such recommendations are typically ignored, particularly if those recommendations call for major change. They are ignored because they are often viewed as the consultants’ solutions to problems the members have not accepted. The shortcoming again lies with the approach. There is a better way.
We have found that people will not agree with a solution, unless they first agree with the problem. Most governance reviews (both internal and external) focus on solutions without first getting consensus on the problems. Therefore, people choose sides based on the solution they like best and the “sides” never reach agreement… or agree to a watered-down version that offends no one… and pleases no one. In order to successfully bring about changes in governance, the people within the organization must first own the problems with the structure and then become invested in the solutions to those problems.
Our approach is based on the principles of performance improvement. The organization is viewed as a system with three critical parts:
- Outcomes – clearly defined mission, goals, and objectives
- Performance – the strategies and tactics to use to achieve those objectives
- Structure – the policies, budget, technology, and talent pool that needs to be in place to support the required performance
An effective governance structure is one that ensures these parts work together to produce what no part can produce on its own. Therefore, the process for review and revision of a governance model must be both systematic and systemic. Problems do not occur in isolation. Therefore, solutions aimed at resolving superficial symptoms will fail.
In the Handbook of Human Performance Technology, experts in performance improvement define a problem as a critical difference between what should be and what is. Our process is designed to help staff and leaders of the association (not us, the consultants) identify what problems exist within their structure and then to assist them (not us) in developing their own solutions consistent with their strategic plan and their unique culture.
An outline of the process appears in the sidebar. A specific description of each step follows:
Formulation of A Governance Taskforce (GTF): It is critical that the leadership be involved with and invested in the process. We suggest the association form a governance taskforce composed of 12-15 members. We also recommend that a past-president be appointed to serve as chair of the taskforce and that its membership include the president-elect, some past presidents, the CEO, committee chairs, a few board members-at-large, and one or two leaders who are not currently on the board but have been critical of the organization at times in the past. It is important that the group reflect not only diversity in position but diversity in thought as well.
Develop Performance Requirements: As we have noted, we define a problem as the critical difference between what is and what should be. In order for the organization to identify any problems with its structure, it must have clear agreement on what should be. If a couple engages an architect to design a new house, the architect will ask several questions regarding function, such as: “Do you have a large family?” “Do you entertain?” etc. In a similar way, it will be important for the association to first agree on the design features that any governance model it develops should meet. We refer to these as performance requirements. When developing performance requirements, the GTF should address the following questions: Regardless of how the organization is structured, what important features or requirements must any structure have to be acceptable to the organization? Examples of performance requirements developed by our clients include: “Committees and task forces are created and disbanded consistent the strategic plan. All members of the board should be actively engaged and accountable.” At this step, no discussion of the current model or issues with that model are entertained. The discussion focuses solely on what elements the members of the GTF believe SHOULD be present.
Board Approval of The Performance Requirements: It is important for all to agree on what should be. Board members are asked to approve the list of performance requirements as developed by the GTF. Our experience with this step is that while the Board may make some slight modifications to the list, the GTF’s work is typically approved by the board as presented.
Gap Analysis: With the performance requirements in place, the GTF is now ready to identify problems. It compares the organization’s current model with its approved performance requirements and identifies any gaps that might exist. For example, assume the organization has a performance requirement that states that all board members be actively engaged in and accountable for actions of the board. It is an axiom of group behavior that the larger the group, the less opportunities for individual engagement and the greater difficulty in enforcing accountability. In analyzing this performance requirement, the group would be asked to determine whether the size of its board is consistent with the performance requirement. It is important to know that the discussion at this stage is confined to identifying problems—NOT solving them. As earlier noted, discussing solutions without first agreeing on the problems is counterproductive. Our job as consultants at this phase is NOT to tell the organization what its problems are. Rather, our job is to assist the organization in objectively comparing what is to what should be. Our experience in performance improvement and association governance provides assistance in that assessment.
Board Approves Gap Analysis: The purpose of this step is to get board consensus on the problems, if any, with the current structure. As was true of the pervious step with the GTF, the Board’s discussion should focus on agreement with the problems and not with any attempts to resolve them.
Design A New Model: Once problems have been identified and agreed upon, we work with the GTF to design options to address the performance requirements and problems identified by the taskforce. A basic principle of performance improvement involves the concept of “equifinality,” as found in An Introduction to General Systems Thinking. Said simply, this principle asserts that several acceptable methods can be used to reach the same end. Consistent with this principle, we work with the GTF to develop several options for meeting the performance requirements. Each option is accompanied by an assessment of advantages and disadvantages. Once those options are thoroughly investigated, the GTF reaches consensus on which option it will recommend to the Board.
Vet New Model: Communication with key stakeholders in the organization is critical. The truth is, the vast majority of your members do not know how you are currently structured—nor do they care. They want to know what value you provide for their dues dollar. That said, there is a group, usually around 10 percent or less, who are volunteering their time in some form or fashion and do have a stake in how the organization is governed. Communication with these stakeholders is critical. It is important to communicate to various groups what the current problems are, how they were identified, and how the proposed solutions are designed to correct them. Placing things in this context makes for more orderly and logical discussions. As you communicate the solutions, you will undoubtedly receive some push-back. Under our process, you are able to positively manage that push back by responding with a question rather than a rebuttal. That question being, “If you are unhappy with our proposed solution, what improvements can you suggest to better solve the problem.” Faced with this question, reasonable people will either see the value in your solution or offer a better way. Our experience has been that through this vetting process, the proposed new model is tweaked and refined. The process also creates buy-in with key stakeholders.
Refine Model Based on Feedback for Vetting Process: It has been our experience that the vetting process leads to improvements in the proposed model. The GTF uses the data form the process to make appropriate changes.
Board Final New Model: The board is asked to approve the GTF’s recommendations for changes to the organization’s governance structure.
Bylaws: Once the board has approved the recommendations, we prepare a draft of new Bylaws that conform to the newly approved model. It has been our experience that such changes are usually numerous and best handled by a totally new set of Bylaws that will replace the current ones. If, however, changes are minor, we draft amendments to the current Bylaws. The GTF reviews the draft to ensure the elements in the Bylaws are consistent with the newly approved model. Once the GTF approves the draft it is submitted to the Board for its approval. In either case, new or revised Bylaws, we often find that there is more information included in the current Bylaws than is necessary, often operational processes. This information should be included in policies and procedures that can be easily updated by the board of directors as opposed to going through the formal Bylaws updating process.
Transition Plan: It is doubtful that any organization will be able to automatically transform from what is to what should be with the simple passing of Bylaws. We work with the GTF to develop a transition plan specifying what steps will be taken to move toward the new governance model. The plan specifies what will be done, when, by whom and at what cost. The objective of the transition plan will be to affect an effective transition while causing the least disruption.
Example: A State Dental Association
All state dental associations are “chapters” of the American Dental Association (ADA). While each state association has its own Bylaws, most pattern their governance structures after the ADA’s. The group with which we worked had nine geographic districts within it. Each district had one seat on the board to which they elected or appointed a board member. Each district also had alternate board members. The ultimate governing body of the organization was a House of Delegates (HOD) composed of delegates from each district, the number of delegates for each being proportional to the number of members in each district. The HOD met once annually. This governance structure had been fundamentally the same since the 1840’s.
The client formed a governance taskforce consisting of officers, delegates, board members, committee members, and state and district staff. They developed 17 performance requirements that were reviewed and approved by the board and the HOD. The GTF next performed a GAP analysis and identified about 14 problems. Key to this discussion were the following problems:
- The structure should facilitate each member in carrying out his/her fiduciary roles of care, obedience, and loyalty. Because board members came from districts, some board members, and more importantly, most members within the district, were of the mistaken belief that the board member was to vote for what was best for the district rather when, in fact, their duty of loyalty required that they vote for what was best for the majority of members in the state.
- The process should enable the recruitment of the most qualified members to serve. The structure of having membership by district meant that when choices had to be made among which leaders to serve, geography trumped aptitude.
- The body with the legal liability for a decision should make the decision. Under state law, the board, not the HOD, was liable for decisions made. However, under the association’s structure, the power to make the final decision rested with the HOD.
Through a series of meetings and vetting, the GTF recommended a structure with the following key elements:
- The board would be composed of officers and 9 board members-at-large.
- The board would have the authority to make final
- The HOD could forward resolutions to the board on matters of policy. Such resolutions were advisory and not binding.
- The HOD would elect the officers and the board members at-large.
This model had to be approved by both the board and the HOD. The HOD controlled amendments to the Bylaws, and such amendments required a 2/3rds vote of that body. The changes were approved by more than 75% of the delegates. As one can imagine, many delegates were reluctant to give up the authority for final decisions. However, because the HOD had previously approved the performance requirements and because they had also previously agreed on the gaps, the vast majority of the delegates realized that the proposed solution was, in fact, the best solution for the problems identified.
Key Areas to Consider and Pitfalls to Avoid
We have worked with numerous organizations to revise their governance structure and we have experienced governance reviews and restructuring as staff of an association. Based on those experiences we offer the following considerations:
Take as Much Time as Required To Bring About Change: Effective change requires buy-in and buy-in takes time. Some organizations can move faster than others. It is important that you move at a pace that does not leave key stakeholders behind.
Communicate Often: While most members have no interest, those who do have interest also have influence. They will want to be kept abreast of what is happening. That said, it is also important to ensure messaging does not get ahead of you. For example, while the GTF is working on models and exploring options, it will be counterproductive to have that information “leaked.” Changes should only be communicated when they are fully thought out and ready to be vetted. Communicating the process that will be used, as well as progress on each step will improve the chances for success.
Governance Is NOT Government: Associations are non-profit corporations. How a political entity should be governed and how a corporation is governed are often vastly different. What is right for one is not always right for the other. For example, the duty of corporate board members is not to represent the issues of their constituents. Their duty is to be responsive to the needs of the members as a whole. It will be important to separate issues of corporate governance from those of governmental bodies.
Avoid Confusing Solutions with Problems: All of us, at times, confuse the two. For example, the statement: “The problem is we need a smaller board.” does not state a problem, rather, it states a solution, i.e., a smaller board. It begs the question “why?” The answer to which is, in fact, the problem. Consider this statement “We need a board whose members are actively engaged. Currently they are not.” Now we have stated a problem—and one of many potential solutions is to reduce the size of the board. It will be important for the leadership to constantly keep people focused on problems first and solutions second.
Remember That Consensus Is Not Unanimous Agreement: If it were, consensus would be nearly impossible to achieve most of the time. We define consensus as meaning that while not all agree with the decision, all can live with it. We have found this definition has served our clients well.