March 2, 2022

Nonprofit boards—for the founder or for the organisation?

What does good governance look like in nonprofits that are largely founder-driven?

4 min read

Boards are generally of two types: one that is set up by the founder and continues to centre governance around them, and the other where the board takes the lead in determining the nature of governance, usually with the organisation at the centre.

Organisations are expected to set up boards to guide and steer them strategically and with accountability to their stakeholders. This is the group that oversees governance, be it founder-centric or organisation-centric. Therefore, the boards ideally comprise members who are competent, objective, and work in the best interest of the organisation.

The nonprofit sector in India is largely founder-centric. There is nothing wrong with that; although some may argue otherwise. Lack of substantial data to prove that non-founder-run organisations function more sustainably and are better aligned to the original mission begs the question: Is founder-centred governance—where the founder stays at the helm of all affairs—really a deterrent to achieving the mission of the organisation?

Given that many founders do not want to let go easily, can good governance be attained with them remaining at the centre of determining the board’s role? Some of this depends on the life stage of the organisation and the specific nature and personality of the founder. These notwithstanding, what are some realities that we need to be cognizant of in the context of good governance?

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Boards ideally comprise members who are competent, objective, and work in the best interest of the organisation. | Picture courtesy: Rawpixel

Relationships matter

In the two decades that I’ve spent working closely with nonprofit leadership and their boards, I’ve seen that the non-compliance-related functions of a board are greatly influenced by the chemistry and personal relationships that form among board members and often between the board and the founder. This is why most founders will look at composition from the point of who knows them and whom they know reasonably well on a personal level.

Board decisions for the most part tend to factor in ‘get alongability’ as a desired outcome in the dynamic. This is fine when done in the best interests of the organisation. However, it sometimes supersedes the objectivity required to make a decision, despite the fact that the decision may be hurtful to the founder or a few board members. Therefore, boards will often disengage and distance themselves from such engagement. For instance, if a board finds that a founder is consistently closed to suggestions for changes, members may be more likely to distance themselves rather than confront the situation. Exceptions do exist, but are not easily found.

Providing support as sought

One of the biggest laments of founders is that when boards evolve or when founders have attempted to create boards that comprise people who don’t know them well enough personally, the support they receive is not as useful as it can be. Board responses range from backslapping the executive to deferential distance that keeps them from getting more deeply involved. Conflict and/or indifference arises when the founder’s expectations and the board’s own understanding of its role are misaligned.

The role of the board needs to be flexible to factor in the evolving nature of the organisation, its team, and its readiness.

In an ideal world, the board’s role largely is to derive accountability from the organisation’s senior leadership, and steer the organisation’s mission with authority, beyond the fiduciary. As organisations evolve, founders will begin to seek support in various ways. A board that is not able to provide the advice or support in the manner it is sought, but instead believes its role to be different, will struggle to engage. The reality is that the founder’s need for specific support will change and evolve, and this requires a board to be agile. Often founders fail to have this open conversation for the fear of alienating the board or jeopardising the relationships they have with the board members. The role of the board needs to be flexible to factor in the evolving nature of the organisation, its team, and its readiness.

Founder preparedness

Establishing whether a founder actually needs a board to do anything beyond basic compliance is critical. Boards and founders spend a lot of time pandering to one another’s perception of what is considered good practice. Founder preparedness can often be discerned by the actions that a founder takes in engaging with the board.

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If a board is able to serve the aspirations and needs of a founder, greater trust is built.

Frequent and open communication, proactively seeking out support, acting on suggestions and providing feedback, and being open to diverse perspectives are some signs that indicate how prepared the founder is to engage with an active board. In turn, this requires the board to respond efficiently to the founder when they reach out. There is nothing wrong in boards simply providing compliance support. To conclude that such boards compromise on mission achievement or influence the organisation’s sustainability is erroneous. Founders who would like to retain greater entrepreneurial freedom may instead seek support from advisers, volunteers, and other acquaintances or friends.

Organisation readiness

It is not enough for the founder alone to be prepared to engage an involved board. The organisation must be equally ready and resourced to be able to translate the inputs shared by the board. This means ensuring the presence of a competent management team. Often the sector struggles with the availability of talent at a price that it can afford, which renders board translation of insights more challenging in most organisations.

A board could therefore invest some preliminary time with the founder to establish the execution capability available and possible before providing insights and guidance. Alternatively, the founder could first establish a team that can ‘absorb’ the board inputs adequately. The role of the board needs to be flexible to factor in the evolving nature of the organisation, its team, and its readiness.

The board–organisation relationship is a hierarchical one. However, if a board is able to serve the aspirations and needs of a founder (within the framework of compliance and fiduciary responsibilities), greater trust is built. This allows the board to then exercise its powers more easily for the overall mission fulfilment of the organisation, despite a founder, if need be.

As a sector, we are a long way off from that.

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ABOUT THE AUTHORS
Aarti Madhusudan-Image
Aarti Madhusudan

Aarti Madhusudan is the founder of Governance Counts, an initiative which helps nonprofits build more effective boards. This includes identifying key board related issues and recommending good practice guidelines. She has consulted several Indian and international organisations. Aarti is passionate about volunteering, and runs Whiteboard, an iVolunteer initiative that brings senior corporate professionals together as a group to provide strategic guidance pro bono to nonprofits. She volunteers herself with DaanUtsav. Aarti is an alumna of TISS, Mumbai and NIMHANS, Bangalore.

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