Governance may be one of the most misunderstood and misused words in the nonprofit sector. It seems to cause unnecessary angst or confusion.
A Relevant Definition
Governance may be puzzling because it means quite different things in various contexts, such as governments, corporations, and nonprofit organizations.
Nearly 20 years ago, the seminal book Governance as Leadership: Reframing the Work of Nonprofit Boards, provided a helpful definition and structure for governance within the sector. Although much has changed since then, I still find the authors’ recommendations for nonprofit governance roles to be a relevant and helpful paradigm. Let's unpack and demystify the three key functions.
The Three Modes
The authors—Chait, Ryan, and Taylor—suggest three modes of governance: fiduciary, strategic, and generative. These modes can be seen as steps toward board development, with fiduciary serving as the most elemental level and generative reflecting the most nuanced and challenging role.
Fiduciary Role: This is foundational to all board work and often the role most associated with governance. All boards need to engage in financial oversight, compliance, and risk management. These topics and activities include:
Watching for conflicts of interest
Providing transparency and accountability
Monitoring the budget and financial reports
Questioning financial practices, policies, and decisions
Strategic Role: The board is responsible for setting the long-term strategy and direction for the organization. Strategic roles and activities include:
Conducting regular, formal strategic planning
Considering the organization’s role within a larger ecosystem
Setting organizational goals—especially BHAGs (big hairy audacious goals)
Monitoring progress toward goals and objectives
Generative Role: This final role encourages creativity in exploring possibilities and imagining new paths forward. Generative activities look like:
Analyzing existing data or information with a new lens and asking new questions
Challenging current assumptions and considering ways to strengthen the organization
Anticipating future opportunities or challenges
Embracing curiosity and welcoming divergent views
The healthiest boards can work comfortably in all three modes and know when to “put on another hat.” In order to develop that type of board, it’s essential that staff provide support and tools: create a solid onboarding process, provide regular training, conduct self-assessments, and foster healthy relationships.
The highest-performing boards are proficient in all three modes. Lean into this triad, and embrace governance as leadership.