- Posted by Paul Zilz
- On September 4, 2018
- Board Role, Ends, Owners and Ownership
This is a fundamental, but often overlooked, question for your board to ask: “What is our position and our role in this organization?” The way your board answers this question will determine, to a large extent, its focus and its processes.
Many boards assume that they are “at the top of the food chain,” that by virtue of being “the board” they are at the head of the “chain of command/” Consider an alternative: it is more constructive for your board to consider itself to be the link between those who are invested in your organization (let’s call this group “owners” for shorthand) and the person to whom the board delegates authority (let’s call this person your CEO, for shorthand).
Let’s focus on the governance implications of the board’s relationship with its owners.
In the construct above that I asked you to consider, your board connects its authority to govern, as well as its accountability, to those who morally, if not legally, “own” your organization. If you are a not-for-profit organization, your owners are the equivalent of a for-profit’s shareholders. Perhaps your owners are your members, if you are a trade association, church, or credit union. Perhaps your owners are members of your community, if you are a health services organization or a public school system. Your board governs on behalf of ALL your owners, not various subsets of your owners, and it must make decisions in the best interest of the ownership as a whole.
In this scenario, your board is NOT the “top dog” of the organization. Rather, your board acts as a servant-leader to those on whose behalf it governs – your owners. Specifically, on behalf of the owners your board decides:
- what benefits your organization is to produce,
- the beneficiaries of those intended benefits, and
- the worth of producing those benefits in terms of the cost to produce them, either in terms of actual cost of resources or in terms of priorities;, that is, the opportunity cost of producing more of one benefit than another.
Let’s call these three strategic governance decisions “Ends” decisions, for shorthand. These Ends decisions are your board’s strategic contribution to delineating the difference your organization will make in people’s lives!
One of the key job contributions of your board is to connect with your defined owners, to understand their values, perspectives, and desires, specifically related to the Ends issues above. When last has your board identified who “owns” your organization? Do your board policies include a written definition of who owns the organization, what the board’s relationship is to the owners, and what the board’s expectations are regarding how it will connect with the owners?
If your board has clarified that relationship in written policy, the next step is for the board to actually connect with your owners in order to assess their values and perspectives on the three Ends issues above. This entails developing an ownership linkage plan which includes identifying the Ends-related questions to be asked or issues to be discussed, what groups of owners will be contacted for input, and the method(s) used to solicit the focused Ends-related information from each group. Only in this way can the board ensure it is truly representing the interests of the organization’s owners when making Ends decisions.
The final step of this connection process is for the board to communicate with its owners regarding how it has used the feedback received from the owners in the board’s continual process of reviewing its Ends to ensure they properly capture the owners’ values. This strengthens the relationship between the board and the owners and demonstrates to the owners how the board has used their input to determine the direction of the organization. Active, two-way, governance-focused dialogue between the board and the owners can strengthen the owners’ confidence in the board’s governance capacity and build trust in the board’s decision-making processes and results.
As boards govern based on the ethical and practical implications and responsibilities of being accountable to those on whose behalf they govern, they do so with legitimacy. Governing on behalf of the organization’s owners allows the board to lead with a servant heart, as it seeks to make a difference in the lives of those the organization serves.
For more resources on how to effectively connect with your owners, contact The Governance Coach™.