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The Three Types of Governance Thinking

posted on 8:15 AM, February 25, 2019
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by Maria Lahiffe

Governing boards exist for one main reason: leadership. The board should take the long view, with a wide perspective of the organization and its operating context, ask big questions, and give general direction to staff.

In framing the leadership role of governing boards, it is useful to divide governance thinking into three types: [1]

Type 1 Mode: Fiduciary

Every board has a fiduciary responsibility to its organization and its stakeholders, to steward the organization’s tangible assets responsibly. In executing this responsibility, every board member should understand details such as how to read a financial statement, what laws pertain to their organization and its operations, and how effective operations work.

However, such detailed considerations are really the responsibility of staff. The board needs to understand staff reports on these topics; however, the real fiduciary view of a board should be wider-ranging. Certainly, the budget needs to be balanced, but is the current programming the best use of current funding? In evaluating new possible initiatives, the board needs to consider financial, legal, and operational concerns, as well as stepping back to evaluate if the initiative fits with the organization’s mission, vision, and values. The organization is in compliance with existing laws, but what laws are coming down the pipe, and how will they affect the organization and its purpose?

Type 2 Mode: Strategic

When operating in strategic mode, the board acts as a strategic partner to senior management. Its core work includes setting priorities, reviewing and modifying strategic plans, and monitoring performance against plans.

Type 3 Mode: Generative

“Generative thinking is a cognitive process for deciding what to pay attention to, what it means, and what to do about it… The board ‘decides what to decide’; discerns challenges and opportunities; and probes assumptions, logic, and the values behind strategies.” [2] This is the most important aspect of board governance, a function which is very difficult for staff to fill because staff are caught up in the day-to-day details of running the organization.

If your board is a working board, i.e. if you do some or all of the work of running the organization in addition to governing, you need to allot separate time during meetings for "working" discussion and "governance" discussion. It is impossible for your brain to occupy both spaces at the same time. Use a parking lot to hold off-topic ideas, in order to keep the discussion focused.

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Related blog posts:

[1] R. P. Chait, W. P. Ryan and B. E. Taylor, Governance as Leadership: Reframing the work of Nonprofit Boards, Washington DC: BoardSource, 2005. [2] The Pew Fund for Health and Human Services, "Governance as Leadership: Reframing the Work of the Nonprofit Board," 29 October 2007. [Online]. Available: http://www.pewtrusts.org/~/media/legacy/uploadedfiles/wwwpewtrustsorg/reports/pew_fund_for_hhs_in_phila/governance20as20leadership20summary20finalpdf.pdf. [Accessed 12 March 2018].
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