Essential Responsibilities of Foundation Governance

Phil Buchanan

Governance matters across sectors, of course. But within the nonprofit sector, foundation governance is especially crucial. 

After all, foundations have a significant impact on nonprofits, fields, and communities. But, unlike for an operating nonprofit, there aren’t a lot of naturally occurring feedback loops for private foundations if the CEO or executive director — and/or his or her staff — have significant weaknesses (AKA “areas for growth”) or, worse, are just mailing it in.

That’s why the board is so crucial.

Given this, it was especially disappointing to see that nearly a third of CEO respondents in a just-released BoardSource study on foundation governance reported that they hadn’t had a performance review in the past 12 months. Eighteen percent of the 111 respondents said they’d never been evaluated! (It’s noteworthy that the story was very different for the 28 community foundation respondents, of which 91 percent experienced a review in the past year, and 100 percent reported they’d been reviewed in the past two years.)

Admittedly, BoardSource makes no claim of representativeness or generalizability in its clearly-presented and important report. CEP benchmarked governance practices at larger foundations in 2015 and found a slightly lower proportion — about a quarter — who hadn’t had a review in the last year.

But whether it’s a third or a quarter, it’s still troubling. Every board should annually and in some formal way assess its CEO against mutually agreed-upon goals. There’s no excuse for not doing so. Foundation CEOs whose boards haven’t initiated a conversation about the process should take the initiative to do so themselves — proposing a process that includes a range of relevant qualitative and quantitative data and allows for direct and unfiltered feedback from staff and other key constituents to the board.

I’ve experienced the power and utility of well-constructed performance reviews. My own review process at CEP — which I am sure is not perfect but has been incredibly useful to me — includes the following elements:

  • A self-assessment that reflects on my performance against personal goals (articulated and discussed with the board early in each year), drawing on available data such as (these are just a few examples): frequency and visibility of speaking engagements and writing; anonymous 360-degree feedback about me that any staff member in the organization can complete (and nearly half of our 42 staff members typically do), which goes straight to a board committee at the same time it goes to me; and results of our regular staff survey.
  • An assessment of organizational performance that includes results relative to agreed-upon targets on a series of performance indicators (spanning the gamut from conference attendee satisfaction to blog readership to the economic contribution of CEP’s assessment and advisory services); a detailed report on progress against our workplan for the year; analysis of data about our influence on practice, which most years includes third-party assessments based on independent surveys; and an assessment of our financial performance, including earned and contributed revenue and cost levels relative to budget and past years.
  • Board member feedback and, every so often (most recently last year), a series of board-conducted interviews with key stakeholders — major funders, clients, and other infrastructure organizations — to explore their perceptions of my performance and to ensure the board is really hearing about how I am doing.

Some might argue CEP is not a foundation, so our performance is therefore somewhat easier to assess. But the difficulty of assessment in a foundation context only makes it more crucial, not less.

I have seen foundation boards whose CEOs go through a similar process to the one I described for myself. Those who do inevitably feel, as I do, that much is learned in the process. I am better at my job than I was a decade ago (though I have much still to work on), and I’d credit well-constructed board-led performance reviews with contributing to a lot of what I have learned.

This kind of process takes time and commitment from board members, but it is a crucial way for a board to fulfill its essential responsibility of ensuring that the CEO is performing well — and remains the right person for the job.

Admittedly, two-thirds of respondents to the BoardSource study have had a recent review, so you might argue that I am making too much about the third that have not. But I’d argue that the percentage of boards that review their CEOs annually should be the same as the percentage whose financials are audited, or who complete their 990-PF: 100. The functions are of at least equal importance.

Moreover, I know from my experience working closely with foundations that, even among those that routinely assess their CEOs, there is a range of approaches — some much more diligent and thoughtful, with opportunities for board members to hear unfiltered feedback from a range of constituents, than others.

Boards need to assess their own performance, too, although not necessarily every year. Yet foundation boards represented in the BoardSource study are less inclined to do this, with just 38 percent saying they had conducted a self-assessment in the past three years. CEP’s 2015 benchmarking study found 48 percent in the same timeframe. Again, either way, that leaves too many who aren’t.

Board self-assessments are crucial ways to ensure each member of the board can candidly and confidentially have her voice heard about how it’s going. (CEP’s board has over the years used a variety of processes to do this and now implements BoardSource’s self-assessment every two to three years. In addition, we do a short self-administered survey of board members after each and every meeting.)

There’s positive data in the BoardSource report, too, and it’s well worth reviewing all the rich data. But the data points about CEO evaluation and board self-assessment jumped out at me as both concerning — and frankly not that hard to fix so long as the will is there.

Note: In my next post, I’ll discuss the BoardSource data on racial diversity — or the lack thereof — in the boardroom.

Phil Buchanan is president of CEP. Follow him on Twitter at @philxbuchanan

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