In setting out the Policy Governance approach in "Boards That Make a Difference" (currently going into its third edition)1., John Carver introduced the concept of ownership to the non-profit sector. In my experience, the significance of this concept is often not fully appreciated for what it is -- the fundamental starting point for good governance under any model. It is also my belief that lack of an appreciation of the importance of ownership is at the root of many non-profit board's governance problems, and, certainly, without such an appreciation, the full value of Policy Governance can never be grasped. Nonprofits that do not embrace the concept of "ownership" often think instead of "stakeholders". Let us uncover what lies behind these two concepts.
Typically, the term "stakeholders" is used to include anyone and everyone that has a "stake" in how well the organization does. In most cases, this includes clients, employees, suppliers and funders. The Policy Governance definition of "ownership" does not automatically include any of these groups. Clients are the beneficiaries of the work of the organization -- and, except in the case of membership associations, not necessarily the same people as the owners of the organization. Employees, suppliers and funders are contractors with the organization and, unlike owners, except in the case of cooperatives, have no automatic legal or moral hold over the organization beyond the terms of their contract.
The entire Policy Governance approach starts from the principle that a board's authority to govern an organization comes exclusively from the organization's owners (subject only to the legal framework established by the state on behalf of the public at large) and the board's accountability for the use of that authority is back to owners. This is why the board's job is unique -- no one else, including the CEO, has this direct link to owners. It follows that a board cannot even begin to govern until it knows who its owners are. It is impossible to act on behalf of someone else if you have no idea what their interests and concerns are.
A local branch of the United Way, for example, would be an entirely different organization if it considered itself to be owned by donors, by beneficiaries, by the local non-profit community, or by "everyone concerned with the development of local philanthropy". Donors might want an organization that focused on giving donors the widest possible range of choices for allocating their money together with assurance that their money was being well-spent and reasonable acknowledgement of their generosity. Beneficiaries might want an organization that focused on identifying need and stimulating as much giving as possible from as many donors as possible. The non-profit community might want an organization that focused on raising money with as few strings attached as possible to cover their common "difficult to fund" needs such as those for training, economic office space and administration. "Everyone concerned with the development of local philanthropy" might want the organization to focus on establishing a culture of giving through school and community wide programs. Different owners create different organizations.
So who owns your organization? Clearly, your legal owners are those who have the right to vote the board in or out, but subject only to these people's agreement, the board is free to interpret "ownership" more broadly. For example, the legal owners of the International Policy Governance Association are those who qualify for "full membership", but the board considers its moral ownership to be "everyone who is committed to the integrity of Policy Governance implementation". Discovering your moral ownership requires uncovering those whose interest in the organization goes beyond their own immediate personal self-interest and towards the longer-term interests of your organization as a vehicle for providing benefit for themselves and others for the foreseeable future. Some or all of these owners may also be customers or funders or employees or suppliers, but the board's job is to respond to their ownership interest rather any other interest they may have.
It may sound heretical to say it, but although customer/client/user focus is a vital thing for staff, it is highly dangerous for boards. Witness the sad spectacle of boards at the mercy of "customers". School board trustees and councillors know what it is like to be constantly besieged by conflicting individual interests. Good governance comes not from board members individually reacting to the demands of customers and trying to commandeer the board to fulfill those demands, but from board members together, on the basis of their collective knowledge, considering the best interests of all. In another example of the folly arising from an inadequate grasp of the board's ownership obligation, witness the non-profits who drift away from their founding principles as they follow the lure of funding.
The notion of ownership thus:
- legitimizes a board's authority
- clarifies a board's accountability
- unifies board members in common cause
- provides a touchstone for making difficult board choices
- helps distinguish the board's role from the CEO/staff's role
- enables a board to insulate itself from pressures that could divert it from achieving its goals on behalf of all those to whom they are properly accountable
To summarize, in order to do its job properly, it is vital that a board knows to whose tune it should rightfully dance and this isn't always as straightforward as it might appear. Whatever the board needs to do to achieve clarity, in terms of investing its own time and finding skilled facilitation is worth doing. A board that is not clear about the source of its mandate will flounder and when the board flounders, the whole organization usually flounders too (or unduly relies upon its CEO for its overall direction). To be successful, an organization needs to know where it is going and why, and it all starts with the board and its grasp of the concept of ownership.
1. Boards That Make a Difference: A New Design for Leadership in Nonprofit and Public Organizations, John Carver, Jossey-Bass Publishers Inc. 1990, 1997 and 2005