In two recent conversations, stitched together here into a single edited transcript, In Trust editor William R. MacKaye and Barbara E. Taylor, a longtime student of nonprofit governing boards, discussed aspects of the current thinking of Taylor and her colleagues William Ryan and Richard Chait. An excerpt of a recent article the three wrote begins on page 20. Here, in an expanded version not found in the print magazine, Taylor probes further with her reflections, and offers examples applicable specifically to theological schools.
MacKaye: You and your coauthors suggest in your paper that nonprofit boards ought to expand their vision of what they are for. Can you give me some examples of how they might do this?
Taylor: A lot of the important work in an organization is not going on at the high and formal level—the president or CEO sitting around making command decisions. It’s happening on the front lines, where work is actually being done. In a seminary, it’s in the classroom or in the coffee lounge or wherever there are discussions going on. Or externally, where potential students and potential givers live, discussions about the organization are going on all the time. How can a board develop strategy or make sense of what’s going on without direct contact with the operational realities of the organization? It’s in operations that new strategies and ideas often emerge and invariably are validated or discredited.
What that suggests to us is that there ought to be a lot more contact between board members and key constituents. For example, board members might go out to church councils and the like and ask, “What’s your experience of ministers, not just from our seminary but from other seminaries? What kinds of things do you think seminaries are not emphasizing sufficiently?” This is a way of building the intellectual capital of the board.
Boards bring to their institutions a number of kinds of capital: intellectual, political, reputational social. Just think of the reputational capital that’s built for a seminary when church members say, “These important board members came to our church council and talked with us about what we need. That must be one heck of a seminary. They’re really interested in what we think about this.”
Another example of how to learn the real life of the institution is for a trustee to shadow a faculty member or a seminarian for a day, just spending the day with him or her, learning how they spend their time, being part of the interactions around the lunch table, sitting in on classes, seeing what they’re like. That kind of first-hand information can never be duplicated through the kind of formal presentation that a board might receive from a president.
MacKaye: Let me interject a question here. If a board decided to assign its members each to get deeply acquainted with a member of the faculty, how then might the individual experiences of those board members become common property of the board as a whole?
Taylor: That’s a really good point. The focus needs to be simultaneously on educating the individual trustee and on sharing that education with the rest of the board. Say three trustees have been assigned to shadow three faculty members for a day. Then, take an hour at the meeting to do a presentation and lead a discussion about what they learned and to talk about its implications. If, for example, all three of the faculty members talked about their worry about the declining quality of the student body or the anxiety over the retirement of the president next year, talk about what this means for us as governors of this seminary. The board as a whole has to process this kind of information, or it becomes just kind of the personal property of an individual trustee.
Through such devices, and also by inviting outsiders into board meetings, the boardroom becomes the locus where things are processed, not the center of all trusteeship activity. Here’s an analogy: the staff meeting. Nobody would say that everything that a staff does is contained in a staff meeting but a staff meeting is a place where you report on what you’re doing. You may describe problems you’re having and seek advice. You may catch up on what other people are up to. But there’s a lot of work going on between staff meetings.
I think we need to rethink board meetings in much the same way, that the board meeting is a place where you share what you’ve learned, you catch up with one another, you do problem solving, but in between there’s a lot of activity that’s intended both to enhance the board’s own work and also to build the reputation of the seminary with the outside community.
MacKaye: It seems to me that there’s a tension here between the executives, particularly the seminary head, and the board. The professional managers don’t want the board to interfere too much. And the board members themselves likely are ambivalent. If they have confidence in the management, they want the managers to manage. And yet they keep worrying, What if? How are we supposed to stay on top of whether this place is running the way the president assures us that it is?
Taylor: There is a tension because there’s always the danger that a trustee will overreact to what they perceive as an invitation to do any darn thing they please. That’s why it’s so important that these kinds of activities be organized and supported by the chief executive and the rest of the board and not be a lot of freelancing.
Also, it’s important to note that what I’m describing is not the sole extent of trusteeship. What we’re talking about right now are three forms of governance. We’re calling them, not very cleverly, Type I, Type II, and Type III. Type I is the traditional fiduciary function. You still have to do that. Type II is the strategic function, what we promulgated in “The New Work of the Nonprofit Board.” One of the jobs of a board that’s practicing Type II governance is to work with the chief executive to help him or her make good strategic decisions.
Type III is what we call the generative mode of governance, where trustees try to make sense of what’s going on in and around the organization. They identify problems, frame issues, look at matters through multiple perspectives. The work involves making sense of what’s going on around you. What has happened and why? Are there patterns we should be paying attention to? Why do we do this in this way? What would happen if we did X, Y, or Z? It’s not immediate problem-solving. It’s more about figuring out what the question is.
MacKaye: Type III doesn’t replace the other two.
Taylor: It doesn’t replace the other two at all. I think you could argue it enhances the other two, but the other two absolutely have to be done. And if you try to do Type III without doing Type I you’ve got a disaster on your hands.
The bill of goods that we’ve sold to trustees—and I’ve been part of the selling of that bill of goods—is that strategic work is the most important thing that a board does. But if you come right down to it, you’re not making strategy every single day. Type III work enhances your ability to develop strategy and to make key decisions when those moments arise. And to recognize a strategic decision when you see one.
The board represents a tremendous underutilized asset in an organization that doesn’t have a lot of assets to waste. This point, I think, is particularly pertinent to seminaries. If you’ve got a group of really smart, committed people and you’re not utilizing them to the same extent that you utilize your endowment or your physical plant, you’re leaving a lot of value on the table.
MacKaye: To me, one of your most disturbing points is that too many board members are really disengaged from the operation of the organization on whose board they serve and that many are neither very curious nor showing a whole lot of energy about doing anything about their ignorance. If a president is confronted with this kind of diffidence, what does he or she do about it?
Taylor: I think the issue of ignorant and uninterested board members is some combination of poor selection of trustees and also, probably more fundamentally, a real reluctance—sometimes understandable reluctance—on the part of the chief executive to let board members know very much for fear of what might happen.
To be sure, a little knowledge is a dangerous thing, as they say. It becomes a big design responsibility for the president and the board chair to figure out how to do Type III work in a way that adds value to the organization commensurate with the effort it takes to make it happen. I think for a lot of chief executives their reaction is to say, “I don’t even want to touch that—it could create problems for me and it’s not worth the cost.” There may be organizations for which that’s absolutely true. They should stick to Type I governance and not even get into Type II. But what we’re saying is that the highest performing, highest value-adding boards are boards that can practice all three forms of governance skillfully.
MacKaye: One of the things that has always interested me about the possibility of boards adding value is the power of the “dumb” question. That’s the question raised by a person who comes into a situation without knowing anything about it and asks a different kind of question that forces the expert to look at it in a different kind of way.
I suppose this is related to the sense-making idea you’re working on.
Taylor: Absolutely. But you can ask better “dumb” questions if you have some experience of the way the organization is currently operating. The sense-making thing is a perfect illustration of the power of ignorance.
Here’s an example. One of us worked with a museum that had the opportunity to purchase some masterwork for $20 million or something. And a trustee asked, “Is this the best possible use of the $20 million? What if were to take our current collection and use that same $20 million to take it around the country and show it to more people? Would that be a better use of the money?”
With that, the conversation was enlarged beyond, “Should we pay $20 million for the painting or just stop if we can’t get it for $15 million?” “What else could we doing with this money?” was added to the mix.
Ron Heifetz has written about the difference between adaptive and technical problems. The power of the “dumb” question becomes really evident when you’re talking about something that’s not a technical question, when there are multiple possible answers, so that any reasonably educated and informed person can probably make as good a judgment as any other reasonably educated and informed person. The question of whether to use the money to take the collection around or to buy a painting is not something that the director of the museum is inherently better able to answer than an informed member of the board.
One of the key issues for a CEO is to help the board determine the difference between a technical and an adaptive problem. And not to assume that all adaptive problems are actually technical, which is the mistake I think most CEOs make. They tend to say to themselves, “Only I, the experienced one, am capable of making this decision.” Board members also need to learn this lesson and resist the urge to say things like, “If only you understood the seminary the way I understand my insurance business, you’d make the same decisions I would.”
MacKaye: The question about the $20 million reminds me of a question that I’ve heard Lilly Endowment’s Craig Dykstra pose. This does not apply to any particular institution but is a question he believes marginal theological schools ought to be thinking about. The question is, you have a collection of assets here at this school, you’re not doing well pursuing the particular mission you have at the moment and it costs X dollars a year to educate your students, and so forth and so on. Is this the best use of your resources?
Taylor: You’re absolutely right, that’s a very pertinent question for your audience. This takes us back to the age-old question of whether a trustee is a trustee of that institution or a trustee of the larger purpose of the institution.
There are lots of different answers to that. But even if you were to say, “I’m a trustee of this institution and I want it to survive,” it doesn’t necessarily have to survive in exactly the same form that it is in now. The intelligent ignorant person might be in the best position of all—and this is where the “dumb” question comes in—to ask, “What if we were to take our assets and make our seminary into a research institute or something else?” I think those are good examples of sense-making opportunities. You get together and somebody says, “We can’t balance the budget.” In response you say, “Instead of talking about the technical effort to balance the budget, let’s take a step backwards and ask, “Is this the best possible use of our resources?”
You can see how this kind of reframing would make CEOs crazy. But, on the other hand, I think the other thing people have to remember is that we have largely—at least at the level of the best literature on this—dropped the idea that any one person, no matter how smart, has the answers to everything. You know, particularly when you’re one little president in a seminary with enormous problems. And most of them face enormous challenges. Read virtually any book on management these days, and you’ll find that the command-and-control model is essentially dead, particularly in flat organizations like educational institutions. It’s not as if the chief executive of a seminary can make decisions without talking to the faculty, for example.
MacKaye: Your mention of the change in recommended leadership styles reminds me of something I noticed about the books you reported that you’re currently reading (See “Reading List”). They’re all concerned with leadership. What is the connection between leadership and board service?
Taylor: It’s really interesting. We have this new theory that leaders—formal leaders, presidents and other chief executives—have essentially hijacked governance, though not malevolently. So what we now call leadership in these organizations is, in effect, governance. Governance is decision-making about important issues. Chief executives—and who could blame them?—have hijacked this role because it’s the more interesting job, while board members have been left to do some kind of thin gruel form of management. You know, overseeing the physical plant and the academic program. Essentially hands-off, watching the institution go by.
Go back to the original idea of a chief executive as agent of a board. Then the board, theoretically at least, would say to the chief executive, “These are the things we want you to do, and we’re going to make decisions.” In point of fact, it’s now just the opposite. The chief executive in effect says to the board, “Here are the things you can do. You can oversee the physical plant and you can work on the budget and you can, heaven knows, raise money. But, in the end, I will tell you what to do—I will recommend policies to you and you will adopt them.”
In point of fact, while boards may talk about making policy, they don’t make policy. They adopt policies recommended to them by the chief executive.
Henry Mintzberg, one of the people I’ve been reading, says that what an organization does is pursue policies and strategies that arise from its collective mind regardless of what the formal strategic plan might say. So the job of a leader is to figure out what the collective mind is saying and to try to influence it.
But meanwhile we have executives who have told their boards, “We’re going to isolate you over here in the boardroom, and the real stuff—the development of the collective mind and trying to understand what strategy is emergent in the organization and so on—we’ll take care of that. We’ll talk to the constituents and we’ll figure out what’s going on and we’ll come and bring you recommendations about grand strategy.”
MacKaye: But your sense is that the trustees, in a better world, would be part of discerning what the collective mind is?
Taylor: Absolutely. That’s why we need to get board members out of the boardroom, give them more opportunities to talk to the people who are the determinants of what the collective mind is. If you’re going to understand what’s really going on in an organization you have to talk to the people who inhabit the organization and you have to talk to the people outside of it who determine what kind of resources you’re going to get, what kind of reputation you’re going to have as an organization. A board still has to do the other things. You still have to be a fiduciary and you still have to pay attention to formal strategy because there are some aspects of organizations that lend themselves to formal planning, formal strategy, but the point is you can’t leave it at that.
MacKaye: So what’s the appropriate role of the chief executive with a board that’s operating the way you’re suggesting the board ought to operate?
Taylor: It’s really an organizing job, a kind of convening and authorizing role. If it’s true—and I believe it is—that constituents have a lot to say about an organization’s emergent and realized strategy, the job of a chief executive is to provide the environment within which what’s going on can be discovered and people can talk about it. What matters is not that you can issue orders but that you have the authority to convene a meeting, to develop an agenda, to ask somebody to find out from somebody else what’s going on.
Building on this, the CEO should be asking, “How can we organize the board so that it, in a responsible way, can participate in figuring out what’s going on around here?"
The other thing that you can do is to set up the board as a kind of loyal opposition to the chief executive, challenging them to mount the best argument they can against what the chief executive is proposing to do. Not to try to undermine the chief executive but to try to make sure that he or she has really thought matters through.
MacKaye: It’s not uncommon for CEOs to have a little demon inside who says to them from time to time, “You know, listening to what the constituents or the staff want is kind of a nuisance, it gets in my way because I know what to do.” What is the mechanism by which a board begins to resist—or, at least, try to refine—the ideas of the CEO who doesn’t necessarily immediately want that to happen?
Taylor: That’s a really interesting question and one to which I don’t completely know the answer. I do think that it helps a lot if you’ve got good board leadership and if you’ve got a board chair who’s not willing to knuckle under just because the chief executive wants to be the heroic leader.
MacKaye: The chair may have a role as being sort of an alter ego and contrarian to the CEO.
Taylor: Absolutely, and just to say, in essence, you don’t know everything the constituents are thinking, you don’t control everything that they think, and we’d be wise as an organization to have a better understanding of what people think of us, internally and externally, and to use that information to inform the decisions that we make.
In point of fact, the environment—internal and external—will decide what it thinks of your organization regardless of what the chief executive thinks. So the idea that you can somehow run the thing from the top, and ignore the signals that are coming from constituencies, internal and external, is a—I mean, people who think that are living in a dream world. You may be able to pull it off for a short period of time but not for long.
MacKaye: I’m curious as to whether you have any sense of a trend in nonprofit organizations, whether boards have become more effective, less effective, or just stayed the same over the last ten years. Do you have any feeling about that?
Taylor: I think they’re becoming more effective. I think they’re struggling. They’re struggling to find a role and one of the things that has really struck us as interesting, and that really underlies all of this work, is the degree to which boards are struggling to figure out how to play a role that’s useful. I think it used to be that they were satisfied to be honorific and they’re not satisfied anymore.
I just came back from doing a seminar on Saturday for a group of board chairs of independent schools from across the country. The reaction I got is one that is happening to the three of us wherever we go and talk about this stuff. Board members acknowledge that what they’ve been fed up until now is boring and uninspiring. They love this new way of looking at the work of the board. The idea that they might actually be able to do something, other than just stand there and watch, is incredibly appealing to them.
MacKaye: Were there CEOs present at the seminar you just mentioned? As you know, In Trust has tended to operate on the principle that it’s not wise to work with board chairs alone, that the president should always be present at training sessions.
Taylor: I used to think that. I don’t anymore. It depends on what it is you’re trying to do.
I do think that if you want change to occur in a board having both of them present at a training session is really helpful. But as a principle, I really dislike the idea that it’s okay for chief executives to go off and have their little meetings but that board chairs can’t go unless their hand is being held by the chief executive. You know, I personally find that offensive.
MacKaye: Did you have a specific experience that led you to change your mind on this?
Taylor: It’s been gradual. Over the years my feeling has grown that boards ought to think of themselves as more independent. To some extent, this going to a meeting without the chief executive holding your hand is a natural outgrowth of the sense that the board shouldn’t have to feel as if it’s the creature or the subordinate of the chief executive.
Pragmatically speaking, though, the president, for better or worse, has a lot—and one would hope for better—has a lot of influence on the way the board operates. If you can get him or her into the tent that’s great. But I just react viscerally to the idea that trustees should never be able to get together and talk to each other without the chief executive there to make sure that we don’t stray from the path of righteousness.