Comparisons: McKinsey Global Survey on Improving Board Governance

By Virgil Carter

Every organization, whether for-profit or non-profit, strives to achieve an effective governing board.  McKinsey & Company, a recognized leader in organizational management in the for-profit corporate sector, often provides research useful for profit oriented and non-profit organizations alike.  In a recent 2012 survey, “Improving Board Governance:  McKinsey Global Survey Results”, McKinsey has some interesting findings which may be useful benchmarks for non-profit CEOs and volunteer leaders.

Survey contributors Chinta Bhagat, Martin Hirt and Conor Kehoe write, “Board directors today are more confident in their knowledge of the companies they serve and more strategic in their approach than they were in 2011. We asked respondents to focus on the single board with which they are most familiar. Overall, 166 respondents represent publicly owned businesses, and 606 represent privately owned firms; they represent the full range of regions, industries, and company sizes.

Focusing on Strategy

“Over 90 percent of respondents also say their boards have become more effective over the past five years, most often attributing that improvement to better collaboration with senior executives and more active or skilled independent directors”, according to the survey.
Two reasons may explain why boards are most effective at strategy: board members say they spend more time on it than other areas and that they have increased the amount of overall working time they devote to strategy, answering the call to action expressed by respondents to previous surveys. “In our 2008 survey, respondents reported that 24 percent of board time was spent on strategy—and a clear majority said they would increase the time spent.”  Now, directors say their boards spend 28 percent of their time on strategy, and only 52 percent say they would increase it (compared with 70 percent of respondents who said so in 2011). Meanwhile, the share of time spent on execution, investments, and M&A has shrunk, which is likely related to the fact that overall M&A activity has declined since 2007.

Room for Improvement

While respondents say their boards are taking more responsibility for strategy, risk management is still a weak spot—perhaps because boards (and companies) are increasingly complacent about risks, as we move further out from the 2008 financial crisis. This is the one issue where the share of directors reporting sufficient knowledge has not increased: 29 percent now say their boards have limited or no understanding of the risks their companies face. What’s more, they say their boards spend just 12 percent of their time on risk management, an even smaller share of time than two years ago.
Despite the progress they report, directors identify the same factors that would most likely improve board performance as respondents did in the previous survey: a better mix of skills or backgrounds, more time spent on company matters, and better people dynamics to enable constructive discussions. With respect to time, directors say they devote roughly the same number of days to board work as in 2011, and they still want more time. Across regions, directors at North American companies work an average of 22 days on company matters—notably less time than the 29 days and 34 days, respectively, reported by directors at European and Asian companies.

Looking ahead

• Increase attention to risks. According to respondents, most boards need to devote more attention to risk than they currently do. One way to get started is by embedding structured risk discussions into management processes throughout the organization.
• Make time. As in 2011, most directors say they want to spend more time on board work, and the results suggest real benefits from doing so: directors at higher-impact boards spend many more days per year on their work than everyone else, which likely helps them stay more relevant to and engaged with important company matters.
• Learn from peers. Directors at boards with less impact have much to learn from the actions taken by higher-impact boards, and not only when it comes to strategy. Using robust financial metrics, conducting postmortems of major projects, and using systematic processes to create competitive advantage through M&A—which the high-impact boards do more often—could all help boards become better.

How would you compare your non-profit governing board to these results?  Do you periodically survey your board for bench-marking and opportunities for governance improvement?  For a full copy of the survey findings, go to http://www.mckinsey.com/Insights/Strategy/Improving_board_governance_McKinsey_Global_Survey_results?cid=other-eml-alt-mip-mck-oth-1308

Aligning Mission and Money

By Virgil Carter

Despite the slow economy, some non-profit organizations are doing well.  Their membership and major programs, products and services continue to be successful.  Their financial performance continues with annual positive variances to their yearly budgets.

Many other non-profit organizations, however, have not been so fortunate.  Since the beginning of the economic downturn in 2009, the membership and major programs, products and services of these organizations have not performed as well as hoped.  Many of these organizations have experienced substantial reductions in membership, dues revenues and non-dues revenues.   The threat (or actuality) of negative financial performance has alarmed volunteer and staff leadership alike.  What can be done?

This situation is really about aligning mission and money.  When the economy and organizational performance are going well, there may often be little concern for the alignment of mission and money.  When things are going so well, however, the alignment of mission and money becomes much more critical for the prolonged health of the organization.  What should volunteer and staff leaders be doing to align mission and money?

One key approach to align mission and money is evaluation.  Annual evaluation of association programs, products and services serves to analyze and make decisions about existing and proposed programs, products and services to determine the degree to which each of these supports the organization’s mission and operational goals, including financial performance.  An on-going annual valuation process, tied into the organization’s annual budget process, providing a rational decision-making basis for existing and new programs—which programs deserve continuation, expansion, reduction or sun-setting.  This same review process also helps to identify and prioritize which of the new program proposals deserves resources for the coming year.

If your organization is facing challenging economic conditions this may be the ideal time to dust off and refresh your annual review of programs, products and services.  Are your mission and money aligned as needed to support your organization’s successful performance?

A Better Senior Staff Team in Three Steps

By Virgil R. Carter

Many non-profit organizations and their CEOs depend on their top, senior staff team to help organize and lead the daily work of the non-profit so that it may be a consistently successful organization.  The day of a “one person” leadership team, in most organizations, is long gone.  Are there ways for the executive team to function better?  According to an article in McKinsey Quarterly, authored by Michiel Knuyt, Judy Malan and Rachel Tuffield, “few teams function as well as they could”.  The authors write that there are three important steps that can be taken for more effective executive teams.  Consider the following:

•      Get the right people on the team…and the wrong ones off:  Remember the oft-quoted advice to “get the right people on the bus”?  The corresponding critical ingredient is to help the “wrong” people find a new and different opportunity that more closely fits their capabilities and career preferences. CEOs are responsible for selecting the senior staff executive team.  The authors note that this responsibility “…typically requires conscious attention and courage from the CEO, otherwise, the top team can under deliver for an extended period of time.”  Without the right people, the senior staff team’s performance will be limited and organizational performance will suffer.
•      Ensure the team works on only what it can do:  The purpose and focus of the top staff team is critical.  It’s up to the CEO to communicate the purpose and focus of the executive team, and to closely monitor the team’s adherence to the purpose and focus.  Like committees everywhere, left alone the team will look for things to do that seem interesting and that justify the team’s existence. Thus, purpose and focus must be carefully drawn and matched to the unique needs of the nonprofit organization. For example, projects with critical cross-functional or cross regional programs often provide valuable work for the top senior staff team.
•      Keep team dynamics and processes positive and productive:  CEOs must give “unrelenting attention” to the productive collaboration of the top staff executive team.  It is all too common for executive teams to become dysfunctional over opposing priorities, entrenched thinking, competitive views, and the like.  CEOs must lead their executive teams, setting the example and addressing the dynamics of their team, while dealing with concrete business issues.

With a senior staff team that is willing and able to effectively do its work, a non-profit organization can achieve a major performance improvement.  For the full article, see https://www.mckinseyquarterly.com/Organization/Talent/Three_steps_to_building_a_better_top_team_2743

Overcoming Silos

By Virgil Carter

You know silos. According to Wikipedia:  “A silo is a structure for storing bulk materials. Silos are used in agriculture to store grain (see grain elevators) or fermented feed known as silage. Silos are more commonly used for bulk storage of grain, coal, cement, carbon black, woodchips, food products and sawdust.”
In non-profit organizations silos tend to result from “vertically” structured organizations where each major business function—education, publications, meetings, etc.—is a stand-alone, fully self-contained business operation. 

Silos tend to reflect an inward focus by an organization.  That’s because silos tend to focus inwardly on doing the things that those in the silo “like to do”.  It frequently doesn’t matter (to those in the silo) if there is a market for their products, or if operations are profitable.  And this is one of the major issues with silos:  silos are often characterized by the interests of the silo taking precedence over the interests of the organization as a whole.  Further, it’s not uncommon for there to be strong competition among silos for organizational resources—financial and human.  The result?  The more silos that an organization has, the more that internal competition may inhibit organizational responsiveness, performance and viability.  Sound familiar?

Is there an alternative for improved organizational performance?  Here it is folks:  market focus!  That’s it:  market focus.

Market focus means identifying the markets critical to organizational success as the basis for the development and sales of all of an organization’s goods and services.  This involves “the voice of the customer”:  learning and understanding the customer’s expectations and requirements, delighting customers and building loyalty.  This is a far cry from “producing what we like to produce” and trying to get someone to buy it.

This can be a cultural and functional shift for non-profits where volunteers in silos “do what they like to do”.  Market focus is an “external view”, as opposed to silo’s “internal view”.  Implementing market focus, using the voice of the customer, involves an annual process to assess and guide an organization’s portfolio of goods and services.  This means encouraging and supporting innovation for new programs; it means sunsetting some existing programs, in a planned, orderly basis.

Market focus means new opportunities.  New opportunities mean new revenues and resources, which will benefit all organizational members and customers.  Want to trade your silos for new opportunities?  Become market focused!

Litmus test for sustainability

By Steven Worth

It is a forehead slapping, frustrating moment when a manager realizes the metric they have been using to measure a program’s effectiveness may not be the right one--but it is the only explanation sometimes when hitting a target leaves you less than satisfied, when you realize that you could hit the target repeatedly and still never be any further ahead in the end.  It is a more common managerial mistake than many realize, but how do you solve it—how do you know you have set the target on what truly matters?

The answer lies in the realization that every strategic goal has multiple dimensions such as: 

·        Financial, are the revenues generated enough to cover costs and contribute to investment in new intellectual capital?;

·        In what measurable way(s) does it contribute to advancing the organization’s mission and vision? and

·        In what measurable ways does it increased the market share or impact of your organization on your target markets?

But there is a fourth area that the most effective programs cover as well: 

·        How has this improved the economic performance of your customers?—how has it helped students find jobs, professionals to find better paying positions, and employers to operate more efficiently and profitably?

As important as the first three are, it is this fourth aspect of measurement that matters most in this competitive global economy we all live in.

Strategies For Burnout

By Virgil Carter

As a CEO, and the top leadership interface between your organization’s members, customers and staff, have you experienced burnout?  Do you know CEOs who have gone through burnout?  It’s no surprise that leaders, with the challenge of being responsible for planning and performance of their organizations, can become victims of burnout.  The continuous, never-ending burden of top leadership can wear anyone down.

Are there some ways to reduce or avoid burnout? 

A recent Internet article from LeaderPoint notes that while the weight of being in charge can overcome the most successful leaders, burnout is often a function of not delegating and working through others effectively.  Harvard Business Review blogger John Baldoni is quoted as stating that the “best way to overcome the drive than made (CEOs) successful in the first place—the relentless pursuit of perfection—is to shift focus from one’s own success to the success of the executive team.”

Here are some suggestions from the article to help avoid burnout:

--Lead through others:  Being a CEO widens the scope and increases the magnitude of the results to be achieved.  Assign others the significant outcomes so that the CEO is not the bottleneck, consumed with personal problem-solving.

--Knowing everything:  No CEO can do everything well.  Accepting that no one can possibly know everything allows one to ask more questions, learn more and allows the work to remain with those show should be doing it.

--Enabling others:  Motivating others is a challenge.  Sometimes it works and sometimes it doesn’t.  Instead, focus on the work to be done, the desired outcome and assign these to key staff.  Big jobs with significant outcomes tend to motivate people.

The bottom line is about getting results, consistently over time.  It’s hard to do that without the support and assistance from others. One of the best ways for CEOs to achieve success is to drop their invincibility posture.  Successful leadership and successful organizations are not a solo act.

To read the article “Avoid Burnout by Focusing on Your Team”, by John Baldoni, go here:  http://blogs.hbr.org/cs/2010/11/avoid_burnout_by_focusing_on_y.html#