July 20, 2021

Strategy as Governance

“Tell me and I will forget. Teach me and I will remember. Involve me and I will understand.”

Typically, board training focuses on the first two parts of this ancient wisdom. We tell board members what they should do, which they are likely to forget. Or we teach them best practices that they are likely to remember but fail to execute. How can we reconceive of board training so that board members will understand what good governance is and how it can be attained? Fortunately, the means of doing so has been hiding in plain sight.

First, it is important that we come to agreement on what constitutes good governance. For my money, there is nothing better than the framework presented in Governance as Leadership (Chait, Ryan, and Taylor, 2005). To summarize, boards operate in three different modes of governance. The fiduciary mode focuses on issues related to compliance, accountability, and efficiency. To resurrect an old analogy, fiduciary oversight ensures that the trains run on time (and within budget).

The second mode of governance is strategic. Building on the fiduciary responsibilities, strategic-level governance focuses on priorities, planning, and alignment. While financial oversight ensures that your nonprofit is sustainable, the strategic mode introduces consideration of the impact of organizational spending. To extend the analogy, strategic governance ensures that the trains are going to the places people want to go.

The third mode of governance is generative. In my experience as a consultant and board member, this is the most neglected aspect of governance. Rather than reviewing (and sometimes nit-picking) financial statements, generative work requires reflection, critical thinking, and sense making. It is one thing to be solvent as an organization (fiduciary). It is a better thing to know that we are creating the intended mission impact (strategic). The generative mode forces us to look both inward and outward to understand gain a clear sense of how we got to where we are and how the future conditions may shape our aspirations for impact. Generative strategy considers questions such as ‘what has our past taught about our potential’ and ‘what external changes might affect our ability to remain relevant’.

Good governance lies in the ability and willingness of a nonprofit board to engage in the various modes when each is called for. A fully engaged board might conclude that yes, the trains are moving on time; yes, we are going to the right places; but how are not sure if people will still be riding trains in twenty years.

Simply put, strategy development is the ideal vehicle for involving board members in the deep, multi-faceted work of governance. The three phases of strategy development – visioning, implementation, and review – depend on the effective use of each of the three modes of governance. Without the ability to learn from our experience, we are unable to imagine ourselves into the future. Without a clear understanding of our desired impact, it is difficult to know if we are meeting our mission. And without the knowledge of our financial position, we may set ourselves up for failure in achieving our strategic aspirations.

The relationship between strategy and governance is illustrated in the table below. The reality is that it doesn’t matter which door you use as a point of entry. Board governance training will quickly run into the need for strategy. Likewise, it is difficult to develop a useful strategic plan without full immersion of the board. Either way, your organization is better off.

The Relationship Between Strategy and Governance

Need Additional Assistance?

If you are interested in going deeper into your nonprofit strategy or if you wish to review your organizational strategy more broadly, click the link below to schedule a 30-minute phone or zoom consultation with Mike Stone.

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