Why Management Decisions Should Only Be Made By Management

More than one general manager of a sports franchise has stated "when I make decisions based on what the fans think, it's time for me to get out of my office and into the stands and become one of them".

Whether it is the member of a church, a director on the board of a Bible camp, or the parent of a student in a private school, at some point this individual will deem it their right to offer an opinion on a management decision and demand that their opinion be accepted. Pastors are hired to (among other things) make administrative decisions. Executive directors make program decisions for a Bible camp. School principals have expertise in the administration of the school. And we will readily acknowledge that expertise until that expertise does not align with our opinion.

People are entitled to their opinions. Church members can vote in a new board or join a new church. Corporate members can vote different directors onto a Bible camp board. Parents can lobby at the PTA or send their children to a different school. But when the decisions of the leader are made based on the response of a constituency, that is not the leader you want.

The rank-and-file can voice their dissatisfaction with a leader by voting in new directors at the next AGM. If the board of an organization functions using Policy Governance^®, the leader is responsible for every management decision; reporting only to the board so it can monitor compliance with the limitations which it has put in place.

Once the board, or worse yet the members, begin weighing in on management decisions, you will eventually (read soon) have utter chaos. Neither directors nor members should ever be allowed to weigh in on administrative decisions. If so, the leader would need to go to the board to get approval for every (and I mean every) decision. Directors would ostensibly have the right to determine who is hired, which volunteers are accepted, a camp menu, the pastors preaching series and the brand of toilet paper used. While some may suggest that deciding on the brand of toilet paper is ridiculous, those same people will not be able to identify at what point along the continuum of arbitrary input, the point of ridiculous was reached.

So let your board govern and your leader manage.

What Does "Charity" Really Mean?

Recently I had coffee with the Executive Director of the mission agency. In the course of our conversation my friend told me about a phone call he received from a potential donor.

“My wife and I just returned from a vacation in Honduras. While we were there we came across a situation in which a small group of believers was desperately in need of a church building. Five thousand dollars is all they need and I know your organization works in Honduras. So we would like to donate that sum to your ministry so you can send it to Honduras for their church building”.

It is not my intention in this blog to get involved in the legalities (or illegalities) of doing such a thing. Nor is my intention to elaborate on the subject of designated gifts. But let's just think about the whole idea of charity.

The term "charity" seems to have lost its true meaning. Under the Income Tax Act, a charitable gift is defined as a voluntary transfer of property without valuable consideration.  The donor must be transferring the gift to the charitable organization without expecting anything in return. Long before the complications of register charities, that was the intent of a charitable gift.

Somewhere along the way that notion has become blurred by the concept of “it's my money and when I give it I want to control where it goes and how it is spent." That perspective is very common and for the most part, legitimate. Could the potential donor unilaterally decide whether he wants to give $5000 toward a church building in Honduras? Of course, it's his money. But once he decides he is going to give a charitable donation, the playing field changes from "it's my money" to money which he has voluntarily transferred to a charitable organization.

So you can decide. If it is your money, control it as you please. If you want to donate to a charity then charity is…well…charity.

What About Term Limits For Board Members?

It is important that we have term limits for board members so we can get fresh blood.

You need terms limits; otherwise how do you get rid of poor board members.

Make sure you have staggered terms so everyone does not leave at once.

And there are other supposedly good ideas for ensuring term limits for board members.

In many cases excellent board members are “forced” to step off the board to make room for often less experienced, less effective and even less willing board members. Add to this the lack of familiarity which new board members have with the current functioning of the board and therefore requiring orientation and training time.

Healthy boards do not need fresh blood. A board that is functioning with excellence will have ongoing connection with its various constituencies. These constituencies include the legal members, volunteers, donors, recipients of the ministry etc. The board is constantly being challenged by the input of these people and using that input to further clarify its Ends. Ends is the Policy Governance® term used to describe the benefit/blessing provided by the ministry, the beneficiaries of that ministry and the relative cost/value for providing that ministry.

What do we do with board members who are ineffective or just plain tired? One option is to place something in the bylaws that legally requires the organization to do what it does not have the moral fortitude to do; (an option, but not a particularly good option). A board needs to be constantly monitoring itself to ensure that the directors are performing their role effectively. Another way to address this is to have one, two or three-year terms which are constantly renewable. For example a Nominating Committee can approach those board members who are doing an effective job and invite them to let their names stand for reelection. Doing so requires the Nominating Committee to do its homework in finding out if the particular board member is effective. It also allows the membership the opportunity to vote out directors which the membership senses is not effectively governing on its behalf.

I currently serve on the international board of a mission organization that has a very low turnover. This virtually eliminates the concern for having all board members resign at the same time. If a board wants to mitigate the likelihood of this possibility, it can still have staggered terms. 

Whatever an organization decides to do, it needs to do so because it is in the best interests of the organization and not because the board is unwilling to monitor the effective performance of its directors.

When is it Time for By-laws Changes?

Laws are typically understood as requirements or mandates imposed on one from a higher authority, usually governmental.  Charity by-laws are laws formally imposed on a charity by its members. They are kind of like family rules.  For example the "family" decides how and how often it will identify directors, what percentage of family members constitutes a quorum and how family members must be notified of family reunions; more commonly referred to as an AGM.

At some point the family made the rules and so the family gets to change the rules.  The rules should serve the family and not the other way around. So when the family discovers that some of the rules don't serve the family anymore, the family can collectively decide which rules need to be changed and what part of that rule needs to be changed.

When I am asked if I can help a charity revise its by-laws, the first thing I want to understand is the motivation for wanting to make changes. The reason is usually because the charity has discovered that its current by-laws do not effectively serve the charity. That discovery is often made by finding out that decisions have been made that were not consistent with the by-laws or wanting to move in a direction that the current by-laws do not allow.

If your organization is considering making by-laws changes, let me offer some encouragement:

Make sure your changes serve your charity and not the other way around. Find out how you want to function before you look at making any changes. Then make the changes to serve the structure.

Keep them very basic. Often requirements are placed in by-laws that handcuff the charity and remove legitimate flexibility.

Engage a lawyer with experience in charity law. By-laws are important enough that revisions should not be left with a board committee or a consultant. Important items can be missed or some implications may not be considered.

Finally, don’t be intimidated by the subject of by-laws. Your charity is in charge, so let your by-laws serve the charity.

By-laws changes do not need to be a huge hassle. Now you can breath easier.

Value Based Fees

How does a consultant decide on a fee structure?

One way is to base it on an hourly fee. Like legal fees charged by some lawyers, a record is kept of the amount of time spent, and the client is billed accordingly.

Another somewhat similar option is to first project an approximation of the number of hours required to complete the consulting service and set that as a flat fee.

I like to consider the service being provided to the client. Let's suppose as a result of a consulting service, a mission agency has been able to resolve the conflict between its board and its leader. That organization needs to decide what that result is worth. What has the conflict and the associated distractions cost the organization? What ministry has been interrupted or worse yet what ministry opportunities have been lost as a result of the conflict? And they have not started to quantify the emotional energy spent, relationships which have been fractured and sleep that has been lost.

What is it worth to a board to have someone provide it with a model of governance that minimizes those recurring issues that never seem to get resolved? How much time does a board spend on trivial issues which result in it not spending time on the real issues?

Once a board has been able to quantify those costs, it has an idea of what the consulting service is worth.

I like to establish an hourly face time rate. Face time is the time I physically spend with the client or time I spend in conference calls or significant telephone conversations. The hourly face time rate is sufficient to provide time for the development of reports, casual conversations and a certain amount of scope creep. Scope creep can include a client wanting advice or information about something which may be related to the current project but not germane nor a part of the original consulting service. This is preferable to posting a charge for every quarter hour I spend on the phone or charging an hourly rate for developing a report.  Furthermore if a client knows they are going to be charged for every phone call or email exchange, they are less likely to call for information or clarification which may expedite the resolution of the issue or completion of the project. As such I like to develop a flat fee which allows certain parties such as the chair and the leader to have unfettered access to my time. That way neither of us feels awkward with casual conversations or coffee time connections.

My ideal fee structure is one in which client sees the result as being worth twice the cost while I am appropriately compensated.