# Governance > *Governance* involves structuring, sustaining, and overseeing the organization's purposes, resources, and goals (often through *boards* or *trustees*). <div class=iframe-container> <iframe width="560" height="315" src="https://www.youtube.com/embed/0OVG-WQ9jL4" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe> </div> The Governance Institute of Australia [offers a useful definition](https://www.governanceinstitute.com.au/resources/what-is-governance/) of the term: > Governance encompasses the system by which an organization is controlled and operates, and the mechanisms by which it, and its people, are held to account. Ethics, risk management, compliance, and administration are all elements of governance. In the United States, business entities are formed and regulated at the state level (for the most part). But they are also subject to federal laws and regulations that shape their governance status and structure. Nonprofits must follow their [state's requirements for governing boards](https://www.harborcompliance.com/information/nonprofit-governance-by-state), but also must meet the [requirements of the Internal Revenue Service](https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-501c3-organizations) to be recognized as 501c3, tax-exempt organizations (see [[What's a Nonprofit Arts Organization?]]). > Read [Field Notes related to the Governance function](https://notes.artsmanaged.org/t/governance). Beyond the compliance requirements, nonprofit governance can be a complex and confounding challenge for any nonprofit. Board members are volunteers (not allowed to gain financial benefit or advantage from their role), and yet they are charged with significant responsibilities to oversee, direct, control, and resource an organization toward the success of its mission (which they also determine). For-profit organizations also often have a board. But that board represents the interests of the business owners (for example, if the company has publicly traded stock), and therefore has different goals, authority, and motivation to exert control of the enterprise. As John C. Whitehead frames a primary difference: > "A for-profit board has an obligation to get out of a bad business while a nonprofit board may have an obligation to stay in, if it is to be true to its mission" John C. Whitehead (quoted in Bowen 1994) The interplay between boards and the paid professional leaders and staffs of an organization can bring both powerful impact and perilous conflict. One useful framework for this relationship comes from the BoardSource "Board Chair & Chief Executive Partnership" infographic ([available for download](https://boardsource.org/board-chair-chief-executive-partnership/?utm_campaign=Resources&utm_content=224223155&utm_medium=social&utm_source=linkedin&hss_channel=lcp-30636)). ![[Board-Chair-CEO-Partnership-Table-Cover.png]] --- ## Video Transcript One of my favorite descriptions of what a nonprofit governing board does came from an older gentleman during a strategic planning project I was running, where he piped in from the back: “Noses in, fingers out.” Hi, I’m Andrew Taylor. I’m on the Arts Management faculty at American University in Washington, DC. And this is ArtsManaged, a series of resources about Arts Management: What it is, how it works, how you might get better at it. And in this video, we’re exploring the complicated and sprawling question of governing. Governance, as you might remember, is one of the [10 Functions of Arts Management](https://youtu.be/gjKi40yYSMs) described in one of my previous videos, take a look at the link if you don’t know already. And governance is one of the trickiest bits of business in a nonprofit organization and certainly in a nonprofit arts organization, as well. As a basic definition, a governing board is the required leadership structure of a nonprofit organization in the United States and in most in many other countries around the world. The nonprofit structure, as you might recall, is part of the plural sector ([if we looked in a previous video](https://youtu.be/XJimFMcSPNQ)), which is not a private sector with private ownership, and not a public sector with public voting and political process. So a plural sector organization requires a plural-ish organizational leadership structure. Essentially, at least three people, who have no ownership interest or ownership incentive in the enterprise, serving to represent the public trust and make sure the organization succeeds according to the mission that it states out into the world. I thought in this short video, we could focus on some of the reasons why it is so hard to govern effectively. What makes it so difficult for smart people in a room to behave in intelligent and collective ways. And I’m going to offer “three discomforts” or disconnections that make it difficult to run a governing board or to serve on one and “one dangerous comfort” — one time when it feels comfortable, but you’re actually walking the enterprise into deep danger. And the first discomfort is collective leadership itself. A governing board of a nonprofit organization is a reasonably unique form of leadership in the United States structure, where we’re very used to owners and individuals having their say and representing their interests. A governing board is really about a collection of people, a group, a collective leadership entity, which requires all of its members to absolutely show up with their full selves and their full understanding and action and insight, but behave as a group. Not to make decisions _in_ a team. But to make decisions _as_ a team. And that turns out to be a bit of a bear. For one thing, often the people appointed to boards are civic leaders or business leaders or institutional leaders from their communities, who’ve gotten to where they are by being strong, individual agents of their own success — making thoughtful and effective decisions in the world. And you get them all in the same room, and they’re supposed to suddenly turn off that impulse and that insight. That’s why so many of the policies and practices of governing board meetings can feel so weird and awkward. Because they are intended to disrupt our natural tendencies to think and act individually even in a group. So for example, [Robert’s Rules of Order](https://robertsrules.com/) — that odd and complex set of rules around parliamentary process — which require you to have a motion and a second before you can even talk about something you might vote on. And then eventually you have discussion, and the board votes through whatever process and majority rule it has set up in its bylaws. Robert’s Rules of Order is intended to disrupt the natural tendency for one strong voice to lead the conversation. You can’t even talk about things in the board in a formal way without a motion and a second. Another example comes from John Carver who wrote extensively on governance. He talks about the “one voice” principle, which says that the board speaks in one voice or not at all. So all the individual conversations and arguments and debates and political wrangling are certainly essential to board process. But the only time the board speaks as a collective governing entity is when it votes successfully on a motion that has been moved and seconded according to the bylaws of the institution. So a board speaks with one voice when it votes according to its process and policies. Otherwise, it’s just chatter. The second discomfort for nonprofit governing boards that makes the work so hard is “Who do they work for?” At the end of the day? Who are they accountable to? Who are they responsible to? If you ask some governing board members, they’ll say, “Well, at the end of the day, we’re responsible to the organization to the nonprofit to make sure it is resourced and successful, and making positive and powerful impact based on its stated mission.” But you could also say as a board member, you represent the public trust. You’re there to represent the larger interests of the community and to ensure that the organization is actually delivering on what it states is important in the world. You’re making sure the organization is following laws and practices and regulations. You’re making sure it’s responsible in its leadership and action and the stewardship of people’s resources. You’re essentially a referee, while at the same time, you’re also a cheerleader, and that makes your life as a board member. really confusing. And the third discomfort for nonprofit governing boards is these roles and relationships are constantly evolving and shifting and changing. It’s not like you can get it right and then continue on that path successfully forever. Nonprofits and their boards have evolutionary tendencies. They grow from stage to stage. And their needs, of a governing board and executive leadership and the relationships to the larger community, change as well. Karl Mathiasen talks about [three stages of governing boards](https://boardsource.org/three-stages-nonprofit-board-lifecycle/), each appropriate to the state and nature of the nonprofit it’s governing. He talks about an organizing board, a governing board, and an institutional board. And not all organizations move through all of these, but they’re important to understand as a basic principle. Organizing boards tend to be around the startup of an organization, they’re when a group of concerned citizens get together and decide, “We need to start a an institution to advance some cause or purpose.” So they form a board. And they start that work together. Another version of the organizing board gathers around a single strong leader or group of leaders that said, “We want to do something in the world. And we want to form a nonprofit to do it. And we would love our friends and family and supporters and advocates to join us and support us as governing board members.” So you can hear there’s two flavors of organizing board. There’s the _leading_ board where it’s a group of citizens themselves forming a board. Often these are volunteer institutions, and initially without executive staff. Or, there’s a _following_ board where there’s some leader or group of leaders that want to make something and they need a governing board to gather around them, advise, support, and connect them to the world. An organizing board is often highly hands-on. It’s doing the work of the organization. Either it’s cleaning the restrooms, it’s preparing the venue, it is setting up tables and chairs. It’s doing real active work because the organization is often small and volunteer led. But at some moment, the nonprofit might grow in size and complexity and resource needs or an owned resources. And the organising board isn’t sufficient anymore to lead the organization. There’s not enough hands on deck to do the work that’s necessary — both raising money for the enterprise, building positive and powerful connections to other community members and civic organizations, and actually getting the work done as the work itself gets more complex. So at this moment, an organizing board might give way to a governing board. The governing board is more detached from hands-on work. It may certainly still do volunteer tasks and clean restrooms and set up tables. But its primary job becomes around policy around reaching out into the community about ensuring the organization is growing responsibly, and is behaving in appropriate ways given all rules and regulations. Often this shows up at an arts organization when the board first says “no” to the artistic leader or the forming artistic director of an organization. They say, “No, you may not do that project. It’s not responsible. It’s not the kind of work we should be doing.” And this is often a first awkward moment for a nonprofit organization in a process of growth. And for some nonprofit organizations, likely a very small percentage of all nonprofits, the board needs to evolve yet again into an institutional board. And here the distinction between board governance and executive or staff action becomes even more distinct. There’s a fully professional executive leadership and staff that are executing the work of the enterprise. And there’s a governing board who has an increasing and almost dominant purpose of raising resources for the enterprise to succeed. So for governing boards and institutional boards, that’s where the “noses in and fingers out” comes into play. Where a governing board really is about sniffing around the organization and making sure it’s following appropriate procedures, it’s being a responsible steward of gifts, it’s following all rules and regulations and beyond. But it keeps its fingers out. It has an executive leadership, and it has an administrative team that is responsible for executing the work. And the board’s job becomes defining the policy and ensuring the resources available to the enterprise to execute on those policies. So again, this third discomfort of a nonprofit board is it’s always evolving, and you’re never quite there. You’re always on a journey to whatever comes next and the evolving needs of the organization, its mission, its purpose, and the communities it serves. So those are three discomforts that make nonprofit governance particularly challenging in the arts in any other sector. There’s also a comfort that can make it dangerous for the enterprise and its work. And the comfort is around who gets to serve on governing boards. Most nonprofit governing boards and the arts are self perpetuating, which just means the board itself is responsible for deciding when and whether to add people to the board or to remove people from the board. And then who is the best possible pool of candidates when they add new people. And that’s the trap of comfort for governing boards. Because so often when they look into the world for new members, they look for people like them. They look for people who are already connected through social networks or professional networks, who are similarly situated in wealth and power and influence. And so often that becomes a monochromatic board by every definition of that term. And yet governing boards are supposed to be representative of their communities. They’re holding the institution accountable to its public service and its public trust. So a monochromatic board of white, wealthy, influential people may be good for the balance sheet and the bottom line. It’s bad for the larger purpose, service, and impact of the organization and its work. So in short, governance is really hard. And it’s hard not only for the board members themselves, but for the executives and artistic leaders that have to work with and work for the board. Worse yet when it starts to feel comfortable, that may be an indicator that you’re drifting off course. So if you want to work effectively on a governing board, or if you’re an artistic or an executive leader that needs to work with and for a governing board, it’s a good time to learn how to be both a cheerleader and a referee at the same time, and to be increasingly comfortable with discomfort. --- ## Sources - Bowen, William G. _Inside the Boardroom: Governance by Directors and Trustees / William G. Bowen._ New York: J. Wiley, 1994. ## Tags (click to view related pages) #functions #functions/governance #video #seedling