The cost of poor governance

The domino effect of colorful wooden blocks, Selective focus

Your kitchen tap is leaking. You know what I’m talking about. It’s that annoying drip that doesn’t stop regardless of how tight you turn the tap. I know, those washerless taps were supposed to cure that problem but in my case that has not always worked. My frustrated spouse suggests that we engage the services of a plumber. I soon find out that a plumber is going to charge $125 to install a 35 cent seal or else it’s going to cost much more to install new taps. Here’s the solution! Instead of buying a 35 cent seal, why not buy a 35 cent sponge and put it in the bottom of the sink? The leaking tap drips quietly into the sponge… until the sponge becomes saturated and it begins to drip monotonously into the drain.

Let me tell you five things about the dripping tap problem:

  1. It will be frustrating.
  2. The drip won’t go away.
  3. The problem is going to get worse.
  4. It will likely cost you money as you continue to waste water.
  5. Eventually you’re going to call a plumber.

Good governance is costly. However, poor governance is even more costly, and like the dripping tap, it costs more than just money. Let’s take a look at a few of the other costs.

Lack of Clarity

First, there is a lack of clarity relating to the issues which are important. Many boards meet regularly to put out fires or respond to issues that have arisen since the last meeting or matters that don’t seem to ever be resolved. Because there is no focus on the priorities of the organization and no clear determination of the unacceptable, the same issues are likely going to continue to recur.

Avoiding Real Problems and Issues

Another cost is the time spent by the board in maneuvering around the real problem. It’s the elephant in the living room. The board doesn’t want to talk about the real problem, because it’s terrified to face the consequences. Maybe if the real problem is addressed, a decision will be made that results in a significant donor pulling his support or the CEO will tender her resignation. If it’s a church, a high-profile family will move on – or worse, they will stay and make life very difficult for the board. So instead, the board chooses to avoid that issue and tries to manufacture a solution to work around the problem.

Loss of Organizational Momentum

Another cost can be the loss of organizational momentum. Instead of the board spending its time looking to the future with a view to enhanced impact, it gets bogged down in addressing chronic issues. Every fifteen minutes that a board spends discussing those ongoing challenges is fifteen minutes it won’t spend on matters that will make a difference for the future of the organization and those the organization serves.

Loss of Good Leadership

Another cost can be the potential loss of the CEO. If the CEO is passionate and effective, but the board is not prepared to establish clear priorities, the leader will probably want to invest his skills and passion in an attractive situation where he can be used to his greatest advantage. That attractive situation is not a situation where a board refuses to address ongoing issues. Competent leaders are not easy to find, so you don’t want to lose someone because the board refuses to address an uncomfortable issue. If your organization continues to be dysfunctional and you find a candidate that wants to work for you, it may be someone that is having a difficult time finding opportunities to provide leadership to a healthy organization. That is not the kind of leader you want.

Sometimes the CEO is the problem. However, often the board is afraid to lose that individual because of the political fallout or the hassle of finding someone new. Again, like dealing with a dripping tap, it is better to face the pain now and move on rather than ignoring the problem.

Lack of Board Members

Add to these potential costs the cost of being unable to attract new board members. Men and women who will be effective board members will not want to sit on a board that is rehashing the same old issues time after time. Those who do become board members, may not want to stay there very long.

There is a parallel cost to the challenge of attracting new board members. That is the loss of passion for people to become involved. If you have any involvement with a non-profit organization now, you will know how hard it is to get good volunteers. You want to create an environment where volunteers are freed up to live out their passion and not become bogged down by the politics of the organization. If there is a problem at the board level, it is invariably going to soak into the day-to-day operations of the organization and those problems may end up squeezing out good volunteers.

Loss of Financial Support

Now, let’s talk about a cost we can clearly relate to: the loss of financial support. When the board lacks direction and focus; when it becomes painfully obvious that it is not willing to deal with problems; when it lacks good long-term administrative leadership and when overall, people become disenchanted with what is or isn’t happening, people will express their concerns by keeping their wallets in their pockets. When that happens, just go back through the list we’ve already talked about and see how the problems begin to spiral out of control. Good board members don’t want to sit on a board that is constantly dealing with financial problems or where good leaders are quitting or poor leaders are being let go – or worse, kept around – or programs are being cut back or discontinued or there is a chronic shortage of volunteers. The worse it gets, the worse it gets.

Loss of Missional Benefit

The greatest cost of not addressing board issues is the loss of missional benefit. It becomes clear that the very reason for which the organization exists isn’t happening or certainly not happening as effectively or efficiently as it could be. You want to be part of something that is making a long term difference in the lives of people. That difference is eroded because of a board that is reactive rather than proactive.

Most board members who find themselves in situations like this are simply at a loss to know what to do. But there is hope. There are qualified plumbers out there who can identify the source of dripping taps and offer some solutions. The cost of education is far less than the cost of ignorance.

Our team can assist boards by facilitating discussions to identify and articulate where the leaks are and how they can be addressed.


 

By: Ted Hull, REALBoard Advisor

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