Club governance is the engine to most clubs’ success. A well-functioning club board provides the guidance necessary for club leaders to prioritize and execute important goals. What are these groups supposed to look like? How should they function? Today’s trends are shaping the best practices for these leaders, impacting their performance, composition and roles.
Where Boards are Struggling
Achieving an effective board is difficult. Fifty-six percent of nonprofits struggle with board governance, according to the 2017 Stanford Survey on Leadership and Management in the Nonprofit Sector. The same survey reports that half of nonprofit boards believe they struggle with evaluation and another 38 percent say they struggle with strategy.
Dissatisfaction appears to come from within. More than a quarter of nonprofit directors do not have a thorough understanding of their organization’s mission and strategy and a majority do not believe their colleagues on the board are experienced or engaged in their work, reports the survey. An additional 52 percent have difficulty establishing clear roles and expectations for each board member. Despite admitting to this problem, nearly half (49%) of boards say they do not receive regular and specific feedback that allows them to improve their performance. Almost a third are dissatisfied with the board’s ability to evaluate organizational performance and a majority do not believe their fellow board members are very experienced or engaged in their work.
While many boards underperform in critical areas, current recruitment methods may not solve these issues either. According to the Leadership Impact Study by NonProfit Pro and NAPCO Research, 53 percent of nonprofit have difficulty finding quality board members who are passionate about the nonprofit’s cause. Additionally, 82 percent of nonprofit executives prioritize passion for mission when recruiting new board members, according to BoardSource’s Leading with Intent: 2017 National Index of Nonprofit Board Practices. Justifying these efforts, the board’s understanding of mission was rated an “A-” by respondents. Only 53 percent prioritized community connections and 24 percent demographics when recruiting new board members, resulting in grades of “C+” and “C” respectively when rating board performance in these areas. These metrics signify a correlation between how well boards perform in relation to what is prioritized in the recruitment of directors.
One area of strength for clubs compared to other nonprofits regards duty. While a majority of nonprofits struggle establishing roles and expectations for the board, for clubs, 87 percent of clubs have documented roles and responsibilities for their boards. Seventy-one percent of club boards have an orientation process, reports Club Benchmarking.
Selecting the Right Board Members
Having the right directors serving on a board is critical to an organization’s and club’s success. According the National Club Association’s (NCA) “Dynamics of Club Board Cycles,” clubs should create a board profile, outlining the qualifications and requirements to serve as a director. Once these are developed, the Nominating Committee should lead the process. This group should be comprised of a handful of members who have had previous board and/or committee experience.
Clubs need a sufficient number of board members to represent different categories of members and the various viewpoints of the membership. However, there should not be so many as to make decision-making difficult and impede conduct of the club’s business. This ranges depending on club bylaws, however, the average club board size is 11. Qualifications and term limits that align with the club’s culture and mission are usually established in the club bylaws as well. According to Club Benchmarking, 80 percent of clubs have three-year terms, however, the number of consecutive terms a director can serve ranges from one (25%), two (42%), three (8%) or four or more (25%).
Usually, a club would want the terms of office staggered to ensure the majority of the board would not turn over in the same year. It is common for a board to have one-third of its members up for election each year.
While bylaws dictate the method for nominating a board member, the Nominating Committee is the most common way to identify a pool of candidates. NCA’s “Model Private Club Bylaws” indicates that club bylaws not only outline procedures for board nominations and elections, but also the requirements for board meetings, board powers and responsibilities and how officers are chosen.
In any club’s bylaw section covering governance, emphasis must be placed on the importance and value of best practices, which should include an acknowledgement of the Sarbanes-Oxley Act of 2002. Clubs with a strong system of governance frequently operate more effectively and efficiently.
A strong governance bylaw section encourages the board to focus on the club’s strategic direction and encourages them to avoid the distractions of the club’s day-to-day activities. A club’s board of directors is the central decision-making body of the club. Strong governance derives its authority from the members and a proper structure allows the board to represent the members and their interest to the fullest.
Finding the Right Governance Model
While varying for need, club governance models must have key elements to achieve success. According to John Kinner, CCM, founder of Private Club Governance, the model must:
- Represent the club members and include their input
- Establish and promote governance standards, such as election policies, board duties and term limits
- Revolve around the club’s strategic plan
- Embrace collaboration using the board’s unique skillset
- Comply with legal and ethical standards
- Employ self-evaluation
- Establish succession best practices
Board Policy Manual (BPM)
This critical document compiles all current club policy and governing documents, serving as a key reference for club boards to accomplish their goals. While the document is vital, only 56 percent of clubs have a BMP for new members, reports a McMahon Group/NCA Pulse Survey. Regarding the value of the BPM, in NCA’s “Dynamics of Club Board Cycles” Terra Waldron, CCM, CCE, ECM, COO at Greensboro Country Club in Greensboro, N.C. says, “Having the BPM as a recurring item on the board agenda keeps it in the forefront and is vital for the club’s direction.”
The BPM establishes board standards to ensure that board and committee roles are carried out effectively. It is developed through the strategic planning process and can evolve as club policies are changed. The BPM can be broken down into five key parts: introduction, purpose and use; strategic elements; board organization and process; board/staff relationships; and executive parameters.
Board Diversity at Nonprofits
84%
Caucasian board members
90%
Caucasian chief executives
52%
Male board members
57%
50+ year-old board members
BoardSource’s 2017 Leading with Intent
Club Board Structure
The average club board size is 11 directors
73% of directors serve for two years.
78% of boards have female members
95% of heads of club have titles of either general manager or general manager/chief operating officer.
2017 McMahon/National Club Association Pulse Survey
Increasing Board Voices
While diversity is an area of improvement for nonprofit boards, some have overcome this challenge. The Online News Association (ONA), once lacking diversity from its directors, now boasts a majority-women board. ONA Executive Director Irving W. Washington said the organization had to be willing to accept and address the need to change. ONA made diversity one of its core principles, launching a committee to increase representation on its board and at its conference, resulting in greater range of voices from the organization’s directors.
Trends Nonprofit and Club Board Roles
Succession Planning
One of the primary duties of the board is to inform the succession process. A BoardSource study found that nearly one-in-five (17%) of nonprofits were in a transition point for leadership, having an executive on the job for less than a year or having one leaving within a year. Despite the high turnover, 53 percent of nonprofit executives and staff believe their organization does not have an effective succession plan for top executives. Bridgespan Group, a U.S. nonprofit leadership consulting group, found that 46 percent of CEOs said they received little to no help from their boards during their onboarding.
Strategic Planning
Strategic planning is another critical role for boards. At clubs, 52 have developed a strategic plan within the last five years reports a McMahon Group/National Club Association 2017 Pulse Survey. Thirty-six percent update their strategic plan at least annually and 63 percent update it every two years.
According to the Club Benchmarking data, 51 percent of clubs use the board of directors as the planning arm of the club and 49 percent use a Strategic Planning Committee. Most clubs (64%) do not seek approval of the plan by the membership. However, if there are significant changes in the plan, 23 percent of clubs will have the plan approved by membership.
Only 13 percent regularly seek membership approval of the strategic plan. This data also shows:
- 66 percent of clubs utilize a membership survey to develop the plan.
- 61 percent tie their annual operating and capital budget to the strategic plan.
- 38 percent include strategic planning items on each board meeting agenda.
Emerging Role: Cybersecurity
As technology evolves, so too does the role of the board. According to governance data from Spencer Stuart, only 21 percent of board members believe their company has properly managed the cybersecurity capability. Two-thirds of directors say their senior IT executive occasionally reports to the board.
According to an expert IT panel conducted by Spencer Stuart and Morrison & Foerster, in order to minimize cyberthreats there are five key board functions.
- Take Responsibility for Cybersecurity – The level at which an organization addresses cyberthreats depends on the industry, however, some companies treat it on a board-wide level, while some assign responsibility to the audit committee. Regardless of which governing body addresses the topic, boards should prioritize cybersecurity.
- Set Expectations for Management – Boards should ensure management establishes the necessary framework (staffing, budget) to protect the organization from cyberthreats.
- Understand the Organization’s Risk – Boards should be mindful of cybersecurity topics such as legal risk, asset protection, threat detection, etc.
- Assess current Cybersecurity Capability – Boards should understand current management’s role and ability to protect the club from cyberthreats. Hiring an outside auditor may be necessary.
- Prepare and Practice – Boards should establish policies and practices that prepare organizations and management to response to cyberattacks accordingly.
Success for Today’s Boards
Boards have increasing demand to be flexible and to take on more duties—all while performing at a high level. As we have seen, today’s boards still struggle in several key areas. However, solutions to these problems exists for boards and clubs ready to adopt them.
Club Trends Fall 2018