Nonprofit boards are weird

For companies that either are already public or are in the pipeline of venture capital start up to acquisition or i p o, the board dynamics can be very interesting and well dynamic.

The main difference is that in this case the people who sit on the board, the startup founder CEO usually, and representatives of the various investor groups, have usually done this before and have a play book. Their objective is to maximize the return on their investment, and that's what they do professionally.

Unfortunately, in my experience, in spite of the fact that this should result in a much more functional and experienced Board of directors, somehow things still end up getting pretty weird in a lot of cases. It mostly comes down to Ego and head games various directors seam inclined to play, often having to do with previous interactions or rivalries between investor groups. Also, CEOs are often cut from a certain type of personality cloth that plays into this gamesmanship. I'm not talking about the founder CEO , I'm talking about the CEO that was brought in to scale the company up and prepare it for acquisition or public markets. He ( it's almost always a he) needs to think about his own career, especially if things aren't going as well as everybody would like to think they are. It often boils down to a game of prisoner's dilemma.

When this sort of thing gets out of hand, it can begin to feel like some sort of five dimensional poker game where you don't even know the rules. A bit like the game Mao if anyone remembers that.

* Definition of success: With for-profit boards, there is a clear shared view of what the long-term goal is: value creation for shareholders. While there are lots of healthy debates about how that is accomplished, they are all in the context of the same goal. With a non-profit, each board member may have their own view of what the org is ultimately trying to accomplish. Further, these differing views may never be surfaced in open conversation, leading to people talking past each other a lot.

* Incentives: Related to a shared view of success is the issue of incentive. Many private company board members are shareholders and have a clear financial incentive to make the company successful. I won't go so far as to say this creates accountability, but it does serve as a clear motivator to be engaged. Non-profit directors have nothing at stake that creates an incentive for engagement. If anything the incentive may be a friendship with other directors or the ED, in which case, the incentive is to maintain the relationship with that person rather than do what is best for the org (a common cause of dysfunction). This is a particularly acute problem when it comes to the most important issue a board can face: when and whether to replace a CEO. Most non-profit board members have no incentive, or a negative incentive, to engage in such a difficult conversation.

* Size: Non-profit boards are often very large (10+ people), while private company boards are usually 5-7 people. Size makes everything harder, and leads to fewer meetings, less discussion, and less engagement.

* Skill sets: Non-profit directors are often recruited with the primary goal of fundraising. They often have little to no board experience and may not have any experience with governance of an organization of any size in either a director or executive capacity. In my experience, even the ability to read simple financial statements is rare, much less the ability to think strategically about where to take an organization or how to scale it.