Myths and Maxims for Co-op Boards
Without a doubt, an effective board of directors requires smooth and well-planned internal systems. Yet, given the press of responsibilities and the on-going demands of the job, this is one area that sometimes "slips through the cracks." Indeed, when things don't go well, most directors and managers tend to overlook the importance of the board's own operational systems in trying to make improvements.
Obviously, the goal of an effective board is to add value to the co-op -- to help guide the co-op, to add to the expertise base ofthe company, to make sure that the coop is true to its mission and meets the needs of its members. All in all, the goal of an effective board is to contribute to a well-run co-op (in both operations and governance) and to help guide the co-op's decisionmaking. But, without good systems through which a board can consider information and track its decisions, even the best deliberations on matters won't avert miscommunication or problems.
When things don't go well, most directors and managers tend to overlook the importance of the board's own operational systems.
What are these "internal systems?" What do we mean by board "operations?" These are the systems and mechanisms a board uses to keep itself organized, to plan its work, to coordinate and communicate, and to record and document its actions. In other words, these systems help a board effectively stay focused on its responsibilities and the mechanisms used to keep track of what has happened and what will be coming up. All of these things add up to what could be called board operations, internal systems, or board administration.
Let's start with a few myths regarding boards' operations that merit de-bunking:
Myth #1:
An effective board keeps itself focused on its overall role and responsibilities.
This statement sounds so simple we can only hope it's true. Unfortunately, as with most things, focus, coordination, and organization take work -- they don't just happen "organically." This is as true in board systems as it is in natural law -- entropy is an inevitable and predictable phenomenon. Without getting too philosophical, suffice it to say that boards need managing. "Board management" -- that is, managing the board's work -- may not sound like a familiar concept, but it is imperative that it happen. Some aspects of board management are expected of the coop's manager; other aspects are the board's own responsibility.
To begin with, most boards elect officers specifically for the purpose of being accountable for certain areas of the board's work. Officers aren't just figurehead positions, they're positions with responsibilities. The president's primary role is to serve as the board's overall coordinator -- planning how the board will get its job done, preparing for board meetings and special sessions (e.g., retreats), coordinating with other groups, and acting as the board's primary liaison with management. The vice president is prepared to help the president or to serve as the president in his/her absence. The secretary is the board member accountable for making sure the co-op's record keeping is being done and being done to the board's standards. The treasurer serves as the board member most responsible for keeping track of the co-op's financial systems, needs and condition. And, in total, these four officers, or those elected as the board's Executive Committee should be clearly responsible for planning the board's work for the next year and making sure it gets done.
As for management, good co-op managers know that the management and board form the co-op's leadership team and neither can operate in isolation. While the board acts to ensure the owners' interests are protected and considered, the staffs job is to ensure operations run smoothly and efficiently. The co-op's manager is the bridge between the two.
A good co-op manager knows that it's part of the job to work with the board in planning their work, in strategizing for the future, in keeping focused on the big issues without losing touch with the reality of the co-op. S/he anticipates the kind of information that board members -- both inside (employee) and outside directors -- will want and need to make decisions on the issues before them. And, effective co-op managers know that it is their job to provide support (both leadership and clerical support) for the board's internal systems.
Despite all of this, some may recoguize a kernel of truth in the statement, "An effective board keeps itself focused on its overall role and responsibilities." Indeed, all good directors understand the responsibilities of the board and, as conscientious directors, make sure that they understand how the board will get its job done in the next year. Effective directors are familiar with the internal systems being used by the co-op and will work to keep themselves and the board focused on its overall role and responsibilities.
Myth #2:
Committees help a board focus its work and should be created for special projects or issues.
This statement is really only partially true. Without a doubt, committees should help boards focus its work. Committees should be the working arms of the board -- they should be created in areas where regular work is needed that doesn't require all directors' participation. But, like arms, too many commitees can be difficult if not impossible to manage and coordinate. Unfortunately, most boards have too many committees, and the end result is that the committees contribute less to a sense of focus and more of a sense of busywork for directors. Too many committees tend to make co-ops more bureaucratic and create endless demands on directors' and managers' time.
Remember that committees can be created for ongoing work (called "standing" committees), or for special needs (typically called "ad-hoc" committees). Keep the number of standing committees to a few -- no more than three or four is recommended. Every board will need a Nominating Committee -- because the job of recruiting and overseeing the elections process for selecting new directors is too critical to the co-op's future to leave to chance. And, every board will want a Finance Committee -- because of the similarly critical need to monitor the co-op's finances and address future financial needs in more detail than can be addressed in board meetings. Beyond that, it's recommended that boards carry no more than one or two additional standing committees.
All board committees must be chaired by a board member. The Finance Committee is most typically chaired by the Treasurer. A board member who isn't up for re-election that year should chair the Nominating Committee. Since a committee is the board's working arm, it needs the accountability of a director as the committee chair. But, committees are also an excellent mechanism for member input and participation in board deliberations. Encourage retiring board members as well as interested members to join a committee as their schedule and skills/interests allow.
There are two common board committees that are not really needed at all. The first is a personnel committee. The only real personnel function that a board has is to hire/fire and evaluate management. Typically, this will boil down to a once a year responsibility to coordinate the manager's evaluation. Given the importance of this board function, all directors must participate in the evaluation; is it really necessary to have a committee to coordinate this job? Even when starting from scratch with no prior experience as a model, one or two directors can work with the manager to coordinate thisjob. (See article on management evaluation in Cooperative Grocer #48/Sep-Oct. 1993.)
A second common but unnecessary board committee is a planning committee. Again, planning is undoubtedly a critical area of board responsibility-- setting the context for the co-op's future and setting standards for future performance. And again, all directors should be involved. The only function of a planning committee would be to plan the planning process! Hopefully your co-op can avoid this approach.
Myth #3:
Board members need comprehensive information on plans and proposals; the more details that can be provided, the better.
This is an endless trap for managers and directors alike. Constantly asking for more details will leave board members feeling like a young puppy chasing its tail -- there's no end to that game. Some ofthe decisions needing action by a board are such that waiting for more details may result in a missed opportunity or too long of a delay. It's difficult, perhaps even impossible, for managers or committees to be able to provide all of the details some directors may demand.
Good proposals are summaries -- summarizing the need for action, the research done, providing documentation for some of the more critical areas of analysis that has been conducted, and then succinctly providing a clear recommendation for action. It's appropriate for directors to ask for details -- to ask what the recommender (management or a committee) has considered in various areas, to ask for their thinking behind various aspects of a proposal. But directors don't need to re-do every step of the work themselves nor do they need to review or be involved in all discussions on the topic. At some point, making decisions is an act of faith. Endlessly asking for more details is the ultimate statement of no faith.
Myth #4:
Minutes should be a comprehensive transcript of the actions and discussion at a board meeting.
Absolutely untrue! In fact, when minutes (for regular, routine meetings) are recorded in this way, it's a general indicator of underlying problems.
To begin with, there are practical problems with this transcript approach -- documentation of who says what, when a break was taken, minor procedural discussions, etc., etc. Such minutes become exceedingly long and tedious documents and are rendered virtually unusable as a reference for most basic information.
In addition, there are potentially more serious political problems with this approach because it will tend to inhibit discussion. Directors need to be free to kick ideas around without being interpreted as advocating a particular position, to play "devil's advocate" in considering recommendations for action. When every spoken word will be recorded and identified with the speaker, such free discussion will be constrained and the quality of the board's deliberations and discussions will also suffer.
Board meeting minutes need to be a record of three main things: (1) the basics and mechanics -- i.e., when the meeting was held, who was in attendance, what items were reviewed and discussed, etc.; (2) what was decided; and (3) what was considered in making that decision. Minutes can be too sparse; find the balance point so that they are useful for referencing as well as provide documentation that directors are acting responsibly. And, of course, at any time, a director may ask that his or her own comments or vote be recorded in the minutes.
Myth #5:
Good minutes provide adequate documentation for all the board does; no further records are needed.
On the surface, this statement sounds true. But, at deeper examination, consider board policies. Policies are decisions or procedures established for recurring circumstances. As such, there will be a need to refer to approved policies over and over. Since minutes are filed by date of meeting, they're not going to be very useful as a reference document for policies.
There's no way around it -- each co-op board that makes policy decisions will need a separate record of those policies. A policy manual will serve as a place where directors, managers and employees can easily find out what the co-op's current policy is on a topic or find out if there is a policy on a particular issue.
However, beware the bureaucratic trap of policies -- when you get to the point where you have a policy on making policies, make sure that your co-op hasn't become too entrenched or unapproachable by members. While policies provide a framework for handling certain common circumstances -- elections procedures share repurchase, access to records, etc. -- policies aren't always what is needed. No policy is needed to authorize two directors to work with management on new lease negotiations, or on other one-shot matters.
Now, a few maxims for effective board operations:
Maxim #1:
All directors are responsible for the conduct of board meetings.
Yes, it's the president's responsibility to plan and run effective board meetings. But, because one director is responsible, that doesn't mean all other directors have no responsibility for the way meetings go. Each and every meeting participant contributes to the effectiveness and functioning of each and every board meeting. No one is off the hook.
Maxim #2:
All boards should establish a formal board orientation process.
After one year on the board, almost every new director says, "I'm just now getting to the point where I feel like I understand what's going on here and what our job is all about." This phenomenon is even more disabling for co-ops with high board turnover and short terms. But having any number of directors feel illequipped to do their jobs will make it more difficult for all directors.
A good board orientation process can help directors catch up on what issues the board is wrestling with and provide an orientation to the co-op's operations and key performance indicators. Additionally, an orientation provides an overview of what the board's yearly calendar of topics and major decisions looks like. While it's somewhat inevitable that directors will feel more comfortable with the job after having served one year, make sure that you do all you can to shorten the learning curve.
Maxim #3:
Surprises should be avoided at all costs.
Absolutely. Always. This applies equally to surprises among board members as well as between the board and management. Surprises (except for social occasions) never reflect trust and respect between the two parties, something that an effective board needs among all directors and between it and management. Trust and respect one another. Communicate openly and honestly. Avoid surprises. It will help your board immensely.
In summary: remember that the internal systems used by the board to conduct its business -- meeting structure and conduct, record-keeping, committee system, policy development, agenda preparation and advance materials, communication between meetings, training and orientation for new directors, etc. -- play an integral role in the overall effectiveness of a co-op board of directors. A little time spent preparing and planning how the board will get its work done will go a long way toward smooth, value-added board work.