PLAN DE DESTREZAS CON CRITERIO DE DESEMPEÑO

The logical progression from the assessment of board performance is the assessment of organisational performance and the extent to which effective board performance contributes to desirable organisational outcomes.

Herman and Renz (1998), using data from a previous study, conducted an empirical study on nonprofit organisational effectiveness and identified differences between effective and less effective organisations. The study involved defining objective (verifiable) measures of organisational effectiveness, collecting stakeholders’ judgements of board effectiveness, collecting stakeholders’ judgments of

organisational effectiveness and identifying specific organisational characteristics such as board member age, organisational strategies, financial data and board prestige.

Two theoretical perspectives underpinned this study. The first was multiple constituency theory which states that organisations have multiple stakeholders and that these stakeholders will most likely have different objectives, and will therefore also has different views on organisational effectiveness. The second was social constructionism which states that reality about an organisation is actually created by the beliefs, knowledge and actions of stakeholders. As people invent their own reality, they may reach general agreement on this reality or they may disagree and the organisation will be a fragmented reality to the different constituents. The social constructionist perspective therefore would view organisational effectiveness as stakeholder value judgements. Hence, this study used multiple constituency theory to justify the inclusion of different stakeholders in the evaluation process and then used social constructionism to support the use of those stakeholder value judgments.

They determined several general, practitioner developed indicators of board effectiveness. These are presented below and were not ranked in any order of importance by the authors:

• Existence of a mission statement

• Use of form or instrument to measure client satisfaction

• Existence of a Planning document

• List or calendar of board development activities

• Description of or form used in CEO performance appraisal

• Description of, or form used, in other employees’ performance appraisal

• Report on most recent needs assessment

• By-laws containing a statement of purpose

• Independent financial audit

• Statement of organisational effectiveness criteria, goals, or objectives.

There were five further indicators which were specific to the particular charities which formed the sample and are therefore less relevant to this study.

They also identified nine indicators of organisational effectiveness as follows which were measured by way of stakeholder perceptions:

• Financial management

• Fundraising

• Program Delivery

• Public Relations

• Community collaboration

• Working with volunteers

• Government Relations

• Board Governance

• Human resource management

Their findings indicated that the sample taken as a whole showed no correlation between the practitioner developed indicators of board effectiveness and the stakeholders’ judgment of organisational effectiveness. However, when the results were re-analysed for the very effective and the less effective boards, they did find a moderate relationship. They concluded that the more likely boards were to adopt correct procedures, the more likely those stakeholders perceived the board to be effective.

Their findings on the correlation between stakeholder judgments of organisational effectiveness and objective (verifiable) measures of effectiveness were again inconclusive when the whole sample was considered. However, when the results were stratified as above into very effective and less effective, clearer relationships emerged. They suggested that “doing things right (objective effectiveness)” (Herman & Renz, 1998, p.33) had a positive relationship with stakeholder judgment. One conclusion reached in their study supported the intuitive position that management practices such as needs assessment, strategic planning and measuring customer satisfaction, together with certain management strategies (seeking new revenue sources, cutting costs) are likely to improve effectiveness.

Nobbie and Brudney (2003) also attempted to link governance of a nonprofit to its performance. The study tested the effect of the implementation of policy governance (Carver, 1997) on both the performance of the board and the performance of the nonprofit organisation. The authors explored the extent to which firstly, the

organisations had implemented the policy governance model; secondly, the effect, if any, on board performance; thirdly, the effect on organisational effectiveness; and finally a comparison with organisations which had not implemented the policy governance model.

The study involved several stages. First, board members were asked to rate their governance practices following adoption of policy governance. Second, CEOs and board members were asked to rate their perceptions of whether board performance had improved following implementation of policy governance. Third, CEOs and board members were asked to rate their perceptions as to whether the organisation had achieved its goals and the extent to which this had occurred. They were also asked to rate whether their progression against goals had improved or worsened over the past five years.

Nobbie and Brudney (2003) used five frameworks to assess effectiveness: goal achievement (measure by perception of achievement); financial viability (measured by calculation of revenue to expenditure ratios) and resource acquisition (measured by perceptions as to whether sufficient resources were acquired); internal processes (measured by perceptions of systemic process); CEO job satisfaction (measured by CEO ratings); and CEO effectiveness (measured by board chair ratings). The inclusion of CEO related measures, go to the core of the board’s role in appointing and removing the CEO. Job Satisfaction could well be a predictor of tenure which Fletcher (1991) identified as a factor underlying board performance measures.

The findings indicated limited impact of policy governance on organisational performance and are discussed in some detail. The strength of the study was the attempt to link governance to organisational effectiveness. However the research lacked some rigour in the determination of some of the measures. For example, the study relied almost exclusively on subjective measures for the goal attainment factor rather than seeking specific identification of goals and determining objective

measures. One flaw in this approach, is that the organisations may in fact have poorly defined goals, or in fact no clear, explicit goals, which could compromise these

results.

Some rigour was evident in the determination of the measures for financial viability and resource acquisition. The authors focussed on measures of productivity,

profitability and resource acquisition. Productivity was determined to be the

productivity of each dollar of expense to the revenue generated. Hence the financial measure revenue to expenditures ratio was used. It encompasses both a productive use of cash resources and profitability. However, the measures for resource

acquisition were given a subjective measure through a rating by CEOs on the extent to which the organisation has been able to acquire the resources it needs. The findings indicated that there was no evidence that implementation of policy governance improved this measure.

The internal processes framework measured the relationship between the CEO and the board, which was highlighted by the authors as a source of frequent tension. Two aspects of the relationship were rated: the extent to which the CEO was allowed to interpret board policies; and the extent to which the board gives instructions to only the CEO and not other staff. The findings indicated that there was support for the hypothesis that the implementation of policy governance would improve this measure.

The fourth framework, CEO job satisfaction, again was measured subjectively with a rating of satisfaction. The fifth measure of CEO performance was obtained by asking Board Chairs to rate the performance of the CEO. There was support for the

hypothesis that job satisfaction was increased following implementation of policy governance, but there was no evidence of support for improved CEO performance. These ratings were then compared to organisations which had not implemented policy governance. There was partial support for the hypothesis that implementation

increased job satisfaction and CEO performance.

This study, while generally lacking objective measures of effectiveness, validated the need to link board performance and organisational performance. Their findings indicated however, that there was a tenuous if any, relationship.

Allison (2002) provided some further insight into the effects of turnover in CEOs for the nonprofit. Using the results of extensive consulting in nonprofit organisations, he approached the study on the basis that the CEO role of a nonprofit was a job someone only held once. This gave rise to concerns that there was a lack of experience in the nonprofit management ranks.

Allison conducted a study of organisations which the consulting group had assisted in CEO transitions, and evaluated the success of the transition one year after recruitment. He found that boards of nonprofits tended to underestimate the risks and costs of bad hires. The nonprofit board would respond more attentively and willingly to woo a new funds’ contributor, than they would to replacing the CEO. Boards tended to see the replacement as an annoyance rather than an opportunity to reshape the

organisation and this thinking was reflected in the attention they gave to the hiring process.

He also found that boards were unprepared for the task. Replacement of the CEO required the board to act in their governance role while many on the board were in a ‘leadership’ role. Finally, he found that boards failed to take advantage of

opportunities in transition. The study implicitly provided CEO turnover as a measure of board effectiveness.

Brown (2005) is also pertinent to this discussion. His study used both subjective and objective measures of organisational performance, while board performance was determined through the BSAQ. Organisational performance was measured objectively by four factors: Public Support; Fiscal performance; Fundraising efficiency and Net Revenue. These were defined and calculated using the financial indicators

summarised below. As there were limited relationships between all aspects of board performance and financial indicators, the author also determined a subjective rating of organisational performance from the respondents. The financial measures were determined as follows:

Financial performance: Total Revenue/Total Expenses Public Support: Total Contributions/Total Revenue

Fundraising Efficiency: Total Revenue/Total Fundraising Expenses Net Revenue: Total Revenue – Total Expenses

The study found that the analytical, interpersonal dimension and strategic dimensions of the board (discussed in chapter two), and ranked by board members had some impact on the financial indicators. Analysis of the perceptions of executives found that both the interpersonal and strategic dimensions were most likely to lead to better financial performance. The full results of the study are discussed in chapter two.

Summary

Board Performance

While there has been considerable literature on the performance of the board, the studies and results are generally highly subjective and based largely on self

evaluation. Fletcher (1991) provided context for board performance by identifying key behaviours required of directors. The organisations’ boards were assessed by their executives to determine how often they followed ‘good board behaviour’. She identified six factors which were more closely correlated with a good behaviour rating. One factor was the tenure of the CEO which indicated that a longer tenure would suggest a better relationship and therefore a better rating. This last finding provides a useful context for further studies on performance which consider the tenure of the CEO or factors which may affect that tenure.

There were several models developed to measure board performance. Holland Jackson (1998) built on previous work to identify eight key characteristics that contributed to an effective board. Gill, Flynn and Reissing (2005) refined the BSAQ to develop their own board evaluation tool. Preston and Brown (2004) studied the commitment of board members suggesting a link between commitment and effectiveness.

Links between the board performance and organisational performance were discussed. Brown (2005) identified key organisation performance measures and used the BSAQ to examine any links between board performance and those measures. Failing to establish any link between the board and objective measures, he then obtained

subjective ratings of organisational performance and determined that there was a link between some dimensions of the BSAQ and the respondents’ perceptions of the likelihood of increasing financial performance.

Organisational Performance

Herman and Renz (1998) examined the links between board performance and organisational performance, although the study misused the term effectiveness to describe performance. Both ‘objective’ and subjective measures of organisational performance were identified and correlated with ‘objective’ measures of board performance. It should be noted that the authors acknowledged that ‘objective’ relates to the use of procedures and processes (inputs), rather than outputs or outcomes and on that basis found no link between ‘objective’ measures of board performance and ‘objective’ or subjective measure of organisational effectiveness. However, when they stratified their results for ‘especially effective’ or ‘less effective’ organisations, they found that organisations which used correct procedures are more likely to enhance perceptions of effectiveness.

Nobbie and Brudney (2003) evaluated links between the implementation of the policy governance model and organisational performance. They examined five areas of performance: goal achievement; financial viability and resource acquisition; internal process; CEO job satisfaction; and CEO performance. Subjective measures of performance were obtained for four of the five areas, with financial viability

performance being the one measure which was objectively determined. They found a limited relationship between the factors and policy governance. They further found some relationship between policy governance and the relationship with the CEO, CEO job satisfaction and CEO performance. However, there was no evidence that policy governance improved the performance of the first two areas.

So, in summary, the studies indicated a rather weak relationship between governance processes and evaluations of board and organisational performance. This raises the question of whether AFL clubs’ governance influences organisational performance. The conventional wisdom is that sound and professional governance produces improved organisation performance (OECD, 1999; ASX, 2003). As noted in chapter one, the primary aim of the thesis is to test this proposition.