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There are approximately 175,000 Canadian voluntary sector/non-profit organizations in Canada, and more than 78,000 of these are registered charities. These groups provide a variety of services for the benefit of the Canadian public, including community service, arts, recreation, religion, social services, education and health. They account for some $90 billion in annual expenditures, assets of $109 billion and about 12% of Canada's Gross Domestic Product. They employ 1.3 million Canadians and benefit from the service of some 7.5 million volunteers. Sixty per cent of their revenues derive from various levels of government (1). The effective governance of these organizations is therefore clearly in the national interest.

The primary objectives of this research were to:

  • Learn from organizations doing a particularly good job of governance, as well as derive lessons from organizations that have experienced major problems;
  • Develop a better understanding of how governance practices in non-profit organizations need to be adapted to take into account a variety of factors that influence governance needs and functions;
  • Identify alternative governance models available to boards and create a coherent framework for understanding these models;
  • Provide support to boards and executive directors in understanding what governance practices and policies may best suit or serve their particular organization;
  • Discover and develop a foundation of knowledge on which to build additional tools and resources to assist non-profit organizations in creating effective governance practices.

Responses derived from interviews and a Governance Self-Assessment Checklist completed by board members and the CEO's were analyzed in conjunction with relevant documentation to assess the governance practices of 20 non-profit organizations in Canada. The study sample contained organizations from the education, health, community/social services and crown agency sectors. The studies included organizations ranging in size from a rural Lions Club with no operational budget to a pan-Canadian study of school board governance. The median budget size was approximately $3,000,000.

Overall, we found that interest in governance issues has increased tremendously during the past decade. This has been spurred by aggressive promotion of the Carver 'Policy Governance' model, and increased demands for greater public accountability generated by governance problems in a number of high profile cases. At the same time, alternative governance models have not been readily accessible or well understood. As a result, many non-profits have attempted, with limited success and, often, considerable frustration, to implement the 'Policy Governance' model or adapt it for their own purposes.

This research identified several models currently used by non-profit boards in Canada. They are referred to in this report as: 'Operational', 'Collective', 'Management', 'Traditional', 'Policy Governance', 'Corporate' and 'Constituent Representational'. We found most boards use a hybrid of these models created by applying practices drawn from two or more models to different aspects of their mission or responsibilities.

We examined how a number of factors influence governance practices. These factors included:

  • who 'owns' the non-profit;
  • different processes for board selection;
  • the impact of size, complexity and geographic scope;
  • mandate;
  • form of incorporation;
  • financial circumstances;
  • organizational history;
  • knowledge about alternative governance models;
  • personal and political agendas;
  • critical events and transitional phases.

Although others also had significant influence, we concluded that the most important factors in determining an appropriate governance model were the size and complexity of the organization.

Boards and CEO's rated their overall governance effectiveness between 70% and 75% of their preferred ideal on the Governance Self-Assessment Checklist used in these studies. Areas of greatest strength were Board Culture and Board Structure. Human Resources Stewardship, Performance Monitoring and Risk Management were generally acknowledged as requiring improvement. Although 30% of the organizations had experienced serious financial crises at some point during the past decade, the Financial Stewardship of current boards was generally strong. These conclusions were supported by an analysis of documents and interviews with key informants.

The Major Concerns of Boards identified through this research included: director liability; financial viability; adopting more 'business-like' practices while maintaining human service values; how to 'add value' to the organization; finding the right balance between 'policy focus' and knowledge of operations; improving succession planning for board and staff; strengthening board orientation; developing clarity between the respective roles of board and senior management; improving measurement of board, CEO and organizational performance; and improving communication with stakeholders.

Signs of a Board in Trouble included: excessive turnover of CEO's or board members; difficulty recruiting credible board members; rapid depletion of reserve funds; chronic unplanned or unmanaged deficits; role confusion between board and CEO; low attendance or participation in meetings; poor management of meetings; factionalism; underground communications; unresolved conflicts; failure to address conflicts of interest; decision deadlock; disrespect for organizational norms and policies; and poor communication with funders and other key stakeholders.

We also identified the following Keys to Success:

  • Strong board and staff leadership
  • A positive working relationship between board and CEO
  • Role clarity
  • Strong agreement of key stakeholders on organizational values, mission and objectives
  • Respect for organizational norms, board policies and decisions
  • Good board development practices and teamwork
  • Regular, objective assessment of board, CEO and organizational performance
  • High levels of trust and low levels of conflict
  • Constructive resolution of conflicts and 'conflicts of interest'
  • A good balance between organizational stability, flexibility, innovation and enterprise
  • Consensus or 'near-consensus' decision-making
  • Effective management of meetings and board work

The keys to success are easy to articulate, but the doors to good governance are difficult to unlock during the normal course of human interactions and organizational politics. It takes resolute commitment to open communications and a good deal of hard work. The early warning signs of trouble ahead are usually easy to discern. Boards and funding authorities need to be vigilant for these and to take remedial action before, rather than after, crises erupt.

1 "Building on Strength: Improving Governance and Accountability in Canada's Voluntary Sector", Report of the Panel on Accountability and Governance in the Voluntary Sector (Broadbent Report) Ottawa 1999 p13.

Also published in:

The ‘Journal', Ontario Assn of Children's Aid Societies, Vol. 46, no. 1, April 2002, and

ARNOVA News, Focus on Research, Fall 2003 Vol. 32(4).