BOV Governance workshop 2-20-14

2-20-14 BOV Meeting:  Governance committee meeting 8;46.

Governance Workshop. Richard P.  Chait leads discussion.

This will be a 3 hour workshop.

We will try to  post the video later

Think about how we think about and how we practice governance.

Chait will leave a copy of the slides with Susan Harris.

If we can elevate the boards purposes, can elevate its performance

goal: consistency, constructively, consequential governance.

 

Context: academic Culture

Modes: Rolls and Responsibilities

Dynamics: Board Culture

Mechanics: Structure and procedures

Most boards deal with facts, and it is the least consequential.

will discuss these in order with an eye to best practices.

(note, if this is successful, I think the video of this would make great board training for new members,

talks of the different between U’s and corporations.

 

EXTERNAL MARKETS

Corps: maximize profits mindful of social responsibility

U’s       maximize prestige mindful of public interest.

 

DiNardo suggests using term :maximize excellence” instead of word prestige.

 

Corps  expand market share

U’s       expand mind share

Chait points out that in education, the more customers you turn away,( as well as  the better quality of the students, and faculty) ,   the value of the product increases.   You don’t see takeovers, very few are in search of bitter.

corp : compete on output

U’s     compete on input

 

corp: dynamic competition

U’s     stable competition

44% of companies that were publically traded 20 (?) years ago, no longer exist.

Competition and intensity change all the time.

 

corps newer generally better

U’s      older generally better.

University’s live in a world of stable competition. The in the top 20 Public U’s, the newest one was established 60 years ago

In the private, 1891 was the most recent

Note: U of  Phoenix was great stock for 3 years, now in decline in students and as a stock

Any product you get in grocery is new and improved
In education, older is better.

U’s sell tradition.

You don’t see Princeton 2014

1913 first rankings of U’s. of those, 10 are still in the list.

The 5 that disappeared were all publics. No publics in the top 20.

Uva is # 25.

 

INTERNAL ENVIRONMENT.

Corp “ Proprietary  strategy

U’s public strategy

 

Corp board of prominent peers focused on shareholder value

U’s board of prominent citizens swamped by multiple missions

 

Corp strategies are private

U’s  strategies are public, can get opposition and tell competition what you are doing

 

Corp  growth by substitution.

U’s     growth by accretion

 

Businesses exit unprofitable lines

U’s have an obligation to keep unprofitable departments. That’s why they are non-profit.

Academic communities add more than they substitute

 

Corp increase margins

U;s   increase subsidy

People want the best value for the least price.

Try to maximize the difference cost of the product  and the cost to the customer.

Students are looking for the best deal and you will get better students.

We pay for the best students.

 

Can’t prune your courses based on profitability

Ford can get rid of Pontiac brand, while U can’t get rid of German.

 

Corp:   definite performance metrics.

You measure less whether the effects of the product that you advertise are met.

U’s      indicative performance

 

Corp     concentrated authority.

U’s     disperse authority.

 

U’s move slower, sometimes what appears to be a glacial pace.

 

Corp: Boards of peers focusd on shareholder value

U’s     Boards of prominent citizens swamped by multiple missions.

Corp Have expertise in the field, and often picked by CEO

U’s  Not just shareholder value

So many other issues: athletics, economic engine.

 

There are 2  kinds of trustees.

First he notes: In Math: there are those who understand it and those who don’t

 When you go to England, and other Commonwealth Countries :

There are  those who say they drive on the wrong side of uthe road and

 Those who say they drive on the other side of the road.

When you realize, that’s how they do it, and it works the same as our way

You have to understand it.

When you come into a University you have to  understand it

 

The collegial compromise: Monday drive on the left, Tuesday Drive on the right.

Notes in the academic world: When you decide you need to change,

Unequivically you need to change.

But do it gradually

10 originally companies of the original Dow Jones, only 1 still exits.

But universities are durable.

 

Top  25 public  Us’    152 years old

Top  25 private U’s    187  years old

Top 25 private colleges 181 years

UVa 195 years

Top 35 regional colleges in Midwest 123 years.

 

Q. Should they still exist

Chait: Trustees don’t want them to fail.  Its an emotional decision.

 

Q. is the same emotion tied to programs.  ( I understood) point of the question was really about UVA holding on to Departments

A. Sometimes decisions are made to stay alive, but he things they meet a market test. Someone says I want it and will pay for it.

 

RIP Notable Colleges and Universities.

There are none on the list

Dinardo:  Many of the Catholic colleges merged in the 1960’s and 70’s

It was a painful decision, and there was an hierarchy that was able to make those decision

This is the end of Context portion of the program

 

Martin asks about publics losing ground

Chait:   notes that the publics are losing ground..

Some of the privates have dropped, but haven’t fallen off a cliff.

 

I fly a lot. Would you put me on the board of Boeing.

I have a checking account, would you put me on the board of a bank.

You can’t change a culture if you don’t understand it in the first place.

 

Dragas: we should not  be driven my rankings but by prestige

She talks aabout Student aid,

State funding in decline

 

CHAIT:

Under what circumstances would a decline in prestige undermine mission

Would pursuit of mission over prestige be  something to consider.

 

Corporations looks at whether social responsibility is to be considered over just profits.

 

Chait hands out a qustionaire that he would like everyone to fill out anonymously and it will be tabulated, to see how the board thinks on hypothetical problems that have occurred other places.

 
He now hands out an anonymous survey that they will come back to later.to answer who decides what.

12 not so hypothetical. They include issues that have arisen on other campuses.

 

 

Dinardo: not comfortable with this because It becomes public

Chait: when you do this, it becomes my property

Dinardo: I think it is public

Chait suggest Martin make the call on this.

Martin says DiNardo does not have to do this

Chait says he will share the results with the board of what they think.

He will take them home and they are his

The results will be public.

 

Dragas: is there a right and wrong answer

Martin these are hypothetical questions . He doesn’t see a problem.

Final decision, if you are comfortable fill it in and if not, don’t

Chait: trying to see the underlying principals by which you as a board decide.

Silence and it appears that most people are filling this out.

 

9:55

Q posed by Chait:

Should the Boston Museum of Fine Arts lend 12 Monet painting  to the Bellagio in Las Vegas?

Presume: You are the collections committee of the Museum

What should you ask? The board comes up with the following:

  1. climate
  2. security
  3. why do you want to do this.  : possible good answer. Exposure to  the masses to the arts, why should art be for the sliver, prestige, publicity,   how much are you getting $ for this.
  4. Effect on donors. : can tick off donors in Boston, but also get more donations. What does this do to our image?
  5. What effect will this have on attendance and the museum.
  6. Territorial control: who controls display in Vegas
  7. Opportunity to do something else in the  museum
  8.  Why does management want to do this and how strongly do they feel about this.

 

None of the board  has expertise in this field. They did this as a   collective effort

Maybe one person in the room could have come to these questions, but it was faster as a group

 

Instinctively thought about the 3 roles that the board should play

Fiduciary

Insurance, security, donor restrictions, timeline, curatorial control

 

Strategic  effect on attendance, image, audiences, prototype deal, competitive responses, Possible  tie ins Vegas in Boston

 

Generative

What the mission, Will MFA do anything for the right price

Public art/private dealer

Venue consistent with values. MFA conservative or iconoclastic

Commercial or civic

 

They did the deal and it was successful, they did others

Huge attendance.

Were paid $1 million

Boston critics decried it,

 

Louvre loaned art and name of the Louvre to Abu Dabhi. for $550 million.

 

10 minute break.   Start again at 10:30

Looking at the 3 rolls that boards play

1. Fiduciary:

Stewardship of Tangible Assets: oversight

Boards Principal role/ Responsibility

Guardian/ Oversight.

 

Board’s Core work

  1. determine pursue and refine mission
  2. Ensure quality, integrity, sustainability
  3. Oversee and audit finances and risk
  4. monitor performance and progress
  5. Safeguard institutional values, reputation, autonomy
  6. Select , support and evaluate president.

Value added Fiduciary Work.

You are a steward and a guardian

Oversight     &    Inquiry:
due diligence    hold what in trust for him

Scandal free:     safeguards in place

In compliance: Voluntary measures to earn trust

Can we afford it:     what the opportunity cost

Clean audit insights from Audit

Budget balanced:     budget matches priorities

 

I didn’t get all of this.

 

Strategic mode:

Board central purpose: strategic partnership with senion management.

 

Boards principal role/responsibility

Strategic/ foresight

 

Board’s core work.

Understand internal and external environments

Ensure  sensitive feasible comprehensive strategy

Monitor performance and progress

 

Value added strategic work

Boards are better as strategic thinking

Strategic planning  vs strategic thinking

Thinking about what matters most.   Does not come from SWAT analysis, but from active thinking.

 

Board is to think

Strategic.   thinking

Do we understand past, what’s the idea, what’s the superior insight, what are the intended outcomes, challenges to status quo, sure signs of success new markets, non traditional competitors, customer appeal, proprietary advantages.

Board to raise strategic issues, test it, not to make the strategic plan.

Generative Mode

Purposes; Decide what merits attention and what I means

Roll & responsibility

Sense-maker-/insight

Core work

Make sense of circumstances

Find and frame problems and opportunities

Reconcile realities, values and choices.

 

Hs has a great graph of the work of a board.  ( 11:44)

Generative   strategic   fiduciary.

Board purpose

Chief role

Core work

Value added

 

 

Next imagse:

 

The Generative Curve.

 

Competition for Students

On what issues are we competition. Start first with looking at generative .

What business are we in, what is our model.

Look at MIT. They don’t name buildings, not selling amenities.

 

One school has class discount for classes on Friday after 3 pm

 

What will you build to appeal to students.

What about grade inflations. At Harvard 80% of students get !’s.

 

Catering to consumers.

 

Generative is not thinking out of the box. Its not separate from all other activity. All 3 parts matter, but generative is where you start.

 

Robertson.

Donor wants you to give you all this money and tell you  where they want you to put i

 

CHAIT:

Board should tackle questions that don’t have obvious answers and require values based decisions.

 

Slide of “Board looking for hidden agenda”  they are all under and around the board room looking for something.

 

Pertinent practices,: Elevated Purpose

 

With management, decide what to decide

Focus on the “main thing”

Get the questions right

Develop rolling 12 month agenda for board and committees

  UVa has it for committees. Should do it for board.

Wear “tri-focals” to analyze issues

Close trustee and staff knowledge gap on key issues

Ponder what CEO suggests. Suggest what CEO should ponder

Substitute high value added for low value added activity

Apply corporate standards of relevance.

 

Make sure the main thing is really the main thing. That’s the first order of business.

Why are you doing what you are doing.?
Is this the most important work of the institution.

 

What is it that keeps the president awake at night. How can Board contribute to helping

 

One best practice is get this right.

Good governance and good research start with good questions

 

BOARD CULTURE: A huge intangible asset.

Its sensitive, about dynamics and behavior

Share values and beliefs  define acceptable behavior

 

Group dynamics underpins the  board’s ability to do its job

 

Its hard to teach behavior.

 

He has a chart of a healthy and unhealthy board culture

Hard to do on non-profit. Board. Just come together 4 times a year. Hard to build relationships. Everyone has been a leader, and comes here and is a in a different role

Not the quarterback but on  the offensive

Don’t chose your board members, hard to build the team. Lost of turnover.

 

Healthy

Team players: this is critical.

Distributed influence

Collective wisdom

Charismatic listeners

Institutional perspective

Constructive dissent

Candid exchanges

Confidentiality

Divergence

Mutual accountability

Respect and trust

Clear expectations.

 

 

He suggests doing an exercise to look at the culture of the board now, and look at what the goals are for 2 years from now. How to get there

 

PERTINENT PRACICES:   Board Culture

State and honor mutual expectations: Have a statement about this

Orient newcomers to board culture

Set goals and benchmarks for board

Self-assess Board, committees, overall performance

Seek management assessment at least annually

Collectively interpret and utilize evaluative data

Fortify role of Governance Committee

Establish position description and succession plan for Chair

Epitomize performance accountability

 

 

He reads from UT new guidelines that their board has put together.

Reads from Williams College guidelines for board behavior

 

Need to have a collective sense of norms

 

CHAIT SUGGESTS THAT YOU  ASK BOARD:

What do you wish you know now that you wish you knew when you joined the board.

 

Boards don’t want to be measured.

Where do you spend your time? What % of your time was well spent.

That’s like sending 60 cents out of every dollar are well spent.

How helpful are we to management? How do we know.

 

 

Pertinent Pracices: Organize to do the work

Strategy drives structure. Not vice versa

Board drives committees ,not vice versa

Synchronize Bards work and  U’s prioritize

 

Have board chairs meet together once  a year

 

Selectively deploy task forces

 

Substantively engage constituents, round tables about specific topic.

 

One board has off site meetings with leaders of constituencies

 

PERTINENT PRACICES: Make meetings meaningful and interesting.

 

Specify objectives

 

Organize around strategic themes

 

Create   efficiencies:

 

Consent agenda

On-line updates

Advance surveys

Performance dashboards

Committee flash reports

Contacts for clarification.

 

Highlight opportunities for BOV to add value

 

Seek real time feed-back from management.

Ask if you are being helpful.

 

When you see people disengage around the room. You know you may have a problem

 

Pertinent Practices: Promote Robust Discourse.

 

Distribute discussion question in advance.

 

Minimize staff presentations

maximize board discussion

invite board participation, elicit constructive dissent

 

Vary format;

Breakout groups

Anonymous input

One minute memos

Constituent views

Advocacy panels

Silent starts

Case studies/ hypotheticals

Experimental learning.

 

Break out groups can allow for more candid conversation.

 

Hand out index cars and write opinion and pass around and have others read them out, so you don’t know who said it, but you know the sense of the group.

 

CATALYIC QUESTONS;

 

WHAT BEST EXPLAINS UVAS recent successes and setbacks

 

What’s UVA’s value proposition.

 

Best University or best value

 

What is UVA’s theory of change

 

Pertinent Pracices: promote Robust Discourse

 

At end of discussion need to synthesize the discussion.

Designate someone in advance to summarize the discussion and what is the message we are telling management and ask management.

 

don’t leave the room till you know what’s next.

Synthesize, implications and follow up

 

EFFECTIVE BOARDS:

Provide a strategic asset and comparative advantage

Pursue elevated purpose to achieve elevated performance

Focus on the “main things” and the right questions Partner with the president , share ownership of problems

Focus on fusion of thinking not demarcation of territory

Accept individual responsibility and collective accountability

Model behaviors trustees want the university to exhibit.

 

 

He believes quality board governance will determine which schools  do the best

 

Young drivers see just over the hood

The best drivers are out to the horizon and come back and look in the review mirror.

 

This is doubles tennis.

You are both on the same sides of the net.

There are lines on the court.

But most important is what is out of bounds.

 

President of Tufts would start every meeting:
My problems are your problems. I’m so glad you’re here.

 

Its 11:45, running over time.

Nau asks, what are the next steps

He and Robertson and Dick Chait have talked about this.

 

Nau says, this is a whole new set of facts

1 Survey the board on perceptions

2. Chait interview members of the board.

3. then interview senior staff

4. share data with BOV

 

 

Would create assessment of Board as it is , and steps to improve the board’s effectiveness.

 

Nau says: had not seen the material before. He recommends that they keep him engaged.

 

Robertson: we need to look at setting mutual practices of norms of behavior

The idea of setting goals for the board is novel, and this committee should consider it

 

Genovese: If you survey the board, it becomes public.  How do you do this.

 

Martin; its all in how you do the survey.  What are the questions you ask.

Less suggestive

 

Nau: as long as we are focused on improvement,

If the target is better performance

 

Genovese: as long as its told in that manner.

 

Martin: I will look to the committee to develop the format

Dinardo: perhaps there are things we can work on now, that are more tactical.

Dragas: should make more time in the agenda to have discussions like this

. Want to engage Chait, but needs to know the cost and where the money is coming  from.

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