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October 08, 2010
Although only a brief sketch of Type I governing, this account is doubtless familiar to most trustees. Trustees know why it is indispensable and, on the whole, they know how to provide fiduciary oversight, if only in the narrowest sense of the term. Society wants more Type I governing, practiced more diligently. Much less is known, however, about the organizational assumptions that underlie Type I.
Generative Thinking: The Board’s Highest Purpose
We turn now to the perspectives on organizations that shape Type I governing. This mental map helps answer important questions:What must people assume about organizations if this is the way they govern them? What kind of organization, or what aspect of organizations, is best suited to Type I governing? Did we get a clean audit? Is the budget balanced? What can we learn from the audit? Does the budget reflect our priorities?
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Should we move resources from one program to another? How will the program advance our mission? Does a merger make mission sense? Is it ethical? How will the gift advance our mission? Does the donor expect too much control? Are we treating staff fairly and respectfully? Will the proposed program attract enough clients? Does a merger make financial sense?
Viewpoint: Good Remedy: Not for Every Ill
Is it legal? How much money do we need to raise? Can we secure the gift? Is staff turnover reasonable? Early twentieth-century giants of organizational and sociological theory, notably Max Weber and Frederick W. Where previously an individual artisan designed and created a product from start to finish, the emergence of the assembly line allowed essentially unskilled workers to learn and perform repetitively one small step of the production process which, in turn, enabled the mass production of standardized goods Scott, He introduced a raft of ideas that promised organizational effectiveness and efficiency at all levels and that are still fundamental to our conception of an organization.
Hand in hand with bureaucracy, and also central to Type I governing, is another construct so familiar that it is hidden in plain sight: the idea of principal—agent accountability. Perhaps more than any other, this unglamorous idea makes capitalism possible.
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It allows for the duties of owners and managers to be neatly divided, so that an owner the principal can hire a manager the agent to run the organization. The owner tries to ensure that the agent acts on behalf of the principal. Though nonprofits are ownerless by definition, the parallels to for-profit organizations make the principal—agent construct relevant.
Along with the idea of bureaucracy, the principal—agent model continues to animate much of the Type I governing practiced today. Type I governing sees organizations largely as closed systems, free to set and pursue goals without regard to environmental forces. The board looks inward to check for trouble and outward largely for financial purposes. If the organization has an endowment to manage, trustees pay attention to the impact of financial markets on organizational assets or, in the absence of an endowment, to the impact of the larger economy on fundraising and revenue generation.
But most Type I board business takes place within the confines of the organization. This is where agents in service to principals can best be observed.
Governance as Leadership: Reframing the Work of Nonprofit Boards | Wiley
In short, Weber would certainly admire modern attempts to clarify the roles and responsibilities of boards, to codify the separation of power between boards and executives, and to convert the obligations of fiduciary duty into a series of manageable, discrete, committee-driven processes. It is no surprise, then, that boards function like industrial quality-inspectors, walking the factory floor to be sure that defects are detected and corrected, and that wayward workers do not misuse resources.
In fact, the bureaucratic assumptions of Type I governing have become institutionalized in the Type I board, a problematic archetype even for the fiduciary goals this model was designed to advance. The protocol of oversight became a basic template for board agendas: Listen passively to reports and occasionally ask questions of management. Rules of parliamentary procedure shaped board discourse. Even the profile of Type I board members became standardized: people with technical expertise or managerial competence were appointed, the better to oversee management and do the technical work of fiduciary governing.
More than many modern organizations, the Type I board looks like a slice of the bureaucratic organization of the early twentieth century, when workers repetitively and dutifully performed assigned tasks. Although not all boards conform to this classic design, there is ample incentive to do so.
It is important not only for boards to do fiduciary work, but to be seen doing it as well. Symbolically, the Type I board provides constituents with assurances of organizational integrity which, in turn, help attract money, clients, staff, and goodwill. But this legitimacy comes at a price when Type I governing institutionalizes four flawed assumptions about organizations. Nonprofits may have bureaucratic features, but they are not bureaucracies. Nonprofits are not bureaucracies per se, and none wish to be.
Like other organizations, nonprofits have bureaucratic features that serve useful purposes.