Meet Your Future Board Members
from January/February 2008
by Nancy Shepherdson
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Frank, 29, was taking part in the board-fellows program at Northwestern University’s Kellogg School of Management, which combines academic preparation in board governance with yearlong service on a nonprofit board, sometimes that of a multimillion-dollar enterprise like the YWCA or the Field Museum. He brought to that morning’s meeting a strategic-planning document based on his classes in nonprofit best practices and on a number of interviews he’d conducted with various directors and employees of Boys Hope Girls Hope. His presentation helped the Wilmette directors pinpoint their target clients (“academically motivated children in need”) and create an eight-point action plan to serve them better. “Mark has helped us look at strategic planning as something we can incorporate in our ongoing process,” says Wilmette Boys Hope Girls Hope board member Dave Morrison, 57, a principal at the investment company William Blair & Co. in Chicago. “We did the stereotypical strategic plan—write it, read it, put it on a shelf. Mark got us focused on a hands-on approach to strategic planning.”
Frank, an intense West Pointer who served as an infantry captain in Iraq from 2003 to 2004, graduated in June and now works at Morgan Stanley. He is aware of the impact the Northwestern program may have on his long-term ambitions. “I hope to become a corporate board member eventually, and I know this experience will help me,” he says. “We’ve taken courses in board governance that were extremely helpful in learning what an effective board looks like. We’ve had board members come in to speak to us. And I have had small-group discussions with other board fellows for a year, where we discussed how we can improve outcomes. It’s been like sitting on 15 boards at the same time. I feel I have more qualifications to be on a board than if I’d been in the business world for 10 years.”
Northwestern is one of about a dozen graduate business schools, including Dartmouth, Duke, Georgetown, Stanford, and the University of Michigan, that offer students for-credit experience on nonprofit boards. Jordan Graham, 47, managing director of business development at Citigroup Global Transaction Services and a director of insurance company RLI Corp. in Peoria, Illinois, says, “Serving on the board of a nonprofit credit union and a venture capital board laid the foundation for me to join a corporate board. It’s one facet of a multi-pronged strategy—which must also include strong subject-matter expertise—to prepare for being a corporate board member, which is so complex today.”
T. Jay Collins, 61, president and CEO of Houston’s Oceaneering International, which supplies services and products to the offshore oil industry, isn’t so certain of the direct value for future corporate board service. “But I’m sure it’s a good team-building exercise and valuable bit of real-world experience,” he says. “These are all positive things for business students.”
At Northwestern’s Kellogg School, nearly a quarter of the first-year class of 650 applied to the board-fellows program, which begins in the first of the two years they spend earning an M.B.A. degree. Just 45 students were accepted. “We’re not limited by the number of nonprofits who want fellows,” says Elizabeth Gipson, 28, a second-year M.B.A. candidate who heads the student leadership committee that helps run the program, and serves on the board of Girl Scouts of Chicago. Indeed, more than 120 nonprofits asked to participate, up from 98 in 2006 and 75 in 2005. But the program didn’t have the resources to provide a “quality experience” for more than 45 fellows that year, Gipson says. In 2006, 48 students were participants.
Students accepted into the program are required to take an introductory board governance class taught by Anne Cohn Donnelly, 62, a clinical professor of social enterprise and the board-fellows academic director. They learn the basics of nonprofit board governance, including directors’ duties, their ethical and legal responsibilities, the limits of board-member authority, the life cycles of boards, and the impact of legislation like Sarbanes-Oxley. In the second year, while serving on their boards, they take an advanced class. The majority of those class sessions are devoted to studying governance in depth and are augmented by small-group meetings that dissect the students’ board experience. This preparation, in addition to coursework in management, leadership, marketing, finance, accounting, and other disciplines, helps them bring a fresh eye to their boards. They are able at times to recognize problems that the regular directors, even those who serve on corporate boards, simply may not see.
For example, last year David Shreni, 27, was a fellow on the board of San Miguel Schools of Chicago, which operates two inner-city middle schools sponsored by the De La Salle Christian Brothers, a Roman Catholic teaching order. Shreni helped the board “plan and prioritize its fund-raising activities to grow attendance,” he says. He and the board came to understand that a better fund-raising strategy than targeting wealthy people on the city’s posh North Shore would be to reach out to local businesses that might employ San Miguel graduates. They also began to tap alumni of other schools taught by the De La Salle brothers—including a whale of a fund-raising champion, Chicago mayor Richard M. Daley, a graduate of De La Salle High School. The mayor has agreed to be honorary chairman of this year’s San Miguel fund-raiser.
“They might never have thought of asking him if I hadn’t helped focus their attention in another direction,” says Shreni, who now has his M.B.A. and is an associate at Booz Allen Hamilton in Chicago—a job he says he owes at least partly to his San Miguel experience: “Learning how boards function strategically gave me a basis for discussing organizational strategy in my interviews.” Victor Mowatt, head of the San Miguel board’s marketing committee, says, “We never had a fundamentally sound, comprehensive strategy for fund-raising. David helped us answer some important questions, like how do we ensure the long-term viability of our organization and how do we reach into the right pockets to maximize our funds?”
Shreni says Northwestern’s case-study method of teaching “helps us learn what the best boards do well. It gives us a strong basis for knowing what to do.” In addition, first-year fellows participate in a mock board meeting before they’re sent out on their own. Each student has a role, and real nonprofit board members monitor the meetings and critique them. Donnelly, a slender, tanned, no-nonsense woman in houndstooth and reading glasses, says that the approach of businesspeople to nonprofits can be “all heart” and no analysis. She doesn’t pull her punches in these classes for board fellows. One of her first questions is, “Who is responsible for making sure that a nonprofit’s mission is carried out?” The answer: “A group of people who don’t own the organization but are required to put aside their own self-interest and uphold a sacred trust.” The most important skill of an effective board member, corporate or nonprofit, Donnelly continues, is “a willingness to ask hard questions.” She calls that the director’s golden rule. Sometimes, she says, the duty is as simple as studying the numbers to make sure, for instance, that an organization isn’t spending $100,000 to send a newsletter to 30,000 people.
A case often taught by Kellogg instructor John Joseph in his decision-making classes highlights the perils of not looking closely at assumptions and numbers. Presenting it as a case of NASCAR owners trying to decide whether to race on a cold day, Joseph lays out the situation during a recent class. Engines seem to blow up when the temperature outside is cool, he says. But the team stands to gain a great deal of money if it races the next day and could lose a lot of endorsements if it doesn’t. The forecast is for coolish weather. Does it race or not?
Students are given roles as owners, drivers, or engineers. Most of the “owners” and “drivers” quickly focus on an analysis of the probabilities. In most situations, they conclude, the probability of success is high. But, as usually happens in the role-playing, the engineers are cautious because of the data that show the tendency of engines to blow up in cold temperatures.
In Joseph
Joseph then rolls a video reenactment of the incident on which the case is based, the space shuttle Challenger disaster. There are gasps in the classroom as students hear space officials in the video berating one of the people who say they shouldn’t launch: “Bob, take off your engineer’s hat and put on your manager’s hat.” Just like those space officials, most participants in Joseph’s role-playing exercise decided it was worth the risk to race and persuaded the engineers to agree with them. “You tend to yield to the loudest, most passionate voices on the board,” says Joseph. And in this case, tragedy was the result of an inadequate consideration of all the circumstances.
Such examples of human error tend to stick in the minds of students as they work with their boards. When Maggie Hulce joined the board of Chicago House, a $3.7 million-a-year nonprofit serving people with HIV and their families, she learned that it planned to become less dependent on government money, which can be slashed at any time. The nonprofit’s CEO, the Reverend Stan Sloan, had been approached by two investors who wanted to start a business that would use a portion of its profits to benefit Chicago House. As part of any arrangement, Chicago House wanted the project to have a jobs component designed to give the people it was helping experience with work routines and something to put on their résumés.
Hulce, a serious 29-year-old with controlled gestures and dancing eyes, helped come up with the idea of starting a high-end retail bakery. To check out its prospects, she says, “I surveyed average Chicagoans.” Then, with the help of students in her entrepreneurship class, she wrote a business plan for Chicago House, focusing on the above-average margins that higher-profit elements like online ordering and gift-giving opportunities could deliver. And one night in June, her last as a board fellow, dressed in a satiny red blouse and a black pencil skirt, she presented her plan to the full board of Chicago House. Her study had found that 85% of target customers were willing to spend more on bakery goods if the profits would go to a worthy cause. She had also discovered an upscale neighborhood underserved by bakeries. Projections in her report showed that an enterprise located there would generate around $2 million in revenues by year five. As part of her fellowship, she also presented the CEO with an analysis of the pros and cons of a joint venture with private investors.
“The main learning I received was how you communicate a new venture to a board,” she says. “I saw the value of building consensus and a sense of ownership so people won’t try to knock it down in the end. I’ve come away with a sense of what I would do to be an exceptional board member or board leader.”
CEO Stan Sloan announced at the meeting that Hulce’s materials had helped Chicago House acquire a $50,000 grant to plan the venture. One of the three seed-money investors, W. Bradley Werner, a former commodities trader, also spoke up at the meeting to say that Hulce’s work and the bakery concept “could be a model for social-service agencies around the country. Sometimes young people don’t understand the intricacies of a business, but what Maggie and her team did was provide the kind of detail investors and grantmakers need.”
Dave Morrison, the Boys Hope Girls Hope director, believes that a board-fellows program could benefit for-profit companies as well—“middle-market private corporations especially,” he says. But the intense privacy of corporate board business, and the impact of board decisions on the stock price, can preclude allowing an outsider in. Certain nonprofits, however, may “closely mirror a corporate board environment—a credit union, for example, where the role of the board is to be stewards of the membership’s money,” says Jordan Graham of Citigroup Global. For their part, adds Professor Donnelly, “our fellows arrive with a high level of understanding of the challenges boards face.” That, class, is a textbook example of a win-win situation.
