The choice of corporate governance model can significantly influence an organization’s strategic direction and operational efficiency.
With various models available, each tailored to different organizational needs and external conditions, selecting the appropriate framework is crucial.
This article examines ten corporate governance models, offering insights into their benefits and best fits for different types of organizations.
Discover how the right governance model can streamline decision-making, enhance accountability, and ultimately drive sustained business success.
What Are Board Governance Models?
Whether you run a for-profit business, a nonprofit association, a nation, or even a household, every decision is made through the lens of established roles, rules, and practices.
This process is called governance, the proper administration of designated policies to achieve an overarching mission and purpose.
A board governance model is a framework of strategic systems and policies that helps the board of directors promote organizational values and achieve long-term objectives. It defines a range of protocols, procedures, and roles that must be followed to ensure proper corporate governance practices.
When establishing strong board governance, companies must use an appropriate board governance model that closely aligns with the company’s work and goals.
Importance of Board Governance Models
Models of board governance come in different forms, adjusting to the needs of both nonprofit organizations and for-profit companies. While no specific model is universal, they all incorporate techniques that enable board members to be effective in fulfilling their fiduciary and strategic responsibilities.
As noted earlier, all board governance models are different and serve different needs. Specific governance models support nonprofit organizations where the board and staff serve out of passion and commitment to the cause.
In contrast, others are more geared toward corporate boards bound by legal and regulatory measures and, as a result, these corporate governance models require a specific board structure.
9 Common Board Governance Models
The descriptions listed below provide a brief overview of the inner workings of each model and how they can enact growth in your organization. Find out more about which model fits your organization the best and how to implement the best strategies within these separate models.
1. Advisory Board Model
A CEO who founds an organization will soon find that they need help in running the organization. An advisory board serves as the primary resource for the CEO to turn to for help and advice. Advisory boards may also exist to help and advise the board, as a whole.
Advisory board members typically have established expertise or credentials in the nonprofit’s field. An organization that is visibly connected to an advisory board’s name, can increase the organization’s credibility, fundraising efforts, or public relation efforts.
2. Patron Governance Model
The Patron Model is similar to the Advisory Board Model. The main difference between the two models is that the primary purpose of the board members under the Patron Model is to perform duties related to fundraising.
Patron Model boards are typically comprised of board members who have personal wealth or influence within the field.
The primary role of board members under the Patron Model is to contribute their own funds to the organization and to use their network to gain outside contributions for the organization.
Under this model, the board members have less influence over the CEO or organization’s board than in the Advisory Board Model.
3. Cooperative Governance Model
A board that operates without a CEO uses a Cooperative Model. The board makes consensual decisions as a group of peers, making it the most democratic governance model. There is no hierarchy and no one individual has power over another.
The board exists only because the law requires its formation.
This model requires that each member be equally committed to the organization and willing to take responsibility for the actions of the whole board.
4. Management Team Model
The most popular governance model for nonprofit organizations is the Management Team Model. This model is similar to how an organization administers its duties.
Rather than hiring paid employees to be responsible for human resources, fund-raising, finance, planning, and programs, the board forms committees to perform those duties.
5. Policy Board Model
John Carver, author of “Boards that Make a Difference,” developed the Policy Board Model, which quickly became a staple platform for nonprofits. The board gives a high level of trust and confidence over to the CEO.
The board has regular meetings with the CEO to get updates on the organization’s activities. Under this model, there are few standing committees.
Board members should have a demonstrated commitment to the organization and be willing to grow in the knowledge and abilities regarding the organization.
6. Carver Board Governance Model
Next, we’ve got the Carver Model. This one’s all about focusing on the end game. The board’s main job is to define the “ends” – the ultimate goals and outcomes the organization is striving for.
They give the CEO the reins to handle the day-to-day “means” to get there. It’s a model that works well for both nonprofit and for-profit entities, keeping everyone’s eyes on the prize.
7. The Cortex model
The Cortex Model takes a community-centric approach. It’s all about the value the organization brings to the table.
The board’s role is to set the standards, expectations, and performance outcomes that align with the organization’s aspirations.
They’re the ones defining what success looks like and holding everyone accountable to those metrics.
8. Consensus Board Governance Model
The Consensus Model, also known as the Process Model, is all about democracy in action.
Every board member gets an equal vote, equal responsibility, and equal liability.
It’s a model that works best for corporations without major shareholders, where everyone has an equal stake in the game.
9. Competency Board Governance Model
Last but not least, we have the Competency Model. This one’s focused on developing the knowledge and skills of the board members themselves.
The emphasis is on communication, trust, and relationships – the key ingredients for a high-performing board.
The organization’s bylaws lay out the policies, practices, and strategies to make it all happen.
Usually similar board take a deeper look into their board and initiate board performance evaluations to reveal growth areas.
5. Nonprofit Board Governance Models
Nonprofit boards keep the organization’s mission at the forefront when directing the affairs of the organization. Incoming funds are used to support the organization’s work.
Most board members for nonprofit organizations serve on the board because of their passion and commitment to a cause.
While serving on a nonprofit board carries a certain level of honor and prestige, board members need to take an active approach to overseeing the organization to prevent governance problems and legal issues.
Nonprofit boards hold responsibility for fiduciary matters, as well as matters that have been delegated to others.
1. Advisory Board Governance Model for Nonprofits
A CEO who founds an organization will soon find that they need help in running the organization. An advisory board serves as the primary resource for the CEO to turn to for help and advice. Advisory boards may also exist to help and advise the board, as a whole.
Advisory board members typically have established expertise or credentials in the nonprofit’s field. An organization that is visibly connected to an advisory board’s name, can increase the organization’s credibility, fundraising efforts, or public relation efforts.
2. Patron Governance Model for Nonprofits
The Patron Model is similar to the Advisory Board Model. The main difference between the two models is that the primary purpose of the board members under the Patron Model is to perform duties related to fundraising.
Patron Model boards are typically comprised of board members who have personal wealth or influence within the field.
The primary role of board members under the Patron Model is to contribute their own funds to the organization and to use their network to gain outside contributions for the organization.
3. Cooperative Governance Model for Nonprofits
A board that operates without a CEO uses a Cooperative Model. The board makes consensual decisions as a group of peers, making it the most democratic governance model. There is no hierarchy and no one individual has power over another.
The board exists only because the law requires its formation. This model requires that each member be equally committed to the organization and willing to take responsibility for the actions of the whole board.
4. Management Team Model for Nonprofits
The most popular governance model for nonprofit organizations is the Management Team Model. This model is similar to how an organization administers its duties.
Rather than hiring paid employees to be responsible for human resources, fund-raising, finance, planning, and programs, the board forms committees to perform those duties.
5. Policy Board Model for Nonprofits
John Carver, author of “Boards that Make a Difference,” developed the Policy Board Model, which quickly became a staple platform for nonprofits. The board gives a high level of trust and confidence over to the CEO.
The board has regular meetings with the CEO to get updates on the organization’s activities. Under this model, there are few standing committees.
Board members should have a demonstrated commitment to the organization and be willing to grow in the knowledge and abilities regarding the organization.
Choosing the Right Board Governance Model
So, with all these models to choose from, how do you know which one’s right for your organization? It’s not a one-size-fits-all situation, that’s for sure. There are a few key factors to consider.
First and foremost, you need to think about your organization’s unique needs and goals. What’s your mission? Your vision? Your values? Your governance model should align with and support those core elements.
You also need to look at the composition of your board. What skills and expertise do your board members bring to the table? What’s the dynamic like?
Different models may be better suited to different board makeups. You can rely on governance evaluation software that can help you determine what’s the best fit for your organization.
Aligning the Governance Model with Organizational Goals
At the end of the day, your governance model needs to enable your board to effectively steer the organization towards its goals. It should empower them to make strategic decisions, oversee operations, and ensure accountability. Aligning the model with your organizational goals is key. If there’s a disconnect, it’s going to be an uphill battle.
Evaluating the Effectiveness of the Current Governance Model
Even if you have a governance model in place, it’s important to regularly assess how well it’s working. Is it enabling effective decision-making? Facilitating strong oversight? Fostering a culture of accountability? If not, it may be time to reevaluate and consider a change.
Implementing and Transitioning to a New Board Governance Model
So, you’ve decided it’s time for a new governance model. Now what? Implementing a new model is a process. It’s not something that happens overnight.
The first step is to clearly define the new model and what it will entail. What structures, policies, and procedures need to be put in place? What roles and responsibilities need to be assigned?
From there, it’s about developing a plan of action. What steps need to be taken to transition from the old model to the new one? What’s the timeline? Who’s responsible for what?
Communicating Changes to Stakeholders
Communication is critical throughout the process. You need to keep all stakeholders – board members, staff, volunteers, donors, etc. – in the loop. Explain the rationale behind the change, what it will mean for them, and how they can support the transition. Transparency and clarity are key.
Overcoming Challenges During the Transition Process
Let’s be real – change is never easy. There will likely be challenges and obstacles along the way. Resistance to change, confusion about new roles and responsibilities, hiccups in implementing new policies and procedures – these are all common hurdles.
The key is to anticipate these challenges and have a plan in place to address them. Provide training and support to help people adapt to the new model. Be open to feedback and willing to make adjustments as needed.
With a clear vision, a well-thought-out plan, and a commitment to communication and collaboration, you can successfully navigate the transition to a new governance model – and set your organization up for long-term success.
Conclusion
So, there you have it – the lowdown on board governance models. We’ve covered the different types, from the traditional to the cutting-edge, and explored how to choose the one that’s right for your organization.
Remember, there’s no one-size-fits-all solution. It’s about finding the model that aligns with your values, your goals, and your unique challenges. And don’t be afraid to mix and match, to create a hybrid that works for you.
The key is to keep an open mind, to be willing to experiment and adapt. Because when you find that sweet spot, that perfect fit, it’s like unlocking a whole new level of potential for your organization.
So go forth, my friend, and find your board governance model soulmate. Your organization (and your sanity) will thank you for it.