E.H.Fram is professor emeritus, E.Philip Saunders College of Business, at Rochester Institute of Technology. According to the summary on the back cover he “pioneered the development of the Corporate Model for nonprofit organizations.” This book explains his model and its application to nonprofit organizations. The author and his associate V. Brown claim that their publication “shows how to transform your organization by optimizing: Strategic Planning…Board Structure…Board-Staff Relations…Operations and Compliance.” They claim the model was developed and first implemented in 1975.
Fram is convinced that nonprofit organizations need to improve their ability to do their jobs and they way to do this is to improve their management and their governance. He argues for a shift in board attention from a focus on operational issues to critical issues “involving vision, direction and adapting to new challenges and capturing emerging opportunities” (xix). Their thesis is that “good governance simply makes fiscal sense” (xxi). They communicate their ideas through a series of email exchanges between ‘Russ’ and ‘Jack’, two fictional characters. Russ is portrayed as the board member of a nonprofit and Jack is the leader of a nonprofit organization that has being implementing the Corporate Model for the last four years. Through their interchange the strengths of the Corporate model in its application to nonprofits are explained.
In essence the nonprofit Corporate Model “requires a fundamental change in behavior. Directors must be willing to give up the operating power they have in traditionally structured non-for-profit groups. The top executive must be comfortable making decisions and taking risks” (5). The payoff is greater professionalism, greater flexibility, and great efficiency. “The board sets policy. The top manager is responsible for operations” (21). The role of the board is described on pages 29-30. This includes directing management, evaluating management action, approves management action, advises management, receives information from management and acts as a public and community relations resource to management. The greatest limitation for this model is “maintaining board members’ commitment” (34). Fram addresses this question and presents the concept of board member assignments as a way to expand board member involvement in the key decisions that the nonprofit will have to make. This governance model requires a significant amount of trust and mutual respect between the board and the CEO.
Standing committees are reduced to three in this model — Executive, Planning and Resource, and Assessment (44). The Executive committee acts for the board between meetings. The Planning and Resource committee assists the CEO in long-range planning. The Assessment committee assists the board in the annual evaluation of the CEO and the organization’s performance. This includes financial operations and annual audit.
Fram places considerable weight on the work of the Assessment Committee (85-88). “The Corporate Model promotes accountability” (112). However, more importantly for Fram is the ethos of trust in which this governance model operates. It is interesting that Fram focuses upon the relationship between the CEO and the board chair as the key to developing and sustaining this trust. This is particularly important in the matter of the CEO’s performance evaluation (155-6). Transparency and a “spirit of inquiry” are both key ingredients within the board. The board needs to focus not just on defining outcomes, but assessing the impact of those outcomes.
On pages 213-215 Fram presents in chart form about 40 different ways in which the nonprofit Corporate Model differs from traditional governance models. The book ends with a question-answer section in which Fram seeks to assist organizations to assess whether the model would be helpful for them to adopt and implement.
Evaluation
I am not going to offer a critical review of Fram’s governance model per se, but rather some reflections on its possible relevance to church board governance principles and practices, particularly from the perspective of a chairperson.
1. Fram’s principles of governance reflect to some degree key elements in Carver’s model of board governance. In particular the empowerment of the CEO, the use of policy, and the focus of the board upon policy development, strategic direction and various aspects of evaluation. The various articles on this website related to the application of Carver’s principles within the world of church boards would apply similarly to Fram’s principles.
2. I appreciated Fram’s concern that the adoption of his model would require significant change in the definition of the CEO’s position and management. Church boards need to think carefully about this issue as they consider adopting Fram’s model or Carver’s mode l. Not every pastor has the capacity, motivation or theological perspective that is conducive to such a leadership shift. This requires considerable, frank discussion by a church board and lead pastor before adopting such models. A decision to do so may have the unintended consequence of causing a leadership change.
3. I would caution that Fram’s incorporation of an Executive committee of the board is problematic. Empowering a small portion of the board to act on behalf of the board tends over time to create two classes of board members. Those who are not part of the Executive committee begin to feel that they are not part of the decision-making process. Given that most church boards meet on a monthly basis and the increased use of email or other communication modes (e.g. Go To Meeting, Google’s Hangout, Webex, etc.), I do not think an Executive committee is necessary for a church board.
4. I also have some concerns about amalgamating all forms of assessment under the guidance of one committee. Within small nonprofits such as local churches, a more efficient means would be the appointment of two committees. One would be assessing the financial status and risks and overseeing annual financial reviews; another would focus on personnel issues, which would involve lead pastor annual evaluation. If other elements of the church’s operations need assessment, then this could be handled through adhoc committee appointments. Keep the structure simple and focused.
5. Keeping the focus of the board on the big issues is critical to advancing the mission. Thus the issues of policy development, outcomes definition and assessment, strategic planning, etc. must be the primary business of a church board. How these are shaped and processed will be determined by the bylaws, values, and ethos of the local church.
6. The value that Fram claims accrue to nonprofits who adopt and implement his model, i.e. increased professionalism, increased flexibility and increased efficiency, may not be sufficient motivation for local church boards to embrace his Corporate Model. Its very name will lead some to conclude that the church is adopting the standards and values of the business world! However, if a church board can see its way through these issues to the value that his key ideas and principles might produce, then their adoption normally will result in better stewardship of the congregation’s trust. It will also, I suggest, result in more stable board-staff relations over time.
7. I appreciated Fram’s focus on the need for increased trust between the board and the lead pastor (CEO in Fram’s model), if this model is adopted. Church boards should find this a healthy thing, given the Christian values that support their operations. However, this matter should not be assumed, but explored carefully because appearances can be deceiving.
8. One weakness I think in Fram’s model would be his lack of recognition about the role the chairperson plays in all of this. He does mention the importance of the relationship between the CEO and the chair, but I did not find much discussion about how the role of the chair has to change if his model is adopted. I think this is an unfortunate oversight. The fictional email exchanges between Ross and Jack point out the problem, because neither are board chairs in their virtual worlds and this illustrates the struggles that this creates as Russ seeks to motivate change in his nonprofit context.
Fram’s book presents another perspective on nonprofit governance that is worth reviewing. As I have pointed out is has some elements that church boards particularly might want to adapt, rather than adopt.