Trustees of a Minnesota Foundation Find an Innovative Way to Evaluate Their Own Performance

BRAINSTORMS

By Darlene M. Siska

When Jim Hoolihan was the mayor of Grand Rapids, Minn., in the early 1990s, he kept his office door open. Citizens could come to City Hall to offer comments or even complain about the job he was doing. But in 1992, when he began his service on the board of the Blandin Foundation, a Grand Rapids grant maker that focuses on strengthening Minnesota’s rural cities and towns, he found the boardroom door slammed shut.

“There was no culture of feedback at the foundation level,” says Mr. Hoolihan, who now serves as president of Blandin, which was founded in 1941 by Charles K. Blandin, a paper-mill owner.

The lack of outside views, he notes, seemed especially odd to him because most of the trustees came from the business and political arenas, where stockholder meetings and election booths afford opportunities for decision makers to answer for their actions. The foundation’s grantees and other constituents, he says, “couldn’t come to us and bang the table and tell us what they thought.”

This realization, he says, was a key impetus behind big changes in how the board was composed, and how it evaluated its own performance. At a Blandin board retreat in 1997, when Mr. Hoolihan served as the board’s chairman, trustees began to dig into the issue of governance. “It was a board sentiment that we needed to improve from good to better,” he says. “It was in the culture of our board for self-improvement, and we used our collective will to improve.”

From that desire, he says, the trustees stepped up their efforts to gather outside feedback; as turnover opened up seats on the 10-member body, seven new trustees were added since 1997 from around the state and from a variety of backgrounds. (A survey asking the public for opinions on Blandin’s grant-making efforts also helped garner outside voices, says Patrick Marx, the foundation’s director of communications.)

In addition, the board vowed to take a careful look at itself. It created a peer-review process, which forced its members to evaluate one another’s performance and determine who among them should be asked to continue serving. In addition, the board pledged that every four years it would undertake a formal effort to assess its overall performance.

The steps taken by the Blandin Foundation reflect a growing interest among grant makers to improve their performance and accountability, says Sandra R. Hughes, executive governance consultant at BoardSource, a Washington nonprofit group that helps boards become more effective. She attributes this new attention to governance to recent scandals in the for- and nonprofit worlds, and legislation that is being considered in several states to regulate charities. “The role of the board chair is becoming one of leadership,” she says, “and not just a position given to someone for past good work done.”

Yet, she says, Blandin’s peer-review process, which the Council on Foundations holds up as a model for other grant makers to follow, remains rare in the foundation world. And while some grant seekers say it is laudable that foundations are taking this step, others say far more needs to be done to make grant makers more responsive to the needs of the public.

Increased Accountability

According to Blandin’s trustees, the revitalized recruiting effort and the peer-review process have resulted in a stronger board, with individual members recommitted to the foundation’s mission and attentive to performance and details.

“It allows board members to focus on the issues at hand, provides accountability, and leads to action,” says Bruce W. Stender, a board member who also serves as chief executive officer of Labovitz Enterprises, in Duluth, Minn., a company that owns a chain of hotels and other businesses.”We have a climate at the board table where there is a lot of candor, and you really appreciate it. You don’t deal in personality.”

The current board is more diverse than it was before peer review and renewed recruiting efforts were adopted, says Gene Radecki, a Blandin board member. “We all come from different walks of life, but are working more as a team focused on the mission, rather than as individuals,” he says.

It is rare for foundations or charities to adopt the kind of peer-review process that Blandin uses, says Ms. Hughes of BoardSource. “I try to get foundations even to do a collective board assessment,” she says, “since most foundation boards don’t have any process in place at all.”

Without a formal structure, such as the peer review, board members can push performance issues away, where they tend to be forgotten, says Ken Lundgren, a retired bank executive who is Blandin’s current board chairman. “The structure of the process works,” he says.

Peer Review and Recruiting

Many foundations tend to recruit and keep board members whom their trustees already know from their professional or social circles, says Mr. Stender. But those people, he says, don’t necessarily make effective board members.

As he and his colleagues overhauled the recruiting and evaluation systems, he says, “what was most important was that we didn’t take the ‘old-boy, old-girl approach, ‘ where board members bring on people whom they know in their normal sphere of living and influence.” The idea, he says, was to recruit and keep people on the board who would focus on ways for Blandin to carry out its mission: “We wanted individual skill sets, from people throughout rural Minnesota.”

The process, says Mr. Hoolihan, began with the trustees creating their own peer-review system, based on their experiences outside of the foundation world, and without the use of consultants. They did, however, rely on one particular resource: Boards That Make a Difference (Jossey-Bass, 1997, $35), a book by John Carver, a management and governance consultant, which has been influential in shaping the governance structure of thousands of nonprofit groups, according to Ellen Bryson, who directs the governing-board programs at the Council on Foundations. Mr. Carver recommends that charities and foundations think about board recruitment as a continuous process, and that trustees be recruited for their demonstrated commitment to the values and mission of the organization.

After absorbing Mr. Carver’s lessons, the Blandin board stepped up its recruitment efforts, and went looking for potential board members across the state rather than just among their personal contacts in the Grand Rapids area. They relied on an outside recruiter to gather résumés and candidate histories and do interviews. (Jan Kruchoski, principal-in-charge of LarsonAllen Search, the Minneapolis recruiter that worked with Blandin, declined to say how much the service cost the foundation but said that a similar effort would cost a nonprofit client at least $4,000.) The recruiter then brought back scouting reports to the nominating committee members, who interviewed the finalists themselves, grilling them about their commitment to Blandin’s focus on rural needs.

The members who have joined since 1997 include not only business leaders and public officials but also representatives of the medical and education fields. Of the seven newer trustees, says Mr. Marx, four are members of ethnic or racial minority groups.

Evaluating Performance

The foundation’s trustees serve renewable four-year terms, and it conducts its peer reviews of each board member at the middle and end of those tenures. The process serves as a follow-up on the vetting that took place before the trustee joined the board. The goals, says Mr. Hoolihan, are to determine whether each trustee’s background and experience offer the perspective needed to help lead the organization, to give each trustee constructive feedback, and to identify poor performers.

To meet these three goals, board members fill out an anonymous questionnaire that asks them to offer feedback on each of their board colleagues, ranking one another’s knowledge of and commitment to the foundation and fleshing out their rankings with specific comments. Trustees are also asked to write a few comments about their peers’ working relationships with board colleagues, and about their colleagues’ performance on the board, including such things as their participation in meetings. The questionnaire also asks whether each trustee should be asked to serve another term. “The board members are usually not shy to put down what they feel if somebody is not doing his or her job,” says Mr. Radecki.

The questionnaire’s results are compiled by the foundation’s board-services manager (who also happens to be Blandin’s human-resources director), and then the individuals who have been reviewed meet with the board’s chairman to go over the feedback and hear the board’s decision about renomination.

The collective board assessment questionnaire, which trustees fill out every four years, asks board members to rank their understanding of issues that affect the foundation’s mission. It also asks them whether they feel they are receiving adequate information about Blandin’s mission and finances. The results are compiled by the board-services manager. “Any items receiving a low ranking are discussed by board members together,” says Mr. Radecki. Having both evaluation processes, he says, “gives us a good basis for accountability between ourselves.”

Handling Results

Mr. Lundgren has been through the peer review twice, and says he found the commentary on himself to be invaluable. “Your peers judge how effective you are as a trustee and your weaknesses are brought to light, so you’re aware of what you’re doing,” he says. “It also highlights qualities of trustees that are effective.”

Results are handled with sensitivity, says Mr. Hoolihan. Since the peer-review process began, he notes, only one member of the board was not nominated for the next term due to the review results. Mr. Hoolihan was board chairman at the time, and recalls, “I used the collective peer-review data to acknowledge the significant contributions he had made, but also to deal with the ‘tough stuff.’ And that was to tell the person his performance was not judged to be at a high-enough level [to] where he was invited back.”

The whole process requires discretion and care on the part of the board’s leader, says Mr. Stender: “The peer review adds an extra challenge for the board chair because they have to take it seriously — and they do.”

Mr. Lundgren says that new trustees sometimes feel intimidated about participating in peer reviews when they have only recently joined the board. In those cases, the review process itself has helped break the ice. “In one case, I sensed a new board member had something to say [during meetings] but was feeling sensitive about saying it,” he says. “During my first feedback, I said, ‘We’ve put you on this board because we think you’re a valuable person and we want you to speak up.”

In the seven years since the process has been in place, very few tweaks have been made, say board members. The most significant change, says Mr. Lundgren, was doing the peer reviews at the midpoint of board members’ terms, when there is still time for them to adjust their performance, rather than at the end, when they are up for renomination.

‘Ahead of the Curve’

The Blandin Foundation’s attention to trustee accountability, says Mr. Hoolihan, places it “ahead of the curve. We were lucky to have gotten started on this when we did. The landscape out there today is greater scrutiny from stakeholders and the government, and greater issues of accountability for the foundation world.”

Blandin’s efforts do indeed place it ahead of its peers, says Rick Cohen, of the National Committee for Responsive Philanthropy, in Washington.

“I think it’s great Blandin is doing this, ” he says. But since the foundation’s peer-review process is limited to the board members themselves, it isn’t as rigorous an evaluation as one that would air the opinions of outsiders. He recommends that foundations do a “360-degree review,” similar to those some charities use in evaluating managers — seeking ideas from numerous people with whom an individual works, including those he or she supervises and the charity’s constituents. “It would be laudable for Blandin to expand who has access to offer feedback,” says Mr. Cohen. “Otherwise, the board can still be ingrown, and board members may not hear who has discordant opinions.”

Despite the Blandin board’s efforts to gather outside feedback, it has not immunized itself against public criticism. In 2000, a group of local residents calling itself Citizens for Blandin alleged in Ramsey County Probate Court that the grant maker’s giving to grantees outside the Grand Rapids area was not in keeping with the late Mr. Blandin’s wishes. In December, the court appointed an overseer to ensure that the foundation gives at least 55 percent of its grants to the Grand Rapids area, in perpetuity.

Monitoring its own board via the peer-review process, says Mr. Lundgren, might protect the Blandin Foundation’s autonomy over the long term. “We would rather do self-evaluation than have someone come in and tell us what to do,” he says. “We’d recommend this to any organization, whether it’s a foundation or not.”

Does your group’s board have any way of evaluating its own performance? How does it work — and is it effective? Share your experience in the Building a Better Board online forum.