MBAX 6850 Week 3 Board Governance Memo Example

Memorandum

To: Board of Directors, Lakeshore Literacy Alliance

From: Governance Committee

Date: October 1, 2026

Re: Proposed process for the executive director's annual review

Purpose

The governance committee asks the board to adopt the process below for evaluating the executive director each year, beginning with goals set this November and a first review next October. Lakeshore Literacy Alliance has not held a formal review of its executive director in four years. The process below is designed to be completed in about three board meetings and to protect both the board and the director.

Why This Is the Board's Task

Of all Lakeshore's staff, the executive director alone is hired by the board, and nobody inside the organization is placed to judge that person's work. Every other staff member reports to someone on staff; the director reports to the board as a whole. Carver (2006) argues that a board governs largely through its one employee, setting the ends the organization pursues and holding the chief executive accountable for reaching them, and that a board which does not evaluate its executive has given up its most important lever. Ostrower (2007) found in a national study of nonprofit boards that many did not formally evaluate their chief executives, a gap that weakens accountability. Lakeshore's board has been in that position since the last review.

Goals Set Before the Year Begins

In November, the director and the executive committee will agree on four to six goals for the year, tied to the strategic plan. This year's draft goals are: maintain the state adult education contract with all reporting deadlines met; raise individual giving from about $0.8 million toward the two-year target of $1.0 million; increase the share of retested learners who make a measurable gain; rebuild the volunteer tutor corps to 450; and complete the succession plan for key staff. The full board will approve the goals in December. Agreeing on goals in advance means the review measures performance against something both parties accepted, rather than against expectations formed afterward.

Results and Leadership, Assessed Separately

The review will assess two things separately. Organizational results are measured against the agreed goals using the organization's own reports. Leadership is assessed through structured input from all board members and from the director's direct reports, collected confidentially by the governance committee. Separating the two matters because organizational results depend partly on factors outside the director's control. A year in which the state cuts adult education funding could produce poor results despite good leadership, and a year with an unexpected large bequest could produce good results despite weak leadership. Herman and Renz (2008) note that nonprofit effectiveness is multidimensional and that judgments of it are partly socially constructed by stakeholders, which argues for gathering several perspectives rather than relying on a single measure.

The Process

1. November: the director drafts goals; the executive committee and director agree on them.

2. December: the full board approves the goals.

3. April: the board chair and director hold a mid-year conversation on progress, with no rating.

4. September: the director submits a self-assessment against the goals; the governance committee collects confidential input from board members and direct reports.

5. October: the governance committee summarizes results and input; the chair and one other director discuss the review with the director; the board meets in executive session to consider compensation.

Compensation

The board's compensation decision will follow the review and will consider comparable positions at similar organizations. As a 501(c)(3) public charity, Lakeshore must avoid paying more than reasonable compensation, and documenting the comparison data and the board's decision protects both the organization and the director.

Decision Requested

Adopt this process at the October meeting, with goals set in November. The governance committee will bring the confidential input form to the November meeting for review.

References

Carver, J. (2006). Boards that make a difference: A new design for leadership in nonprofit and public organizations (3rd ed.). Jossey-Bass.

Herman, R. D., & Renz, D. O. (2008). Advancing nonprofit organizational effectiveness research and theory: Nine theses. Nonprofit Management and Leadership, 18(4), 399-415. https://doi.org/10.1002/nml.195

Ostrower, F. (2007). Nonprofit governance in the United States: Findings on performance and accountability from the first national representative study. Urban Institute.