“Tone at the top” is an accounting profession term that describes the effectiveness of the internal controls, governance and oversight responsibilities carried out by a board of trustees. When tone is good (trustees insist on high ethical, financial and academic standards and hold management accountable), higher education institutions can weather the storms of adversity. When tone is bad, colleges and universities could not only be hit hard with financial losses but also lose the reputations they’ve built—sometimes over many decades.
In light of recent admissions scandals, cybersecurity failures, sexual abuse and harassment claims and other issues involving colleges, it’s a particularly good time to reflect on the factors that strengthen and depress the effectiveness of college oversight. The factors outlined below are applicable to public universities and private nonprofit universities alike.
Factors Strengthening Board Oversight
- Training in higher education – Boards well trained in the unique aspects of higher education institutional performance are more likely to be healthy boards with good tone at the top. Such boards tend to monitor academic standards and help ensure healthy financial performance, even in difficult economic times. They ask great questions on all aspects of university performance. They insist on clear, accurate and timely reporting. They focus on student outcomes, not just inputs.
- Training in board leadership principles – College and university boards composed of members who understand their roles and exercise them diligently contribute to top-flight institutional management. They’re able to work through difficult issues more efficiently and effectively than those that don’t fully understand the board’s role. These boards have good structures and handle difficult or controversial issues and conflicts of interest well. When boards fully understand their roles, they know where the line is between strong governance and meddling—and they focus on careful oversight without falling victim to micromanagement. They help steer the institution toward success in the right way, based on the right reasons. That becomes especially important during times of scandal and crisis.
- Seasoned board leadership – The best boards often have expended significant effort to carefully choosing and grooming board leaders. They don’t stop at the typical board training sessions. They work to develop board leadership and diverse perspectives to help ensure good decision making. Well-trained board chairs know how to manage the president and board chair relationship. It may be said they follow the common saying, “Trust, but verify.” With that knowledge and understanding, they take time to build effective relationships. They’re also often rewarded with smoother operations and transitions through difficult times.
Factors Depressing Board Oversight
- Size – Boards with too many members tend to lack accountability based on sheer numbers. When everyone thinks someone else is minding the store, it often turns out that no one is.
- Selection – Boards without robust and thoughtful board selection criteria based on member skills tend to be less effective. The key issues for board selection include competency, character and chemistry. Homogenous boards with little to no diversity are at risk of weak performance. It’s also important that boards select members who have adequate time to execute important board responsibilities.
- Delegation – Boards without a well-thought-out structure of committees and board framework tend to be weaker. They’re not as effective as boards with strong structures and disciplined delegation and execution of committee responsibilities.
- Relationship – Boards dominated by relationships that are too friendly and trusting tend to “look the other way” and not hold key people accountable for bad performance on the part of university administrators, faculty and/or staff. This is a recipe for disaster.
Address these seven factors to help strengthen your board. When the inevitable crisis arises, you’ll be glad you did. In addition, learn about the many customizable, on-site board training services BKD professionals can offer to help your institution reach its goals.
For more information on how BKD’s financial sustainability services can assist you as a board member, reach out to your BKD Trusted Advisor™ or complete the Contact Us form below.