The landscape of Canadian sport is populated by thousands of membership based nonprofit organizations. In the sporting context, membership organizations are ones in which members pay fees motivated by their interest to participate in their chosen sport (for example, a Masters athlete paying dues to a local track club). As result of that financial investment, they gain access to the benefits of coaching, organized practices and officiated competitions. These are the benefits that paying members tend to focus on.

However, paying fees in a membership organization also gives the paying members the right to vote at the annual general meeting and elect the organization’s board of directors. Many members may regard the annual meeting and the ritual of electing a board as a somewhat uninteresting annual event. For many members in many organizations, electing board members is the extent of their engagement with the board of their organization, unless they become dissatisfied with something and believe the board should pay attention to the problem.

The board of a club is usually preoccupied with the many administrative and organizational aspects of running the club’s programs. When there are no managing staff, the board takes on the management role and, generally, as a consequence its role as the governing board gets less attention.

Effective governance

To govern effectively, one must:

• Clarify the organization’s purpose and values in consultation with those on whose behalf it exists
• Identify the risks involved in fulfilling the purpose in alignment with its values
• Direct and control the organization in a manner that enables proper reporting
• Be integrated into a single, forward-looking, efficient and empowering system that starts and ends with accountability

This is true of all organizations, membership organizations included. But it takes disciplined and informed work to navigate the unique context of membership organizations.

Members are shareholders, not just beneficiaries

Every governing board has the same accountability: to set direction, protect the organization and be accountable for achieving its core purpose over the long-term. To do this effectively, a board needs to intentionally and regularly connect with members. Members should be thought of as “shareholders” of the club. It is the board’s responsibility to translate the values of members into policies that direct and protect the club.

Seeking this input is seldom easy. Asking club members to think about the future is not an easy conversation when day-to-day operations are front of mind for both the board and members. Most conversations that boards have with members focus on problems and circumstances that arise in the member’s role as beneficiary, as the consumer of programs and services, rather than as a shareholder.

These conversations are important, as they are valuable in managing the club, but they are not so useful to the process of governing. And so, the board’s time is often spent reacting to today’s problems, planning short-term, and sometimes intervening with coaches, officials, or competition organizers where it seems hands-on control is warranted.

If a board wants members to think about the future, it needs to ask questions that tap into a shareholder mindset. For example:

• If we were meeting again five years from now and looking back, what would have had to have happened for you to be happy with the progress the club has made?
• What are the significant challenges facing our club and our sport in the next five years?
• Are there particular issues that you would like the club to address over the next 5 years? 10 years?
• What are the priority needs of our club or sport that are not being met? How can we best address them?

Governance in an organization of organizations

The Canadian sport system is also characterized by its many federations, which are essentially organizations of organizations. Federations cover municipal sport councils, Provincial and Territorial Sport Organizations (PTSOs) and National Sport Organizations (NSOs).

Effective governing begins with the board understanding the source of its authority to govern. Like any membership organization, a sport federation’s members grant the board authority to govern the organization on their behalf. In return, the board is legally accountable to members for the long-term direction and control of the organization. Although NSOs have different processes and conditions for electing board members, it is the members who hold the power to hire and fire boards.

Governing a federation effectively requires the board to distinguish between PTSOs as shareholders (those to whom the board is accountable) and as beneficiaries (those who participate in the NSO’s programs, events and services).

Which role?

Consider the different perspectives of the PTSO member as shareholder and the PTSO member a beneficiary:

The PTSO as shareholder…	The PTSO as beneficiary
Has the mentality of a long-term investor who looks for sustainable long-term organizational success	Has a transactional mentality who engages in program or service in exchange for immediate return or benefit
Asks: What does long-term sustainable success look like? What results or benefits should the NSO produce and for whom?	Asks: What programs and services are currently available for my PTSO, its athletes, coaches, referees, clubs?
Acts in concert with all shareholders to decide the results or benefits that the NSO should produce	Decides what results its PTSO, athletes, coaches, referees need
Looks at the long-term and big picture	Looks at present and short term
Primary concern is for the common good of the sport throughout the country	Primary concern is for my PTSO, my athletes, my coaches, my referees, my tournaments
Expects NSO to invest human and financial resources to produce a sustainable future	Expects immediate returns or benefits for its investment of fees, time, commitment
Have the authority to make decisions collectively for NSO as a whole	Has authority to make decisions for my PTSO, my athletes, my coaches, my referees
Connects and engages with the board as a whole	Connects with the CEO, staff and coaches

The board needs to engage with member PTSOs so that it develops a deep understanding of their perspectives, their priorities and their values. And then the board, on behalf of all members, needs to translate that input into a clearly defined direction.

It’s not that the concerns of PTSO-as-beneficiaries aren’t important, but dealing with “customer” issues is the job of staff, not the job of the board. Because customer issues are more immediate and concrete than the ambiguous owner issues of what is best for the whole of the NSO, the board needs to be aware of how easily it can be distracted by immediate customer needs.

Avoiding conflicts of loyalty

One problem that membership organizations have is when the board is elected from among members. Those members invariably have loyalties to specific participants, clubs, or PTSOs and experience conflicts of loyalty when deliberating as a member of the board.

The enactment of the Canadian Nonprofit Corporations Act (2014) precipitated the revision of most NSO board structures. Previously most boards were comprised of a representative from each PTSO, as well as an elected president and other officers. The move away from this structure and the increasing number of boards seeking independent directors has mitigated a situation that was ripe for conflict of loyalty.

Some guidelines that an NSO board may want to introduce to recognize the duality of PTSO roles:

• The board will distinguish and serve PTSO interests that derive from their interests as shareholders, not beneficiaries
• The board acknowledges that PTSOs have the right in their role as shareholders to determine and delegate the purpose of the NSO
• PTSOs-as-beneficiaries are relevant to governance only in that the board must define the benefits to be provided to beneficiaries, and make certain that those benefits are achieved. Defining results and confirming achievement is done on behalf of the PTSO-as-shareholder
• The board will sustain effective and ongoing dialogue with the PTSOs-as-shareholders and incorporate into board deliberations the full range of members’ views about direction and control of the organization, not just directors’ personal points of view

Every board of a membership organization needs to be vigilant to ensure that it doesn’t allow or enable conflict of loyalties in its governing processes. Failure to act in the best interest of the whole of the NSO shows lack of fidelity to the task of governing on behalf of the entire membership and is an abdication of the legal and fiduciary duty to govern the organization on the behalf of all.

---

About the Author(s)

Rose Mercier, MBA, GSP, senior consultant with The Governance Coach has for the past 10 years worked exclusively in supporting corporate, nonprofit and public agency boards in Canada and the U.S. to achieve governance excellence. Rose worked in the Canadian sport system for 20+ years in program management, chief executive and system leadership roles. Rose’s extensive involvement in Canadian sport continued through consulting engagements with more than sixty national and provincial sport bodies. She was a founding mother of Canadian Women & Sport (rose@governancecoach.com).

---

The information presented in SIRC blogs and SIRCuit articles is accurate and reliable as of the date of publication. Developments that occur after the date of publication may impact the current accuracy of the information presented in a previously published blog or article.