Hungary – Introducing the concept of governance

Balázs Sátor

In Hungary, as in other CEE countries, the importance of NGO boards is increasingly recognized. As foreign donors leave and fundraising becomes more than a matter of writing grant proposals, boards more often find themselves in a new role of being advocates and gate-openers (if not yet fundraisers) for their organizations.

As the first generation of NGO leaders are leaving, donors have recently focused more on the capacity of their grantees’ boards. Having invested a lot, they now want to focus on what they are leaving behind. So far, they have put trust and money into individual CEOs; they now need a higher level of trust in the institution itself.

Recent research[1] conducted by the Civil Society Development Foundation (CSDF) Hungary and BoardSource on the boards, or governing bodies, of Hungarian associations and foundations[2] shows that NGO boards are not necessarily seen as ‘governing’ or as ‘bodies’.

Hungarian NGO boards

Hungarian boards are of two main types, which could be characterized as the ‘Tell You Everything’ type and the ‘Tell Me Everything’ type. The first is typical of associations with elected board members who see their role as to make all decisions, which must then be implemented at the operational level. There is usually little or no substantive communication with the management. This is the way associations were governed during communist times, with party members on the governing body. Boards like this often get very distanced from reality as they have little understanding of implementation, while turnover among management and staff is usually high owing to lack of motivation.

The ‘Tell Me Everything’ model is the opposite. It’s typical for CEO-led foundations, where the CEO ‘owns’ the cause and recruits board members to meet legal requirements. Such boards exercise little control, acting more as ‘voting machines’, lifting their hands when the management or CEO proposes something.

What these two types of board demonstrate is that the partnership approach is still not a tradition in Hungary. Our experience suggests that it is easier to transform the second type into a real functioning partnership or semi-partnership model.

While many of these boards are helpful to their organizations, they clearly reflect an early stage of development. Boards are not really ‘governing’ because governance and management functions are entangled – 42 per cent of respondents assign the management of day-to-day operations to board members and 53 per cent of management staff are voting members of their governing body. Nor are boards seen as ‘bodies’: the board is usually not considered a part of the organization with a culture of its own and does not act as a team. Consequently, there is no perceived need to develop it.

Board development programmes

Armed with the research findings, CSDF started to develop and deliver board development programmes for Hungarian NGOs. As we saw the need to educate both management and governing bodies, the curriculum included two separate parts, one for CEOs and one for board members.

Working with board and CEOs
As CEOs feel threatened by having to establish bodies that they see as ‘controlling’ them, our challenge is to convince them that a stronger board will be not an obstacle. In fact, if developed well, it will help and contribute to the organization.

The part for board members, particularly those serving on stronger boards, focuses on the threat of losing power if they let go of management. We have to convince them that board development will not result in the loss of power but a more effective exercising of it.

Tackling conflicts of interest
Conflicts of interests are inherent where governance and management are not separate. NGOs do not recognize situations where conflicts of interest are involved and do not find them improper. This is also true of Hungarian society as a whole, so we have to deal with the problem not only at the personal level but at a more general level, by questioning a cultural norm.

Using a range of learning tools
We realized we would have to use special tools because we anticipated a high level of resistance owing to the above challenges. We therefore decided that, over and above the ‘usual’ participative training methods, we would use audio-visual and creative learning tools. These included tailor-made case studies, a debate, a talk-show with a well-known TV host, and a series of five videos related to governance issues.

Two different experiences

Here we would like to analyse and compare two very different training courses. The first was a residential, five-day course, with four parallel groups of 15 people. Groups were divided according to organizational form (associations or foundations) and participants’ position (board or management staff). The groups were strongly resistant, questioning the basic relevance of the governing function of the board and the division of roles and responsibilities between the board and management. Over the week, however, we began to eliminate the resistance and open them up to the ideas we were presenting. Some participants initiated changes in their organizations after the course but for many, although they now understand and even accept the approach on a cognitive level, it may take longer to apply it to their own organization. In such cases, follow-up consultation may be important.

The experience with the second group was radically different. This was a training offered to a select group of NGO leaders with whom we had already been working on organizational development issues. These organizations had an understanding of good management and were facing or had recently experienced changes in leadership. Most had some experience of strategy development. Not only were they open to ideas when they arrived in the training room, they were eager to adapt what they learned to their own organizations at once. If followed through, these may be a core group of leading organizations that will demonstrate that models of good governance can be effective in Hungary.

What we learned

Introducing governance as a concept to the Hungarian NGO sector is about as difficult as it was to introduce management ten years ago (it was considered contrary to the voluntary spirit of the sector). We are dealing with the same kinds of barrier to attitude change at the personal and sectoral level.

While introducing governance and board development is timely for the sector as a whole, there are great differences in readiness among NGOs. Much depends on the actual stage of development of the organization and its experiences of leadership (and leadership change).

Even when an NGO is theoretically ready for a change in its thinking about the board, a lot of time is needed for it to become relevant and applicable to the organization. CSDF’s own board development process reflects some of this. When we launched the governance programme we also started to reform our own board with the help of BoardSource. We introduced good practices, eg strict term limitation and rotation policies, but we found that we had to suspend some of these to allow the board to internalize this culture and ‘catch up’ with the increased expectations. We introduced changes too early and had to slow down, but the experience helped us become more reflective and sophisticated in our approach to developing other NGOs. The major learning point for us was that even when we have accepted good principles, we still need to learn how to apply them in practice.

1 Nonprofit Governance Practices in Hungary (2003).

2 Hungarian foundations are mostly operational foundations.

Balázs Sátor is Executive Director, Civil Society Development Foundation Hungary. He can be contacted at sator.balazs@ctf.hu

For more information
http://www.ctf.hu


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