Should not-for-profit governance be short-changed because of scarce resources and directors being unpaid? Are directors’ fiduciary duties less because it is a volunteer position? Are directors less at risk?
The answer is “no” to all of the above questions. Not for profit organizations are some of the most important in our economy, including hospitals, schools, universities, charities, religious organizations, community organizations and more. Many are large, complex organizations with multiple moving parts and interdependent stakeholders. They are tough to lead and govern but must be as effectively led and governed as for-profits are. They require CEOs, directors and staff who are at the top of their game and will make the commitment necessary.
Beneficiaries such as patients, students, children, congregations, artists, the disabled, military veterans and the vulnerable all depend on a well-governed organization to survive and thrive. Without proper governance, donors are less inclined to give, directors are less inclined to serve, and the mission of the organization less likely be achieved. Not-for-profits can also be the first board a director serves on, so it’s important to learn the right habits at the outset.
I gave a speech in Dallas this week to 160 not-for-profit directors on shaping effective boards, for the University of Texas at Dallas. My slides are here (PDF) and the not-for-profit booklet that I co-authored and was published by the Canadian Institute of Chartered Accountants is here (PPT).
Here are some suggestions coming out of my speech and subsequent roundtables for improving Not-for-Profit boards, and based on my work with leading NFP boards, CEOs and directors. They can all be done with limited budgets and resources, whether you are large or small.
- Formalize board roles. When I asked for a show of hands, most of the room did not do this. Have charters for the board, the committees, the Chair, the Executive Director, and committee chairs if you have committees. Samples of these are in my guidebook if you need them, and are also publicly available on the Internet. Tailor them and draft them yourself. This gets everybody on the same page and establishes standards and the right tone at the top.
- Your board mandate should address vision, mission, strategy and operational plans; program delivery and operations; risk identification and management; finances (budgets, investments, use of donations, etc.); government filings and reporting; values, ethics, reputation and integrity; key policies and procedures; and communication and accountability to members and stakeholders.
- Consider gradual terms of two years and three renewals; or three years and two renewals, contingent on performance, whenever possible, to promote renewal and diversity and allow fit and interest determination. Confirm a succession planning process.
- Mentor and recruit younger directors. Have them serve on a committee but not become board members until they gain a few years experience. Pay attention to needed skills that older directors may not possess such as social media and its impact on fundraising. Have a board talent pipeline.
- Have tight board and conflict of interest guidelines that addresses directors who are also volunteers; directors who are also stakeholders; and donors who sit on boards who need governance training.
- Recruit properly and limit the size of the board. Use a director skills matrix that is aligned with the strategy and mission of the organization. Limit the size of the board so it’s effective at decision-making.
- Adopt an evaluation process – annual and perhaps per meeting.
- Be explicit and up front about donation and solicitation expectations, but be flexible for different capacities. Notify the board about average gift amounts to encourage giving.
- Always say “thank you,” seven times. (Yes, thank a donor or volunteer or other stakeholder who gives a total of seven times.)
- Lastly, have fun and be passionate. NFP directors are some of the most passionate, generous and fun people in the governance space. They serve because they genuinely believe in the cause of the organization.