2. Board of Directors

8/14/2019 2. Board of Directors

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PA 545 Management of

Nonprofit OrganizationsSpring 2008: Week III

http://www.boardsource.org

http://www.managementhelp.org/boards/boards.
http://www.boardsource.org/http://www.managementhelp.org/boards/boards.htmhttp://www.managementhelp.org/boards/boards.htmhttp://www.boardsource.org/


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FOR GOVERNANCE, LET'S START

WITH BOARDS

All nonprofit organizations are governed by a board ofdirectors. But not everything that is called a "board" isthe same. There are "governing boards" that are legallyresponsible for the organization; as "trustees", they are

legally responsible, and liable, for the organization. Theyhave fiduciary responsibilities. There are other kinds ofboards: advisory boards, without governingresponsibility; honorary boards, where persons lendtheir name to the organization to aid its public relations

and give it a boost in credibility; campaign boards thattake on ad hoc tasks of fundraising, usually to increasethe capital of an organization; and others.


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board of directors

as a governing body The board of directors is the governing body of a

nonprofit organization. The responsibilities of theboard include discussing and voting on the highestpriority issues, setting organizational policies, and

hiring and evaluating key staff. Board members arenot required to know everything about nonprofitmanagement, but they are expected to act prudentlyand in the best interests of the organization. They

approve operating budgets, establish long-termplans, and carry out fundraising activities.
http://foundationcenter.org/getstarted/tutorials/establish/board_dev.htmlhttp://foundationcenter.org/getstarted/tutorials/establish/board_dev.html


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Governing boards

Governing boards may be elected by amembership in an organization where themembers have legal status. Usually board

members are nominated and elected byexisting board members, in what used tobe called "self-perpetuating"organizations. Organizations that are not

legally controlled by members are nowusually called "public benefit"organizations in legal documents.


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Governing boards may have a

different "feel" or "culture" to them Governing boards may have a different "feel" or "culture" to them, even if

they have the same responsibilities under law. Some of the factors thatinfluence the culture, style or performance of any given board include thingslike:

the stage of the organization's development- the size and complexity of the organization,

the geographic situation of board and staff the time members have to give to the board and the time available to

process the issues, the size and expertise of staff, and the degree to which staff support and

assist the board, without taking on the board's responsibility; and the technical nature of the organization's work, e.g. an agency that deals

with telecommunications among nonprofits; a medical emergency service; abio-ethics center; a disease research organization; where each will probablyhave a relatively high number of specialized board members.


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The Ten Basic Responsibilities

of Nonprofit Boards In 1988, the first publication of the National Center for Nonprofit Boards was a

booklet, The Ten Basic Responsibilities of Nonprofit Boards, by Richard T.Ingram.

Determine the organization's mission and purpose. Select the executive. Support the executive; review performance and priorities. Ensure organization planning. Ensure adequate resources. Manage resources effectively; manage the budget; protect the public interest. Determine and monitor programs and services. Enhance the organization's public image. Serve as a court of appeal. Its meaning was that the board is the final arbiter of

issues within the organization, short of someone going to court. The nonprofit

organization does have some external regulators, like the state secretary of state, thestate attorney general and the federal Internal Revenue Service. Assess the board's own performance,strengthen the board's own effectiveness

as a board.


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Primary Four Governance Roles

Ascribed to Boards Define and advance the organizations mission

Ensure, develop, and conserve theorganizations resources (including funds,

property, and human resources). Provide oversight of management, and ensure

assessment of the organization.

Engage in outreach as a bridge and a buffer

between the organization and its stakeholders(clients, members, the community it serves,regulators, donors, the public).


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Two Roles of the Board of Directors

Another way of looking at the board member'srole is to discern an overall twofold role, witha certain tension between the two roles:

1. The public, external role, acting in the

public interest2. The governing, internal role, acting in the

organization's interest

This external/internal role is not always easy to

accomplish. It is a balance of objectivity andsubjectivity, of calculation and commitment, ofperspicuity and passion.


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The public, external role, acting

in the public interestBecause the governing board of directors has thefundamental responsibility and accountability ofthe organization and is the final court of appealwithin an organization and an important court of

appeal for the public, the board has a fundamentalaccountability to the public. As represented in ourNonprofit Management Model, the board receivesinput and feedback from the organization'scustomers: consumers, contributors and

constituents. The board member is not an owner,but a "trustee" of the organization and its assets.


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The governing, internal role, acting

in the organization's interest

Assuming that the organization is fundamentallysound, ethical and accountable, then the boardof directors has the responsibility to be thedirectional drivers and ambassadors of theorganization. They are responsible for overallplanning, representing the organization to thepublic, identifying and mobilizing resources andseeing that the organization accomplishes itsmission.


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THE BOARD, THE CHIEF EXECUTIVE AND THE

BOARD-EXECUTIVE RELATIONSHIP IN

GOVERNANCE To govern is to decide, to direct and to control.

To manage is to carry out, implement and

accomplish.

To lead is to take initiative and create change.

Leadership, governance and management are

all needed in a nonprofit organization. In most

cases, ideally, these three roles are shared.


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GOVERNANCE

The board has the primary responsibility to

govern. But, in reality, the board usually

needs a strong executive, and sometimes

senior staff, as support, in order toaccomplish its task. So the executive has

to be knowledgeable of the governing role

and, without usurping it, support the boardin it.


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GOVERNANCE

The executive has the primary responsibility to manage,and to carry out board policies, directives and plans. Butthe board has to manage itself, to develop and evaluateits own activities.

Both the board, as a unit and as individuals, and theexecutive have the opportunity and call to be leaders.

If a board smothers the executive, turning him or her intoa lackey, the organization suffers.

If the executive controls the board, turning the board intoa rubber stamp, the organization suffers.

The board has all the legal authority; the executive andstaff have all the day by day operational information.Neither is very powerful without the other.


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GOVERNANCE

The board is made up of volunteers, non-paid, part time,representatives of the community. The board shouldoperate as a whole, without individual board memberscreating separate agendas with the executive or staff.

The staff is made up of professionals, compensatedemployees, mostly full timers.

In the well run nonprofit organization, the board, as awhole, and the executive (and senior staff) shouldfunction as partners.

This also creates a tension to maintain balance, forboth board members and the executive and senior staff.


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GOVERNANCE

When well directed and operated, a nonprofit is a

powerful entity, drawing on community and

professional resources. It is not difficult,

however, for nonprofit organizations, betweenmultiple board members and an executive with

multiple senior staff, to fall off balance. To find

and maintain the appropriate balance is one of

the fundamental challenges of "themanagement of nonprofit organizations."


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Should the Chief Staff Executive be

a Member of the Board?

Some nonprofits decide to make the chief staff executivean ex officio member of the board, sometimes voting andsometimes nonvoting. This decision should be madecarefully. Some believe that board membership is a goodidea because it enhances the executive's position of

authority within the organization and strengthens theworking partnership between the board and theexecutive. On the other hand, some feel that boardmembership blurs the distinction between the board'sresponsibilities and the executive's responsibilities and

makes it difficult for the board to assess the executive'sperformance objectively. Whatever the executive'sofficial status, his or her insights into the daily operationsof the organization are essential to board decisionmaking by the board.


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Board MembersImportant points during the selection process:

It is essential that prospective board members be told what

is expected of them before they are proposed for election.

Asking people to join the board without providing a "job

description" is sure to create an ineffective board.

Build a board slowly. Proceeding carefully can provide thenecessary time for learning why an individual wants to

become a board member, and deciding whether his or her

agenda is compatible with the organization's.


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Important points during the selection

process:

Seek out the advice of local funders, such as foundation staff,United Way officials, and government officials who have aninterest in your organization's mission

Contact executive directors and board officers of large,

established nonprofit institutions in your community for theirsuggestions

Speak to religious leaders in your locale to see if they canrecommend any candidates, particularly from their owncongregations

Ask for volunteers at any canvassing efforts, open houses,special events, and benefits that your organization sponsors


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How should the board be

structured?

Every board has a fundamentalresponsibility for self management: forcreating a structure, policies, and

procedures that support good governance.The term "board organization"encompasses a variety of tasks, fromroutine matters such as preparing a

schedule of board meetings to actions withbroader consequences such asdeveloping a policy about terms of service.


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Effective Board Organization

To set the stage for efficient board and committee work: Prepare a written job description for individual board members. Develop an annual schedule of meetings, determined a year in

advance. Circulate clear and thorough information materials, including an

agenda, to all members two to three weeks before each meeting. Maintain complete and accurate minutes of all meetings. Keep meetings brief and well focused. Stimulate the broadest

possible participation by members. Ask each board member to serve on at least one board committee

or task force. (For new members, one committee assignment is

sufficient.) Acknowledge members' accomplishments and contributions in a

variety of ways in the organization's newsletter, at meetings, inminutes.


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smooth functioning committees

To encourage smooth functioning committees, followthese additional steps:

Prepare written statements of committee and task forceresponsibilities, guidelines and goals. Theseorganizational documents, which should be approved bythe board chairperson, should be reviewed every one totwo years and revised if necessary.

Make work assignments according to the background,expertise, and schedule of each member.

Distribute tasks among members so that everyoneparticipates but no one is overloaded.

Create a system of checks and balances to monitorcommittee members' work and assure that tasks arecompleted on schedule.


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How Large Should Our Board Be?

The organization's structure and needs are among thefactors that determine board size. In considering the sizeof the board, keep these points in mind:

Every board needs a sufficient range of expertise toaccomplish the organization's mission. If a board is toosmall, its members may be overworked andunproductive. If a board is too large, every member maynot have the opportunity to participate actively.

According to Board Source (National Center for NonprofitBoards, 2000), the median size of a board is seventeenmembers.

What Sho ld be the Length of a


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What Should be the Length of a

Board Member's Term?

There are no hard and fast rules for determining boardmembers' tenure. Many organizations do, however, limitmembers to two consecutive terms and require a hiatusof one year before a board member may be reappointed.

Many organizations also stagger terms of service so thatone half or one third of the board are elected every oneor two years for terms of two to four years. Such policiesencourage institutional renewal because a board canprofit from the experience of veteran board members

while welcoming the fresh perspective that newmembers offer

What Committees Should Our


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What Committees Should Our

Board Have?

Much of the work that a board does is accomplishedthrough its committees and task forces. With theexception of the Executive Committee, which acts on theboard's behalf, committees recommend action to the full

board for discussion and action. Most boards need onlya few standing committees - the rest of the work can beaccomplished by task forces created for a specificpurpose. Common standing committees include

Governance Committee

Audit Committee Finance Committee

Executive Committee (if needed)


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The Board Manual: An Orientation and

Resource Tool

The foundation of a committed, knowledgeable, andeffective board is orientation and education. As anessential companion to orientation and education, everyorganization should have a thorough, easy-to-use

manual that board members can use throughout theirterms.

The board manual is developed by staff in consultationwith the board chairperson and other officers. Present itto board members in a durable, attractive loose-leaf

notebook with a table of contents and clearly divided andlabeled sections. Date every item and replace materialwhen necessary. Insert stationery, brochures, andsimilar items in pockets of the notebook.


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The Board Manual: An Orientation and

Resource Tool

A board manual serves two functions. For thenew board member, it is an orientationhandbook that provides useful information aboutthe organization, board structure and operations,and fellow board members and staff. For thebalance of a member's board service, themanual then becomes an indispensable workingtool and a central resource about the

organization and the board. Materials can beadded and removed to create an up-to-datereference.


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Designing a Board Information

System

Good governance depends on enlightened decision making.Board members in turn need to be knowledgeable about theorganization's status and needs if they are to make sounddecisions that advance its mission. But boards often say that the

information they receive hinders rather than facilitates goodgovernance and strong leadership. They protest that they areoverwhelmed with large quantities of irrelevant information, thatthey don't get enough information, or that they receive materialtoo late to devote serious attention to it. An effective boardinformation system should focus decision making, stimulate

participation, and support an appropriate balance ofresponsibility between board and staff.


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Types of board information

Management consultant John Carver describes three typesof board information:

Decision information is used to make decisions, such asestablishing selection criteria for the chief executive. Itlooks to the future and is not designed to measure

performance. Monitoring information enables the board to assess

whether its policy directions are being met. It looks to thepast and provides a specific survey of performanceagainst criteria. An example is an annual review of an

organization's strategic plan. Incidental information is for the general information of the

board and not related to board action. Committee reportsare frequently in this category.

I di id l B d M b


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Individual Board Member

Responsibilities

Attend all board and committee meetings and functions, such as specialevents.

Be informed about the organization's mission, services, policies, andprograms.

Review agenda and supporting materials prior to board and committeemeetings.

Serve on committees or task forces and offer to take on specialassignments. Make a personal financial contribution to the organization. Inform others about the organization. Suggest possible nominees to the board who can make significant

contributions to the work of the board and the organization

Keep up-to-date on developments in the organization's field. Follow conflict of interest and confidentiality policies. Refrain from making special requests of the staff. Assist the board in carrying out its fiduciary responsibilities, such as

reviewing the organization's annual financial statements.

Wh i h j b d i i f b d


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What is the job description of a board

chair?

Oversees board and executive committee meetings Serves as ex-officio member of all committees Works in partnership with the chief executive to make sure board

resolutions are carried out Calls special meetings if necessary

Appoints all committee chairs and with the chief executive,recommend who will serve on committees Assists chief executive in preparing agenda for board meetings Assists chief executive in conducting new board member orientation Oversees searches for a new chief executive Coordinates chief executive's annual performance evaluation Works with the nominating committee to recruit new board members Acts as an alternate spokesperson for the organization Periodically consults with board members on their roles and help

them assess their performance

What is the job description of a


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What is the job description of a

board vice chair?

Attend all board meetings

Serve on the executive committee

Carry out special assignments as

requested by the board chair Understand the responsibilities of the

board chair and be able to perform these

duties in the chair's absence Participate as a vital part of the board

leadership

Wh t i th j b d i ti f b d


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secretary?

Attend all board meetings

Serve on the executive committee

Maintain all board records and ensure their accuracyand safety

Review board minutes

Assume responsibilities of the chair in the absenceof the board chair, chair-elect, and vice chair

Provide notice of meetings of the board and/or of acommittee when such notice is required

Wh t i th j b d i ti f b d


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treasurer?

Maintain knowledge of the organization and personal commitment toits goals and objectives

Understand financial accounting for nonprofit organizations Serve as financial officer of the organization and as chairperson of

the finance committee.

Manage, with the finance committee, the board's review of andaction related to the board's financial responsibilities. Work with the chief executive and the chief financial officer to

ensure that appropriate financial reports are made available to theboard on a timely basis.

Assist the chief executive or the chief financial officer in preparing

the annual budget and presenting the budget to the board forapproval. Review the annual audit and answers board members' questions

about the audit.


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Sample Governance Committee

Job Description

1. Help create board roles and

responsibilities

2. Pay attention to board composition

3. Encourage board development

4. Assess board effectiveness

5. Prepare board leadership


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Evaluating the Boards

Performance There are a number of ways that a board can seek

feedback on its performance. They include: Dialogue on a dimension of the boards work at a special

forum, retreat, or regularly scheduled board meeting Constituency surveys Third-party reviews Internal reviews by an ad hoc or standing committee on

the board Reflective discussion on critical incidents

Feedback solicited at the conclusion of each boardmeeting And more compressive board self-assessments


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Designing better meetings

Board meetings should not be limited to presenting

information or voting on action items.

It should provide opportunities for airing multiple

view-points, new approaches, and even dissensus. Listening to understand differences of opinion and

probing for information constitute skills that are

often missing in the home and the office as well as

the boardroom.

Discussion


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Discussion

Topic One: the Agenda and Conduct of

Meetings Let's start with your past experience and some insights

you may have picked up along the way that you canshare with others. First, stop and reflect: what do youthink goes into making for good meetings, and, better,

great meetings? Meetings that are turn-ons, thatgenerate energy and get things done? What kind ofthings make meetings ineffective and a waste or time,and, in some cases, a real irritant? Second, how do youthink the board agenda should be prepared? Is it done

by one or more persons? Should it follow any regularorder? Do you have any suggestions for regularlyoccuring items.


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Topic Two: Board & Executive -

Mutual Expectations

Put yourself in two positions: one as aboard member, the other as executivedirector. Answer two questions. One, as a

board member, what do you expect of theexecutive director, both related to theorganization and to the board?Two, if youwere the executive director, what do you

expect of the board, both related to its ownresponsibilities and in its relationship withyou?


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Topic Three: Avoiding "Conflicts of

Interest Many times, a board member or a staff member will have a "duality of interest", i.e.,

will be in a position to benefit from an action for more than one reason, or from morethan one sources."Conflict of interest" means that a board or staff member has aprivate business interest that will benefit from an action of the board or organization inwhich the board or staff member holds a position of pubic trust and accountability.(See Smith, 32.) Sometimes a potential conflict of interest can be present but can behandled. Can you, as a group, after hearing individual opinions, come to a consensuson what would be the best way, in each case, to handle the attorney and the banker

in the following situations:A. The board invites an attorney to be on the board, thenasks the attorney to draft the by-laws, personal policies and handle th agency's legalbusiness. Does this represent a conflict of interest? Does it make any difference if theattorney does the work "pro bono", that is, without charge? Or, at a discounted rate?Or, at the regular agency rate?B. The board invites a banker to be on the board. Thebanker invites the organization to set up its accounts at the bank where s/he is anofficer. Is this a conflict of interest? Does it make any difference if the bank offersservices at a discounted rate? Or, at the regular rate which is the same as

neighboring banks? Or, at a rate above the neighboring banks, but the officer will bevaluable to the organization for fundraising.


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Topic Four: Handling a Board Problem

The board has invited a well-known persons in the community to beon the board. S/he is a person of wealth and has access to others ofwealth in the community. Fundraising is very important to theorganization and s/he has indicated willingness to be significantlyinvolved in fundraising. The bylaws state that if a persons has threeunexcused absences, that person shall be considered to have

resigned and a vacancy declared. It happens toward the end of thefirst year, just before the agency is about to launch its first full scalefund campaign, that this person has missed three consecutivemeetings. Two months s/he was out of the country but had notcommunicated with the agency about board meetings before leavingor coming back. What should the board do? Why? Can you reachconsensus on this?


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Resources on the Web:

Board Source: Building Effective Nonprofit B

(http://www.boardsource.org/)

Free Complete Toolkit for Boards (http://

www.managementhelp.org/boards/boards.htm) Posted by the Management Assistance

Program for Nonprofits
http://www.boardsource.org/http://www.managementhelp.org/boards/boards.htmhttp://www.managementhelp.org/boards/boards.htmhttp://www.managementhelp.org/boards/boards.htmhttp://www.managementhelp.org/boards/boards.htmhttp://www.managementhelp.org/boards/boards.htmhttp://www.managementhelp.org/boards/boards.htmhttp://www.boardsource.org/

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2. Board of Directors

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