Should not-for-profit governance be short-changed because of scarce resources and the fact that directors are unpaid? Are directors’ fiduciary duties less because it is a volunteer position? Are they less at risk?
The answer to all of the above is no. Not-for-profit organizations are among the most important in our economy—some are hospitals, while others are schools, universities or charities. 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 as for-profits. They require CEOs, directors and staff who are at the top of their game and willing to make the necessary commitment.
Patients, students, children, artists and veterans—to name a few—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 is less likely to 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. My slides are here and the not-for-profit booklet I co-authored is here. I have some suggestions from that speech and subsequent roundtables that I’d now like to share. They can all be utilized with limited budgets and resources, and size shouldn’t matter.
1. 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.
2. 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.
3. Consider gradual terms of two years and three renewals (or three years and two renewals) contingent on performance to promote renewal and diversity and allow fit and interest determination. Confirm a succession planning process.
4. Mentor and recruit younger directors. Have them serve on a committee but not become board members until they gain a few years of experience. Pay attention to needed skills that older directors may not possess, such as social media savvy. Have a board talent pipeline.
5. Have tight board and conflict-of-interest guidelines that address directors who are also volunteers, directors who are also stakeholders, and donors who sit on boards who need governance training.
6. 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.
7. Adopt an evaluation process—annual and perhaps per meeting.
8. Be explicit and upfront about donation and solicitation expectations, but be flexible for different capacities. Notify the board about average gift amounts to encourage giving.
9. Always say “thank you” seven times. (Yes, thank a donor or volunteer or other stakeholder who gives a total of seven times.)
10. Lastly, have fun and be passionate. Not-for-profit directors are some of the most passionate, generous and fun people in the governance space. They serve because they genuinely believe in the organization’s cause.