Nonprofit organizations that have an engaged board of directors are stronger financially, attract qualified staff in greater numbers, and have better outcomes.
There are many schools of thought regarding what makes a good nonprofit board - or good board members. Some believe the board must be made up of movers and shakers in the community. Other organizations look for deep pockets willing to contribute financially to the organization. Then there are those who believe that a strong board includes people of varied backgrounds and skills - finance, law, marketing, risk management, etc. And still others seek people who are committed to the cause they are organized around - environmentalists on an environmental organization's board; teachers on an education focused organization, etc.
I have served on more than a dozen nonprofit boards in my career, either as a board member, officer, or the CEO responsible for the governance functions of my organization. I've even been referred to as "one of the nation's most experienced professionals in board service." As you can imagine, I have witnessed nearly every type of board member, behavior, and outcome you can imagine. In this three part series on board characteristics, we’ll discuss the good, bad, and the ugly of board behaviors.
Let’s start with the basic rules of board service. Regardless of who is serving on your board, the work they do on behalf of your organization is your key to success. Your board may be full of content area specialists or philanthropists or power brokers, but if they are not engaged, active, and thoughtful your success will be limited. If they don't understand their responsibilities the organization is headed for trouble. Maybe not today, maybe not tomorrow, but someday.
Board responsibilities can be summed up into three fiduciary duties. These are:
- The Duty of Care: discharging your duties in good faith, prudently, and in the best interests of the organization.
- The Duty of Loyalty: exercising your obligations and powers in ways that are in the organization's best interests, disclosing any conflicts of interest you may have.
- The Duty of Obedience: being faithful to the mission, goals, and values of the organization, including following the law in all official actions.
Fail those three duties, and you are putting the organization - and maybe even yourself - at risk. As a key fiduciary of the organization, board members should attend meetings, pay attention, read the materials, ask questions, and seek to understand the financial and operational aspects of the business. Failure to do those things can even result in personal liability if things go wrong, so it is important that all board members understand this key point. Would a prudent person ask? If the answer to that question is yes, then make sure YOU become that prudent questioner, regardless of how other board members behave. Does a certain action make you uncomfortable? Then it is your fiduciary responsibility to raise objections.
It's that simple, but unfortunately, it doesn't always turn out that way in real life.
For example, governance does not just happen inside the board room. The ED/CEO, and perhaps other key staff may engage in governance functions of an organization. Board members must be mindful of the unintended consequences of this behavior, including over-reliance on staff, decreased oversight, and even abdication of responsibility. Beyond staff, external stakeholders often perform, or more precisely, force, a governance role through their requirements to receive funding or adhere to various standards or regulations. A well-run organization is able to develop strong governance practices, engage staff in a constructive manner, and embrace the external regulatory forces as an opportunity rather than a burden.
In our next segment in this series on Governance, we will discuss negative behaviors typical to many nonprofit boards. In the final segment, we'll discuss some positive behaviors I have seen and conclude with suggestions for how your board can achieve excellence.
If you're thinking about board training, give us a call. We're ready to assist your organization be the very best.
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