PA 545 Management of

Nonprofit Organizations
Spring 2008: Week III
http://www.boardsource.org
http://www.managementhelp.org/boards/boards.h
 FOR GOVERNANCE, LET'S START
WITH BOARDS
• All nonprofit organizations are governed by a board of
directors. But not everything that is called a "board" is
the same. There are "governing boards" that are legally
responsible for the organization; as "trustees", they are
legally responsible, and liable, for the organization. They
have fiduciary responsibilities. There are other kinds of
boards: advisory boards, without governing
responsibility; honorary boards, where persons lend
their name to the organization to aid its public relations
and give it a boost in credibility; campaign boards that
take on ad hoc tasks of fundraising, usually to increase
the capital of an organization; and others.
 board of directors
as a governing body
• The board of directors is the governing body of a
nonprofit organization. The responsibilities of the
board include discussing and voting on the highest
priority issues, setting organizational policies, and
hiring and evaluating key staff. Board members are
not required to know everything about nonprofit
management, but they are expected to act prudently
and in the best interests of the organization. They
approve operating budgets, establish long-term
plans, and carry out fundraising activities.
 Governing boards
• Governing boards may be elected by a
membership in an organization where the
members have legal status. Usually board
members are nominated and elected by
existing board members, in what used to
be called "self-perpetuating"
organizations. Organizations that are not
legally controlled by members are now
usually called "public benefit"
organizations in legal documents.
 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 that
influence the culture, style or performance of any given board include things
like:
• 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; a
bio-ethics center; a disease research organization; where each will probably
have a relatively high number of specialized board members.
 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, the
state attorney general and the federal Internal Revenue Service.
• Assess the board's own performance, strengthen the board's own effectiveness
as a board.
 Primary Four Governance Roles
Ascribed to Boards
• Define and advance the organization’s mission
• Ensure, develop, and conserve the
organization’s 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).
Two Roles of the Board of Directors
Another way of looking at the board member's
role is to discern an overall twofold role, with
a certain tension between the two roles:
1. The public, external role, acting in the
public interest
2. 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 and
subjectivity, of calculation and commitment, of
perspicuity and passion.
The public, external role, acting
in the public interest
Because the governing board of directors has the
fundamental responsibility and accountability of
the organization and is the final court of appeal
within an organization and an important court of
appeal for the public, the board has a fundamental
accountability to the public. As represented in our
Nonprofit Management Model, the board receives
input and feedback from the organization's
customers: consumers, contributors and
constituents. The board member is not an owner,
but a "trustee" of the organization and its assets.
The governing, internal role, acting
in the organization's interest
Assuming that the organization is fundamentally
sound, ethical and accountable, then the board
of directors has the responsibility to be the
directional drivers and ambassadors of the
organization. They are responsible for overall
planning, representing the organization to the
public, identifying and mobilizing resources and
seeing that the organization accomplishes its
mission.
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.
THE BOARD, THE CHIEF EXECUTIVE AND THE
BOARD-EXECUTIVE RELATIONSHIP IN
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 to
accomplish its task. So the executive has
to be knowledgeable of the governing role
and, without usurping it, support the board
in it.
THE BOARD, THE CHIEF EXECUTIVE AND THE
BOARD-EXECUTIVE RELATIONSHIP IN
GOVERNANCE
• The executive has the primary responsibility to manage,
and to carry out board policies, directives and plans. But
the board has to manage itself, to develop and evaluate
its own activities.
• Both the board, as a unit and as individuals, and the
executive have the opportunity and call to be leaders.
• If a board smothers the executive, turning him or her into
a lackey, the organization suffers.
• If the executive controls the board, turning the board into
a rubber stamp, the organization suffers.
• The board has all the legal authority; the executive and
staff have all the day by day operational information.
Neither is very powerful without the other.
THE BOARD, THE CHIEF EXECUTIVE AND THE
BOARD-EXECUTIVE RELATIONSHIP IN
GOVERNANCE
• The board is made up of volunteers, non-paid, part time,
representatives of the community. The board should
operate as a whole, without individual board members
creating separate agendas with the executive or staff.
• The staff is made up of professionals, compensated
employees, mostly full timers.
• In the well run nonprofit organization, the board, as a
whole, and the executive (and senior staff) should
function as partners.
• This also creates a tension to maintain balance, for
both board members and the executive and senior staff.
THE BOARD, THE CHIEF EXECUTIVE AND THE
BOARD-EXECUTIVE RELATIONSHIP IN
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, between
multiple 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 "the
management of nonprofit organizations."
Should the Chief Staff Executive be
a Member of the Board?
Some nonprofits decide to make the chief staff executive
an ex officio member of the board, sometimes voting and
sometimes nonvoting. This decision should be made
carefully. Some believe that board membership is a good
idea because it enhances the executive's position of
authority within the organization and strengthens the
working partnership between the board and the
executive. On the other hand, some feel that board
membership blurs the distinction between the board's
responsibilities and the executive's responsibilities and
makes it difficult for the board to assess the executive's
performance objectively. Whatever the executive's
official status, his or her insights into the daily operations
of the organization are essential to board decision
making by the board.
 Board Members
Important 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 the
necessary 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.
 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 an
interest in your organization's mission
• Contact executive directors and board officers of large,
established nonprofit institutions in your community for their
suggestions
• Speak to religious leaders in your locale to see if they can
recommend any candidates, particularly from their own
congregations
• Ask for volunteers at any canvassing efforts, open houses,
special events, and benefits that your organization sponsors
 How should the board be
structured?

Every board has a fundamental

responsibility for self management: for
creating a structure, policies, and
procedures that support good governance.
The term "board organization"
encompasses a variety of tasks, from
routine matters such as preparing a
schedule of board meetings to actions with
broader consequences such as
developing a policy about terms of service.
 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, in
minutes.
 smooth functioning committees
To encourage smooth functioning committees, follow
these additional steps:
• Prepare written statements of committee and task force
responsibilities, guidelines and goals. These
organizational documents, which should be approved by
the board chairperson, should be reviewed every one to
two years and revised if necessary.
• Make work assignments according to the background,
expertise, and schedule of each member.
• Distribute tasks among members so that everyone
participates but no one is overloaded.
• Create a system of checks and balances to monitor
committee members' work and assure that tasks are
completed on schedule.
 How Large Should Our Board Be?

• The organization's structure and needs are among the

factors that determine board size. In considering the size
of the board, keep these points in mind:

Every board needs a sufficient range of expertise to

accomplish the organization's mission. If a board is too
small, its members may be overworked and
unproductive. If a board is too large, every member may
not have the opportunity to participate actively.
• According to Board Source (National Center for Nonprofit
Boards, 2000), the median size of a board is seventeen
members.
What Should be the Length of a
Board Member's Term?
There are no hard and fast rules for determining board
members' tenure. Many organizations do, however, limit
members to two consecutive terms and require a hiatus
of one year before a board member may be reappointed.
Many organizations also stagger terms of service so that
one half or one third of the board are elected every one
or two years for terms of two to four years. Such policies
encourage institutional renewal because a board can
profit from the experience of veteran board members
while welcoming the fresh perspective that new
members offer
 What Committees Should Our
Board Have?
Much of the work that a board does is accomplished
through its committees and task forces. With the
exception of the Executive Committee, which acts on the
board's behalf, committees recommend action to the full
board for discussion and action. Most boards need only
a few standing committees - the rest of the work can be
accomplished by task forces created for a specific
purpose. Common standing committees include
• Governance Committee
• Audit Committee
• Finance Committee
• Executive Committee (if needed)
 The Board Manual: An Orientation and
Resource Tool

• The foundation of a committed, knowledgeable, and

effective board is orientation and education. As an
essential companion to orientation and education, every
organization should have a thorough, easy-to-use
manual that board members can use throughout their
terms.
• The board manual is developed by staff in consultation
with the board chairperson and other officers. Present it
to board members in a durable, attractive loose-leaf
notebook with a table of contents and clearly divided and
labeled sections. Date every item and replace material
when necessary. Insert stationery, brochures, and
similar items in pockets of the notebook.
 The Board Manual: An Orientation and
Resource Tool

• A board manual serves two functions. For the

new board member, it is an orientation
handbook that provides useful information about
the organization, board structure and operations,
and fellow board members and staff. For the
balance of a member's board service, the
manual then becomes an indispensable working
tool and a central resource about the
organization and the board. Materials can be
added and removed to create an up-to-date
reference.
Designing a Board Information
System
Good governance depends on enlightened decision making.
Board members in turn need to be knowledgeable about the
organization's status and needs if they are to make sound
decisions that advance its mission. But boards often say that the
information they receive hinders rather than facilitates good
governance and strong leadership. They protest that they are
overwhelmed with large quantities of irrelevant information, that
they don't get enough information, or that they receive material
too late to devote serious attention to it. An effective board
information system should focus decision making, stimulate
participation, and support an appropriate balance of
responsibility between board and staff.
 Types of board information

Management consultant John Carver describes three types

of board information:
• Decision information is used to make decisions, such as
establishing selection criteria for the chief executive. It
looks 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 the
past and provides a specific survey of performance
against 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 reports
are frequently in this category.
 Individual Board Member
Responsibilities
• Attend all board and committee meetings and functions, such as special
events.
• Be informed about the organization's mission, services, policies, and
programs.
• Review agenda and supporting materials prior to board and committee
meetings.
• Serve on committees or task forces and offer to take on special
assignments.
• 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.
 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
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
 What is the job description of a board
secretary?

• Attend all board meetings

• Serve on the executive committee
• Maintain all board records and ensure their accuracy
and safety
• Review board minutes
• Assume responsibilities of the chair in the absence
of the board chair, chair-elect, and vice chair
• Provide notice of meetings of the board and/or of a
committee when such notice is required
 What is the job description of a board
treasurer?

• Maintain knowledge of the organization and personal commitment to

its 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 and
action 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 the
board 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 for
approval.
• Review the annual audit and answers board members' questions
about the audit.
 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
 Evaluating the Board’s
Performance
• There are a number of ways that a board can seek
feedback on its performance. They include:
• Dialogue on a dimension of the board’s 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 board
meeting
• And more compressive board self-assessments
 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
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 can
share with others. First, stop and reflect: what do you
think goes into making for good meetings, and, better,
great meetings? Meetings that are turn-ons, that
generate energy and get things done? What kind of
things make meetings ineffective and a waste or time,
and, in some cases, a real irritant? Second, how do you
think the board agenda should be prepared? Is it done
by one or more persons? Should it follow any regular
order? Do you have any suggestions for regularly
occuring items.
 Topic Two: Board & Executive -
Mutual Expectations
• Put yourself in two positions: one as a
board member, the other as executive
director. Answer two questions. One, as a
board member, what do you expect of the
executive director, both related to the
organization and to the board?Two, if you
were the executive director, what do you
expect of the board, both related to its own
responsibilities and in its relationship with
you?
 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 more
than one sources."Conflict of interest" means that a board or staff member has a
private business interest that will benefit from an action of the board or organization in
which 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 be
handled. Can you, as a group, after hearing individual opinions, come to a consensus
on 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, then
asks the attorney to draft the by-laws, personal policies and handle th agency's legal
business. Does this represent a conflict of interest? Does it make any difference if the
attorney 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. The
banker invites the organization to set up its accounts at the bank where s/he is an
officer. Is this a conflict of interest? Does it make any difference if the bank offers
services 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 be
valuable to the organization for fundraising.
 Topic Four: Handling a Board Problem
• The board has invited a well-known persons in the community to be
on the board. S/he is a person of wealth and has access to others of
wealth in the community. Fundraising is very important to the
organization and s/he has indicated willingness to be significantly
involved in fundraising. The bylaws state that if a persons has three
unexcused absences, that person shall be considered to have
resigned and a vacancy declared. It happens toward the end of the
first year, just before the agency is about to launch its first full scale
fund campaign, that this person has missed three consecutive
meetings. Two months s/he was out of the country but had not
communicated with the agency about board meetings before leaving
or coming back. What should the board do? Why? Can you reach
consensus on this?
 Resources on the Web:

• Board Source: Building Effective Nonprofit Bo

(http://www.boardsource.org/)
• Free Complete Toolkit for Boards (http://
www.managementhelp.org/boards/boards.htm
) Posted by the Management Assistance
Program for Nonprofits