7 Tips for Building a Strong Board of Governance
Spring is here, and with it comes spring cleaning. Now could mark the perfect time for a little spring cleaning for nonprofit organizations — specifically sprucing up an organization’s board of governance. One of the key challenges a nonprofit can face is an ineffective and inefficient board. This could include board members who are unaware of their roles, obligations and ultimately the goals of the nonprofit organization. If a board is not functioning effectively, changes must be made. To evaluate whether adjustments need to be made, nonprofits should first consider these seven best practices and tips for building a strong board of governance.
1. Attracting the Right Board Through Recruitment
A strong board governance starts with having the right team, and building the perfect team requires an effective recruitment process. Traditionally, nonprofits utilize a nominating committee to review and hire new board members. Therefore, these committees should constantly review the needs of the organization and align new board candidates whose background and expertise can ultimately benefit the organization.
It is vital to be upfront and honest with potential board members. Consider developing job descriptions for board members. Clearly outline responsibilities and expectations of the time, attendance at meetings and monetary support each board member is required to give. Also consider developing a board recruitment packet that includes necessary information about an organization including its mission and vision statements, history and key accomplishments, most recent audited financial statements, and fiduciary responsibilities. Some organizations also have a mandatory board orientation to get your board members on the right page from the start.
2. Develop Mission and Vision Statements
For an organization to be managed effectively, it must have a clear and concise mission that defines its purpose and objectives. Vision statements are an essential part of nonprofit board governance. A vision statement looks to the future and provides the framework for where the organization is headed. Fully developed mission and vision statements provide a framework for management to carry out the day-to-day operations.
3. Conduct Appropriate Board Training
Don’t leave anything up for chance in your nonprofit organization — especially when it comes to training. All board members should have a strong understanding of their roles and responsibilities. One way to guarantee this is through training. Consider providing training on items such as oversight and accountability, compliance program, conflicts of interest, and board policies. One area that is often overlooked is training on acronyms. Nonprofits use an extraordinary number of acronyms, which can make it very difficult to follow the conversation if proper training is not provided. Another area where training should be provided is reading financial statements. Best practices and, in some cases, the regulatory requirements of funding sources, dictate that training should be provided annually.
4. Ensure Effective Organizational Planning
Strategic planning is a significant challenge for most nonprofit boards, especially in today’s rapidly changing environment. The days of three-to-five-year updates of strategic plans are behind us. For a strategic plan to be effective, it must become a living document that is updated regularly. Strategic planning outlines the future course and drives the actions of the organization forward. Management of the organization should report back to the board on the status of the objectives outlined in the strategic plan at every board meeting.
5. Assess Effectiveness of Board Meetings
Board members’ time is limited, therefore it's best to use their limited time wisely. Hold effective meetings with a focused agenda to keep you on track. One way to cut down meeting time is to have the board review the written reports provided by committees prior to the board meeting as part of a consent agenda. Board members can review the committee’s reports prior to the meeting and the head of each committee can provide an abbreviated report during the board meeting. Having and reviewing the written reports ahead of time will allow board members to ask the appropriate questions and provide a better use of everyone’s time.
6. Review Financial Reporting
The board's financial responsibility includes the oversight of financial statements and fiscal controls. To do this, board members should be reviewing the internal financial statements and questioning management about them. Budgeting is key to reviewing financial reporting. Board members should review and approve the budget prior to the start of the fiscal year. At each meeting, management should report on how the organization is doing compared to the budget. If it is not on budget, why? A budget is just that, a budget, but you need to understand why the original thoughts were different than what occurred.
7. Conduct Self-Assessment on Performance
Last, but certainly not least, is the need for self-evaluation and assessment. One way to achieve this is through an anonymous written survey. Encourage board members to complete the survey and be candid and honest. Ask questions such as:
- Are meetings being properly facilitated and do they stay on target?
- Does the board have the right mix of skills and experience?
- What skills and experience need to be better represented?
- Do board members have sufficient understanding of the organization’s programs and the operating environment to provide the critical oversight needed?
- Is the board providing appropriate oversight without micromanaging?
- Do board members ask appropriate questions of management?
- What are the board’s greatest strengths? Where could the board improve?
There are many challenges nonprofit organizations face, but a strong board governance should not be one of those problems. Those with proper board governance are the ones that will be the most successful in these uncertain times.
Bettina Lipphardt is a partner and the team leader in The Bonadio Group’s Healthcare/Tax-Exempt Syracuse/Utica Division.
Disclaimer: The summary information presented in this article should not be considered legal advice or counsel and does not create an attorney-client relationship between the author and the reader. If the reader of this has legal questions, it is recommended they consult with their attorney.