December 5, 2019 Growing & Complex Businesses en_US Every nonprofit should have a board that's an asset to the organization instead of a liability. Read on for some practical advice to make sure your board starts off on the right foot. https://quickbooks.intuit.com/cas/dam/IMAGE/A9IhwHOGS/How-to-create-manage-and-lead-a-nonprofit-board-of-directors_featured.jpg https://quickbooks.intuit.com/r/growing-complex-businesses/how-to-create-manage-and-lead-a-nonprofit-board-of-directors/ How to create, manage, and lead a nonprofit board of directors
Growing & Complex Businesses

How to create, manage, and lead a nonprofit board of directors

By Katherine Gustafson December 5, 2019

A nonprofit’s board of directors can provide a strong foundation for the organization’s mission. Since a board holds tremendous power over the affairs of the organization, it can be a tremendous boon to the nonprofit’s impact and reach.

However, be sure to structure your board quite carefully: If the board’s members or functions aren’t suited to the work of the organization, it can hamstring efforts to accomplish the collective mission. Board members can have responsibilities in a number of areas, including:

  • Operations
  • Community outreach and engagement
  • Fundraising
  • Legal advising
  • Marketing

Every nonprofit should be concerned with making sure its board starts as and remains an asset to the organization instead of a liability. Read on for some practical advice and perspective to make sure your board starts off on the right foot and continues to benefit your organization.

Nonprofit board of directors 101

Every nonprofit organization is required to have a board of directors, which is charged with ensuring the nonprofit follows legal requirements, abides by its bylaws, and works toward fulfilling the organization’s mission. The board is essentially the governing body of the nonprofit, which holds the power to hire and fire the director or CEO and is responsible for overseeing the organization’s activities. Even a tiny, all-volunteer organization is required to have a board if it is registered for tax-exempt status with the IRS.

Board members have regular meetings to debate and vote on various aspects of organizational governance. While tax authorities don’t require boards to disclose how often they meet, it’s considered ideal for a board to meet as a complete group at least once a year. Many boards meet once a quarter, with additional monthly meetings of various board committees, such as:

  • Fundraising
  • Finance
  • Marketing
  • Membership

It’s best practice to have a separation between nonprofit board members and the organization’s paid managers, though in smaller organizations some of the same people may hold both roles. Board members are not compensated for their work during their terms, which usually last between two and five years.

Guidance on forming a nonprofit board

Setting up a board of directors is an important part of establishing a well-run nonprofit. Your state of incorporation will have a requirement for the minimum number of members your board must have—three is very common.

Look for people whose backgrounds and interests are a match for your nonprofit’s mission and activities. The IRS does not stipulate who can be on the board. You can bring anyone on board as long as there are no conflicts of interest or inurement (improper benefit) involved.

Make sure the people you bring on have defined roles from the start. Board members should be given—or help to create—a job description that clearly spells out their responsibilities. Founding board members should also understand the board’s role is to take a bird’s-eye view of the organization’s activities and finances, not to get involved in day-to-day operations.

Also, make sure that the potential members have a good sense of the time commitment required. Justin Wheeler, founder and CEO of fundraising-tech company Funraise and current director of the board for human rights organization Liberty in North Korea, says, “Some people have a romanticized view of what a board member is, and they might want it for their resume.. But it’s actually hard work. There’s a time commitment… That’s why the vetting process has to be thorough.”

New board members typically must commit to:

  • Full board meetings
  • Board committee meetings
  • Fundraising
  • Management work

This can easily add up to 10-20 hours a month. The heavy time commitment expected of members makes it all the more important that those hours are well-managed and useful for the organization.

Tips for managing a nonprofit board of directors

Each board member must have a clear idea of the role they play and their responsibilities on the board. This includes areas in their purview, what committees they are on, and fundraising activity they are expected to undertake.

Board members should not be too involved in the day-to-day operations of an organization. It’s better for them to limit their oversight to big-picture questions, such as whether the organization is set up for long-term sustainability, whether it is doing what it says it wants to, and how its finances are being maintained and managed. Board members are expected to play a prominent role in fundraising, but they should avoid micromanagement of daily affairs.

“The boards that aren’t successful are literally making day-to-day decisions alongside the executive team,” says Wheeler. “You see this a lot, especially in smaller organizations, where boards can be quite paralyzing and really slow down the way an organization operates.”

He cites situations where organizations consult with their boards about which software they should purchase.

“As a board member, it’s really important to keep the focus on the important things: long-term sustainability, program vetting, and fiduciary responsibility,” Wheeler says.

Best practices for board leadership

Boards that run most successfully organize members into well-functioning committees. Wheeler recommends that every board, no matter its size, have these three committees:

  • a nominating committee for board recruitment
  • an audit committee to oversee regular audits and financial updates and reporting
  • a fundraising committee that is responsible for ensuring sufficient donations are coming in the door

Well-run boards usually have a give-and-get policy, which directs each board member to donate a particular amount to and fundraise a particular amount for the organization. Wheeler says that many organizations are afraid to require this, worrying that it may discourage people from joining the board.

“But you should look at it as: ‘It’s a privilege to sit on my board,’” he says. “You want to make sure people have skin in the game. You want board members that are helping push the organization forward.”

Rethinking how nonprofit boards work

A board may eventually start to engage in approaches or habits that don’t serve in the best interests of the organization. When this happens, a nonprofit may have to change the way the board works or replace members with those who are better suited to the task.

The board should institute a process in which each member does a self-evaluation, comparing their activities against their job description. Board members should periodically sit down with the CEO or executive director, who may or may not be the board chair, and review whether they are fulfilling those requirements. A poor evaluation can result in some sort of censure, either insisting they put greater effort into their work or requesting they step down.

Some boards may find that rethinking their management structuresno can help improve governance. This may include limiting the size of the board, re-evaluating term limits, or revising fundraising requirements. The rules guiding these processes can vary widely among organizations. What’s important is the rules your board uses are best for your nonprofit. They should contribute toward building a board that is well-suited to take a high-level, strategic view of the organization’s mission.

“It’s critical for board members to play for the long game, doing the vision and strategy alongside the executive team,” says Wheeler.

Managed properly, a board of directors can be an incredible asset to your nonprofit organization. With their guidance in vision and strategy, you will be able to set your nonprofit up for success. Recruit carefully, manage them well, and make sure they have skin in the game.

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Katherine Gustafson is a freelance writer based in Seattle, Washington. Read more