Building a strong non-profit organization requires effective leadership, starting with the board of directors. The board of directors is tasked with providing strategic direction to the organization and ensuring the organization is operating in accordance with its mission. Board members are also ambassadors for the organization, helping to enhance the organization’s public standing, advocate for, and promote awareness of the organization and its mission.
Attracting board members who actively participate, make meaningful contributions to meetings, and drive the organization forward can be a challenge. The board should be comprised of individuals with diverse backgrounds who are suited to promoting and advancing the organization’s mission. Board members who are experienced with and understand the programs, constituents, and communities that your organization serves can provide unique insight that will assist with effective decision-making. Interviewing board members as part of the on-boarding process can ensure members are a good fit for your organization.
Once board members are selected, provide them with an on-boarding package that includes past meeting minutes, the organization’s governing documents (including by-laws and the certificate of incorporation), board policies, and past and current financial information (budgets, tax/informational returns, financial statements, interim financial data) to ensure they are up to speed on the inner workings of the organization and can effectively carry out their duties. Consider creating formal board agreements with members that outline term limits, legal duties to the organization, board committee structure, and other relevant policies of the organization and the board. Memorializing the member’s commitments within a formal agreement can promote more active involvement and compliance with requirements throughout their tenure as a board member.
To ensure board members remain energized and passionate in their involvement, consider inviting program staff or constituents to speak during board meetings regarding the organization’s mission, achievements, and impact. Board members should be encouraged to identify with and actively participate in the organization’s work, including attending events, volunteering, and advocating for the organization in their community.
The size of the board of directors is an important component of board structure to consider when building an effective board. There is no set standard for board size, but there are factors that should be considered when determining the appropriate size for your organization. Boards should be large enough to ensure that, collectively, its members have the required skill and expertise to make informed decisions and drive conversation. If a board is too large, however, it may be difficult to reach consensus and keep the meetings moving forward efficiently.
Establishing a committee structure within the board can provide direction and focus to individual members, and ensure necessary initiatives are being carried out. Key committees can include a finance committee (to analyze fiscal performance), compensation committee (to evaluate compensation of key management), audit committee (to oversee annual audit process), nominating committee (to seek potential members and handle succession planning), compliance committee (to monitor ongoing compliance issues), board governance committee (to review governing documents and policies), and development committee (to assist with fundraising). Specific business matters can be discussed in detail at the committee level and then be brought to the full board for approval, which can streamline the board’s operations during meetings.
Board meetings should be structured to be effective and interactive, ensuring active engagement throughout the entire meeting. An ideal meeting would be an hour to an hour and a half in length. Creating detailed consent agendas with proposed resolutions, prioritizing tasks to be discussed at the committee level versus the board level, and providing reference documentation in advance of the meeting will ensure members are prepared to have intelligent and efficient discussions.
Board members should be presented with timely fiscal information regarding the organization’s financial position, operations, and cash flows on a regular basis from the management team. Information provided should be as of a date, or for a period, no more than a few months prior to the date you are reviewing the information. Stale fiscal information is less useful because it does not enable you, as a board member, to make timely and relevant decisions based on that information. Budget to actual reporting with variance explanations and various trend analyses, ratios, and calculations should be performed using this fiscal information to provide insight into the fiscal health of the organization. Fiscal analyses can include measures of working capital, current ratio, quick ratio, days in cash, days in receivables, debt-to-assets, trends in net assets, calculation of expendable net assets, program spending trends, concentrations of revenue, fundraising event profitability, budget-to-actual performance, and program service percentage calculations. Falling short of healthy benchmarks should spark inquiries of management regarding the cause for negative trends and plans to address these trends. Overall, these analyses promote intelligent communication and informed decision-making during meetings to fulfill your fiduciary duty.
The purpose of board meetings is to provide strategic direction to the organization. Strategic planning should occur formally every few years but should also be integrated into regular meetings. Strategic planning starts with evaluating internal and external factors impacting the organization’s strengths, weaknesses, opportunities for improvements, and threats. Once you understand where you are as an organization, and your role in the community, then you can better understand the direction you want to move towards. Key growth areas should be identified and prioritized. You should also evaluate the resources required to create growth, and whether those resources are available or attainable. Identifying clear and measurable goals for the organization, timeframes for goals, responsible individuals to oversee progress, and creating systems to monitor progress towards goals, are essential to ensuring that strategic planning efforts will create actual growth and change within the organization over time. As old goals are achieved, new goals should be identified, to keep the process dynamic.
Strategic planning should also incorporate proactive, rather than reactive, succession planning. Succession planning addresses how operations will continue if key members of management or the board leave the organization. Key steps involve assessing what vacancies need to be addressed, creating a vision for the succession plan, cultivating talent internally, sourcing talent externally (if needed), and properly acclimating new individuals into the organization in the event of a transition. Maintaining open lines of communication between management and the board and establishing formal plans before they are needed is crucial to ensuring smooth transition when turnover occurs.
To be an effective board member, it is critical to have a clear understanding of your fiduciary and legal responsibilities, as well as your organization’s mission, programs, goals, and fiscal health. Attracting and retaining appropriate talent and structuring the board effectively are the building blocks to effective board leadership. However, be sure that you are provided with accurate and timely information you can use in your decision-making process. Ensure proceedings of board meetings are relevant and addresses the unique goals and strategic plans of your organization. With these tools, you will be poised to succeed in building and maintaining strong and effective board leadership, and in turn, a strong organization.
Lauren Grandinetti
Supervisor
Lauren has been a member of Cerini & Associates’ audit and consulting practice area for over five years where she focuses on serving nonprofit, healthcare, education and contractor clients. Lauren has experience performing assurance work, outsourced accounting work, and government filings. Lauren brings her expertise, diversified background, and helpful approach to all of her engagements.