“Not for profit, not for loss.” That could be the logo subtitle for most of the successful nonprofit organizations still standing after the punishing funding environment of the past few years. It has given
new meaning to the importance of building a strong donor base and getting members of the board of directors more involved in raising money for their organizations. In fact it has in many cases eclipsed the importance of oversight, the traditional role of corporate boards, now more commonly referred to as governance. And that has become a problem. In the nonprofit world the board’s governance role has understandably been shared with the fund raising role, but how do you measure governance success? And if you can’t measure it how do you improve it?
The success of fund raising is easy to measure: how much money did we bring in? The success of governance, by contrast, is harder to measure, and for the volunteers so often populating nonprofit boards, easier left unmeasured until some accreditation agency arrives at the door. That is changing, due in part to the desires of regulators to sort out the organizations that have misused the “nonprofit” label to avoid taxes, and in part due to the recognition that business as usual won’t work in a down economy, as thousands of nonprofits close their doors because they’ve run out of money.
So how does governance enhance fund raising, without which the organization ceases to exist? And how does governance in the traditional sense – making boards and staff more effective – contribute to the survival and success of the organization? In the nonprofit world, governance involves:
- Advising the CEO and senior staff in areas of special expertise, such as finance, investing, construction and long range planning,
- Oversight of staff activities to ensure that mission is being carried out and that mission and financial integrity are appropriately balanced,
- Ensuring that board activities are conducted in a professional and productive manner by people who are the best qualified leaders that could be attracted to serve, and
- Gaining greater visibility and respect in the community from which it draws its financial support.
Clearly the board must be well organized and well managed to achieve all of that, characteristics rarely achieved without some structure and sound leadership. Key elements of that structure should include:
- Well crafted operating procedures for board selection, training and evaluation,
- A committee structure that can operate effectively even if current leadership isn’t all it could be,
- A means of overseeing the board itself, just as the board oversees the paid staff, so that the board both collectively and individually is held accountable for doing a good job.
For those of you in the health and human services arena, accreditation agency CARF International (www.carf.org/ ) has stated that governance standards are optional for now, but are under serious consideration to become a mandatory part of their reviews, perhaps recognizing that they have not paid this area enough attention in the past.
Today the structure of choice that meets all those requirements is the governance committee, a standing committee of the board that is charged with guiding the recruitment, nomination, training and evaluation of individual directors, helping the Chair define and document board operating policies and procedures, and driving continuous improvement in the board’s fulfillment of its responsibilities.
So how to begin? The Chair and the board should first create the governance committee and put it into the bylaws as a permanent standing committee. Then find the strongest person to chair the committee. This could be a past board chair, for example, who is well respected for their leadership record. It should not be someone whose seat on the board was bestowed largely because of the size of their financial support. Next, draft the operating charter of the committee and perhaps the key processes of board operation as well. Include in the charter these key items:
- Director recruiting and nomination – the nominating committee becomes a key subcommittee, and approves the work of its subcommittee before nominations are submitted to the board.
- Board training and development – making good directors better requires attention to prior experience, new developments, fund raising expertise development, and lots more.
- Initiation and enforcement of term limits – this is a big issue for board fearful of attracting new talent, yet it’s essential to creating an environment where new talent will want to join and contribute without fearing it’s a life sentence.
- Board evaluation – helping the chair define and apply individual board member performance standards, when combined with term limits, will result in weak directors leaving and strong community members being more willing to serve.
New Horizons, a Los Angeles County-based agency (www.newhorizons-sfv.org/) , successfully recruited a senior executive from the nearby California State University system to their board and governance committee, and as a result got an excellent charter draft from a seasoned educator with deep experience in organization structure. Some of the critical issues the committee defined over the next two years – besides the operating processes of the committee itself – included:
- term limits,
- the agency’s first give-or-get policy,
- director nominating criteria and processes,
- board member performance criteria,
- the framework for board professional development, and more.
In addition, the charter amplified operating procedures for other required board committees, thus avoiding cluttering up the agency’s bylaws with details that might change from time to time. The nature of the board was literally transformed in the process, as was the relationship between board and staff, to the acclaim of supporters and CARF evaluators alike.
Should you or shouldn’t you? The decision to adopt the governance committee model will require discussion, planning, and a firm resolve to get it adopted over the likely objections of those who prefer the old ways. When done well, the results can be dramatic improvement in board effectiveness. Given the challenges for most nonprofits today – do more with less – it’s a step that should be seriously considered.
As always, your feedback and comments are appreciated and encouraged.