An effective board of directors is essential to the success of any nonprofit.
As the governing body, the board oversees the annual budget and activities of the organization. Best practice advises that members meet at least four times per year, though the IRS only requires one annual meeting.
Board members hold both legal and fiduciary obligations to the organization and should be members of the community who are passionate about the mission. Most Boards are responsible for the recruitment and hiring of the Executive Director as well as stewardship.
According to the National Council on Nonprofits, the majority of Board members for nonprofit organizations serve without compensation. Boards hold duties of care, loyalty and obedience. Duty of care refers to the board’s responsibility to ensure “prudent use of all assets, including facility, people, and good will.” The duty of loyalty defines the board’s role in ensuring the organization’s actions are in line with the mission. The duty of obedience requires that the organization follows all laws and regulations.
Recruiting and managing board members is the bedrock of nonprofit governance. Below are four tips for creating an effective board.
TIP 1: HAVE A WISH LIST
- You’re more likely to find board members who add value to your organization if you understand (and can articulate) beforehand what it is you’re looking for. Broaden your wish list beyond skills/expertise (yes, every board should have a CPA) and financial clout (believe it or not, wealthy board members don’t always equate to well-resourced nonprofits). Think about the personal characteristics, perspectives, experiences, and networks a candidate is able to bring to your organization. When we have this conversation with our clients, they often tell us they want board members who are available to participate in board meetings and organizational events, have the ability to think strategically, and hold themselves (and others) accountable — the kind of intangible qualities that are difficult to quantify but can have a huge impact on the success and productivity of a board and the broader organization.
– Suzanne Elliott, Principal at Envision Nonprofit Consulting
TIP 2: CREATE A BOARD CANDIDATE FAQ
Most new nonprofits appoint their very first board members as part of the process of incorporating. Nonprofit corporations (and for-profit ones, too) are created at the state level, most commonly by filing papers known as articles of incorporation with the secretary of state’s office. Those articles generally ask for the names of the nonprofit’s initial board of directors. If your state requires a minimum number of directors (many do and three is a common minimum), you’ll need to name at least that many in your articles.
In established nonprofits, appointing board members is generally a more formal process. Often, a nominating committee of existing board members evaluates the current board situation and its needs, gathers names of prospective new members, and recommends candidates to the full board, which then votes on whether to elect the new members. In nonprofits that give members the legal right to elect directors, the members vote, rather than the board.
One way to tell prospective board members what you expect is to create a “board candidate FAQ” that communicates all of the important facts in a simple, one-page question-and-answer format. Here are some examples of the types of questions that might be included in an FAQ for prospective board members (you’ll need to provide the answers to these questions):
What is the organization’s mission statement?
What is the organization’s history?
What are the board members’ responsibilities?
How long does a board member serve on the board?
Are there any legal issues that board members should worry about?
TIP 3: CONSIDER TERM LIMITS
The most obvious incentive for nonprofit boards to have term limits is that it brings new blood and a fresh perspective to the board. New board members bring their skills, talents and abilities to the board table. New perspectives may stem from best practices that encourage diversity of background, age, gender, ethnicity or other demographics.
Parts of our society are advancing quickly, especially with regard to technology. Societal or economic changes require boards to continually assess their skill sets to ensure the board remains competent. Term limits offer the benefit of adjusting board membership to adapt quickly to changing needs.
Nonprofit boards often find themselves in the position of having a member on the board whose passion starts to wane. As the fire diminishes, they can become unproductive and incompetent, perhaps even absent or adversarial. Negativity can become contagious and can cause the board to become stagnant, tired or bored. A few unproductive board members can put pressure on the rest of the board to pick up the slack and subject them to burnout.
Rotating new board directors into the boardroom and on committees prevents the board from becoming stale. The IRS favors term limits because they believe that static board membership leads to unhealthy attitudes, which can cause boards to govern out of self-interest rather than community interest. Boards that have a majority of longstanding members may intimidate newer members, causing them to hold back with new thoughts and ideas.
Having term limits makes it easy to part ways with unproductive board members and positions the nonprofit to replace them with fresh directors. Term limits also provide a way for board directors to step down gracefully when they no longer desire to serve.
TIP 4: COMPLY WITH IRS REQUIREMENTS
The IRS generally requires a minimum of three board members for every nonprofit, but does not dictate board term length. What is important to remember is that board service terms aren’t intended to be perpetual, and are typically one to five years. Service terms must be outlined in the nonprofit bylaws. New board members are typically nominated and given an up or down vote by existing board members in traditional organizations, and by stakeholder vote in nonprofits that operate via membership.
The IRS expects (and state law usually dictates) that a board of directors should meet a minimum of once a year, and best practices suggest four times a year. During these meetings, the annual budget is passed, and operational and strategic decisions requiring votes are discussed. It is important to remember that the board of directors is responsible for the governance of the nonprofit, not the management.