What is the role of a nonprofit board of directors? Lets talk about the four essential components for effective governance.
1. The role of the board is to achieve the organization mission.
The role of the board must be crafted specifically for each and every organization.
The role is determined based on what you seek to achieve in terms of the mission – the organization’s compelling purpose, and the vision – what you imagine to be your organization’s greater potential in the next few years. And while the mission is usually set, many boards don’t discuss the vision.
Taking the time out to create the vision is fundamental to establishing the role of the board.
Additionally, if you are passionate about the mission, as one should be when you join a board, then the status quo is not sufficient when you know that the organization’s work can be further enhanced or expanded to improve more lives, or do some greater good.
Once the board and the CEO decide on the vision – their three to five year aspirations for the organization – then they can also create the revenue model to achieve success. That is, the most viable mix of funds from foundations, individuals, government sources, fees for services, etc.; the mix varies greatly depending on the type of nonprofit and its programs and services.
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2. The board’s role is to ask: “How do we know?”
Since the board should neither be camped out in the offices of the organization nor micromanaging the operations, the board needs a way to ascertain how progress is being achieved – financially and programmatically.
In order to do so, the board and the senior staff need to collaborate in creating dashboards to address the all-important board governance question: “How do we know that we as an organization are achieving what we set out to do?”
At its regularly scheduled meetings and perhaps more significantly, via committees, board members should have the opportunity to review financial and program metrics, and how the organization will adjust course as needed to remedy any meaningful deviations from plan, or address relevant external factors.
With clear and relevant data, the board is in the best possible position to make effective decisions to keep the organization mission-focused, and driving towards the greater potential.
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3. The board understands that the organization’s success is their responsibility.
Most important, the board is responsible for the organization’s effectiveness, vitality, and sustainability.
Nonprofit CEOs fully internalize their ambitions and concerns for the enterprise, but too often they are alone without their boards as deeply invested.
Nonprofits will thrive when board members truly appreciate the honor and opportunity of serving on the board, and constantly consider: “How can I add value that is meaningful and productive in helping to advance this organization?”
When board members internalize their responsibilities for the organization, it will become natural to them to attend meetings diligently, be attentive to key financial and strategic metrics, engage in thoughtful decision-making, contribute generously, seek support vigorously, and celebrate enthusiastically.
4. Board oversight is essential; it’s also not enough.
On the one hand, oversight is utterly fundamental in ensuring the viability and sustainability of the organization, and so boards must fully commit themselves to fulfill their fiduciary obligations. On the other hand, oversight alone is not enough; if all the board does is to provide oversight, then the board is not proactively advancing the organization toward its greater potential.
To meet their fiduciary obligations, I urge boards at the very least to have an attorney serve as secretary of the board – ideally someone from a law firm that will provide some pro bono legal services to the organization, and also someone with an accounting or financial background serve as treasurer. I also encourage boards to learn about, discuss, and be alert to their fiduciary duties, and ensure that their board composition and structure support the board’s role in exercising its duties.
Derigo, LLC can help in setting up board oversight tools. Call us now at (916) 626-0827.