Jul 25 A Practical Guide to the Challenges of Nonprofit Governance and How Your Nonprofit Can Combat Three Common Types of Board Structures
An Introduction to Nonprofit Governance
Nonprofit governance is becoming a greater and greater challenge for both the volunteer members of the board and its management as the industry continues to adapt and change in the current socioeconomic environment. The board of a nonprofit is there to ensure that the mission of the nonprofit is being fulfilled and to take on the fiduciary oversight to ensure the nonprofit remains sustainable.
However, in the current environment, board governance issues are beginning to form or are now fully exposed as financial complexities arise caused by the fiscal impact of the pandemic, technology is providing greater public oversight than ever before (and with that, greater public scrutiny), and the social environment remains in flux creating questions on what role nonprofits should play. However, in the current environment, board governance issues are beginning to form or are now fully exposed as financial complexities caused by the fiscal impact of the pandemic arise. Technology is providing greater public oversight than ever before (and with that, greater public scrutiny), and the social environment remains influx, raising questions on what role nonprofits should play.
As these issues continue to provide pressure on nonprofits and their governance, board members should work closely with management to ensure that the nonprofit has the right tools in place to ensure it is being properly led in these difficult times. Primarily, nonprofits should be honest with themselves and see if they have any of the characteristics of a dysfunctional board.
While several types of issues can lead to dysfunction, we have grouped the issues into three main types: the apathetic board, the micromanaging board, and the factionalized board.
While many join a board because they care deeply about the organization’s mission and success, that does not necessarily mean they can always stay fully engaged. An apathetic board is simply no longer interested or has the time to invest in the nonprofit’s activities. This board leaves the Executive Director alone and merely approves everything without much thought or care. By doing so, the board has given up its role in governance.
It is no longer providing the necessary oversight over management to ensure that the public funds are being used correctly and sustainably and, in turn, doing a significant disservice to the community that the nonprofit serves. The board is no longer considering the organization’s long-term strategic plan and instead has fully left management to their own devices. While this may sound like a net positive to management on paper, proper oversight is vitally essential and confirms management’s actions when the board is actively engaged. In the long run, there are no differing opinions or other thoughts to help drive the nonprofit forward.
Although many board meetings involve some repetitive practices, it does not mean they should become mundane. Here are a few tips to keep the boardroom active and fresh:
- Make sure agendas reflect current and new topics. If you merely change the date on the top of the agenda each month, it is time to rethink your agenda. Each agenda should have something new or unique (a speaker, a program highlight, a mission moment). Agendas should also be designed by both the CEO and Board President in a collaborative process. Finally, ensure agendas and meetings have topics that will spark the interest of the entire board membership.
- Plan meetings in different spaces. Give a program tour prior to a meeting and then meet at the program location. Book a creative space (libraries and other community spaces are often free for nonprofits). Make sure seating is conducive to participatory processes.
- Create agendas and presentations that focus on interaction. Although CEOs must present information during meetings, the data can be presented in a way that sparks robust conversation. Leaders should not only present the facts but also ask questions of the board to elicit feedback and encourage dialog.
On the other end of the spectrum is a micromanaging board. Unlike an apathetic board, which is not involved at all, the micromanaging board is too involved in the nonprofit’s activities. This board has become too involved in the day-to-day functions that are typically left to the management of the nonprofit. In a typical board setting, the board of a nonprofit has one employee: the Executive Director (or Chief Executive Officer, depending on the title). This individual runs the organization’s day-to-day with the staff they hire and reports to the board their activities. The board provides oversight and evaluates the performance of this individual.
In a micromanaging board, the board oversteps its role and positions itself into many of the duties of the Executive Director. This leads the nonprofit’s leadership to become disempowered and lose confidence in their abilities as they feel second-guessed by the board’s overreaching. The board could take it a step further and begin to go around the Executive Director and give tasks to other key members of the organization. This creates even greater harm to the nonprofit as staff can receive conflicting direction and cause confusion and disillusionment with the organization.
Boards that micromanage tend to believe that they are helping the nonprofit by lending their skills and knowledge to improve outcomes. They assume that “doing” is how they will help – not understanding their role is supporting and guiding. Unfortunately, boards that micromanage are also in organizations led by people who need to improve their leadership skills. As such, the first order of business is to obtain coaching for the CEO/ ED. In addition, several initiatives by the CEO can reduce or eliminate the board’s need to micromanage:
- Onboarding board members – board members/officers should receive an application and a written set of expectations to guide and define their work.
- Board orientation should be conducted annually and include a reminder of the expectations and direction and sign-off on key policies (nondiscrimination, conflicts of interest, code of ethics). This helps to set the tone of shared
- Engage the board in strategic discussions by providing agenda items that support the strategic plan and vision of the organization without getting into operational details.
- CEO and Board Presidents must agree on their roles and the fact that the leadership of the organization is a shared These two key leaders should hold regular meetings to discuss agenda items, challenges, and successes.
The last type of board is a factionalized board. These boards can be broken down into type types: internal factions that oppose one another in the organization’s direction or board members who have their own personal pet projects and do not care about the other parts of the organization as a whole. While how they become factionalized may differ, the problems they cause remain the same. This board no longer has the organization’s best interest at heart and instead focuses on smaller items than seeing the big picture.
Their interests remain focused on just aspects of the organization, leaving management stuck in the middle and being the only one focused on the organization’s big picture. This type of board becomes an even greater problem in times of financial instability as decisions about programs will likely need to be made. These decisions are hard for a properly functioning board, but when a board is not focused on the entire organization, decisions are no longer being made with the best intentions.
When Board members cannot build consensus, meetings come to a halt and little, if anything, is accomplished. Board meetings take on a repetitive and uncomfortable tone, while the organization’s mission needs to be made aware of the debate. To avoid a fractionalized board, here are three things that the leadership can implement:
- Ensure the board participates in the strategic planning process to promote cohesion among members and the organization’s strategic priorities (big picture).
- Facilitate an annual retreat, where board members share their vision of the organization and agree on the priorities for discussion at board meetings.
- Consider facilitating a time for the board members to engage socially (holiday party, summer picnic, etc.). Boards that socialize together are much more effective at managing conflict.
It’s difficult to tease out the factors that make one group of people an effective Board of Directors and another equally talented group of people a dysfunctional one; well-functioning, successful Boards usually have a chemistry that can’t be quantified. They seem to get into a virtuous cycle in which one good quality builds on another. Effective Boards and Executive staff members must develop mutual respect and articulate complex ideas to the group with room for open discussion. This type of Board will support the nonprofit’s mission and ultimately better serve our communities.
About the Authors
Adam Holzberg, CPA, MBA is a Partner at Sax and specializes in audits, accounting and advisory services for closely held companies and non-profit organizations. He focuses on increasing the overall operational efficiencies, financial reporting best practices, and internal controls for clients. He can be reached at [email protected].
Lauren Frary, MA, LRC is the Director of Strategic Business Transformation and specializes in working with nonprofit organizations to develop goals and objectives to improve overall functioning and processes. In addition, she provides Leadership Transition and Coaching, as well as customized workshops and seminars that meet the unique needs of each organization. She can be reached at [email protected]