Why do nonprofits typically operate with a board of directors? The idea behind a board of directors is that a group of people collaborate on making decisions for the organization rather than relying on one person. While there are still leadership positions at these organizations, having a mix of people — often from diverse positions and backgrounds — contribute to a decision yields more strategic and informed results.
To ensure that these boards operate efficiently and in line with set missions and goals, nonprofits will establish a system of nonprofit governance. Read on for an in-depth look at nonprofit governance, including different models, common challenges and best practices.
What Is Nonprofit Governance?
Nonprofit governance oversees the broad aspects of how a nonprofit is organized and led, such as its overall strategies, policies and goals.
The group that makes up nonprofit governance often includes the board of directors, executive leadership and any other key stakeholders of the nonprofit, including volunteers and staff.
The goal is to gather a group that best represents all facets of the nonprofit, so decisions can be made with all parts of the organization in mind. Having a variety of voices present in discussions also ensures that decisions are made fairly and with the best interest of the nonprofit in mind. These decisions will impact policies, procedures and the general management of the nonprofit.
Nonprofit Board Governance Models
Nonprofit board governance can come in several forms, or models, or be a combination of two.
- Advisory Board Model — The traditional advisory board model is composed of subject matter experts. Rather than making decisions, this governance model operates as a feedback mechanism. The draw of an advisory board model is that the nonprofit benefits from the objective professional counsel and expertise of industry leaders and partners. However, it can be challenging to gather a group that is committed to and understands the mission of the organization — rather than merely choosing board members based on their industry connections or relationship to the organization.
- Cooperative Governance Model — As the name suggests, the cooperative board model is a group effort, where the final decisions are based on a consensus. This model can be found in nonprofits that don’t have a chief executive officer (CEO). The democratic nature of this model, where all members have equal responsibilities and voices, is a positive. However, it can be a challenge to get all members to contribute equally. When a decision is made, all members will need to uphold and support it.
- Carver or Policy Board Model — Created by author, professor and nonprofit leader John Carver, the policy board model states that the board strictly oversees policies and strategic direction of a nonprofit. The CEO and other leadership spearhead the management and daily operational decisions of the organization. This nonprofit board governance model elevates the CEO and places the board of directors as second-in-command. This model became popular in the 80’s and 90’s due to the clear expectations and set responsibilities for the board of directors versus the management team. However, when not done well, whether because of poor leadership or lack of interest from the board members, this separation can create distance and slow response times between the two entities.
- Patron Governance Model — Although a similar structure to the advisory board model, in the patron governance model, there’s an emphasis on the board members either contributing funds to the nonprofit or assisting with fundraising efforts. The board has less control over the CEO in this model. A benefit of this nonprofit board governance model is the ability of board members to use their network or personal wealth to aid the longevity and mission of an organization. They may also act as “advertisements” for the nonprofit. A drawback of this model is that the board has less decision-making power. Sometimes, nonprofits will establish a patron governance model in conjunction with another model.
- Management Team Model — With the management team model, the board of directors is broken down into committees that oversee departments, including human resources, fundraising and finance. This model is popular in volunteer-based nonprofits because board members can contribute to their area of expertise while also acting as liaisons between departments. However, without a checks-and-balances system in place, this nonprofit board governance model can suffer. It also doesn’t do well in organizations with paid, full-time staff, where the board may overexert their power.
What’s the Difference Between Board Governance and Board Management?
Both board governance and board management refer to how a board operates, but the level of attentiveness differs. Board governance focuses on high-level items, such as strategies, policies, procedures and processes of an organization. The primary objectives include executive oversight, compliance and finances.
Board management, on the other hand, refers to the daily operations and administrative duties from scheduling and planning meetings to record-keeping and communication.
Common Nonprofit Governance Mistakes
When board members aren’t right for the role or when the governance structure lacks detail, the nonprofit can suffer. These are common mistakes in nonprofit governance.
- Lack of understanding. If members aren’t properly onboarded about their role and the board’s role, they may become inactive and less likely to participate. A lack of awareness and understanding can also impact legal and ethical duties, putting the nonprofit at risk.
- Overstepping. Conversely, to have a healthy balance and working relationship between the board and the leadership team – and any staff – board members should remember that they’re not providing management, only broad oversight.
- Recruiting the wrong members. Nonprofits are eager to attract interested individuals to contribute their time, expertise or funds, but might onboard people who don’t fully align with the mission, vision and goals of the organization. When someone is invested in the purpose of a nonprofit, they’re more likely to show up for meetings and be engaged.
- Ignoring potential conflicts of interest. Boards are supposed to make decisions based on what’s best for the organization. When governance fails to account for and properly mitigate potential conflicts of interest, such as a board member being related to the CEO (for example), it can lead to decisions that potentially hinder or undermine the work of the nonprofit — or expose the organization to legal trouble.
- Relying on outdated information. One of the key duties of nonprofit governance is maintaining and updating the policies and procedures of the organization, including the bylaws of the board. Maintaining accurate documentation allows the nonprofit to run smoothly, and makes onboarding new members easier.
- Poor planning. When meetings are rushed or not organized, the board will struggle to make decisions and stay ahead. Poor planning creates unnecessary chaos.
- Inadequate record keeping. Meeting minutes act as both historical data and legal protection of a board’s decision. Without proper notes from meetings, legal counsel won’t have a record for compliance documentation, for example.
- Allowing one person to decide. One of the purposes of a board of directors is balance. Decisions made by a group of people are meant to be carefully considered and weigh different opinions. When the board lacks proper structure, one person’s voice can become louder than others, perhaps due to a conflict of interest or lack of commitment from other members.
- Lack of confidentiality. When differing opinions or dissenting votes are made public, it can create discord between board members and potentially jeopardize the reputation of the nonprofit. A detailed policy should be in place to balance being transparent but not sharing confidential information.
- Poor oversight. Failure to apply appropriate oversight of strategic decisions, policies and procedures can result in procedures not being followed, decisions not being carried out or issues with documentation and compliance.
Best Practices for Nonprofit Board Governance
To prevent common mistakes, consider implementing these nonprofit board governance best practices.
- Clearly define the roles and responsibilities of board members — as well as the board itself. By having set expectations and well-documented guidelines to follow, you’ll prevent overstepping or lack of action.
- Stay organized. When the board does convene, make sure the meeting is well-planned with a detailed agenda and clear objectives, so no one’s time is wasted and the board can operate efficiently. Clearly state the agenda, topics to be covered and any issues to be discussed or voted on. Also ensure members have access to any data needed to help facilitate a discussion or make a well-informed decision.
- Get into the habit of review. Set a cadence for review, whether it’s annually or quarterly. These check-in periods are blocks of time to investigate what went well or as expected and to define areas of improvement. They’re a good time to plan strategically for the next quarter or next year. These can also remind individual board members to assess their performance.
- Be rigorous with financial oversight duties. Governance plays a critical role in ensuring funds are spent wisely, namely in furthering the nonprofit’s goals and sustaining the organization over time.
- Establish a culture of accountability, honesty and transparency. The public wants to know what your nonprofit is up to, and being transparent and accountable are also required for legal compliance. By making documents available to the public, such as the last few years of tax returns, you can strengthen the nonprofit’s reputation, showing that you are doing exactly what you communicate.
- Have open, honest communication. Speaking of communication, be open and honest with donors about how their money will be used. Update your website to include information about tax-exempt status and past filings. Create a way for staff to feel comfortable voicing their ideas or concerns. These are opportunities to strengthen commitment and promote the ways your organization is remaining transparent and financially responsible.
- Strengthen your conflict of interest policy. Nonprofits are legally encouraged to have a conflict of interest policy, per the IRS Form 990. The National Council of Nonprofits suggests being as detailed as possible about potential conflicts of interest and the steps for addressing them.
- Recruit the board members your nonprofit needs. Vet and recruit the board members that will best serve the nonprofit, based on factors like skills, diversity, background and expertise. It’s also important to weigh the recruit’s commitment to the organization’s mission. When board members are eager and passionate, they’re more likely to engage and devote the necessary time and energy your nonprofit deserves.
7 Tips for Nonprofit Board Members
These tips can benefit any board member, regardless of the nonprofit’s board governance model. As a CEO, chair or member of the board, consider sharing these tips with your existing board members and using them as a guide for new members.
- Understand your responsibilities. To contribute effectively, members need to have a clear understanding of what’s expected of them. New members should be required to read all governance documents and policies as part of their onboarding.
- Be prepared. When a board meeting is approaching, members should ensure they have access to whatever data might be available, review the agenda to see if anything is expected of them and come ready to contribute.
- Speak up. The only bad question is the one that wasn’t asked. Members should speak up when they have a question — someone else might be wondering the same thing, or it can spark a discussion in a direction no one else has considered. Board members have a responsibility to hold leadership accountable. It can be a checks-and-balances situation, but providing oversight — ensuring that policies and strategic direction are followed — is part of a board member’s job.
- Participate and be active. Members who devote their time to being on a board should make the most of it by actively participating in meetings. They should take initiative such as volunteering for a committee, if your organization has them. As an active board member, it’s also easier to stay informed about what staff and the community might be saying about the nonprofit and raise awareness for the mission.
- Contribute to fundraising. Whether members contribute their own funds or help fundraising efforts, another advocate can only make the organization stronger and further the reach of the nonprofit for other potential funding.
- Protect the nonprofit. Board members are given access to sensitive, protected information, including private financial information. This information isn’t meant for the public and should be kept private and secure. It’s also their duty to report any potential conflicts of interest, no matter how menial the relationship might be.
- Contribute to a positive work culture. Board members are figureheads of the organization. No matter who is watching — whether staff, a fellow board member or the general public — members need to be role models for the nonprofit. They can foster a sense of collaboration among team members or local partners or contribute to open, honest communication. The important thing is to take steps to make the nonprofit a place where volunteers and staff want to spend time.
While advanced degrees are not a requirement for being a board member, they can be a useful tool for a career in nonprofit leadership. The University of San Diego’s Master of Science in Nonprofit Leadership and Management program breaks down board management and policy creation as part of the online curriculum — specifically, in the Governance and Strategy course. These skills can serve as a foundation for a fulfilling career as a leader in the nonprofit sector.