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1 McCambridge, Ruth. Are Boards Worth the Trouble? Are Boards Worth the Trouble? - NPQ - Nonprofit Quarterly - Promoting an Active and Engaged Democracy. Nonprofit Quarterly, 19 Sept. 2012. Web. 23 Oct. 2012. <http://www.nonprofitquarterly.org/management/21028-are-boards-worth-the-trouble.html>.
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Source: Leading Resources Incorporated The board, whether for-profit or nonprofit, doesnt act alone: Both oversight and strategy development responsibilities overlap with those of the organizations executive leadership. However, there are some differences between the two. Figure B illustrates some of them.
2 McNamara, Carter. What Is a Board of Directors? What Does a Board Look Like?All About Boards of Directors (For-Profit and Nonprofit). Authenticity Consulting, LLC., n.d. Web. 23 Oct. 2012. <http://managementhelp.org/boards/index.htm>.
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For-profit Earn revenue for owners (shareholders) Increased profit margins and greater revenue Usually on the board Likely Unlikely
Nonprofit Serve the public Meet the publics needs Not usually on the board Unlikely Likely
For-profit and nonprofit boards have similarities, too. Those similarities are most prevalent in their responsibilities. But when it comes to responsibilities, what exactly does it mean to govern a corporation and enforce accountability?
process, the board of directors is tasked with the job of choosing a candidate for the position of CEO, as well as developing a succession plan. Support executive leadership. The relationship between the board of directors and the executive director of a nonprofit, or between the board of directors and the CEO of a for-profit corporation, is very important. The board and the leadership work closely to ensure that their respective outlooks and strategies align and that, ultimately, theyre working towards the same goal. This requires a great deal of communication between the board of directors and executive leadership. Evaluate executive leadership performance. In addition to maintaining a strong working relationship, board members also need to evaluate the performance of the CEO or executive director based on benchmarks and metrics of success to determine how well they are meeting their goals. Ensure and manage resources. Boards have access to and authority over a corporations financial statements. From funding distribution to budgeting, all boards have financial obligations. In the case of a nonprofit, board of directors are required to do a fair amount of fundraising to meet financial goals from year to year. Evaluate program and service performance. Board members also need to look at individual programs and services. Are they effective? Are they worthwhile investments? Being an active and engaged part of a board is not an easy job. Indeed, it requires a lot of work. There is constant interaction between the executive(s) and other board members to carry out the above jobs, plus duties of care and loyalty, take a lot of time and effort. Thats why the organizations mission is so critical. Board members ought to be first and foremost dedicated to the mission of the organization above all else.
Life stages
Boards exist in various life stages. These stages depend on the status of the organization: Is it new or is it well-established? Is it a small effort that only requires a handful of people, or is this a gargantuan city, state or nation-wide initiative?
Generally, boards begin as working boards. From administrative tasks to handson activities, a working board performs the day-to-day work of the organization and manages lofty strategic planning responsibilities to-boot. As the organization grows, the board becomes more established and begins to take on the characteristics of collective or top-level boards, which are more policy-oriented.5
5 Ibid. 6 What Is the Best Size for Your Board? Council on Foundations, 2010. Web. 23 Oct. 2012. <http://www.cof.org/files/Documents/Governing_Boards/Board%20Briefs/Boardsize.pdf>. 7 Ibid. 8 Ibid. 9 Ibid. 10 Ibid.
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A reasonable board size can depend on how long your board meetings are and how much time you are willing to spend while numerous board members weigh in on agenda topics. The chair will need to make sure that everyone is heard and that everyones questions are answered. That is easier with smaller rather than larger numbers. -D.K. Spencer, former President and CEO, Midland Area Community Foundation/Clare County Community Foundation Inevitably, the larger the board, the more bureaucracy there tends to be. However, larger boards have the added advantage of diversity and a wider range of viewpoints and ideas. According to the Council on Foundations, Diversity demonstrates your boards connection to the community.11 More input means more to consider and a more meaningful breadth of views to consider. New blood can be healthy for the boardit brings new energy, new passionand it can rekindle the spirit of the foundation. When the new members came on, the passion grew on the board. The new members brought in a new, younger perspective and new insights on our funding areas. -J. Stamstad, former Executive Director, James R. Thorpe Foundation There are two notable patterns here: The first is that the larger the organization, the more recognition and the more money it is likely to have. In the case of most for-profit boards, board of director members are compensated for their time and effort, something that helps attract capable people to an organizational board. The second pattern is that the larger the board, the more formality it is likely to have, such that there is a great deal of attention to parliamentary procedures and highly proceduralized operations.12 As boards grow over time, the ultimate working model is of a large and institutionalized board with multiple smaller committees to execute focused tasks.
Officer positions
A board is made up of many people and among them are a select few officer positions. Most boards offer three key officer roles between chairman, secretary and treasurer, though some also account for vice-chair, past-chair and future chair, all of which act in supporting roles. Board positions are explained in the organizations board bylaws, or rules (which come a bit later.)
11 Ibid. 12 How Nonprofits Differ From For-Profits and How They Are the Same. Authenticity Consulting, LLC., 2008. Web. 23 Oct. 2012. <http://managementhelp.org/misc/Nonprofits-ForProfits.pdf>.
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The chairman, or chairwoman, of the board may also be called the director or the president. Their first priority is effective leadership. As such, he or she will have to manage the general dynamic of the board and enforce openness and transparency so that board actions are clear. Some other duties are listed below:13 Develop the meeting agenda and preside over meetings. Maintain the minimum number of people on the board. Recruit other members of the community to join the board and build credibility. Exhibit model behavior and model communication, especially between the board and organizational executive leadership. Contribute to strategy development with the executive team, streamline it, and then supervise its execution by management. Oversee and assess executive performance. Prepare for a potential exit by drawing up a contingency plan that includes a possible candidate to step in in case of an emergency. Lastly, the chairman of a nonprofit board needs to meaningfully engage with the community as one of the most visible members of the organization. More than the specifics, however, is how the specifics are executed. If you are thinking about joining a board, or if you are already a part of one and looking to the chairman position, here are some more meaningful tips and tricks:14 Focus on the organizationwhether for-profit or nonprofitas a business. Always make yourself available to other board members and executive leadership. If you are on the board at a nonprofit, remind staff that they are accountable to you, to the mission of organization, and to the community you serve. Have a person or two in mind to take over your position in the event of an emergency, someone who knows the organization well and will be able to lead it as you do. Contribute to the organization in a way that will leave it, and you, with a positive legacy.
13 Corsi, Carlo, Guilherme Dale, Julie Hembrock, and Willi Schoppen. Five Things Board Directors Should Be Thinking about.Five Things Board Directors Should Be Thinking about. SpencerStuart, 01 Dec. 2010. Web. 23 Oct. 2012. <http://www.spencerstuart.com/research/articles/1475/>. 14 Douglas, Eric. Lessons for a Board President.Lessons for a Board President | Leading at Light Speed by Eric Douglas. Leading Resources Incorporated, 22 Mar. 2010. Web. 23 Oct. 2012. <http://blog.leadingresources.com/324/lessons-for-a-board-president>.
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To be sure, if you become the chairman of a board someday, you will have the most responsibility of any other. In some cases you may have the help of a vicepresident whose job it is to assist and support you, the chairman, and be willing and ready to step up in case you are unable to lead for any reason. In addition, you will also have the help of the board secretary and treasurer. The board secretary has the following responsibilities: Keep meeting notes. Track meeting minutes. Certify formal and/or legal documents. Board treasurer, on the other hand, is the primary authority on all things money-related as they provide financial expertise and leadership to the organization.15 They are responsible for: Annual budgets Audits Forecasting The ideal board treasurer has a thorough understanding of finances and financial reports and is able to convey money-related concepts and consequences to others with ease. A really talented treasurer is able to interpret board questions and connect money to the mission of the organization.16 Depending on the size of the organization, there may be a handful of people in charge of smaller committees able to deal more closely with important board areas. They, too, are very helpful members of the board.
15 Barr, Kate. Balancing the Mission Checkbook.What Makes a Great Board Treasurer? Nonprofits Assistance Fund, 28 Sept. 2010. Web. 23 Oct. 2012. <http://www.nonprofitsassistancefund.org/blog/2010/09/28/what-makes-a-great-board-treasurer/>. 16 Ibid.
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Finance. How is the organization performing financially? What actions need to be taken to ensure revenue generation and/or avoid spending beyond the agreed-upon budget? Evaluation. How is the organization performing at a whole? What are some of the shortfalls? Is it living up to its mission and vision statement? Executive. Is the chief executive officer an effective leader? If not, what steps should be taken? Who is the ideal back-up candidate in the event of an emergency? Marketing/public relations. What are some ways to promote the organization and the board? How best to reach out to employees and/ or the community? Program development. What programs need to be developed, or which programs need to be reconsidered? Are there any other program ideas the organization could implement to be more successful? Sometimes, however, the need for a committee is only temporary: for example, if the board is hosting a community-wide event, or conducting a capital campaign. Both are salient examples of projects best handled by a smaller group of people. The person in charge of the various committees is known as a committee chair. They are comparable to project managers in that they oversee committee activities and report back to the board on progress. Becoming a committee chair is a good way to gain leadership experience within a board and a stepping stone to taking on an officer role with more responsibility in the future.
17 What Are the Advantages and Disadvantages of Term Limits? BoardSource, n.d. Web. 23 Oct. 2012. <http://www.boardsource.org/Knowledge.asp?ID=3.1240>.
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then rotated out, which can be difficult for an organization.18 Without term limits, however, organizations run the risk of stagnating as power becomes concentrated in one small group.19 Term limits vary by organization, but the rules (or lack of rules) are always explained in the board bylaws. If the formation and activities of a board were a game, bylaws would be the rules that dictate how the game is played. Essentially, bylaws dictate how the board is organized and how it operates. In addition to defining term limits and various positions, like those outlined above, bylaws include:20 Time, location and overall structure of meetings How many board members are needed in the organization What kinds of qualifications board members should have If the corporation is a for-profit, bylaws should include the title and rate of pay for officer positions Rules regarding the approval of contracts, loans, checks and, if a for-profit, stock certificates Process by which a board law, article, charter or constitution may be changed Just as a game cannot be played without the rules, a board cannot operate without standards to guide its activities. Bylaws should be set in one of the first meetings so that board meetings thereafter have a set structure and flow to follow.
an existing director on the board. In fact, some boards require a certain degree of familiarity of their incoming board members, meaning they may first have to be recommended by someone already on the board. This is where personal connections and professional networking come into play: You never know where or how your professional contacts may be able to help you beyond the office. An important thing to consider if you want to become a board member is your skillset. What professional skills do you have? What makes you a valuable asset? Then, take a look at the credentials of some of the existing board members to determine where you might fit in best. Highlight your skills in an application or letter of intent if the board requires one.
21 What is a Conflict of Interest? BoardSource, n.d. Web. 23 Oct. 2012. <http://www.boardsource.org/Knowledge.asp?ID=3.382>. 22 Ibid.
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usual. In these instances, the board of directors likely had to alert the executive leadership to the smelly vegetables in the fridge and nudge them to address the changing situation.
Conclusion
So, oddly enough, the concept of organizational boards can be explained with a vegetables-in-the-refrigerator-bin metaphor. That metaphor helps capture why boards are well-worth the trouble. This is why, in the words of Ruth McCambridge: We need a group to provide the level and diversity of challenges that a nonprofit needs to keep itself true to its constituents.25 As the member of a for-profit or nonprofit corporation board of directors, you have the opportunity to affect social responsibilitymaybe even affect social change. Board members play an essential role in the governance and guidance of organizations, many of them global, and many with the capacity to make a positive difference in the lives of many.
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25 McCambridge, Ruth. Are Boards Worth the Trouble? Are Boards Worth the Trouble? - NPQ - Nonprofit Quarterly - Promoting an Active and Engaged Democracy. Nonprofit Quarterly, 19 Sept. 2012. Web. 23 Oct. 2012. <http://www.nonprofitquarterly.org/management/21028-are-boards-worth-the-trouble.html>.
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