The members of a board of directors collectively set the direction of an organization, steering it toward a better future by setting the tone that promotes sound and ethical legal governance and financial management policies. The board is entrusted with and accountable for the leadership and governance of a nonprofit organization. However, a typical board’s work goes beyond governance. These individuals are ambassadors, sponsors, representatives, advisors, consultants and resource developers. So how can an organization promote good governance? Here are some guidelines and tips to consider:
- Enhance board composition – The first important step is to have an appropriate mix of individuals on the board. An organization should have a list of credentials and skills they want in an ideal board and should be targeting those individuals. The addition of a member should add to the capabilities of the board as a whole. Look for trustees who have experience in strategic planning, accounting and finance, law, risk management, strong leadership roles, fundraising, and specific not-for-profit knowledge.
- Define roles and responsibilities – Unless board members are aware of what is expected of them, they will not be able to do their job effectively. There should be clarity provided for individual trustee responsibility, the organization’s expectations, as well as the role of the board.
- Set purpose and strategy – Once the right mix of people is present and their roles are defined, the board must establish and implement the vision and goals of an organization. The board should have a strategic plan in place that is timely and relevant to the organization.
- Manage risks – Every board meeting should address some topic related to risk management. Several types of risks, ranging from compliance, financial, operational, governance, or strategic, brand and reputational, may impact an organization at once. Risks should be identified, analyzed and prioritized. The board’s role should be to assess the organization’s risk appetite and implement strategies to better manage risks.
- Ensure integrity and accountability – In order for the board to do its job, flow of information and transparency is a necessity. It’s important to identify the type of information that aides the board in the decision-making process. Dashboards are one example of an effective way to illustrate how an organization is performing. Integrity and accountability in communicating information become even more important when external financial reporting comes into play. Whether an organization is reporting to grantors, donors, or providing audited, reviewed or compiled financial statements, the board plays a role in ensuring the integrity of the information provided and should hold themselves accountable for having the responsibility of effective and accurate reporting.
- Instill culture and ethics – The culture of any organization is influenced by the tone and, more importantly, the actions of its board and the individual trustees. This includes identifying potential conflicts of interest. All decisions made by a board should be impartial and in the best interests of the organization. Does your organization have a process in place to evaluate this?
- Evaluate board effectiveness – Do your board meetings start and end on time and cover all agenda items? Are all discussions constructive? Does your board assess the performance of its members regularly? Is time devoted to thinking about and planning for the future of the organization? Are committees used effectively? All of these questions should be addressed when evaluating the effectiveness of your board.
The level of knowledge, involvement and strategic planning from your board members is critical to your nonprofit’s survival and success. Above is only a short list of things that should be considered. Contact me at firstname.lastname@example.org or 609-689-9700 for more information on the board training, governance consulting and strategic solutions Mercadien can provide to enhance the contributions of your board of directors.