Seven Keys Series: Priority Roles of the Nonprofit Board of Directors
Following PMA’s successful Innovation Blog Series earlier this year, the firm is pleased to continue this focus on strategic organizational development. The firm has built its approach to working with nonprofits on its Seven Keys to Organizational Excellence. In September, PMA will focus on engaging your board of directors.
Since its founding in 2009, PMA consultants have conducted countless board and staff retreats with organizations large and small, and the priority topic for many of them is the same: “what should our board of directors be doing?” It is a question asked by Executive Directors and Board Chairs in equal measure, and not always an indicator of organizational dysfunction. The firm has developed a set of methodologies for working with organizations to refine the role of the board of directors, a cornerstone of the firm’s Seven Keys to Organizational Excellence.
During the downturn, the challenge was clear – nonprofits were experiencing sizable cuts from funding sources, and the board of directors was viewed as a potential savior. But as devoted volunteer leaders dug deep and worked their networks, many learned three important things:
- Nearly every nonprofit was going through the same financial crunch, and reciprocity of charitable support was expected by individuals solicited (“I’ll give to your thing, but then you have to give to mine.”).
- Raising funds while bailing a boat is a lot harder than when setting a course with vision as the guide.
- Cuts to the bottom line would be likely, meaning the organization’s programming would likely need to be placed under a microscope.
With tough decisions needed, some less engaged board members decided to end their tenures, making the challenge even more difficult. While this may have been unavoidable, the fact is too few individuals accept the role of director of a governing board of directors with a full and complete understanding of what is expected of them. So it shouldn’t be a surprise that when the going gets tough, some board members get going.
Did you know that nonprofits are owned by everyone? Board members act on behalf of the public interest, managing a nonprofit to enable its legal existence. Legally, the only role of a board member is to ensure that the nonprofit does not run afoul of the IRS. But this is hardly the ideal position description for an engaged member of a nonprofit board of directors. According to PMA, the following are the top three priority roles of the governing board of directors:
- Funding – Without financial resources, a nonprofit is unable to fulfill its mission, which makes funding the nonprofit the #1 role of the board of directors. That means contributing personally and assisting in securing other donors. Board members who note discomfort with asking others for money can engage in fundraising in other ways, but PMA questions whether a very fundraising-adverse board member can add enough value in other ways to outweigh the loss of director-driven revenue.
- Financial Management – Approving budgets and monitoring finances is the next most important role, perhaps 1B to fundraising as 1A. During a time of a recovering economy and cuts in public funding, a board must have the wherewithal to become educated on budget detail and informed enough to make what are often difficult, impactful decisions. It is never easy to cut staff or discontinue a program that is making a difference, but a board must have the strength and resolve to do what needs to be done to ensure fiscal strength. On the flip side, boards also need to be willing to take calculated risks, investing hard-won revenue in needed resources that advance mission and ensure sustainability.
- Planning – As noted above, it can be difficult to look 5- or 10-years into the future when the boat you are in is taking on water, but a strong vision is one of the most important factors to ensuring sustainability for an organization in crisis. Donors need to know where an organization is going, as their funding is tied to what you will do with the money. Setting a bold vision requires a board of directors willing to take the long view and stake themselves out on ambition, potentially at a time of uncertainty and heightened near-term focus.
Other roles surely exist for board members, including management of the Executive Director, committee oversight, advocacy and ongoing evaluation, but a board of directors that fully embraces the three roles above is likely to be much more successful than one that, while very involved, shirks these priority responsibilities.