Building Blocks of Not-for-profit Board Governance

Highlights from the Foundations for Board Governance guide

Part one: Good foundations

What is our purpose? For whom are we here?

Framing the issue

Two important questions seldom considered by board members are: What is our purpose and for whom are we here? The responsibility of stewardship can be all-consuming, and the answers to fundamental questions of why the organization exists and who it is for are often assumed rather than given full consideration. As a result, it can be easy for board members to lose focus on the organization’s core purpose and their role in serving it.

 

Caring for the details of stewardship is different from micromanaging an organization. Non-profit boards should complement management by asking a different set of questions—this is true governance.

In our experience

  • Board member
  • Accountability
  • Mission statement

What is a board member?

Every board member shares the responsibility for having general control and management over the administration of the organization that they serve. But what does it mean in practice? Even the names used to describe board members are varied in the non-profit sector: trustees, governors, committee members and directors. However, in the context of the drive to achieve high standards of governance, the job descriptions are, in practice, interchangeable and largely inconsequential.

 

Regardless of their job titles in a particular non-profit, board members are the people who lead the organization and decide how it is run. Being a board member means making decisions that will affect beneficiaries, and with this responsibility comes accountability.

Fiduciary responsibility and beyond

Accountability is important. Financial oversight is critical and board members will always have ultimate fiduciary responsibility. Without an ongoing cash inflow, the not-for-profit organization cannot be sustained in perpetuity. But board members need to be aligned with the organization’s core purpose. The first step in effective board governance, therefore, should be to focus on the mission statement: the charitable objectives and the reason for the organization’s existence.

Understanding the organization's purpose

Most non-profit board members are serving as unpaid volunteers. They are drawn from all areas of society and bound by the same desire to serve their organization through decisions that will positively affect its beneficiaries. It is essential that board members understand and consistently support the purpose behind their organization. A strong, concise, values-driven mission statement can help achieve this.

Examples of Mission Statements

“Inspire and prepare young people to succeed in a global economy.”
“To inspire breakthroughs in the way the world treats children and to achieve immediate and lasting change in their lives.”
“Growing the movement of leaders who work to ensure that kids growing up in poverty get an excellent education.”

Being a board member means making decisions that will affect beneficiaries, and with this responsibility comes accountability.

Good Governance Indicators

1

Focus on the big picture. In addition to fiduciary duties, board members set aside time to consider what exactly they are trying to accomplish.

2
Existence of a mission statement that complements the organization’s vision and strategic plan. Even if no mission statement exists, then every board member should be able to articulate the rationale for the activities being undertaken and how performance is being measured. For example, can each board member identify the organization’s three most important objectives, and whether the organization is achieving them?

Want the full list?

Access our full Foundations for Board Governance guide for all five good governance indicators.
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Part one: Good foundations

THE BUSINESS OF THE BOARD

Framing the issue

For a board member, time is a scarce resource, and a significant portion of it will be spent in board meetings. It is critical that these meetings are well-timed, effective and focused on the critical issues. This allows board members to be effective in how time is spent on a not-for-profit organization's affairs.

 

Far too often, a board can attract highly skilled and experienced individuals, but a bland agenda or poor chairing of the meeting does not fully utilize those qualities. Creating an engaging agenda is fundamental. It is equally important to go beyond the routine policy and process of meetings and drive the strategy of the organization.

In our experience

What’s on your agenda?

Board members are typically busy people. Providing sufficient notice of meeting dates and purposes helps drive good attendance. A well-run board will have a rolling program of meetings at least 12 months ahead. Consideration should be given to the frequency of board meetings, which can occur as infrequently as twice a year to as often as monthly, depending on the size and complexity of the organization, as well as whether additional work is conducted through committees.

Policy and procedure

Governing documents or bylaws detail how and when to organize meetings and how to vote on decisions—these requirements must be followed or actions and decisions may be invalidated. Understand the quorum requirement for decision-making and how to deal with conflicts of interest. It is good practice to have a standing item on any formal agenda for declarations of interest to be made (or to allow for confirmation that none are known). Capturing this in accurate minutes of meetings is vital evidence of a well-run board.

Measuring the strategy

Having identified the strategic direction of the organization, the board should then consider how the organization will monitor its performance. There are many metrics available such as the balanced scorecard or key performance indicators (KPIs). Obtaining accurate data is critical to organizational performance measurement and boards will need to be mindful of the methods required to achieve this.

Ineffective vs. effective board meetings

Ineffective

Routine meeting structure

Effective
Varied agendas

Ineffective

Focus on information
Effective
Focused on strategy

Ineffective

Passive listening
Effective
Respectful debating

Ineffective

No forward annual plan
Effective

Seasonal plan with intentional themes

Ineffective

Dominated by a few
Effective
Full engagement

The business of the board should leave board members feeling fully engaged in their most significant time commitment.

EXAMPLES OF key performance indicators

1
Number of care professionals in charity or non-profit network
2
Number of people supported through face-to-face services
3
Patient information resources downloaded and distributed

Looking for more sample KPIs?

Access the full Foundations for Board Governance guide for more examples.
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Part two: Thriving and excelling

PROBLEM SOLVING VERSUS SOLUTION BUILDING

Framing the issue

A problem-solving approach to decision-making is very common among boards. Management approaches the board with a number of identified problems and asks the board to collectively determine a course of action. This approach has board members spending time assessing facts, reasoning, and then determining how to intervene and eradicate the problem. The focus on problems is not an inspirational way of operating. The widely recognized SWOT analysis (to determine strengths, weaknesses, opportunities and threats) similarly concentrates on preventing trouble rather than promoting success.

 

An alternative, solution-building approach empowers managers and board members to focus on an organization’s existing strengths and consider its opportunities.

In our experience

  • Framing issues and debating
  • Scenario planning
  • Assessing risk
  • Defining success

Framing issues and debating

Many boards are prone to operating in a repetitive fashion— meeting at regular intervals and dealing with similar, routine business. This can be detrimental to constructive debate. Without debate and the opportunity to frame issues, board meetings can become dull affairs and lead to disengagement. Lively discussions keep the focus on a board member’s initial motivations for joining the organization: to support the beneficiaries’ cause.

Scenario planning

Scenario planning helps boards map paths to achieve the organization’s vision. This creative exercise helps develop a range of possible outcomes and the sequence of events that might bring them to bear, allowing for better decision-making. Without time to frame issues and explore possibilities, boards may incorrectly assume that the future will replicate the past with only gradual changes. In today’s era of disruption, scenario planning considers the impact of possible events—for better or for worse—thereby improving odds that an organization is prepared for whatever may unfold.

Assessing risk

Strategic risk can be defined as those risks that, if realized, could fundamentally affect the way in which an organization exists or provides its services in the next one to five years. These risks will have a detrimental effect on the organization’s achievement of its key business objectives. The risk realization will lead to material failure, loss or lost opportunity. It is imperative to understand potential risk.

Defining success

Achieving mission success is important, but boards must be careful not to define success in a way that creates risk. Boards should set reasonable stretch goals, taking care that daily infrastructure and capabilities are positioned to support the goals.

 

Perhaps most important, the board must demonstrate and communicate the effect the not-for-profit organization is having on those it serves. The board should define and measure outcomes in order to quantify how the organization is helping constituents.

Scenario planning provides a method to map alternatives and challenge existing strategies.

addressing Strategic Risk

1
What is occurring internally at the organization that could present strategic risk or challenge?
2
What are beneficiaries, regulators, partners, the public and other stakeholders telling you about the organization?
3
What does the organization want to look like in five years? How different is that from now? What will the organization face in getting there?

Want to learn more?

Access the full guide for additional ways to address strategic risk.
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Part two: Thriving and excelling

COMING TOGETHER

Framing the issue

The fear of failure or takeover keeps many corporate entities effective. For many reasons, charities and not-for-profit organizations historically have been sheltered from such outcomes. Yet, strategic boards and those board members who are thinking creatively about the future are actively pursuing collaborations, mergers and amalgamations.

 

When two organizations would benefit from working together, either collaboratively or in a formal merger arrangement, boards should be open to exploring the opportunities.

In our experience

Thinking about
the future
An effective board will anticipate changes in the sector in which its organization operates, as well as environmental or financial developments. Anticipating the future helps ensure services to beneficiaries remain appropriate and relevant.
Considering other
organizations
Non-profit partnership needs to be for the good of the beneficiaries. Before entering into any arrangement, both organizations should undertake a cost-benefit analysis of the likely outcomes.
Working
collaboratively
Organizations can work together informally as advocates or formally as part of a legal service delivery agreement. Boards must understand what is expected and how proposed partnering benefits the mission.

It is important that a board devotes sufficient time to consider collaborative working and merger opportunities with other organizations.

STRATEGIC QUESTIONS EVERY BOARD SHOULD CONSIDER

1
Do we periodically consider the emerging trends of the sector which we serve and the needs our beneficiaries will have for the next several years?
2
Are we the only organization that is capable of delivering the services we provide and want to provide?
3
Which other organizations do we admire or might benefit from working with us?

Considering strategy partnerships?

Access the full Foundations for Board Governance guide for additional collaboration questions.
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Inspire confident decisions

Taking the time to put these building blocks in place creates significant opportunities for a board and the organization it serves. And what are not-for-profit organizations best at? Meeting challenges, overcoming barriers and making a difference. Gain access to our full Foundations of Board Governance guide for a full discussion on the opportunities created by a well-structured and effectively run non-profit board.

Part One Good Foundations

1. What is our purpose and for whom are we here?

2. Expectations of board members

3. The business of the board

4. Organizing for good governance 

Part Two Thriving and Excelling

5. A thriving organization and board

6. Problem solving versus solution building

7. Board dynamics

8. The two critical roles - the chairperson and chief executive

9. Coming together