What is the Role of the Nonprofit Board of Directors?
The Basics
The IRS and state laws require all 501(c) organizations to have a board of directors. But nonprofit boards are crucial for more than just legal compliance and oversight. An engaged board of directors brings diverse expertise and perspective to their strategic leadership. Read more about what They play a vital role in the nonprofit’s mission impact and sustainability.
The legal fiduciary duties of care, loyalty, and obedience are the starting foundation for ensuring the nonprofit is fulfilling their mission and operating legally. It is important that each board member understands these responsibilities.
But there is so much more! Board members are an essential part of strategic planning and resource management. Effective board leadership includes identifying and minimizing risks, assessing and establishing sustainability practices, promoting effective communication, and fostering a culture that facilitates adaptability. Their experience and expertise provide valuable insights into optimizing the effectiveness and efficiency of operations. They are integral to building the nonprofit’s reputation by implementing measures to enhance transparency and accountability.
Three Modes of Governance
The book, Governance as Leadership, presents three modes of governance: fiduciary, strategic, and generative. Each mode is distinct and serves a specific purpose. One of my big takeaways was the author’s example of the Boston Museum of Fine Arts being asked to lend twenty-one Monet paintings to the Bellagio Casino in Las Vegas. The fiduciary and strategic modes are commonly seen in effective boards, but the generative mode is less common. The generative mode takes a different perspective and challenges assumptions to think broader. In the Boston Museum example, the generative question posed was “How does it fit with our mission?”
Engaging Your Nonprofit’s Board of Directors: A 4 Step Process
So how do you develop and foster a board that engages in all three modes of leadership? Board engagement is frequently discussed, but hard to sustain. It takes intentionality and consistency. The board needs to be reminded they are not just preserving the status quo and protecting charitable resources but also locking in on the advancement of mission and values.
The starting point is identifying the competencies, expertise, and skills needed. Building a board matrix based on the identified key factors creates a visual to understand the current board composition and highlights the gaps that need to be filled. Recruiting new board members with the skills and characteristics to fill these gaps facilitates building a well-rounded, versatile leadership team.
Actively engaging team members is the next step. This includes comprehensive onboarding of new members that defines the responsibilities and expectations. One of those expectations is being prepared for meetings. Generally, there should not be presentations or reports given during the meeting as this is work that should be done in advance of the meeting. The meeting time should be reserved for meaningful discussions and collaboration. Promoting participation from all board members contributes to robust strategy and leverages the competencies, expertise, and skills identified in the board matrix. Conducting regular board evaluations is essential in ensuring ongoing accountability and engagement.
Whether you are a small nonprofit, just starting up, or a national association, effective board governance is crucial in achieving your mission. We understand that there is no one-size-fits-all board and Wegner CPAs’ nonprofit advisors will help you identify the governance needs of your organization. Whether you’re just getting started or ready to evolve your board’s role, we’re here to help. Looking to strengthen your nonprofit’s leadership team or improve board performance? Explore our Nonprofit Advisory Services and check out our available nonprofit board training opportunities to support your mission and governance.
