When is the Right Time to Change a Nonprofit’s Bylaws?
By Eugene Fram
In listening to a recent Nonprofit Quarterly webinar, I was again reminded that the habit or long standing culture could hinder the capacity building function of a nonprofit organization. One example cited was the tendency of nonprofits to procrastinate in a review of their corporate bylaws. Original board standing committee structures and board/management relationships remain in place long after they are needed to drive mission growth and to improve client services and impacts.
Two bylaw changes that many nonprofits fail to revise on a timely basis are first the reduction in the number of board standing committees e.g., building, personnel, marketing and nominations. Modern board-staff task forces or ad hoc committees can effectively expedite policy or strategic decisions in these important areas. Only three to five board-standing committees are needed to meet 21st century requirements. (For example see: http://amzn.to/eu7nQl)
The second consideration for bylaw change calls for a new look at the position of Executive Director and the possibility of expanding the scope of his/her responsibilities. This reduces the potential for board micromanagement and facilitates the transition from ED status to President/CEO, which, for many nonprofit organizations has resulted in increased efficiency and better mission focus.
Following are the types of outcomes or behaviors that signal a change in bylaws needs to be considered. Any one, several or all of the items can be a clarion call for bylaw revision.
• When annual budgets exceed one million dollars and/or full time staffs exceed 10 professionals – This guideline will vary greatly, based on the type of nonprofit. For example, trade associations with multimillion-dollar budgets may only employ five or six full time staff.
• Board agendas becomes crowded with minutiae – Examples: discussion of annual dinner menus, detailed technical reports of operations, meeting time used to develop promotional copy, and reviews of slide presentations.
• Director turnover is much too frequent – Directors need to feel they are making meaningful contributions, and those who become bored with lengthy reports and routine discussions rarely reveal the true reasons for resignations. (Increased job or family requirements often are a “cover story” for leaving.) Also, candidates for board seats will respond more positively to an invitation to become a director if they perceive the board’s focus is on meaningful activities.
• Failure to hire better managers – If too many desirable management job candidates are rejecting offers, it may be a sign that the organization is not being recognized as being a viable one for the 21st century. Funders and volunteers also may be turned away if they perceive the board is micromanaging the organization and operational management is weak.
• The CEO is expected to be a fundraising partner with board directors – This type of partnership is becoming the norm. Consequently, having an operational chief executive officer who has the President/CEO title can provide an external perception of being a manager having the directors’ confidence. During fundraising efforts, a new donor encountering an ED title can be confused as to the person’s management responsibilities. On one hand, it can describe a person who is a glorified administrative assistant, or on the other hand, it can describe a senior health care manager with a significant budget and a hundred employees.
In terms of business or donor relationships, the title change clears the confusion and allows the chief executive to interact with external business executives and donors on a senior level basis. More professional and experienced chief executives will require this title to assume the top operational position.
Many nonprofit organizations remain anchored structurally and internally by maintaining a culture more appropriate to founding organizations in the last century. The two bylaw changes suggested allow a nonprofit to form true internal partnerships and build trust among internal stakeholders.