Top Factors For Improving Nonprofit Directors’ Board Experiences
By: Eugene Fram
Spencer Stuart, an international placement firm, recently asked 500 directors who serve on for-profit boards to name the top factors that would reasonably improve their board experience. (http://bit.ly/1D14NFU) Their answers also resonate in the nonprofit arena.
More Strategic Planning — Most nonprofit boards must draw their members from a wider pool of backgrounds than for-profit boards, which can easily nominate qualified senior executives and professionals. Nonprofits often represent a broad community like a town or city. Their nominees are required to mirror broader demographic cross sections.
To meet its obligation for strategic planning, any nonprofit board needs to have about one-third of its directors who are qualified in strategic thinking and planning. Otherwise, board discussions are likely to be reduced to descriptive reports and minutiae. Then the board may lapse into micromanaging operations. Given the demographic diversity requirement the NFP board faces, it will be a continuing challenge to recruit a cadre of directors who are highly experienced in strategic planning at a high level.
More Discussion Time -– Monthly meetings are usually 1.5 hours. Some nonprofits even structure their quarterly or bimonthly meetings for the same amount of time. They rationalize that the rigorous debate has taken place in board committee meetings. Rigorous debate can take place within a several hour meeting, but a governance structure that promotes the flow of information between committees is required. (Example: http://amzn.to/eu7nQl)
Using Volunteer Time More Effectively:
• Nonprofit board work is teamwork that must be meaningful, but individual behaviors must be considered. For some it will be making arrangements for the annual dinner; others will want to focus on strategic planning and policies.
• The current demands of the job and family have led to compressed volunteer lifestyles. Consequently, many boards have directors who really don’t know each other. Allow a few minutes at the end of each meeting for directors to mention an important event in their lives. The process should provide a personal base for directors to become better acquainted.
Better Risk Oversight Understanding – People join nonprofit boards for a wide variety reasons: mission dedication, the organization’s prestige, networking opportunities, contributing or practice their skills, etc. Many don’t understand that a board position involves understanding corporate governance processes. This duty requires assessing personal risk as well as overseeing the risk environment of the nonprofit Some nonprofit directors have found themselves with personal liabilities for failure to provide “due care” in overseeing agency operations. Example: Fifteen members of one board of a health care facility were personally fined $2.2 million for failure to take actions when they knew that the staff was incompetently serving clients. (http://bit.ly/1GQo1jY)
The usual orientation for nonprofit directors is a lecture or two by the CEO or an attorney. The better format is to provide some basics in lecture format, but to have the more knowledgeable directors and the board chair apply governance principles when an issue arises. Example: Sophisticated directors know that they can be absolved of liability if they vote “no” on an action that can lead to director and/or organizational liability. From the small number of “no” votes I have observed over the years, I estimate few directors are aware of this important alternative.
Eliminating Ineffective Directors – The for-profit corporate board can have more leverage in this effort because investors have a significant financial concern with the effectiveness of the board. It can be very difficult to drop an ineffective nonprofit director, even when he/s does attend meetings. Nonprofits often care more about “hurt feelings” that develop with such a board action. Improvement in self-evaluation of nonprofit boards and their directors is needed to elevate board-recruiting standards.
Although the results from the Spencer Stuart survey are based on for-profit boards, applying them to nonprofit boards helps raise issues that aren’t frequently considered.