Can Only Three Nonprofit Board Committees Engage Directors Meaningfully?
By: Eugene Fram
Current research shows that the average nonprofit board has an average of 4.5 standing committees, down from 6.6 in 1994. * I suggest three standing committees. ** This three-standing committee configuration is flexible. Its strength is that it generates a coordinated robust review of the past board experiences to drive an emphasis on policy development and strategic planning. Organizations know where they have been, are thinking about the future but are not mired in micromanagement
- A Policy/Strategy Focused Board
Planning & Resource Committee: The CEO, working with the committee, is chiefly responsible for developing the nonprofit’s vision, subject to the input of staff plus the input and approval of the board. The group also plays an important role to make it easier to keep strategic planning and evaluation of new projects a prominent part of board agendas. At the same time, it also monitors the activities of all board task forces. These are work-groups of board and staff tasked with investigating policy or strategic issues. There, for example, is no separate personnel committee under this configuration, but if there is a need to revise a retirement plan for the organization, a task force is given the responsibility to review options for board discussion and decision.
Assessment Committee: If there is no finance committee, this group, along with the CEO, establishes organizational and budget goals. The committee subsequently conducts a robust evaluation of the CEO and organizational impacts, using both quantitative and qualitative impact data.
Executive Committee: The committee’s major function, outside of its legal obligations to act for the board between meetings, is to act as a review group for all reports emanating from the two other committees, fostering a high level of director engagement. This, for example, provides progress reviews at the task-force level, at one of the two standing committees and then at the executive committee level. All of this is before an item is placed on the board agenda. Most on the board have one or more opportunities to provide their suggestions and concerns. It is an engaging “no surprise” review system.
- Exceptions & Permutations Of The Three-Standing Committee Approach
State Regulations: Some states require separate standing finance and/or audit committees. If not, the assessment committee is responsible for the financial well being of the organization, and several members of the committee may act as an independent audit committee, meeting with the external or internal auditors as needed. Another way to meet state requirements is to have an audit committee composed of independent outside experts plus one or two board members. Former board members often are willing to volunteer, if they are familiar with the organization’s financial reports. However, it may be necessary to have one member of the audit committee with significant experience in accounting and/or financial management.
Strategic Planning Objectives: Some nonprofit boards use interim standing committees to reflect major objectives of the strategic plan. If a major building project is needed, a standing committee is formed to overview the project until it is completed. A new ad hoc configuration of four committees is formed.
Governance Considerations: Under the three-committee approach cited above, the executive committee acts as a governance committee and needs to overview governance issues such as board recruiting, board self-evaluations and occasionally establish task forces to review situational governance issues. “Donors are more likely to reward nonprofits with good board management, according to a 2014 study. The study found donors take board education, training, and access to historical records into account as part of their considerations.” ***
Cyber security?: There are wide ranging views on whether or not a cyber security standing committee is needed. One side concludes the potential losses are so substantial in the 21st century that it needs substantial board attention. Others conclude that it is a major risk that needs to be monitored in connection with the probabilities of other types of major risks such a flood or fire.
Special Regulations: Some fields, such as healthcare, have special regulations for which a board is ultimately responsible. One approach is having a board committee overview the impact involved. But nonprofit boards, with a three-committee format can use task forces which to review compliance with the regulations. No need to have meetings when issues arise on an irregular basis and can be resolved by small task forces.
My experience with this board committee configuration has proven it is productive and adaptable to making board structure changes. Prior to board action, the task force members and the two other groups reviewing reports become well versed in the options available. Since the topics reviewed are limited to policy and strategic opportunities/concerns, the board and staff members become meaningfully involved.