By Kimberly Sterling
Nonprofits are a big business in the Lone Star State. More than 400,000 Texans work for nonprofits – earning close to $17 billion in wages and contribute roughly $1.6 billion in state and local revenues.
Often, nonprofits are established by ordinary people who want to make the world a better place through education, the arts, faith, conservation, or other cause-related activities.
The nonprofit surge has had many positive consequences, as charitable organizations play a vital role in our society’s health, wellbeing, and quality of life. At the same time, the nonprofit sector is inherently disorganized. Few nonprofit founders conduct competitive research or develop business plans before entering the nonprofit marketplace. As a result, the missions of many nonprofits overlap, and there is a shortage of people with the management and fundraising experience needed to run the day-to-day work of these tax-exempt businesses. There is also a shortage of board members with the experience, knowledge, and commitment needed to play the governance role that is critical to nonprofit success.
The Role of the Board
Whether a charitable organization is small and driven only by volunteers or is fueled by a multi-million dollar budget, and whether the board is composed of the three individuals required by Texas law or by a group of more than 100 directors, the functions of a nonprofit board are always the same. These responsibilities are somewhat different than those of a for-profit board of directors, where the chairman and CEO roles are often held by the same person. In nonprofit organizations, these roles are typically separate – and that line must be drawn and protected. It is the board’s job to:
It is the job of the nonprofit CEO to operationalize the strategic plan, manage the day-to-day work of the organization, and implement the policies developed and approved by the board. When nonprofit management is weak or overstretched, however, boards too often step in and micromanage. It is almost impossible to operate an effective organization in this fashion.
Eventually, the CEO will probably resign or be terminated, leaving the board with the habit of reaching over the line into management’s job. When the CEO is strong and the board is weak, many nonprofits can get along well until a situation arises where the board’s involvement is crucial – such as a serious financial challenge or major management issue – and then it is almost impossible to quickly strengthen the board’s performance. When both the CEO and management are weak, a nonprofit will lose revenue over time and even go out of business. The ideal, of course, is a healthy partnership between a strong CEO and a strong board, with each respecting and reinforcing the other’s roles and responsibilities.
What to Ask Before Agreeing to Serve
Being elected to a nonprofit board of directors is an honor, and it can be one of the most meaningful activities that a business person can undertake. Yet it is an enigma why many business leaders suspend their judgment and experience when asked to serve on a nonprofit board. Prospective board members may think well of the organization’s mission, and may be attracted to the prestige associated with serving on a nonprofit board, but often do not give adequate consideration up front to the business side of the charity. This is even true of some private sector CEOs who manage their own organizations tightly.
Therefore, prospective board members – particularly CEOs, who bring much-needed business acumen to the table – do both themselves and the charity a great service by asking some fundamental questions before they agree to serve. These include questions about:
Personal commitment to the cause. As flattering as it may be to be asked to join a board, very few people have the time to spend on things that they do not deeply care about.
The organization’s mission, programs, and results. What is the nonprofit established to do? Do the programs advance the mission? How are results measured? Is there a strategic plan to guide program growth? How is the organization doing with respect to its “return on investment,” as measured by mission impact?
The organization’s financial well being. Are accounting and reporting practices in place? Is there an audit? If so, what does it show? Does the board review and approve the budget, and are monthly financials provided to the board? What do the financial reports look like? Is there a cash reserve? What is the revenue mix?
Relationship between the board and staff. Do the board’s leaders and the CEO understand their respective roles? Do they adhere to them? Is the relationship healthy? Does the board review the CEO every year? What is that process for that review?
The work of the board itself. Is there a formal statement of expectations for board members? If so, does it reflect the actual experiences of current board members? What are the time and financial requirements? What are the fundraising expectations? How often does the board meet, and how long are the meetings? Do many board members discuss and deliberate during board meetings, or are the meetings dominated by reports? Does the board work through committees? How are committee assignments made? Does the board conduct an annual self-evaluation?
After Signing On
After agreeing to serve on a nonprofit board, C-suite professionals can play a high impact role by remembering five simple priorities:
Corporate leaders possess the skills, knowledge, and experience that nonprofit organizations urgently need in order to fulfill their missions and do their best work. By agreeing to serve on a nonprofit board, embracing the role with purpose and diligence, and keeping in mind the simple priorities listed above, they can not only add tremendous value to the nonprofit sector but also enjoy the deep satisfaction that comes with being involved in life-changing service to their communities.
Kimberly Sterling is the president of Houston-based Sterling Associates. She and her firm have worked with more than 150 nonprofit organizations since 1988, providing services including capital and endowment campaign management, strategic planning, program development, board development, and communications.
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