TSB 025: Nonprofit Governance: Best Practices and Potential Pitfalls

board development capacity building governance growth leadership nonprofit the saturday boardroom Apr 08, 2023
TSB 025: Nonprofit Governance: Best Practices and Potential Pitfalls

Read Time: 5 minutes

This week's tip: You can avoid the pitfalls of nonprofit governance with this guide. 

As a nonprofit organization, your success largely depends on your leadership and governance.

The board is responsible for ensuring that your organization is operating in compliance with legal and ethical standards, making strategic decisions, and ultimately guiding the organization toward achieving its mission.

However, nonprofit governance is not always easy, and various factors can undermine board effectiveness.

In this blog post, we will analyze the best practices of nonprofit governance and explore the potential pitfalls that can arise, as well as provide examples of successful nonprofit boards and practical tips for improving board performance.

Best Practices in Nonprofit Governance

  • A successful nonprofit board should have a clear understanding of each member's roles and responsibilities. This includes the board's overall purpose, its fiduciary responsibilities, and the roles of individual members. Effective boards ensure that each member knows their roles and responsibilities and that they understand the expectations of their position.
  • Diversity and inclusivity are essential for effective governance. A diverse board brings different perspectives, experiences, and expertise to the table. This diversity of thought can lead to better decision-making and increased creativity. Additionally, a board that values inclusivity can attract a wider range of members, including those from marginalized communities.
  • Strategic planning is critical for nonprofit organizations. The board should create a strategic plan that outlines the organization's mission, goals, and objectives, as well as a timeline for achieving them. This plan should be regularly reviewed and updated to ensure that the organization remains on track to achieve its goals.
  • Board self-assessment is an important tool for nonprofit organizations. This process helps the board identify areas of strength and weakness, and it can help the board create an action plan to address any issues. Board self-assessment can also help board members understand their roles and responsibilities and improve their performance.

Potential Pitfalls in Nonprofit Governance

  • A lack of diversity and inclusivity can undermine board effectiveness. When the board is not diverse, it can lead to groupthink, where members are hesitant to voice opposing opinions. Additionally, a lack of inclusivity can make it challenging to attract members from different backgrounds, leading to a board that lacks the expertise and experiences needed to make informed decisions.
  • Accountability is critical for nonprofit governance. The board should hold itself and the organization accountable for its actions, ensuring that it is operating in compliance with legal and ethical standards. Additionally, board members should hold each other accountable for fulfilling their roles and responsibilities.
  • Transparency is essential for nonprofit organizations. The board should be transparent in its decision-making, its finances, and its operations. This transparency builds trust with stakeholders, including donors, members, and the public.

Examples of Successful Nonprofit Boards

Here are three examples of nonprofit boards that include diverse members with a range of skills and experiences. They are focused on strategic planning and actively seek out funding opportunities to support their organization's programs. Additionally, they prioritize community engagement and developing strategic partnerships to support their mission.

  • The Women's Home - This Houston-based nonprofit provides housing, counseling, and job training services for women who are homeless, addicted, or otherwise in crisis. The board of directors includes business leaders, healthcare professionals, and advocates for women's issues. The leadership has been instrumental in expanding the organization's programs, including its WholeLife® model that integrates mental health, addiction recovery, and vocational training. The board prioritizes fundraising and regularly hosts events to engage donors and supporters. They have been successful in securing grants and partnerships with local businesses and healthcare providers to support their programs.

  • The Community Cycling Center - This Portland-based nonprofit promotes bicycling as a means of transportation, fitness, and fun. The board of directors includes community leaders, bicycle enthusiasts, and nonprofit experts. They have been instrumental in expanding the organization's programs, including its youth apprenticeship initiative that teaches bicycle maintenance and repair skills to underrepresented youth. In addition, they’ve implemented a successful fundraising strategy that includes regular donor communication and engagement.

  • Girls in the Game - This Chicago-based nonprofit provides sports and fitness programming for girls in underserved communities. The board of directors includes community leaders, business professionals, and experts in sports and education. They have been successful in expanding the organization's reach to new schools and community centers and developing innovative programming to address the unique needs of girls in their programs. They also prioritize diversity, equity, and inclusion in their hiring practices and board recruitment, ensuring that the organization reflects the communities they serve. The board actively fundraises and seeks out grants to support the organization's programs and has been successful in securing partnerships with local sports teams and businesses to provide additional resources for their participants.

Practical Tips for Improving Board Performance

  1. Implementing a board self-assessment process can help the board identify areas of strength and weakness and develop an action plan to address any issues and improve its effectiveness.

  2. Fostering diversity and inclusivity on the board is critical for effective governance. To accomplish this, the board can develop a diversity and inclusion policy that outlines its commitment to these values and sets measurable goals for achieving them. The critical step is actually seeking out individuals that have the skills and experiences the board needs in addition to representing a diversity of thought, experience, and background.

  3. Creating a board handbook can help board members understand their roles and responsibilities and improve their performance. The handbook should include the organization's fundraising goals, bylaws, policies, procedures, and protocols, as well as information on the board's purpose, mission, and vision. It should also include a code of conduct that outlines expected behavior, conflict of interest policies, and confidentiality agreements.

  4. Providing ongoing training and development opportunities for board members can help improve their performance and effectiveness. The board can offer training on topics such as nonprofit governance, financial management, legal compliance, and fundraising. The board can also provide opportunities for board members to attend conferences, seminars, and workshops related to their areas of interest or expertise.

  5. Using metrics to measure success can help the board evaluate its performance and make data-driven decisions. The board can develop key performance indicators (KPIs) that align with the organization's strategic goals and objectives. These KPIs can include metrics such as fundraising goals, volunteer recruitment, program outcomes, and community impact.

  6. Fostering effective communication and collaboration among board members is critical for effective governance. The board can use tools such as the BONFIRE Board Meeting Preparation Approach©, email, video conferencing, and collaborative software to facilitate communication and collaboration. The board can also establish clear communication protocols that outline expectations for communication, decision-making, and conflict resolution.

  7. Regularly Evaluating board composition can help ensure that the board remains diverse, inclusive, and effective. The board can review its composition annually or as needed to ensure that it reflects the organization's mission and values. The board can also identify any gaps in expertise or representation and develop a plan to address them.

Improving nonprofit board performance requires a commitment to best practices, a willingness to address potential pitfalls, and a focus on continuous improvement. 

By implementing practical tips such as board self-assessment, diversity and inclusivity, creating a clear board handbook, providing ongoing training and development, using metrics to measure success, fostering effective communication and collaboration, and evaluating board composition regularly, nonprofit boards can improve their effectiveness and achieve their mission.

That's all for today. I'll see you again next Saturday!


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