Effective Governance — How Important is It Really?
Kelly H. Buchheit
The value of an involved board of directors (governance) cannot be emphasized enough. Any well-run organization, whether for-profit or not-for-profit, has a layer of controls beyond management to ensure that there are appropriate checks and balances over management’s responsibilities. This also means that governance should be completely independent from management. In other words, governance should not be involved in the day-to-day operations of the organization and should not make management decisions.
An effective way to ensure independence is to utilize conflict of interest agreements. At a minimum, board members should sign conflict of interest agreements at the start of their board membership. However, as a best practice, we suggest obtaining signed agreements on an annual basis since situations and circumstances can change over time.
The board of directors should be meeting regularly to ensure it has the most up-to-date information about the organization for strategic planning and informed decision-making. As a best practice, governance should meet at least quarterly. However, it is up to your board to determine if more meetings would be useful to ensure the success of the organization. For example, perhaps monthly meetings make more sense for your organization due to turnover in key management positions. This allows for more timely monitoring of new management personnel. In addition, board leadership (board president, board treasurer) should have consistent communication with management throughout the year, not just at the board meetings. Management should feel comfortable approaching governance in case of a whistleblower scenario or situations where someone in management may need to report above a direct supervisor.
As a best practice, governance should consist of professionals in a variety of different industries and positions. This will result in a well-rounded mix of individuals with a multitude of skillsets and experiences to help best serve the mission of the organization. Classic examples are accountants, attorneys and financial advisors. But it should be noted that there is no prescribed formula for a board’s composition. It should be whatever best serves the organization.
For example, a small-business owner may be more valuable on the programming and planning side to the board of an organization that helps incubate small businesses as opposed to an attorney. However, the attorney may provide pro bono legal services which can serve the same organization in a completely different, yet equally important, way.
In addition to providing a professional skillset, the individual needs to be a good fit with the organization in order to have effective governance. Does the individual believe in the mission of the organization? Will the individual commit to investing the necessary time and resources into fulfilling the mission? Is the person passionate about the organization? Take the time to vet and interview potential new board members. Bringing in the right individual could open a number of doors from both a strategic perspective and also could result in an increase in donations from new connections.
A not-for-profit organization is only as strong as its weakest link. Don’t let your weakest link be your top level of strategy and decision-making. Encourage an involved, well-rounded board of directors who meet regularly and maintain open lines of communication with management, and you will have the administrative foundation for a successful not-for-profit organization.
For more information, contact Kelly Buchheit at email@example.com or 312.670.7444. Visit ORBA.com to learn more about our Not-For-Profit Group.