Checklist of best practices for effective boards

 

Published in the March 20, 2009 edition of Columbus Business First

 

In a recent column I recounted Peter Drucker’s observation that the best nonprofits have advantages over for-profit businesses through their focus on mission and their effective use of their boards of directors.  Several readers have asked for specific suggestions on what nonprofit boards should do to be effective. 

 

Effectiveness must be evaluated against purpose.  The purpose of the board should be to ensure the nonprofit can reliably serve a need in the community, even in difficult economic times such as we are facing now. 

 

Here is a checklist of what your board can do to be effective.  The recommendations fall into three categories:  defining the purpose of the board; focusing on the future, not on the past; and aligning fundraising with the priorities of your organization’s mission.

Define your job and stick to it

Any job worth doing has a description of key duties and expected outcomes.

  • Have written expectations for each board member for attendance at meetings and key events, personal giving, and advocacy and outreach on behalf of the organization.  Each board member should be evaluated annually against these duties and outcomes.
  • Each committee should have a charter that describes its role and key annual tasks and decisions, which should be coordinated with board decision-making.  Each committee should be evaluated annually on its performance.

 

Every meeting should have a purpose

Meetings are the most visible aspect of a board’s work.

  • Create a timetable of  topics for your board meetings over the next year that maintains a continual board focus on identification and advancement of long-term goals. 
  • Prepare your meeting agendas so that the purpose and intended outcomes of the meeting are clear and the focus is on discussion and decision-making.  Informational presentations should be minimized.
  • Board materials, including the agenda, should be distributed at least one week in advance and should be clearly focused on items for discussion and decision. 

 

Discussions look forward, not backward

A board sets strategic direction and oversees compliance with that strategy.  This requires that board time and effort be forward-looking and focused on adjustments needed to maintain mission priorities. 

  • Put in place a process to review at least every two years how the community’s needs have changed and how your service programs and mission should adapt in response to the changes.
  • Determine how sensitive your nonprofit is to the health of the economy and make sure that you have at least one goal or objective each year that enhances the future sustainability of your services.  Identify your need for working capital and your need for separate reserves for emergencies, new program development, and major replacement costs.  Have a plan to address those needs over the next five to 10 years and follow it.
  • Create a summary of what you are doing this year to move toward your long-term goals.  Regularly communicate this to board members, staff, donors, clients, and patrons.
  • Identify the three to five primary activities of your organization and estimate the principal revenues, contributions, and expenses for each activity.  Make sure the activities with lower mission priorities have either smaller financial losses or larger net revenues. 
  • Set up a process to verify throughout the year that spending remains consistent with the priorities the board has set for the year.  Ask as many questions about underspending as you ask about overspending.  Underspending can reflect under-performance, which is not an appropriate way to save money.  Make sure you don’t have cost savings that may be undermining the mission-effectiveness of your programs. 

 

Fundraising sustains mission

The board is responsible for assuring that adequate resources are available to sustain mission.  Fundraising should serve mission, and the board must be vigilant that the way money is raised does not limit flexibility in meeting mission priorities. 

  • Identify any restrictions on gifts and assets and compare them to your top mission priorities.  Take steps to prevent restrictions from diverting your nonprofit’s activities from its top mission priorities. 
  • Make sure that your fundraising focuses on sustainability by first building unrestricted cash and reserves to adequate levels before focusing on endowment. 
  • Always have a tickler schedule for when you expect to receive payments on major pledges and grants and have the board intercede whenever receipts are delayed. 
  • Know what are your unrestricted net assets and whether they are board designated, fixed, or readily spendable for any purpose.  Know how or whether each of the assets can be used to pay your bills that are due this year.
  • Require that any proposal to expand facilities or services specify how the expansion and its future operating costs will be supported from new or expanded revenue sources.

 

Taking each of these steps will improve the effectiveness of your board.  The reward will be engaged board members who have purposeful meetings that strengthen the sustainability and relevance of your mission. 

 

Allen J. Proctor was formerly chief financial officer of Harvard University and is the author of Linking Mission to Money® Finance for Nonprofit Board Members. Subscribe to his free newsletter at www.proctorconsulting.org.

Copyright 2009. Reprinted with permission, Business First of Columbus Inc.