Dear Clients and Friends,
Happy 2022! Hope all of you are doing well!
As we look back on the first two months of the year (yes, February is almost over!), it has already been very busy but good. The start of a new year brings opportunities of reflection, renewal, and recommitment to our responsibilities and goals, which result in opportunities for change and growth.
Our winter newsletter addresses one of those key topics where reflection and recommitment definitely drive change and positive results: board governance. Covering the key requirements for building an effective Board of Directors, we provide a simple list for developing and maximizing the impact of your organization’s Board of Directors.
At Kreischer Miller, we are committed to educating our clients on timely topics and changes that may impact your business, and to empowering management to make more informed decisions. If you have any questions regarding board governance, or if you have a topic that you’d like us to explore in a future newsletter, please reach out to me or to any member of Kreischer Miller’s Not-for-Profit industry team.
Stay safe and well!
Elizabeth Pilacik, Director, Audit & Accounting and Not-for-Profit Industry Leader
Building an Effective Board of Directors for Your Not-for-Profit Organization
Not-for-profit organizations with an effective board of directors have a greater impact, accomplish more, and bring a higher level of satisfaction to their stakeholders.
Here’s how your organization can build an effective board that not only carries out its legal obligations but also plays an important role in governance:
- Identify the composition needed for the board of directors. It is important that board members are passionate about the mission of the organization. One of the legal duties, the duty of loyalty, requires board members to ensure that the organization’s activities and transactions are advancing its mission and making decisions that are in the best interest of the organization. If a board member is passionate about the mission, this is a much easier duty to fulfill.In addition to being passionate, it is critical to have board members with varying skills, especially those with specific expertise such as fundraising, legal, or accounting. Throughout their term, board members should also be held responsible for setting and achieving goals that align with their strengths and skill sets. Finally, along with varying skills, diversity among the board is necessary so that different perspectives and ideas are provided.
- Make sure board members understand their roles and responsibilities. Roles and responsibilities for board members may vary but there should be minimum requirements for each, including attending and meaningfully contributing to a specified number of meetings throughout the year. Board members should also be knowledgeable about the organization’s bylaws and current operations.In addition, each board member should be able to recognize any conflicts of interest and recuse themselves from the discussion around the related topic. By requiring board members to review and sign a contract that states their roles and responsibilities, the organization can avoid confusion. There should also be formal and informal check-ins with each board member throughout their term to ensure everyone understands their responsibilities.
- Develop a strong program for training and orientation. A training and orientation program allows directors to obtain the information needed to build confidence and bring them closer to the organization’s mission. The program should include information regarding the mission and vision of the organization, the role of the board, and the responsibilities required from each member. Orientation should also include details about the board including any subcommittees, frequency of meetings, and how decisions are made. Finally, training should include current budgets, information on funding sources, and strategic plans. Educating the board members should be ongoing, not just at the initial onboarding, to continue to build engagement.
- Host efficient and effective board meetings. To allow board members to fulfill their duty of meaningfully contributing to the meetings, it is important that the meetings be concise, relevant, and useful. By sending out the agenda and related reports ahead of the meeting, the board can avoid any down time in the meeting as directors review the reports. This will also allow board members to be more knowledgeable prior to the meeting. Meetings should be scheduled for the proper amount of time with important items early on the agenda to allow for the highest amount of concentration. Finally, the agenda and follow-up materials after the meeting should specify who is responsible for certain tasks.
- Evaluate the board of directors. Similar to how an organization evaluates its employees, the evaluation of the board of directors is important for determining the effectiveness of the board and its individual members. This evaluation may take place by the individual, peer-to-peer, by the organization’s board of directors, or a third party. Assessments should include analysis of leadership, procedures, dynamics, and relationships.
Developing a diverse board of directors that understands its roles and responsibilities, is properly trained, conducts effective meetings, and is appropriately evaluated is a difficult task but one that will be worthwhile. An effective board can significantly improve the impact a not-for-profit organization has on its stakeholders.
Contact us with questions or for more information about this topic.
Information contained in this alert should not be construed as the rendering of specific accounting, tax, or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will the publisher be liable for any damages, direct, indirect, or consequential, claimed to result from use of the material contained in this alert. Readers are encouraged to consult with their advisors before making any decisions.