Nonprofit Board Governance

For my last blog on nonprofit board governance for the time being, I want to close out by talking about board governance in general terms. I have talked about the formation of the organization and the creation of bylaws. I have also discussed the importance of diversity, proper team building and committee structures. These are the things that will help attribute to board success. However, it does not matter if your board is high functioning or under-performing, there are certain things that must continue to be reviewed. 

The first thing that must be reviewed  on a regular basis are the laws that pertain to board governance. The area of board governance is often changing, the requirements for compliance are becoming more and more like the reporting requirements of for-profit organizations. If you want to remain legitimate as a nonprofit organization, you must adhere to all required compliance. The most recent wave of nonprofits losing their tax-exempt status for not being in compliance with IRS reporting standards shows us this. It was the fault of each organizations board that they no longer have this status. Do not allow this to happen to your organization because of oversight. 

The second thing that nonprofit boards must do is provide board members with ongoing training. Assuming someone knows their role can lead to negative impacts on an organization. Board members often assume that their colleagues understand their role as a board member because they have had success in their career. Often times the board member will also think that they in fact, do know their role, yet this is not always the case. 

Training will allow individuals to discover where they lack the necessary skills for nonprofit board governance. The volunteers that serve on boards typically come from a field in the business sector, they often feel that they have more knowledge because of their success in their field of work. The chief executive should work with the board chair to ensure that proper training is delivered to ensure this type of thought process will not happen.

The third and final thing that I believe nonprofits should be aware of, especially  when they have been in existence for a long time, is the review of their mission and vision to determine if they are still relevant. With the passage of time, comes a change in the environment around you. The review of your mission and vision will allow you to determine if the mission needs to change, and if it is accomplishing what it says it will accomplish. Reviewing your mission will also allow you to review your program offerings to ensure that you have not allowed mission drift to occur. 

Nonprofit governance does not have some type of one-size fits all mode. The organizations themselves are so diverse, which leads to even more diversity in how boards are governed as well as the their makeup. It is up to the members of your current board to determine what type of governance model you will use or how diverse you want your board to be. However all nonprofit boards have essential roles, and the three things that I have discussed in this blog are items that need to be addressed by every board. 

Board Power

Every organization operates in a different manner, especially when it comes to the power distribution of their board. As discussed in an earlier blog, many things surrounding nonprofit board governance is based on contingency theory. Nonprofit boards however, typically distribute power in one of five ways, they are:

• CEO-Dominated Board 
• Chair-Dominated Board
• Fragmented Power Board
• Power-Sharing Board
• Powerless Board

The CEO-Dominated board is an example of a rubber stamp board. This occurs in an organization with chief executives that have a long tenure with the organization and is more knowledgeable about the organization. The chief executive typically has an executive team that assists him in the operation of the organization. The chief executive and his team performs tasks that are later reviewed by the board and signed off. When a serious issue arises in these types of organizations, the board quickly blames the director for the issues that come up.

The next type of power distribution comes from a Chair-Dominated board, this is evident in organizations that have founder's syndrome. A chair-dominated board is when the elected chair is the clear leader of the organization. In this type of setting the executive director simply carries out the strategic direction of the chair. The problem with these types of boards is that it leads to the poor development of teams. As discussed in a previous blog, in order to form a diverse board you must select individuals based on the needs of the board and the organization. In this setting the chair selects individuals based on who he knows, to ensure he is able to lead without question.

The next type of power distribution is Fragmented Power Board. A fragmented board is when there is a clear divide between the board on most issues surrounding the organization. Each side argues their point without truly hearing the other sides argument. This can occur when a board tries to create a more diverse group within the board. By bringing in new members with varying views, experienced members can get upset because they feel as if they are trying to change everything. These types of boards rarely accomplish forward movement for the organization because they are unable to achieve the desired tasks. These types of boards can be avoided if there is a strong chair person or chief executive that is able to moderate the discussions of the two sides.

The next type of power distribution is Power-Sharing Boards. Power sharing boards are focused on the mission and purpose of the organization. They do not allow for any one group to dominate the board discussion. This seems like it would be the ideal setting for a board, however it too is flawed. The power sharing board can address issues ad nauseum to allow everyone to express their points. Therefore this type of board can prevent organizational growth.

The final type of power distribution is a Powerless Board. An example of why a powerless board occurs is when there has been major turnover on a board and new members are recruited. When the new members are recruited they are not given an orientation into their role as a board member. This can also occur during the foundation stage of the organization. This type of organization would be the type of power distribution you want to avoid because a powerless board fails to act. They wait around waiting for someone else to do the work.

Again, there is not a specific way in which an organization must operate, there can be benefits to each type of power distribution. The only type of power distribution I would recommend that you always avoid is the powerless board. I do not see the benefit of a group of individuals failing to act on their responsibilities. If I had to choose a type of power distribution it would be power-sharing, I would ensure that the board chair is a leader or at least the executive director is strong leader. With a strong leader in place, they can push the board to act more quickly.

Crisis Mode

When on the board of a nonprofit, there is a constant ebb and flow in the stability of the organization. So for a nonprofit board to be in a crisis situation is somewhat normal. However this does not mean that there aren't different levels of crisis. Significant crisis (i.e. closure) can be adverted depending on how the board handles the situation. In a study by Jill Mordaunt and Chris Cornforth (2004) titled The Role of Boards in the Failure and Turnaround of Nonprofit Organizations, they look at the stages that 4 types of nonprofits went through during a time of crisis.

The stages that organizations go through in crisis are; Recognition-and-denial, Mobilization, Action, and Transition. The Recognition-and Denial stage is when the issue is brought to a boards attention for the first time. The issue is typically brought up by someone who has recently joined the organization, this could be a new board member or board chair or a new executive director. In most cases, during this stage the chief executive attempts to get the board to recognize the problems confronting the organization with limited success (Mordaunt & Cornforth, 2004). It is rare that there will be a consensus amongst all board members.

Once there is a majority understanding of the problems facing the organization the board will attempt to move into the mobilization stage of the process. During this stage the organization will begin to determine how they are bale to move past the problems that are facing the organization. This stage I believe can also be called the strategic planning stage. It is necessary for the organization to have a clear and concise plan in order to move forward. A quote that I heard at some point is quite accurate during this stage of the process, failure to plan, is planning to fail. If this stage is skipped and individuals move directly into the action stage, board members will become frustrated when their tactics do not work.

The next stage is action, there are many organizations that never make it to this stage because they were unable to agree on the problems or possibly the plans to fix the issues. When boards begin to act, the successful boards report back on their successes and hold additional meetings to review the plan. Organizations that failed in this stage often began to blame each other for their failure.

When an organization is successful in curbing the crisis they slowly transition back to their original organizational structure. In the beginning stage of the transition the board is involved more in the day-to-day operations of the organization. A gradual drift drift back to the chief executive dominance occurs, until the next crisis (Mordaunt & Cornforth, 2004).

The ability of a board to mobilize and act determines if an organization is going to succeed or fail in times of crisis. Too often boards are overwhelmed with the crisis information and will fail to mobilize, many board members will resign from boards in these situations. If you are an executive director of a nonprofit it is your job to assist board members through a crisis stage.

Board Structure

This summer throughout my board governance course at James Madison University we talked a lot about different things that nonprofit boards should do, how they should be set up, and what governance model they should implement. No matter how we thought about any of these practices, we eventually came around to determining that there are times when this does not apply. In the end, as a colleague of mine stated during the course, everything is contingent. I think contingency theory is the only thing that remained constant in this course. However, I am going to show how I believe a committee structure should look for every nonprofit board. 

The structure that I am going to present does not suggest that other committees cannot be added, however I do not believe you can take away any of the committees. The first committee that I believe to be a standing committee is the Executive Committee. The executive committee is comprised of the officers of the board and is responsible for determining what matters are brought to the board. 

The second committee that I believe should be a regularly standing committee is the Finance Committee. The finance committee is responsible for ensuring that the organizations financial books are balanced and accurate. They are also responsible for the development of the organizations budget. At the end of each fiscal year, the chair of the committee, who is typically the treasurer is responsible for developing an ad hoc audit committee. The ad hoc committee is not a standing committee because after the audit is complete, there is not a reason for this committee to meet again until the next audit. A key note on audit committees is that they do not have to consist of members of the larger committee or even board members for that matter.

The third standing committee compliments the finance committee and that is the fundraising committee.This committee is responsible for raising the amount of funding that was set by the finance committee for the organization. They will develop several ad hoc committees if they hold special events (one committee for each event and then they disband at the end). In order for this group to truly be successful it must rely heavily on outside members to serve on the ad hoc committees. It is rare that an organization has enough board members to plan and prepare all of the events for an organization. When a nonprofit boards tries to do this without outside help they typically will have hig turnover rates of board members because of burn-out. 

The fourth committee that should be a standing committee is the operations committee. The operations committee covers all aspects of the organization in terms of the delivery of programs and building related issues. The ad hoc human resource committee is also in this category, they are responsible for forming the policies and procedures for employees. This committee will also ensure that the organization has all of the necessary insurance for the organizations operations. 

The final committee is the board governance committee. The board governance committee is responsible for the orientation and training of all board members. They are also responsible for recruiting new board members. This committee will form the policies and procedure that the board will adhere to, they also are responsible for the insurance that is required for directors of an organization. 

The committee structure above will allow the organization to run efficiently. Without many of these committees the responsibility will flow to the staff of the organization without any oversight into the matter. If the board does not oversee every aspect of the nonprofit, it will leave you questioning who is actually in charge?

Reviewing the Executive Director

A nonprofit board is essentially responsible for every aspect of the organization that it monitors. However there are several roles that are more important than others when determining priority. I believe it is evident that the nonprofit board is responsible for the financial well-being of an organization. This means that they are responsible for the fundraising as well as the monitoring of expenditures. There are several instances where nonprofit boards take a back seat on fundraising, this does not mean they are not involved, they simply are not the primary fundraiser. An example would be when there is a large development staff for a national or international nonprofit. In these instances board members still are fundraising in their local community and at a bare minimum they are giving a personal donation. 

One aspect of a boards role that should not be tasked out to anyone other than the board is the hiring and review of the Executive Director of the organization. The hiring phase of the executive director should always be done by the board because this person will act as the agent of the board and they are ultimately responsible for the organization. When hiring an executive director it is important to have a clear job description outlining the roles and responsibilities of the executive. If the job description is too vague or too specific it will make it very difficult to review the director. 

Reviews are based upon the required duties of the the individual being reviewed. It would be very difficult to rate an individuals performance on something they were never required to do. The key is to stay away from assumptions. During a review you will also be able to determine specific outcomes that you would like to see done by the director before the next review.

Many boards will give performance reviews once per year, I believe that this is a negative way to review an individual. Having a review once per year can sway a review one way or another. I am guessing that everyone has heard of the "halo effect". If you haven't, the halo effect occurs when an individual is able to do something very positive in a segment of their tenure and this is what they are remembered for. An example would be if an executive director is able to receive a large grant in the beginning of his tenure that enables the organization to become more financially stable. The fact that he was able to do something that dramatically shifted the organizations financial stability, is seen as a very positive. When it is time for his review, board members will remember this and overlook many of the areas where improvement is needed, because he excels in one area. 

The opposite of the halo effect is the "horn effect". If early on in an executive director's tenure he has difficulty adjusting or loses a funding source (even if it is not his fault), he will be remembered for this regardless of the things he has achieved since then. This is why I believe reviews should be done every 6 months. The annual review should still exist, since this is typically what raises are tied to. Each 6 month review does not have to be a fully extensive review, but it should discuss the executive director's progress towards stated performance measures. 

It has often been said that when reviewing the performance of an individual you should use the "sandwich method". The sandwich method is a critiquing method that sandwiches a single negative critique with two positive critiques. I am against this for several reasons, however, the main reason is because when an individual hears a negative comment they tend to block out the positive comments and vice versa.

I believe that when a review is done it should highlight the areas that the individual was successful in performing. The areas that need improvement should be placed in the next 6 month review in order for the individual to correct these performance flaws. The reason I believe reviews should be done in this manner is because, when the negative performance is put on the current review it is filed away and never reviewed again. By only putting the areas where an individual performed up to standard on the current review you do not have to worry about it not being reviewed again. In order for an individual to improve on their performance, the performance must be tracked. 

It is imperative that the board review the executive director, this is how you are able to keep checks in balances on the individual representing the organization in your name. Not only should the board require a performance review but it should be done on a 6 month basis. I believe that this will prevent the board from assessing an individual on a small segment of their tenure. If you are an executive director you must insist that a review is done, it not only protects the organization, it protects you.

Hidden Cost of Government and Grant Funding

When looking at the financial records of a nonprofit organization it is rare to discover that the organization does not have any grant funding. Even the larger nonprofit organization will apply for grant funding to deliver their mission. Grant funding can come in very large amounts and is very tempting for many nonprofits. However, the question that remains is, are large sums of money worth the reporting required?

Government funding is the most tempting form of grant funding for nonprofit organizations for several reasons. The first reason is because of the amount of funding that a government agency will award. Government agencies typically put out RFPs (Request for Proposal) for services that are an expressed need of the people they serve, as well as the difficulty for a government agency to provide this service. 

The second reason government funding is so appealing to a nonprofit is that it is typically multi-year funding source. The reason this funding is multi-year typically is because the administrative aspect of creating the RFP and reviewing all of the applications negatively impacts the resources of the agency because of the time involved. 

After reviewing an RFP, a nonprofit see that the government contract will ensure half of their budget for three years. They decide to apply for the funding and they receive it. The organization believes that now they are able to provide the necessary resources for their programs. However as the director reads the award letter he notices that there are several pages attached. The pages attached outline the reporting requirement for the grant. The RFP did not clearly state the reporting requirements of the grant. Requirements of government grants can require anything from being responsible for attending a week long conference to being required to hire an additional person to administer the grant. 

A lot of times is the stress that the grant reporting forces on the administration of the organization. The reports will often require quarterly or monthly progress reports. At the end of year the organization typically must file a detailed year end report. The requirements can often impact program delivery of an organization. Some grants require specific programs to be delivered with the funding. This type of requirement can cause an organization to drift from their mission. 

Financial implications are not the only negative impact of a government grant. What often occurs with nonprofits that receive a substantial portion of their budget in grant funding is that the organization becomes content. The financial burden has been lifted and the board and professional staff can have the tendency to become lazy. This is problematic because government funding or any grant funding is not always stable, especially if the funding is not granted up front.

In the recent economic downturn the funding instability of government agencies has impacted several nonprofit and for profit organizations negatively. With cuts in federal spending many government agencies have been force to pull back their grant awards. If you are part of a nonprofit organization that relied on a large portion of your organizations fund to come from the government grant it could mean that your organization will have to close.

The negative impacts of grants can be avoided to a certain extent. Major requirements of a government contact are typically laid out in the RFP. However there are times that reporting requirements can be vague, leaving organizations with a false sense of security. If you do receive funding, you should never change the way your organization raises funds. Even if a grant is slated to fund you for five years, the grant will still run out in five years. There are not any guarantees that your organization will be able to receive this continued funding. More importantly is the fact that grant awards that are reimbursed or dispensed on a yearly basis can stop at anytime.

Choose wisely the funding streams that you accept at your organization. There isn't a such thing as free money in terms of grants, there are always hidden costs that go along with it. Also to ensure that you do not fall into the trap of government funding being a major source of funding, set fundraising goals. By this I mean understand the percentage of funding you want your organization to have from grant funding. This does not mean that you should not accept grant funding. This means that when you receive a large grant you must work to raise the other revenue streams as well. Doing this will allow your organization to be prepared for the loss of grant funding.

Building a Team

Nonprofits are required to have a Board of Directors if they want to have tax exempt status. What that Board should look like varies from board to board and from state to state (the law can dictate what a board looks like in some states, it can also dictate the makeup of certain types of nonprofits). For the most part however it is the role of the founding members to decide what the board will look like.

Developing a board is very similar to developing an athletic team, you must have the right players in the right position to accomplish your goal (mission). In order to select this team you must truly know what your mission is. So many boards get caught up in filing for their tax exempt status that they often times determine what the makeup of their board will look like before they have a good understanding of what they are going to do. The first step that is taken by nonprofits is usually to get right to finishing up all of the items that are required by law so they are able to begin operating. One of those first items is creating the organization's Constitution (Articles of Incorporation) and their by-laws. The by-laws of an organization explain to the state and the community how they will operate as an organization. This means determining the size of the board, committee structure, how often the board meets, board limits, etc.

Once each of these things, and only when these things have been determined is when you should  begin to form your board team. When forming this team you must think of what the final board makeup needs to look like. For example if you are a nonprofit offering youth development services your board makeup should be built to support this cause. You should look for individuals with skill set in youth development/education, a board members should probably come from the health field. Most nonprofits try to find a board member that comes from the legal field, financial field (CPA, Banker), business community, as well as other key elements of the organizational setup. This is extremely critical for smaller nonprofits. Typically nonprofits do not have the necessary financial resources to hire professionals for every role an organization requires. It is quite common for board members to act in these positions through their role as a board member.

The reason for this type of diversity on a team allows you to become a multidisciplinary team, with each board member complimenting the other members. If you think about it in terms of sports you have never seen a football team win a Super Bowl with the three best players in a single position. The goal is to distribute the workload across the entire team.

Nonprofits boards understand that diversity is important to the success of the board, but trying to get to this point is always a challenge. The problem usually exists in how the recruiting of new members is being done. Typically nonprofit board do not have a formal recruiting process for new board members. What normally happens is that individual board members will invite the people they know personally, either in business or in their personal life. This is done because the individuals know these members and they trust them. This creates a board of like-minded individuals, narrowing the perspective of the group.

A formal process for board recruitment is necessary for a strong, diverse board. During the process you will identify how many board members are needed and what type of skill sets you are looking for. This will not only help you to avoid bringing in only the people you know, but it will also prevent you from bringing in individuals for one need of the organization. This occurs a lot in nonprofits that are having difficulty raising funds, they will feel that they need people who can simply fund raise. This will lead to a neglect in many areas of the organization. The most dramatic impact will be on the programs of the organization, when the financials are the only concern it becomes the only topic of discussion at board meetings.

The key to building an effective team is to 1) know what the purpose of the organization is before forming. 2) Know how many board members you actually want, and 3) identify the needs of the organization and recruit based upon these needs. If a team is built with individuals with identical skill sets it really isn't a team. The goal is to build with members that compliment the other members, allowing for each one to positively challenge one another.

What is holding your organization back?

The idea to start a nonprofit typically comes from an individual that has a strong passion for that specific cause. They work tirelessly to ensure the organization is able to open its doors and hopefully become sustainable. The organization is built around their ideas, in the beginning as individuals become involved in the organization they go along with the ideas presented by the founder. As the organization matures, the influence of the founder remains, yet it begins to show signs of what is often referred to as 'Founders Syndrome'.

Signs of Founders Syndrome
Not all things that occur when an organization is suffering from Founders Syndrome is inherently bad. One thing that often occurs is that attendance rates at board meeting tend to be higher on boards that have a founder either as the chairperson or executive director. This is in large part due to the fact that the founder is the primary party responsible for the recruitment of these members. Board members will attend board meetings because of how they believe they will be viewed by the founder for not attending. Whatever the case is for attendance being higher does not matter, attendance is an issue that many nonprofits struggle with, so a founders impact is something that should be seen as positive in this regard.

Another positive that is seen in founder organizations is that meeting agendas are sent out well in advance to the full board. This allows board members to read through materials and come to board meetings prepared to discuss organizational issues. This can also be viewed as negative by some because it can be viewed as a way for the founder to dictate what is accomplished at the meeting.  However, if they are the chair of the board it is their responsibility to dictate what is discussed during board meetings. As a board member it is also your responsibility that any item that needs to be added to the agenda is brought up either before or during the meeting.

Those are positive signs of Founders Syndrome, remember this is not a comprehensive list, rather a few examples that allow you to understand the impact of a founder. The negative signs are typically the signs that individuals involved with a nonprofit organization need to be aware of. One sign that supports Founders Syndrome can be seen in the bylaws of the organization. Typically when the bylaws are created by a founder you will find that board limits are vague or non-existent. This is not always an intentional omission by founders, however it can be problematic for a board. The reason this occurs could be due to the fact that a founder can not see a day when they would not be involved. What founders need to understand is that being involved in something, does not mean having complete control. Term limits should be set up, not only for regular board terms, but there should be term limits for officers of the organization as well.

The final issue that is considered a negative affect of founders syndrome is the impact it can have on an organizations growth. Studies have shown that the size of a nonprofit will often determine if a nonprofit has founders syndrome. When discussing size you typically look at the size of the budget and the number of employees the organization has. The smaller these numbers are the higher the chance of founders syndrome. Obviously the potential for growth will have some bearing on this phenomenon as well. If an organization does not have the opportunity for growth than it would be difficult to focus on the founder as the only issue. However, it is rare that a nonprofit stays the same size throughout its existence. Typically a founder's vision is limited to their original vision, unable to accept the changing environment them.

If you have recently joined a board that has involvement of the founder be certain to check for signs of founders syndrome. Not all signs are inherently bad however, even the things that may seem positive have hidden implications. Board member attendance seems like it would be a positive thing, yet boards are not formed to be the rubber stampers of a founders "early" agenda. Boards are supposed to be the checks and balances system for a nonprofit agency. Without this system the organization becomes a tool for one individual t push forth their agenda. Nonprofits are meant to serve the community's need, not an individuals interest.

Nonprofit Fundraising

Wouldn't it be nice if as a nonprofit, we didn't have to worry as much about fundraising? If everyone believed in your mission and donated regularly, so you wouldn't have to put on so many fundraisers that require so much work. That would be nice, but the reality is that as a nonprofit you can never go away from fundraising, no matter what your income streams are. Since this is the reality for nonprofits, we should at least have policies set around the acceptance of these gifts, as well as determining who is responsible for raising the funds for an organization.

Responsibility
There are varying views of who is responsible for the fundraising for a nonprofit organization, many will argue that it is the Executive Director's responsibility, arguing that this is why a board hires a director. Others believe it is the boards responsibility to raise funds. The board does have a fiduciary responsibility to the organization that it serves. Therefore there is some liability for individuals who join a board. The problem with choosing between these two options is that it diminishes the partnership that is required between a board of directors and its executive. If one party has  more responsibility, the more likely their will be a power shift to this individual party. I suggest that the easy way to divide fundraising responsibilities for an organization and continue to work together, is to have the board develop the fundraising strategies and the director alongside the board chair carry out these efforts.

Donation Policy
One thing that is often forgotten about in nonprofit fundraising is the understanding of what to do when a donation is received. The struggle to determine who is responsible for the fundraising efforts typically overshadows the most important aspect of fundraising. This is, what do you do when you receive a gift. Before you decide who is responsible for fundraising, you should have created a donation acceptance policy. A donation acceptance policy allows anyone who is soliciting donations understand what is an allowable contribution by the organization. I am sure this may confuse a lot of people, however in the nonprofit world donations do not always come in the form of money. Sometimes land and vehicles will be donated as well as other non-monetary items, these items are considered in-kind donations (non-monetary donations, i.e equipment, services, land, etc.).

One reason it is necessary to have a donation acceptance policy is that all donations are not created equal. Every donation is a great jester, this does not mean every donation can be accepted. The most tempting of donations that would seem like an easy yes, but must be analyzed extensively, is land or building donations. It is extremely tempting for a nonprofit that is just starting to accept a building or land without inspecting the property before accepting it. This is not to say that you should not accept the property, just that it is wise to due a thorough investigation of the property. Many times land and buildings are donated to a nonprofit because they are not able to be used or sold without extensive work. The most common problem with land is that there are code issues or utilities are not present, other times it might be in a flood zone. Again, not every donation has an asterisk but it is your responsibility to remove any doubt.

Another item that should go into the donation acceptance policy is how monies should be used. There are individual donors that prefer that their donation go to a specific program or area of the organization. Your acceptance policy probably will not say anything specifically to this situation, however it should state how donations should be processed and documented. Processing and documenting the donation will allow your organization to track the dollars and ensure they are used properly. It might also be wise to treat earmarked donations as a grant, tracking expenditures of the donation as well as outcomes.

Another item that should be included in a donation acceptance policy is, what you should do after you have received a donation. The answer to this question is to acknowledge that donor. This process can be slightly in-depth with several stages of acknowledgement or you can simply send a thank you letter. It is essential that you send a thank you within the first 48 hours of receiving a donation (for a smaller organization, maximum one week). This stage will often times determine if you will have each donor in the future. No matter who an organization deems responsible for the fundraising efforts of an organization. It is both the executive director and the boards responsibility to ensure that their is a donation acceptance policy.

Knowing what to do with a donation is only part of fundraising, you also need a plan to determine how you will collect the fundraising goal. Nonprofits often times get into situations where they are fundraising simply to pay the bills. When fundraising is done in this manner board members can become exhausted. This type of fundraising also tends to stray away from the mission and focus only on financials. A strong fundraising plan can prevent this from occurring.

Fundraising is necessary for nonprofits to survive, a focused fundraising effort will provide board members with an understanding of what needs to be raised and how it should be done. However, it is also very important to understand what needs to be done with donations as they are received. A donation acceptance policy should be created before any fundraising takes place, this will help protect not only the organization but the donor as well.

The Need to Understand Your Role

Have you ever been at the gym or grocery store, simply going about your day as usual, all of a sudden you are approached by someone who begins discussing a local nonprofit? As the conversation comes to an end, you are now a member of the Board of Directors of that same nonprofit as your friend who approached you just minutes earlier. If this has ever happened to you, it was not the way this type of situation should occur. If this has not happened to you, remember this blog entry and start running as fast as you can, or at least refrain from saying sure.

This is a common occurrence among nonprofit organizations, especially with the nonprofits that are smaller or in smaller communities. The reason this should raise red flags is because it sends a clear signal that this organization does not have any formal policies and procedures that they they follow. Board recruitment has several stages and they typically follow a pattern such as this: Identify, Cultivate, Recruit, Orient, Involve, Educate, Evaluate, Rotate. This pattern is typically cyclical because it is a continuous cycle.

Although the Board building pattern is typically the same across the nonprofit sector many of the stages are skipped, the typical cycle looks like this: Recruit, Involve, and Rotate (sometimes). Typically Board's recruit individuals to get involved instantly, usually learning what they can about the organization and their role from Board meetings along the way. When it is done in this manner, the most important steps in this process are skipped, and that is Orient and Educate.

An orientation serves as the time where clear roles and expectations are laid out for new board members. During this time they will get an overview of the organization (i.e. mission, programs, etc., what committee they will serve on and a position description for the role on the committee and the Board.

Most individuals understand that as a board member there are certain responsibilities that come along with the position, i.e. executive oversight, financial oversight and resource development. Some would say that making sure that the Board is focused on the mission is an understood role, however many new board members are not informed of the mission due to the manner in which they were brought on to the Board. When asked to join a Board, if an individual says yes, Board leadership often assumes they know the mission and purpose of the organization.

This is why Education and orientation are important. In order to get the most out of volunteers it is important to educate them to the specific duties of their role on the Board. The information that is provided to them must be adequate, basic information or handing out of documents for training will not ensure that every board member has an understanding of their role. Boards must recognize that inadequate information can leave individuals confident that they understand their roles even when they do not (Wright & Millesen, 2007).

Role ambiguity will lead to a high turnover in Boards because not knowing exactly what it is that you are there for, will make you less committed. If changes are not made to the training of board members a new cycle will exist within the organization. This cycle will continue until it is broken or the organization fails. Therefore, I suggest if you are on a Board that has unwillingly instituted this vicious Board Development Cycle, it is time to implement a new cycle, one that includes orientation and education of new members.

Are the right people on the bus?

Nonprofit organizations typically represent a diverse population, unless an organization has a mission aimed towards serving a specific group, this remains constant. It is widely discussed that Boards of these organizations should be diverse and representative of the individuals it serves. However, Boards in the nonprofit sector rarely show significant signs of diversity, yet so many deem it necessary. If nonprofits are attempting diversity, why is it that they fall short on reaching their goals?

One answer to the question of falling short of diversity is the simple fact that too many Boards have a limited understanding of what diversity truly is. Many nonprofit organizations have the belief that diversity is as simple as age, race, and gender. However human diversity is defined along various different dimensions including gender, age, ability levels, sexual orientation, socioeconomic class, ethnicity, culture, ideology, location of residence, status as agency client, potential client, or person to be affected by policy decisions, expertise, special talents, length of time a person has lived in a community or served on a board, and so on (Houle, 1989; Rutledge, 1994; Daley, 2002).

Another reason that they fall short is that they have not created a specific plan outlining what they are looking for in terms of diversity. The first reason highlights the fact that Board's do not realize what they are looking for when it comes to diversity. Once the board truly understands what diversity entails, they will be able to see where they fall short and select new members accordingly. The plan will then be able to detail where they lack specific areas of needs and focus on these areas in developing their board.  

Is diversity as necessary as much as it is discussed? This question really does not have an answer that will sway you one way or another. However, it is important to understand the impact of diversity on a board. When looking at all aspects of diversity, there are some clear advantages to creating a diverse board. The first advantage is that it can bring individuals with a certain skill set onto a board that may be lacking in certain areas. A good example of this would be a small organization with only a full-time director and no other full-time positions. This organization may need to seek out Board members with expertise in fields that the director is lacking (i.e. marketing, development, etc.).

Another reason that diversity is seen as positive is for the differencing of viewpoints that it brings to any setting. Often  times when Boards are formed it is done through a process that focuses on the social groups of the individuals that have formed the organization. When this is the case the Board will typically have the same viewpoint on matters concerning the organization. Diversity allows for these viewpoints to be scrutinized and questioned, decreasing the amount of agendas that are set forth in the average boardroom (this is not to say that agendas still will not exist, however they may come to light more often).

As I stated earlier in this post, the view on Board diversity can go one way or another. Each of the reasons that I gave for why Board diversity is positive have been given to express why they are negative. The first example of individuals that have a specific skill set (i.e. marketing or development experience) can impact an organization negatively because they do not truly understand the mission. When these individuals come on to boards they often do things the way they have been trained and are unable to adapt to the nonprofit environment. The second reason I mentioned focused on how a diverse board can bring varying viewpoints to the board discussion and decision making process. The reason diverse opinions are viewed as negative is because it slows down the decision making process. If there are multiple viewpoints on an item that is going to come to a vote, it could take a very long time for the item to be approved.

It does not matter how a  Board's composition is determined, diversity should be used in building this board. It seems that anything can be seen as both a positive and negative, many times for the same reasons. However, the negative thoughts on diversity can be overcome by creating a board diversity plan. A diversity plan will help map out the reasons why you are looking for diversity, as well as the specific areas of diversity your board wants to bring on the bus. As it is with so many things in the nonprofit sector, there are not any "best practices", or one size fits all formulas for determining what should be done. In my personal opinion I would choose diversity.

To Be or Not To Be? For Nonprofits, that should always be the question!

Have you ever thought that you can feed the hungry, or teach low-income children how to read? Maybe your next thought was, "I should start a nonprofit". The question you should ask yourself, what does it take to start a nonprofit? According to the Internal Revenue Service to be tax-exempt under section 501(c)(3) of the internal revenue code an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. This definition explains the legal aspect to which a nonprofit can form, but there are several other factors that need to be considered before starting a 501(c)(3).

If you are still interested in starting that nonprofit, I believe you should follow what I like to consider the 3 P's to ensure a successful nonprofit. They are: People, Planning, and Patience.

People are the most important entity of any organization, they are even more important for a nonprofit organization. Not every state requires multiple individuals to start a nonprofit, Virginia included, although in the state of Texas it is the law to have at least three directors, a president and a secretary. As we go along you will see the need for people. And for the purposes of this blog we will be focusing on the State of Virginia. For other states please review your states guidelines for becoming a nonprofit.

The main reason people are in important in a nonprofit start-up is because they will be the sole resource in the beginning, unless you are independently wealthy, they will also be the machine behind the development of other resources (i.e. funding, building allocation, ideas, etc.).

Where people play the most important role starts with the second P, Planning. The first step in planning is deciding if there truly is a need for your specific nonprofit organization in your community. A needs assessment of the community should be done, this does not have to be an extensive assessment, although the more information the better to ensure a successful program. A needs assessment should include some of the following elements:

Programs Provided Locally 
- When deciding to start an organization of any kind, nonprofit, for-profit, or even governmental services you must assess the competition that is in the area. First thing, are other organizations currently providing services that you hope to provide? The answer to this question is not always the determinate factor of if you should start the organization or not, which leads us to the second assessment element,

Under-served Populations
- An example of this would be a community with several organizations offering after-school programming to youth. Typically when deciding to start a nonprofit you think there is a need for the service in the community because there are individuals who are not receiving needed services. During the assessment you need to determine why these specific segments of the population are into being served. Possible reasons could be location or access to transportation, cost of the program, the inability of that organization to take more individuals, and possibly cultural differences.

Resources
A community is limited in the amount of resources it has available for multiple nonprofit organizations. This includes financial resources as well as human resources. When an assessment of the community is done it should always include assessments around how an organization will be supported. There may be a strong interest for a particular program in a community but this does not mean that the community will be able to support its activities.

Before opening the doors of a nonprofit the above mentioned focus points are some of the things that need to be considered. Competition is not always a bad thing, in fact it can make programs increase the quality of their existing programs, as well as ensure a higher level of accountability from all organizations that offer these programs. However, competition can also inundate a community and cause undue stress.

After you have done an assessment of your community and determined that there is a need for your services it is time to starting thinking about a name for your organization. This seems like a simple task, however section 13.1-829 - Corporate Name of the Virginia Code for Corporations there are many regulations that are required for adherence. One of the common mistakes made by individuals forming a nonprofit is when they decide to become a corporation. Often individuals feel that they need to add an Inc., Corporation or Co. to the end of their name, to be a nonprofit you must avoid this mistake.

After determining your name, you must decide your purpose. What is the reason you want to form a nonprofit, in other words your reason for existence and what is your aim? It is very easy to get carried away when writing your mission statement, the key is to be as succinct, yet detailed as possible. The ideal length of a mission statement is a ten word maximum limit. Remember, your mission statement is something you want to have the ability to say on the spot.

After you have decided on a Name and Mission, you will need to create the by-laws of your nonprofit. Your by-laws are very important to your organizations success and operations, they serve as your organizations operation manual. It spells out how many directors will be a part of the organization, what type of activities your organization will be involved in, and the structure of your organization, etc. When writing your by-laws you should try to be as thorough as possible when detailing how things will operate. Although by-laws can be amended, it is wise to be thorough to protect directors and the organization.

The final of the three P's to consider is Patience. Creating a nonprofit can have it's ups and downs, with many challenging steps along the way. They key is to be patience, skipping steps will not get you to the finish line quicker, in fact, skipping steps can prove to be detrimental to the development and creation of your nonprofit. When a nonprofit is well planned and your dream has been realized, the rewards are limitless.

Conclusion
There are a lot of important things to consider when creating a nonprofit organization. The worst thing a nonprofit or any organization can do is to open their doors to provide a much needed service to an under-served population, and not be able to sustain the services. Once an organization begins offering services, there are many that rely on these services and as a nonprofit professional we must make certain that we are able to achieve sustainability to fulfill our mission.