How Does Nonprofit Board Governance Impact Success?
Poor board governance results in poor performance for your nonprofit across all areas. Does your board of directors know why your nonprofit organization exists? When the why, or nonprofit’s mission, isn’t clear to board members, it shows up as dysfunction to donors and supporters instead of your nonprofit engaging in the cause.
In the nonprofit sector, this can hurt your organization in more ways than one. It’ll affect your nonprofit’s ability to attract new board members in the future because people with real capacity join well-run organizations and avoid others. Poor nonprofit governance also leads to strategy being ignored and innovation being suppressed because there’s dysfunction between board members and staff (Proverbs 29.18).
The truth is, good governance by the board of directors is supposed to be a “given,” a minimal expectation that donors and supporters have of nonprofits.
What do you discuss at your board meetings?
The vast majority of the Christian school and ministry board meetings focus on tactical topics such as which fundraiser we should conduct next, how we will make payroll this month, or what contractor we use to repave the parking lot.
The board’s role is to set strategic direction to achieve your purpose and discuss topics such as how to create an environment where students reach their academic potential and develop a close personal relationship with Jesus. Is your board tactical or strategic?
What Are the Three Nonprofit Board Governance Models?
OPERATIONAL BOARD GOVERNANCE
Policy BOARD GOVERNANCE
STRATEGIC bOARD GOVERNANCE
These three board governance models have varying levels of efficacy and follow different board governance best practices. Let's go through and define each of them along with their strengths and weaknesses.
Operational Board Governance
We don’t recommend any nonprofit organizations adopt this model as it is the least effective and has the most disadvantages.
When a nonprofit board of directors operates from an operational governance model, it is because it doesn’t have a strategic plan. This board is created in a response to a crisis situation and it is, therefore, always in survival mode. It is crisis management without a plan—simply trying to keep operations up and running.
An operational board is involved in the day-to-day operations of the nonprofit instead of focusing on the big picture. Its board members are involved in management-level decisions such as making purchases and hiring/firing employees.
- It is dysfunctional by design.
- It creates frustration by hogging control and power—not allowing other leaders and management to do their job.
- It is inefficient because of the breakdown in hierarchy and chain of command, which can also create a shift in the organization’s culture. Employees don’t know who is in charge and who they should go to with important information.
- It leaves room for a hero/victim mentality where blame and excuses are acceptable (with board members and staff).
Policy Board Governance
The policy board governance model is a step ahead of the operational model. Nonprofit board members come together to create policies, procedures, and rules for the organization to follow. As long as none of the rules and policies in place are broken, board members are happy.
- Not strategic: There’s no “How to” or plans to achieve anything more than exist. There’s no connection to the nonprofit’s mission statement.
- Distant: Creates what we call “Ivory Tower Syndrome.” Board meetings become a time where instead of creating plans to build a sustainable future, board members prioritize policy over people and put an instruction manual over the organization’s mission.
- Rigid: Places rules over relationships—everyone becomes subject to the tyranny of the manual instead of giving people grace.
- Leaves room for blind spots: board members don’t recognize what their fiduciary duties and legal duties are to the organization, other members, and staff. Instead of stepping up to lead, directors lag behind and are reactionary
- Negative: The only measurement for success for this board governance model is whether or not any rules were broken, and that’s just not how the nonprofit world should work.
Strategic Nonprofit Board Governance
The strategic model is a collaborative effort of the entire board and leaders of the organization. Nonprofit boards are meant to help create and manifest the vision, mission, and strategic direction—the Why—of the organization. The strategic model helps do that.
A strategic board of directors does not concern itself with daily operations or financial management, but more so the organization’s ethical standards, advising key decisions, approving plans and budgets, etc.
A strategic nonprofit board focuses on building up leaders, setting strategic objectives and policy, approving budgets that advance the non-profit’s mission, and being spiritual leaders who lead by example.
Strategic Board Members’ Roles
Each strategic nonprofit board member may have different responsibilities and titles depending on their occupation, previous experience, professional skills, and other factors. These titles may include board chair or chief executive director with responsibilities to determine who’s in charge of what, to ensure certain tasks get done, and to evenly distribute duties.
Strategic Board Meeting Agenda
When the board of directors comes together for a meeting (usually quarterly), they’ll have an agenda of what to go over. This agenda will be comprised of varying topics pertaining to the nonprofit such as the organization’s assets, the addition of new board members or a board member’s exit, quarterly financials for the nonprofit, fundraising and capital campaigns, etc.
Strategic vs. nonstrategic
So what do the goals, plans, and policies of a strategic nonprofit board of directors look like? They focus on manpower over meddling. When they hire the right leaders and program directors, they trust them to do their job competently and support, encourage, and protect them. The strategic nonprofit board holds its leaders and directors accountable by evaluating and incentivizing them. And they show their appreciation for all of their hard work by fairly compensating them and investing in them. They don’t micromanage the responsibilities they’ve given the leader by involving themselves in the day-to-day affairs of the nonprofit.
Instead of focusing on narrow impact, situational issues that can cause division, the strategic nonprofit board of directors stewards the vision and mission of the nonprofit, sets annual strategic objectives, reviews recommended operating plans, and makes sure the budget is aligned with the operating plan.
To be successful, a strategic nonprofit board knows it must lead as one and create a culture of trust while managing conflict as well as focusing on advancing the mission and vision of the nonprofit.
- There are many benefits for nonprofits that follow the strategic board governance model. But the most important advantage is it helps garner more support. People are more likely to support a nonprofit that is organized, strategic, moving, effective, engaging, transparent, receptive, dynamic, innovative, and healthy. So how do you get there?
How Nonprofits Can Move from Operational/Policy to Strategic
First, you have to know why your nonprofit exists. What is its God-given mission? Once the mission or purpose is clear, you can focus on creating goals, strategic objectives, and a plan to work towards and accomplish them.
What’s next? Adopt a strategic board framework with policy documents that empower strategic thinkers to think and govern strategically. The right board members will help drive your tactical plans and strategies forward. Don’t underestimate the power of diversity of thought. It’s important that there’s not just one great board member brainstorming ideas and setting goals.
Finally, the current board should immerse themselves in the transition: praying without ceasing and inviting others to join in God’s plan.
Elements of a Strategic Governance Model in the Nonprofit Sector
Create a board charter that explains how the board of directors operates and what the roles and responsibilities are. Next, set board member qualifications and selection criteria. There needs to be a process for selecting and vetting new board members. Then, develop board composition and profile that explains desired skill sets, a code of conduct, and conflict resolution guidelines.
Give role descriptions and set a board and member evaluation process to determine how things are going and areas of improvement.
Create board committees and define their composition, responsibilities, functional descriptions, and authorities.
What Does a Strategic Governance Model Timeline Look Like?
Review and ratify the board charter; review board member qualification and selection criteria; review board composition, profile, and code of conduct.
Ratify board member qualification and selection criteria; ratify board composition and profile; review board and member evaluation process and role descriptions.
Ratify board member evaluation process and role descriptions.
Review and ratify committee charters.
Discern by-law amendments if there are any; host final board governance implementation session (optional).
Meta Description: There are three nonprofit board governance models, but only the strategic model can help you set your nonprofit up for success.