Building Better Boards: Strategic Selection and Training for Not-for-Profit Governance

How should not-for-profit organizations select and train board members?

Not-for-profit boards of directors can be significantly different than for-profit boards of directors, due to the differences in goals and characteristics of not-for-profit versus for-profit entities. In my article, The Role of Independent Board Members in Exempt Organizations, I discussed independence considerations for not-for-profit boards. In this article, I share insights on best practices for the selection and training of not-for-profit board members.

Understanding the importance of board composition

The bylaws of a not-for-profit organization include a requirement for number of board members. So, what happens when you lose a board member? What should you consider as you work to replace the board member? The first thought of some organizational leaders may be to fill the seat with those who they already know, or those who are close to them. However, there are some common issues that arise when filling a board seat with those you already know and with whom you feel comfortable. It is possible that their pre-existing relationship with you will cloud their judgement. They may not have the requisite experience in the not-for-profit industry. Choosing existing clients of the not-for-profit is also not the best idea. Although they have a lived experience of being a beneficiary of the not-for-profit organization’s mission, what other skills do they bring to the table? In addition, on the IRS Form 990, there is a section where organizations must enter the number of independent voting members of the governing body. The IRS prescribes certain conditions under which a voting member of the governing body is independent.

Board members of not-for-profit organizations are volunteers. However, they still have legal duties which include the duty of care, duty of loyalty and duty of obedience. The duty of care is to act in the not-for-profit’s best interests by prudently managing assets; the duty of loyalty is to make sure all activities and decisions further the stated mission of the not-for-profit, to avoid conflicts of interest and to put the welfare of the organization above other interests; the duty of obedience is to follow the organization’s governing documents, including its bylaws and to comply with laws and regulations applicable to the not-for-profit organization.

Best practices for selecting new board members

It is a best practice to seek diverse board members, who in total, have the following skills:  leadership, financial acumen, human resources knowledge, legal expertise, development experience, and last but not least, a passion for the mission of the organization. Prospective board members should be made aware of some general rules for volunteer boards. These are the rules of time, talent and treasure. These are just as they sound. Time is to be engaged and committed to the organization; talent is to provide specific expertise to set strategy for the organization; and treasure is to help fund the not-for-profit organization. Regarding treasure, not every board member may be able to contribute. However, they may be able to rally support among their community and, in turn, fund the mission through individuals they know who can make a contribution.

What to include in board member training programs

You may be thinking, if I selected my board members using the methods discussed above, why do they need training? Effective training helps board members understand their role and includes specific information and orientation to the not-for-profit organization in a more detailed way. Some topics to consider in training your board members include:

• The mission, history and values of the organization
• An overview of each program and impact on the community
• Background information on other board members and executive leadership
• An overview and walkthrough of the most recent financial reports which may include audited financial statements, the Form 990, the annual report, and/or key internal reports used by the board
• The bylaws and articles/certificate of incorporation
• Conflict of interest and whistleblower policy information
• The calendar of upcoming board and committee meetings

All of these training items listed are key to being an effective board member.

Final thoughts: Why strong governance starts with preparation

In summary, board members are fiduciaries who make sure that the not-for-profit organization has adequate resources to fulfill its mission. They guide the organization toward the future with governance in legal and ethical areas as well as ensuring sound financial management policies. Enthusiasm for the mission is important, but without proper selection and training procedures by the organization, it is challenging for even the most enthusiastic board member to work to his or her full potential. When organizations prioritize thoughtful board member selection and proper training, the not-for-profit organization and its mission will reap the benefits!

Questions about board selection and training for your organization? Contact your Keiter Not-for-Profit Opportunity Advisor. | 804.747.0000.