When you think about it, a non-profit is unique. Unlike a for-profit business, which exists to make money for its shareholders, a non-profit exists to serve the public good. Its mission is about impact, not profit. And yet, without effective board governance, a non-profit can’t achieve its mission and may be subject to reputational loss - or even struggle to stay afloat.

So, What is Effective Non-Profit Governance?

Simply put, a non-profit's long-term success depends on effective governance. It requires the non-profit organization be governed and managed appropriately and transparently, with defined accountability and decision-making processes.

The following are some of the reasons why effective non-profit governance is essential:

• It strengthens the non-profit's relationships with donors, funders, and other stakeholders.
• It ensures that the non-profit is adhering to its mission.
• It protects the non-profit from reputational risks.
• It helps the non-profit attract and retain quality board members and senior staff.

Effective Board Governance Starts with the Board and Its Board Members

There are many moving parts to effective governance, but it all starts with the board and its board members.

The non-profit board should include members with a wide variety of skills, expertise, and viewpoints. Board members should be committed to the organization's mission, as well as be able to collaborate. To be effective, the board needs to work as a team. This means that board members need to trust and respect one another, as well as be willing to have difficult conversations when necessary.

Each of the board members should have a clear understanding of their roles and responsibilities. Board members should also have a clear understanding of the organization's values, and goals, as well as how they can best support the staff in achieving its mission and goals.

Non-profit boards have an opportunity to provide value and make a unique difference, yet many fail to take it. The good news is that board members may take certain actions to improve their governing abilities. The key to those actions starts by understanding the characteristics of an effective non-profit board and why they are important.

This blog post will discuss the characteristics of effective non-profit boards and why each is so important for your organization's success and effectiveness.

Characteristics of Effective Non-Profit Boards

Characteristic # 1: The Board Members Recognize and Are Dedicated to the Organization's Mission

Recognizing and being dedicated to achieving the mission is important for several reasons, including:

• It ensures that the board, its committees, management, staff and volunteers are all working towards the same strategic end.
• It provides a sense of purpose for the employees and volunteers.
• It helps attract new board member candidates, volunteers, customers, and stakeholders.
• It helps the organization increase its impact and value to its stakeholder communities, funders, and clients.

Characteristic # 2: The Board Leads the Organization in a Strategic Direction

Strategic leadership is an important non-profit board activity that sets the groundwork for the organization's future. The board develops the organization's strategic plan along with its long-term goals and objectives. To stay on track in our ever-changing world, annual reviews and regular updates to the strategy are required.

Non-profit board members are representative of their stakeholder communities or groups. As a result, they have a global viewpoint on the bigger picture and can make good judgments. When it comes to long-term planning and making significant decisions that are in the best interests of the organization, effective board members think outside the box. The organization's actions then align with its strategic plan as well as its established goals and key performance indicators.

Characteristic # 3: The Board is Led by a Strong and Committed Chairperson

Non-profit organizations must have a strong and committed board chairperson at the helm to be effective.

The chairperson's main responsibility is to ensure that the board works well. This entails ensuring that board members are prepared for and attend meetings, that decisions are made quickly, and that the non-profit's success depends on good governance.

Chairperson characteristics include:

• Being a good listener
• Possessing strong leadership skills
• Having the time and the flexibility of time required to be effective in the role
• Ability to take input from all board members into account
• Having the ability to make tough decisions when required
• Possessing the ability to maintain a professional relationship with the Executive Director
• Possessing the interest in and ability to effectively facilitate board meetings.

More than just a meeting facilitator, the chairperson is responsible for making sure that the board functions effectively. The chairperson sets the tone for how things are done and leads the board. They must also be able to listen well and make decisions based on input from stakeholders.

It is the chairperson's responsibility to be in touch with the Executive Director as a representative of the board. The organization's day-to-day operations are controlled by the Executive Director, who reports to the board through the chairperson.

Characteristic # 5: The Board is Diverse.

The effective non-profit board has a mix of directors with different backgrounds, experiences, viewpoints, and skills. A diverse board includes a wealth of information and expertise that may be useful in making better judgments. It also assists in the formation of a more well-rounded board that can address the needs of the organization from multiple perspectives.

Contrary to popular belief, a board does not need to be filled with people from the same industry or have the same level of experience. In fact, a board that is too homogeneous may result in groupthink, where directors tend to agree with each other without critically evaluating the information. This can lead to bad decisions being made.

The ideal mix of directors should be able to provide different perspectives while still being able to work together harmoniously.

Characteristic # 6: Sets and Regularly Reviews Policies

The non-profit board is responsible for setting and updating the policies of the organization.

The Board, its Committees, the Executive Director, and Staff are all directed by board approved policies. The board is also responsible for ensuring that its policies remain up to date and relevant. In some circumstances, the board might delegate policy development and review to a committee or task force. However, the responsibility for policy development, review and, update remains with the board.

Policies are living documents that must be reviewed and updated regularly to assure their relevance and adaptability to the needs of the organization. It also lets the board to make modifications as needed rather than amending the policy to address a problem when it might arise. Non-profit experts recommend that boards undergo an annual review of all policies.

Characteristic # 7: Hires and Regularly Evaluates the Executive Director

Besides the Board and its Chairperson, the Executive Director is the most important person in a non-profit organization. The board of directors hires the Executive Director and is responsible for regularly evaluating their performance.

Effective boards typically assign the tasks related to the hiring of an Executive Director to a search committee. This committee is responsible for developing or updating the job description, advertising the position, screening applicants, and recommending finalists to the board. The board then interviews the finalists and makes the final decision.

It's vital to find the right person for the job. Non-profit boards frequently try to replace the Executive Director with someone with similar qualifications and experience as its outgoing Executive Director. While those skills and experiences may have been important in the past, they may not be suitable for leading an organization into its future.

The Executive Director is typically hired on a renewable employment contract basis. This allows for regular evaluation of their performance by the board. The Board should establish clear expectations for the Executive Director at the outset of their employment and provide feedback regularly.

A good working relationship between the board and Executive Director is essential for effective governance. The board provides oversight while allowing the Executive Director latitude to lead in day-to-day operations. Both parties should be open to communication and willing to work together towards the common pursuit of mission and goals.

Characteristic # 8: Plan for Succession

Succession planning is an important component of effective governance, both for the board and management positions that may become vacant.

When a board member leaves, it's essential to have a ready cast of competent people who are eager to take on the board leadership role.

Management succession planning is required for the organization to maintain operational management leadership if the Executive Director, for whatever reason, leaves.

An important part of succession planning is identifying the skills and experience that are currently lacking on the board or in management. This allows the organization to recruit people with the specific skill set needed to help fill that gap.

The management succession plan includes:

• Having a clear and current job description.
• A set of current expectations for the position so that potential candidates can be properly vetted.

A well-developed succession plan will help ensure continuity of leadership and provide a roadmap for moving forward when there is a change.

Characteristic # 9: The Board is Accountable to The Membership

It is the board, not management, that is responsible to its members, clients, funders, and stakeholders in the end. The effective board is therefore transparent in decision-making and keeps stakeholders and members informed of critical decisions. The board should also regularly solicit input from members and consider that input received when making decisions.

While the board ultimately holds responsibility for the actions of the organization, it is vital to remember that the board works with and supports its Executive Director. For the board to be successful, there must be a good working relationship between them.

Characteristic # 10: Oversee Finances Responsibly

As a board member, it is your shared responsibility to ensure the organizations' finances are managed responsibly. This includes:

• Reviewing and approving a budget.
• Monitoring spending
• Ensure that all income and expenses are properly accounted for.
• Understand the organization's cash flow and to be aware of any red flags that could indicate cash flow problems.

You should understand how to fulfill these responsibilities as a board member, to prevent any unwanted financial consequences. Furthermore, you and your board member colleagues need to be familiar with the organization's annual reports and have a firm grasp of its financial position. You assist the company to maintain its financial health and guarantee that it can continue to achieve its objectives by following these financial oversight procedures diligently.

Summary

Strong non-profit board governance is an important component in ensuring that a non-profit is effective and successful. Your non-profit organization may ensure that it has a strong and effective leadership board in place by following the ten characteristics of sound governance listed above.

Do you have any questions about non-profit board governance? I would love to hear from you. And don't forget to check out our other leadership blog posts for more helpful information.

Thank you for reading! I hope this article was helpful.

 Jon Close,
The UpCloseTeam