Assessing the health of a non-profit board of directors

If you search the internet for examples of ineffective, inept, or malevolent non-profit board of directors, you are sure to come up with hundreds of examples. Recent local news stories have further added to the rolling compendium of examples of poor board behavior. A village mayor resigned “citing a “strained and adversarial” relationship with the board of trustees.”[1] The mayor felt that the board tried to block him from moving forward on issues, felt that his priorities were not the same as the board’s, and that the attitude of the board towards staff and citizens was decidedly different from his and ultimately would not help the village move forward.[2] The mayor also found that one trustee in particular was trying to “micromanage the day-to-day operations of the village.”[3]

In another recent story, after a board of directors attempted to hide negative information about an institution, one board member wrote, “A large-scale turnaround is needed . . . There is an urgent need to start addressing the many challenges now, many months before the new president comes on board. Unfortunately, it is unlikely that meaningful action will happen soon.”[4]

The board of directors of a non-profit does have responsibilities under state law to act as financial and legal stewards of the organization. But beyond the minimal requirements of state law, the job of the board is to act as an ambassador for the organization, to be an advisor to the executive director and to provide program oversight to guide and benefit the organization’s goals and mission. Without strong leadership, boards can devolve into behavior that may harm the organization itself. Below are some red flags to help assess a board of directors and to encourage a healthy and constructive board.

Who am I? Why am I here?[5] Each board member needs to ask themselves these questions and discuss the questions with the board president or executive director. Successful organizations have boards that clearly understand the mission of the organization and their constituency. Boards can easily go off on a tangent and focus on those things that are familiar or fun and lose sight of what the purpose of the organization is. Look to the amount of time spent at board meetings on various issues to determine what the board is placing a high priority on.

Likewise, each board member has been appointed either for their familiarity with the mission of the organization or for their specific skill set which can be useful to the board. The appointment doesn’t confer knowledge of law, accounting, marketing or running a successful business. Board members need a level of self-awareness to understand what their contributions can be and to defer to the staff or other board members when they have knowledge in a certain area. It is always appropriate to ask questions and provide input based on the understanding gained. It is not helpful to impart knowledge, for example, on a complex legal issue based on a conversation you had overheard at the diner.

All failure is failure to adapt, all success is successful adaption.[6] Change is inevitable, but people can be afraid of change, especially board members who have served for a long time. Boards can be very proud of their heritage and love to highlight that the organization has been around for 50 or 100 years. The assumption is that it must be performing well to have stayed around for so long. However, the reality may be that it is on life support and no one has pulled the plug. The successful organization will change with the times and adapt their business model. The mission can remain the same, but the way programs and services are delivered and by who needs to adapt to the current environment. How has the organization adapted over the years and what changes does the board see in the future?

Bylaws, what bylaws? Each board member should have a basic understanding of the organization’s bylaws and how the board is supposed to operate. The same goes for past history of the board. Are there minutes, especially of votes taken, that are readily accessible? They should also have an understanding of how they are supposed to interact with the executive director and staff. New board members should be given a short tutorial and history of the organization and for boards that have historically had trouble operating smoothly, this may need to be done on a yearly basis at a board meeting.

Trouble signs include a history of operating outside of the bylaws such as decision-making outside of the governance structure, board members who directly call staff with tasks that have not been approved by the executive director or leadership, the inability of staff to readily locate important documents, or the board taking on duties that are delegated to the executive director through the bylaws or employment contract.

… Or an obsession over bylaws. Board meetings should not consistently focus on the bylaws or board governance and the executive director’s time should be focused on producing results, not handling issues with board members. When the board spends an inordinate amount of time discussing internal operations, it indicates that they are not clear of their purpose or that there are members who are more concerned with personal gains and gamesmanship.

Time, talent and treasure. Non-profit boards should have a culture of giving. They are situated differently than for profit corporate boards where board members may get paid for service or receive other financial benefits. Board members should be willing to give their time, talent or treasure for the only benefit of advancing the mission of the organization. In fact, the IRS rules and regulations prohibit any financial benefit, no matter how de minimis, for tax exempt entities. This is not to say that the executive director should not make board members feel appreciated for the service.

Board members that continuously ask for special benefits such as free memberships, hotels reimbursements or the like may have the wrong attitude about their service. Members that often speak to the amount of time and effort they put into the board may likewise not have the correct attitude. More often than not they conflate length of time on the board with amount of effort, meaning their view is that if they have served for a number of years it means they have spent a lot of effort on board business. This is often not the case.

Board members of non-profit boards are expected to donate to the non-profit either monetarily or with their time. Board members who are doing neither should be reconsidered. They should contribute time annually at a personally significant level and support development efforts within their means. Yearly review of board members is as important as review of staff.

Money matters. One of the easiest ways for an organization to get into trouble is over financial matters and yet board members often have no understanding of the finances or budget of the organization they are responsible for. People don’t enjoy talking about finances, however each board member should have an understanding of the budget, financial statements, and tax returns and ask questions. Budget items should be reviewed in light of the priorities of the organization and revenue streams should be reviewed for potential issues.

No matter how good you are, you can always be replaced. Boards that pay no attention to board terms or do not know how to fill seats when they become vacant are problematic. Boards without term limits or that keep appointing the same people over and over again are also difficult. The average length on a board of directors is six to eight years. Term limits avoid burnout and new board members can bring new ideas and knowledge. Board members serving longer than this can be challenging as they can become lethargic or exert undue influence due to their length of time and supposed knowledge of operations. They can also become the death of change and growth. Ignoring terms, elections, and term limits is a way for individual board members to retain their membership on the board. Boards should also be able to fill vacancies when they occur with new members. Leaving vacancies unfilled for long periods of time is a signal that the positions are being left vacant for a reason or the board is very disorganized, neither of which bodes well for board functionality.

Let’s create a committee! Some boards create committees to make nearly every decision. While some committees are required by state law or can be useful for ancillary issues, governing by committee leads to important decisions being made by a small number of individuals without proper vetting and knowledge by the entire board. The decision of a committee is generally automatically approved by the entire board. Members of the board not on the committee may miss out on giving their input. Thinking in nefarious terms, it allows a small group of individuals, usually those serving the longest, to control the direction of the organization.

Strategic planning is not strategic thinking.[7] The development of a strategic plan was a concept created for business organizations in the 1960s. If your non-profit board won’t let it go or constantly suggests the expense of creating a new one, they haven’t updated their knowledge of business operations or are using the strategic plan as a public relations tool or to hide past incompetence. After the expense of creating the plan, most organizations and employees put it on a shelf never to be seen again. A good executive director knows what needs to be done and has a strategic plan in their head. It also takes up enough time at board meetings that the board may fail to address more immediate issues and challenges.

The 1990s called and they want your technology back. It is relatively easy to look at the technology of a workplace, the skills of those using the technology, and assess the effort the director and board have made in advancing the organization. If the organization is not reviewing and updating technology on a regular basis and if the board has no minimum understanding of the needs of the organization, it indicates a lack of leadership and direction which does not bode well for the health of the organization. Investment in technology is not the heavy lift it was years ago and with discount programs to get technology to non-profits such as TechSoup, many non-profits find that technology, and especially online fundraising, is a great tool to advance the mission of the non-profit.

Start by looking at the organization’s website. The days when creating a website was an expensive endeavor and updates could only be made by web designers or the computer saavy are gone. Now the products are much easier to use and updating takes minutes instead of weeks. How dated is the non-profit website and has anyone defined the purpose of the site? Is it accomplishing what it needs to?

What is the organization’s ability to operate remotely? Does the staff have the software they need to perform at their best? How old is the phone system? What is the organization’s social media strategy? Ignoring technology in the hopes it will go away isn’t an effective strategy and if the board is hesitant to make small investments in technology or consider it on a regular basis, it shows their lack of interest or knowledge.

Is there a fox in the hen house? It is not uncommon for non-profit boards to have individuals representing professional firms or corporations serving on the board. They may be providing services to the membership of the non-profit or clients serviced by the non-profit and have established working relationships with existing board members. They can be valuable additions to the board when they have working knowledge of the industry served.

While New York State law requires that boards adopt a conflict of interest policy and that each board member file disclosure statements annually, this will only prevent board members from having a direct personal interest in contracts with the non-profit. Most policies won’t cover influence peddling which can be much more insidious and damaging long-term to the non-profit. It is important to assess the status of the board member’s firms to see the extent to which they are enjoying preferred status to the exclusion of others. Their contribution can be valuable but not if it diminishes the participation of other companies that may want involvement in some capacity or want to support the organization through donations.

Review publications, seminars and other programs of the non-profit to see whether there is involvement from a wide range of companies or whether past practice has been to limit involvement to the company of the member who sits on the board. Creating an exclusive relationship for a favored firm does not inure to the benefit of the non-profit in the long term.

Is everyone the same? Does the board have any diversity – of race, ethnicity, age, sex, profession, or opinion? Have they even considered diversity? There is a problem if the board has never even had a discussion of diversity and self-assessed.

If you recognize the board of directors you are working with or working for in this article, reconsider your relationship and whether you want it to continue. There may be a charismatic leader rising through the ranks that will move the board passed its comfort zone. The board may be faced with serious issues which will force change. However, many boards will not change their behavior as they are not self-aware, lack leadership, or groupthink will keep the board on its existing course.[8] But if you are part of a board that is willing to grow and change for the good of the organization, the assessments above can help a board make a change for the better.

[1] Wendy Liberatore, “Ballston Spa mayor unexpectedly steps down, blames board,” Times Union, October 26, 2021, https://www.timesunion.com/news/article/Ballston-Spa-mayor-suddenly-steps-down-blames-16564805.php. The relationship of a village mayor to the board of trustees is akin to the relationship of an executive director to the board of directors. [2] Liberatore. [3] Liberatore. [4] Rachel Silberstein, “RPI officials accused of suppressing negative climate survey results,” Times Union, October 25, 2021, https://www.timesunion.com/news/article/RPI-officials-tried-to-suppress-negative-climate-16562142.php. [5] James Stockdale, Ross Perot’s running mate in 1992, famously opened the vice-presidential debate with these lines. [6] Max McKeown, English writer, consultant, and researcher specializing in innovation strategy, leadership and culture. [7] Henry Mintzber, “The Fall and Rise of Strategic Planning, Harvard Business Review, The Magazine, January-February 1994, https://hbr.org/1994/01/the-fall-and-rise-of-strategic-planning. [8] Groupthink is a phenomenon that occurs when a group of well-intentioned people makes irrational or non-optimal decisions spurred by the urge to conform or the belief that dissent is impossible. The problematic or premature consensus that is characteristic of groupthink may be fueled by a particular agenda—or it may be due to group members valuing harmony and coherence above critical thought. Psychology Today, https://www.psychologytoday.com/us/basics/groupthink.