• Christa Dhimo, Impono LLC

The Non-Profit Perspective: Choose Your Board Wisely

In a previous article, we reviewed the importance of Startups having the right Startup CEO at the helm, hiring based on Startup Leadership needs vs Leadership Track Records. Large established company leaders may not always be the best fit for small not-yet-established startups.

The same holds true for Boards, and in the last few years we have seen a steady (and very appropriate) look at how the Boards must hold the CEO and themselves accountable. This is especially critical in the non-profit world, where small family-run foundations often begin on the basis of a personal endeavor or tragedy where they select their board based on who they know vs what they need and whether the board collective is capable of getting them to reach or exceed their goals.

We just incorporated as a non-profit-- we feel GREAT !! (Now what?)

Nonprofits are a labor of love, started from the founder's heart in order to inspire change and improvement in the world in both a large and small scale (and everything in between). But starting up a company is like a sailing day: you decide to sail because it looks like good weather, yet in nearly all cases the farther from the slip you get the stranger or more cloudy the weather becomes.

Here is where a savvy, supportive Board comes into play-- one that takes the role seriously, and one that follows-through on commitment and governance.

Non-profits in all USA states and commonwealths are encouraged to have a diverse, experienced Board with appropriate structures and protections, both for the non-profit and the Board. Minimum is usually three Board members, there is no maximum-- though in our experience you usually want to keep the team manageable. We believe 5-9 Board members, depending on your strategic objectives, is a good size to share the administration of a Board and bond together for fund-raising, which are the two primary roles of a non-profit Board.

Board membership in nonprofits are not for the faint of heart, nor should the meetings be considered a day of sailing: some easy times, some choppy seas, a few clouds, but when the meetings end, everyone goes home and continues their lives before the day of sailing. That's not what Board membership in a nonprofit is about, and we are consistently stunned to see how the "nonprofit" nomenclature is confused with "profit doesn't matter" when compared to the for-profit sectors.

Nonprofit Board Work is Not Easy, and It Shouldn't Be

If you are considering a nonprofit Board position, do not fool yourself into thinking that it's all blue skies and easy waters. Do not assume it is easier just because it is a nonprofit. Do not take on the position because you want to be at the "big table."

Remember-- nonprofits are businesses also, and they must be profitable in order to survive. In the USA, and in most countries, nonprofits are given certain tax concessions and are eligible for some grants that for-profits might not be eligible for, but that doesn't mean "just anyone" can lead them. In fact, we at Impono think just the opposite: it takes a wildly special person, team and Board to make a nonprofit not only profitable, but also successful.

We helped a wonderful non-profit not too long ago whose original Chairwoman of the Board ran the business into the ground in under a year. Not only did she not organize the Board to fund-raise, but she also didn't truthfully tell them the financial status of the business when she should have. She implemented strange payment processes for their vendors, and while nothing was illegal or unlawful, by the time she was summarily fired, she had single-handedly put the non-profit's reputation at risk, the company was $80K in debt, and the books were it such disarray that it took our team over 200 man-hours to sort through and certify the actual status of operations.

The Board had let the business run wild with no competent leadership challenging the business practices and holding the team accountable, two of the most necessary characteristics of a Board. The nonprofit had paid for everything in a convoluted credit-card trail across two different credit cards, had grossly over-purchased insurance coverages at a total price of $12K for frivolous, unnecessary insurances (one of the Board members was an insurance agent), and had purchased large-scale infrastructure items for banking support, IT tools and services, and various other spends (such as $3,500-worth in A/V equipment for "media") that were wholly unnecessary for such a small nonprofit.

You may think the issue was the Chairwoman, and that is true. She was in way over her head without any business or Board experience previously. But the real issue was the Board, which she masterfully manipulated (even if passively) in order to keep the business going instead of masterfully facilitating problem solving and unpopular decisions in order to determine which part of the business was going to keep going and which part was going to stop. Not only did the Board fail to hold her accountable, they also failed to implement and then follow their own basic requirement of structure, governance, and decision-making processes.

We conducted their audit, and what we found was that most of the Board meetings, led by the former Chairwoman, were status reports on emergency tactics related to unplanned work and reactive decisions. Not once did we see a purposeful, well-organized meeting where the Board was driving the business in a responsible manner, and that was while $100K's of monies were being fundraised, and more than $100K's of monies were being spent.

There were no financial reviews. There were no action items captured and tracked for accountabilities. The by-laws were woefully inadequate. The team wasn't utilized properly. The Board barely fundraised, and in effect, the Board had no idea what was going. Ever. The Board asked for insights and status and financial statements plenty of times, as per their Board minutes, but no one ever held the Chairwoman accountable until the end of her tenure when she was fired with cause, with the non-profit $80K in debt. There were no "grown-up" decisions put on the table for the Board to make. There wasn't even the most basic contracts, commitment letters or role descriptions for Board members so that they could legitimately and fairly hold each other accountable.

Most of the Board Members worked in companies where these formalities were required-- so why didn't they insist on the same as part of how this company operated?

Simple put: they wanted to keep it easy. They wanted the meetings to be a day of sailing. And the company paid dearly for that.

The Nonprofit Board Sets the Pace

Your nonprofit Board represents the leadership of the company alongside the President and CEO or Executive Director. The Board is there to help form, plan, implement and check up on execution of strategy-- a big part of that related to fund-raising, and the other part related to governance. If your Board lacks one or the other (or both), your nonprofit has a limited window for success and an even smaller window to create and sustain a reputation that others will want to align to.

Nonprofits, by definition, do not pay dividends out to shareholders. In the nonprofit world, "shareholders" are "donors," and while they will be able to tax-deduct their donation in the USA (and receive similar benefits in other countries), they are investing in the future vision of what the nonprofit promises to change-- for the better. The "return" is knowing their contributions are helping a cause the donors feel passionate about.

Your Board must be well-chosen to support the needs of a nonprofit, ready to lift bigger loads than usual, ready to work as a fierce team to fund-raise for the cause, and prepared to take on various administrative aspects of Board governance.

BOTTOM LINE: Your nonprofit will only be as good as your Board. Choose wisely.

We know that launching a new or transforming an existing organization isn't simple, but it can be easier with the right advisors and doers. If you have additional questions about this topic or how it can impact your business, contact us. Let's see what we can do for you.

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