By Zachary S. Kester, Executive Director
Nonprofit boards are often made up of a group of people trying to help out their community as best as they can.
Unfortunately, however, they are not immune from mistakes. These mistakes can have serious consequences that range from creating financial liabilities for the organization to leading to its ultimate dissolution to causing the individuals on the board of directors to be individually liable. Even worse, many of the most damaging mistakes are the least well-known.
Therefore, this article is not going to round up the “usual suspects” that many nonprofit leaders already know about fiduciary responsibility and keeping good records. Instead, here are the “sleeper” mistakes— the top 5 mistakes of boards that, in practice, often create more damage than the obvious oversights and might not be on your radar:
- Failing to monitor programming effectiveness or make course corrections
- Not wrestling with tough questions
- Board-level confidences are not kept
- One person (or a small group) runs the show
- Not holding executives and inactive directors accountable
Are you on a board characterized by one or more of these mistakes? If so, you may want to start a board meeting by analyzing those issues.
- Failing to monitor programming effectiveness or make course corrections. Nonprofit boards are sometimes faced with declining programming revenue, requests of grantors for additional outcome measures or a decrease in interest from typical funding sources for a particular program. They should be asking “Why?” and “What can we do?” in these situations. If the programming is not effective, or the organization is unable to show its effectiveness, many managers try to gloss over the problem rather than engage the board and its resources in determining a solution. This is both a missed opportunity and a board failure. The oversight of boards is not only financial, but extends to programming.
- Not wrestling with tough questions. Nonprofit leaders are here to help people, therefore, asking tough questions is sometimes uncomfortable. A good director will politely and diplomatically ask the tough questions and share concerns. This will hopefully be well received by the other directors and result in frank discussions. It may also be helpful for one director to talk about their concerns with other directors at a time other than the board meeting to identify whether others share similar concerns. If your board is not wrestling with tough issues, it should evaluate whether it is being effective.
- Board-level confidences are not kept. This is a hindrance to effective board governance. The Executive Director or CEO is generally a director (either non-voting or full). Any decision made by the board is the decision that person will implement. If the ED or CEO frequently says to a colleague something along the lines of “the board decided” or “over my objection” then that person is affecting the integrity of the Board. Further, individual directors—whether voting or nonvoting—should be able to talk freely with one another and in meetings with the confidence that their comments and conversations will stay within the board. This is the only way to ensure open, honest and full conversation. The boardroom should be virtually sacrosanct.
- One person or a small group runs the show. Sometimes an Executive Director, the founder, the board chair or the executive committee are in full control of the organization, making every decision, determining what information the board is entitled to have, etc. This person or group of people is not, however, where the buck stops; it stops with the full board. It is the full board that will be held responsible if bad things happen—much like the Lemington Home for the Aged board that simply did not pay attention. It may take one lone voice that is willing to question (see #2, above) in order to get things to change.
- Executives and inactive board members are not held accountable. Too often, nonprofit boards let their finger off the pulse of the organization. They do not complete assessments of the executive director, and often do not complete self-assessments. When directors are inactive, or are little more than a warm body in the boardroom. Even if the executive director or inactive director is not actively doing something “wrong” (i.e., stealing, treating people very poorly, etc.) not showing up or not performing to par is equally bad. These types of executives and directors often desire to improve and be more involved, but just may need some guidance. Sometimes though, they can, in fact, be dead weight, causing more harm than the good they bring to the organization. These directors will usually self-select off when the involvement responsibilities increase.
Hopefully these top five board mistakes have given you some food for thought. They may even lead to some good conversations!
About Charitable Allies
With highly experienced legal, accounting and training personnel, Charitable Allies provides all manner of legal and educational services for boards, officers management and staff of myriad charities throughout the sector. From basic one-time questions about a single matter to training for boards and officers to complex reorganization or merger of activities, Charitable Allies is your go-to cost-effective provider of legal services to nonprofit organizations.
- Ellie Carter, http://charitylawyerblog.com/2009/10/05/top-15-non-profit-board-governance-mistakes-from-a-legal-perspective/
- Gene Tagaki, http://www.nonprofitlawblog.com/category/governance/
- Jan Masaoka, Blue Avocado, http://www.blueavocado.org/content/ten-biggest-mistakes-boards-and-executives-make
- Melanie Lockwood Herman, Venable, https://www.venable.com/the-top-10-legal-risks-facing-nonprofit-boards-02-18-2011/
- Benjamin Takis, https://www.nonprofitadvancement.org/blog/top-10-legal-pitfalls-nonprofits-0
- BoardSource Book, Case Studies for Nonprofit Leaders, https://netforum.boardsource.org/eweb/pdf/TablesofContents/416_TOC.pdf, https://www.boardsource.org/eweb/DynamicPage.aspx?Action=Add&ObjectKeyFrom=1A83491A-9853-4C87-86A4-F7D95601C2E2&WebCode=ProdDetailAdd&DoNotSave=yes&ParentObject=CentralizedOrderEntry&ParentDataObject=Invoice%20Detail&ivd_formkey=69202792-63d7-4ba2-bf4e-a0da41270555&ivd_cst_key=00000000-0000-0000-0000-000000000000&ivd_prc_prd_key=8644F738-276E-42E3-B9A1-491D6EA9D646