Organizational Success Role of Nonprofit Board Governance

NONPROFIT BOARD GOVERNANCE

Nonprofit Board Governance and Organizational Success

Board governance in nonprofit settings could be conceptualized in terms of the provision of strategic direction as well as leadership to a nonprofit entity. More specifically, Laughlin and Andringa (2007) are categorical that board governance in this case has got to do with “the combination of systems, guidelines, and processes used to make decisions, hold decision makers accountable, and take action” (74). From the onset, it would be prudent to note that the relevance of effective board governance cannot be overstated when it comes to organizational success in the nonprofit realm. This is more so the case when it comes to meeting the mission of the organization, sufficiently addressing the specific client needs, and sharing outcomes with funders.

Meeting the mission of the organization

According to Cornforth and Brown (2013), ensuring that a nonprofit entity pursues and meets its mission goals happens to be one of the board’s most crucial objectives in as far as governance is concerned. As the authors further point out, the board could partake in a number of undertakings in this regard. These are inclusive of, but they are not limited to, engaging the relevant stakeholders (i.e. government agencies and regulatory/legislative bodies) on issues of relevance to the organizational mission and objectives. Further, as the authors observe, “a board develops specific plans for pursuing the organization’s goals” (Cornforth and Brown, 2013, p. 177). However, the authors are in this case categorical that for the board to play this particular role in an effective manner, there is need for the formulation of procedures and systems for the appointment of competent board members, or training of those appointed to the board.

A review of available literature also indicates that nonprofit board members have a number of primary duties. Those that are instrumental in as far as organization success in meeting its mission is concerned are the duty of care and the duty of loyalty. To begin with, with regard to the duty of care, this has got to do with the member’ competence levels. From a broad perspective, members are expected to ensure that the organization’s ability to meet its mission is enhanced via, amongst other things, the prudent utilization of resources it has at its disposal – with examples in this case being inclusive of people and funds. According to Laughlin and Andringa (2007), from a more formal perspective, this particular duty has got to do with the board’s exercise of care that could be deemed reasonable as organizational stewards. Thus, in effect, one of the actions that members of the board could engage in, in their exercise of the duty of care so as to enhance organizational success in meeting its mission, is be informed on various aspects of the initiatives and programs of the organization, champion prudent deployment of funds, and scrutinize the relevant reports and records to ensure that organizational agenda is being advanced at an acceptable or intended/agreed-upon pace.

Next, we have the duty of loyalty. According to Laughlin and Andringa (2007), this particular duty dictates that the board members ensure that all the undertakings of the organization are designed to advance its objectives and mission. In so doing, they ought to see to it that the decisions they make and the strategies they advance are in the organization’s best interests. Allegiance to the organization’s mission must, therefore, be undivided. A member ought not to actively pursue personal gain in the execution of his roles as a board member. For instance, for the good of the organization, a member would ordinarily be expected to set aside certain interests (be they professional or personal) that appear to be in direct conflict with the organizational objectives and mission.

Sufficiently addressing the specific client needs

According to Ingram (2009), “the board of directors monitors the programs undertaken by the nonprofit group” (104). It is important to note that as the author further points out, this the board does without necessarily engaging in micromanagement of the nonprofit. For instance, the board could mandate that it be furnished with regular updates and reports on a wide range of issues relating to client needs – with examples on this front being inclusive of area of priorities established by staff, the populations served, future programs, etc. The board could, on the basis of the information supplied, elect to either approve or suggest adaptations to diverse suggestions in an attempt to ensure that client needs are addressed in the most effective manner. Indeed, as Ingram (2009) observes, “a board that is familiar with the constituency and its needs is better able to steer the organization in a direction that is helpful to those it serves” (107). In seeking to further enhance its ability to respond to client needs, the organization could, thus, ensure that there are some representatives of its constituency on the board.

It should also be noted that one of the most important factors in efforts to sufficiently respond to client needs happens to be competent management of the nonprofit organization. At the operational level, the tempo for the said competent management is set by the executive director or CEO. Thus, if an organization has a competent leader at the helm directing its various undertakings, it is likely to achieve its various goals and objectives in as far as specific client needs are concerned. One of the most crucial roles of the board happens to be the hiring of an executive director or CEO and setting the compensation of such an executive. Hopkins and Gross (2009) point out that in this particular role or undertaking, “some boards choose to go it alone, some employ a search firm, and others work with a transition consultant” (215). In this role, the board needs to be professional and objective in its approach so as to ensure that the individual selected for the role is not only able to competently run organizational affairs, but also be ineffective ambassador of the same so as to sufficiently respond to client needs (Hopkins and Gross, 2009).

Sharing outcomes with funders

According to Cornforth and Brown (2013), “the world of philanthropy is transforming to results-focused giving” (77). For this reason, the authors point out that nonprofits no longer have the luxury of measuring and tracking outcomes for sharing with funders. Instead, this has become more of a bare-minimum requirement. To a large extent, the need to share outcomes with funders, as Cornforth and Brown (2013) point out, has been born out of the increased competition for resources and dollars. This is especially more pronounced at the present moment due to the COVID-19 pandemic that has resulted in significant downturn in the level of economic activity. As consequence, the board must now play an active role in efforts to tell the organization’s impact story. This is done with the aim of ensuring that funders are filly educated or informed on the impact that a nonprofit is achieving as well as the approach it is taking. Towards this end, the board can champion data sharing between the organization and funders and also ensure increased transparency.

The concept or ideal of transparency is especially important. This is more so the case given that funders are also interested in the prudent utilization of resources. For this reason, the board has a responsibility to ensure that in executing its mandate, it meets its fiduciary obligations. Indeed, in the words of Cornforth and Brown (2013), boards ought to “take steps to help prevent waste, fraud, incompetence, conflicts of interest and corruption” (84). Towards this end, the authors further observe that some of the steps that boards could take in this regard could include seeing to it that there are effective internal controls in place. Yet another instrumental measure on this front happens to be the undertaking of internal and/or external audits. In this case, all the engagements of the nonprofit, i.e. in relation to the undertakings of contractors and organizational officers, can be reviewed and scrutinized. A move of this nature is instrumental in efforts to ensure that funders are aware that their funds are put to the uses they are intended for.

In seeking to share outcomes with finders, there is need to first come up with the appropriate communication plan. On this, Laughlin and Andringa (2007) point out that communication ought to be adapted to align with the changing conditions or circumstances both within and outside of the nonprofit organization. There may also be need to ensure that the most convenient channel is used in this endeavor. Thus, outcomes could be shared in a wide range of formats.

Governance Models

There are a wide range of nonprofit governance models that organizations could deploy in their efforts to achieve effective board governance. These, according to Pointer and Orlikoff (2015) are inclusive of, but they are not limited to; the patron governance model, the policy board model, the corporative governance model, and the advisory board model. To begin with, the advisory board model has, as the name suggests, a board made of members with the relevant skills and insights that the CEO or president could rely upon in. Thus, members could in this case be distinguished professionals. However, the insight and advise is advanced free of charge. Pointer and Orlikoff (2015) are of the opinion that an advisory board that is carefully selected could be instrumental in attempts by the organization to attain some crucial goals including, but not necessarily limited to, fund-raising objectives.

When it comes to the patron governance model, Pointer and Orlikoff (2015) make an observation to the effect that although it could to some extent be likened to the advisory board model, one of the key features of this particular model happens to be the support that board members advance to the organization, i.e. in terms of financial support via fundraising. For instance, in this case, we could have board members lending financial support in their own personal capacity or by way of influencing their vast networks to advance such support. For this reason, members in this case are likely to be individuals with considerable influence in the nonprofit arena, or wealthy individuals.

Next, with regard to the policy board model, the Chief Executive Officer (CEO) has significant scope and mandate in the operations of the affairs of the nonprofit. According to Pointer and Orlikoff (2015), this particular model was first proposed by John Carver. In this case, the board’s confidence as well as trust is effectively delegated to the Chief Executive Officer, and the board is given timely and regular updates on the organization’s undertakings.

However, in some instances, a nonprofit organization might not have in place a Chief Executive Officer. In such a case, the corporative governance model comes in handy – in which case the board is charged with decision-making. According to Pointer and Orlikoff (2015), all members in this case have similar or equal standing in as far as all decision-making efforts are concerned.

Best Practices

In the final analysis, it would also be prudent to note that effective board governance is not a default setting in nonprofit settings. This is to say that in seeking to achieve organizational success – as has been highlighted above - via the deployment of effective board governance, there are a number of best practices that ought to be adhered to. It should, however, be noted that some of the said best practices are largely dependent upon the board governance model adopted by the organization. Some of the governance models that are most common in the nonprofit organization realm have been highlighted elsewhere in this text. The other factor that also ought to be taken into consideration in efforts to achieve organizational success via the deployment of effective board governance is the specific needs of the organization. This is particularly important owing to the fact that organizations differ on multiple fronts.