The Difference Between Governing And Managing
William A. Earon is the president of the New England chapter of the National Association of Corporate Directors (NACD), a nonprofit organization based in Boston. He can be reached at wearon@coastalcapitalllc.com.
You’ve just been asked to serve on the board of directors of a nonprofit organization.
It’s certainly something you’ve wanted to do for some time but had either never been asked or did not have the time to commit to serve in the past.
Now the time is right and the invitation has been extended. But once the luster of that invitation wears off, you quickly realize that you don’t know where to begin. What does it mean to be a member of a nonprofit board? What is expected of you?
More simply: Where does one begin?
Job Description
One of the most important aspects of serving on a nonprofit board is to realize what the role of the board is. Everyone understands that a board provides guidance and leadership, but our natural tendency as successful business people is to lead through managing.
The job of a board, though, is to govern not manage.
Governance, in theory, relates to decisions that define expectations, grant power or verify performance. It differs significantly from management, as it focuses on the overall direction of the organization rather than the day-to-day operations.
First-timers on nonprofit boards should familiarize themselves with general governance procedures.
There are dozens of excellent books written on this topic, including material published by the National Association of Corporate Directors.
Once you understand governance in general, it is important to understand your organization’s governance structure. How are decisions made? What types of committees exist and what are the roles these committees play in the efforts of the board as a whole?
Understanding the makeup of your board is also important. Who are the members? Which members chair committees? How was each member selected? What role does each member play?
These are all questions that will familiarize yourself with the board. They can help you better understand what the current strengths and weaknesses of the board might be and what role you might play.
Do you have a strong financial or business background? If so, you might be a good fit for the audit committee.
Do you have a legal background? Your knowledge might be beneficial to the governance committee.
Not every board is comprised of diverse backgrounds and similarly, not all boards are structured the same. Understanding the committee structure will certainly allow you to bring your strengths forward.
From there, you need to understand the mission and the goal of the organization.
What type of programs does the organization have in place to support its mission and reach its goals? Does the organization operate with sufficient resources and what are the methods used to raise funds? How does each board member assist in raising funds and what will be expected of you?
Risks And Rewards
It is also critical to understand how the board is evaluated and what methods and procedures it has in place to continue to improve board performance. How are nominations for new candidates handled and, what is the procedure for both planning for succession and selecting new members?
Board members also must understand the risks involved in serving.
Risk management has become more than just a buzz word in the recent years. Many feel this is a term germane only to public and private companies, but that is hardly the case.
Nonprofit board members must be aware of responsibilities and risks associated with the operation of the organization, particularly that related to its fiduciary responsibility.
Directors and officers insurance, commonly referred to as D&O insurance and once thought reserved only for those serving on public and private boards, is now common for members of nonprofit boards.
D&O insurance can protect individual board members from liability in case of lawsuits and legal action brought by outside parties.
Once you understand the answers to many of these questions, it is then time to ask yourself: Is this board right for you?
As a board member, you have to be committed to the mission of the organization and be comfortable with the approach and tone of the organization’s fund-raising efforts.
You have to believe that you have the time to commit to the board and not simply show up at board meetings unprepared. Preparation is critical to being an effective board member.
You need to be in a position to place the organization’s interests above your professional and personal interests when making decisions as a board member.
In addition, you need to ensure that you’re able to contribute financial support consistent with what is expected of board members.
Joining the board of a nonprofit organization is an honor and a privilege and, with the right education, experience and understanding of how you can make a difference, it can be very rewarding.
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