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Creating an effective board of directors for your nonprofit

Posted January 24, 2011 10:08 PM by Ted Jackson

We have been fortunate to work with many nonprofits that have dramatically changed their business. One nonprofit grew from five to twenty million in annual revenue. Another grew from twenty to one hundred and twenty million. Yet another rescued its nonprofits from going out of business to becoming a thriving association. I spoke to one of these nonprofit executives about how he made his board more effective as he grew his organization. I think there is a lot to learn from his changes over the last few years.

Brad gave me the following insights. A successful board has three components: wealth, work, and wisdom. Wealth obviously helps fund the organization. Working boards actually contribute their time to help execute the strategy, and wisdom filled boards can usually give valuable advice to help the nonprofit navigate a changing environment. Brad's board was high on wisdom, but low on wealth. This makes sense because Brad is the Executive Director, and he needed lots of advice to help grow the organization.

But now the organization is in a different phase of growth. They have been using strategic planning and the Balanced Scorecard to clearly define their strategy. With years of experience and solid partnerships, the organization had plenty of advice. What they were missing was the ability to grow the organization financially. Most of their funds were given as restrictive grants, so they were stuck with money to execute a two year old strategy. Brad, with the support of a few key board members decided his board needed a major change.

He implemented four major changes. The first was term limits. With three year terms and a limit of two in a row, Brad had a convenient way to get people off of his board that were not contributing. Nonprofit boards are typically very nice, and so they tolerate folks that just show up for the meetings and do not play a significant role in growing the organization.

Brad then established a give-get policy. In simple terms, each board member was required to either give $10,000 or get it through donations--every year. At the time, the board was giving on average $4,000/year, with many of their 30 member board giving less than $1,000. Term limits allowed board members who were not interested to leave gracefully, but this approach also set expectations that board members needed to be committed to the mission of the organization.

The third change was realizing that the board is only as generous as its biggest donor. He worked to land a few big donors on the board, and from there, meeting the give-get threshold became pretty easy.

Finally, he put his board to work. He has four major board committees: Nominating, Program, Finance/HR, and Development. The members are expected to give presentations at board meetings, so they have to work together between meetings and get involved in the organization. Brad provides staff to support their efforts, but he looks for speaking opportunities for the board members to ensure their commitment to the organization.

Brad reports that his board is down in size from 30 to 20 members, but giving is way up, and the board is more committed to the success of the organization. He drives the meetings and solicits their involvement. Looking back at the transformation, he states that he now feels like the board has the right balance of Wealth, Work, and Wisdom to be effective for his organization.

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