An enormity of challenges face nonprofits navigating the world of increasing costs, skyrocketing interests rates and the competition for scarce talent.
In many organizations, the combination of dynamic organizational leadership and keen directional oversight from an informed board of directors help the nonprofit chart its course through the challenges ahead. That being said, not every organization has the best of both worlds — a competent chief executive and a knowledgeable board. Advancement through the changes in the market is essential to organizational growth of a nonprofit, and above all other things, it must have an effective board of directors.
Dozens of books and instructional videos have been written on what it means to have an “effective” board. Is effectiveness determined by revenue or loss? Can effectiveness even be measured?
For nonprofit organizations, an effective board is one that helps the organization serve the mission in perpetuity. There are three key factors that help the board successfully serve the mission of the nonprofit:
- The selection committee
- Developing a board matrix
- Diversifying the board
The selection committee
“How do you find people willing to serve on the board of a nonprofit?” This question was asked of me by the board chair of a nonprofit senior living community recently.
This question is difficult to answer, because the needs of an organization are complex, and the availability of individuals to serve are often limited. Even so, one tried-and-true method for finding new board members is the development of a selection committee.
A high-functioning selection committee will track years of service for each member, develop a list of potential candidates, and present and interview candidates for open positions on the board. A well-oiled and experienced selection committee will have multiple candidates identified before an opening on the board occurs. We will touch on diversity in a moment, but removing the decision of choosing new board members from individuals and putting it in the hands of a committee will help prevent the organization from stacking the board with people who are loyal to an individual and not the mission of the nonprofit they serve.
The board matrix
The quality of membership is another essential factor for board effectiveness that seems obvious, but it becomes hard to implement if the board doesn’t have a plan.
One way to ensure the board has the right person whose skills fit the needs of the organization is through the development of a board matrix. The matrix will identify each current member, his or her strengths, age, religious affiliation (if any), gender, location and many other factors that help ensure the board is diverse and representative of the population the organization is serving.
The New York Times reported on a study in 2014 in an article authored by Gretchen Morgenson called, “The CEO Is My Friend. So Back Off.” The study sought to gain insight between friendships and board members and how that can affect decision-making. The study determined, among many other insights, that “62% of board members who disclosed a friendship with the CEO said they would cut $10 million or more from the budget” to secure a bonus for the CEO. Although the $10 million in this scenario was part of a role play conducted by the researchers, the wisdom gained here tells us that as nonprofits, we must be very careful in how we select board members and must ensure quality and diversity of membership to avoid scenarios that put the organization’s best interests at risk.
Diversification
Another method that is key to reducing risk and heightening quality of board effectiveness is diversifying the board. The board matrix will go a long way in helping the selection committee identify their strengths and weaknesses, but there are other factors for a selection committee to consider when diversifying a board, none more important that ensuring the decision is made collaboratively and in the best interest of the nonprofit organization.
A a Cloverpop study found that diverse teams make better decisions 87% of the time and are 35% more productive, and the company earns 2.5x higher cash flow per employee. Another statistic noted by McKinsey is that companies with ethnically and culturally diverse boards are 43% more likely to experience higher profits.
Nonprofits find themselves in a heavily competitive market no matter what mission they serve. A major advantage in this ever-changing economic climate is a strong board of directors. To create a strong board, prioritizing the three methods of this column will provide a solid foundation for innovative growth and advancement.
Collaboratively selecting new members with a selection committee, ensuring quality of membership with the use of a board matrix, and identifying strengths and weakness of membership so that its composition is a diverse group of individuals whose loyalty is to the mission of the nonprofit organization will go a long way in making sure the nonprofit is serving its mission for years to come.
Brandon Kastner is vice president of Holy Cross Village at Notre Dame, a continuing care retirement / life plan community South Bend, IN.
The opinions expressed in each McKnight’s Senior Living guest column are those of the author and are not necessarily those of McKnight’s Senior Living.
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