chapter 5
The Importance of a Good Board of Directors
Anyone who has worked in the nonprofit sector for more than a few hours will know that one of the most vexing problems most organizations have with fundraising is an inability to recruit and maintain board members who willingly and enthusiastically help with fundraising. This problem has led to a small industry of people who train boards, write about how to build a fundraising board, create materials to give to board members, and so on, and another small industry of people who dispute whether you can or even should put together a board that does fundraising.
To be honest, I am firmly (with a few exceptions) in the camp that believes that the board needs to give money and raise money, and that you can realistically build a board with that expectation in place. Further, this does not require wealthy board members or board members with connections to wealthy donors. The fact that active governing boards that also do fundraising are in the minority of boards discourages me sometimes, but does not make me lose faith because I have seen this model work, and when it does, it creates very healthy and vibrant organizations.
There are three main reasons that boards don’t do their jobs, and in this chapter I am going to address all three:
- They don’t know what their job is.
- There is no accountability: they are not appreciated for doing their work or sanctioned for not doing it.
- Their dislike of asking for money is allowed to excuse them from doing it.
Let’s start with the first problem, which arises from a lack of understanding about the logic of the board as a structure.
Countries with a developed or developing NGO sector start with the recognition that an organization that does work that, by its nature, cannot be profitable, will not long exist in a for-profit economy without some financial subsidies. The primary help the government provides nonprofits is tax relief. Over the past several decades, here in the United States, a body of law has developed creating various forms of tax relief for organizations and tax credits or tax avoidance (not to be confused with tax evasion, which is illegal) for donors—both of which help nonprofits survive financially. This body of law is under the Internal Revenue Service code 501. The most advantageous status for organizations doing educational, religious, or charitable work is 501(c)(3). This is the designation that most nonprofits using this book will either have or aspire to. Organizations with 501(c)(3) status are exempt from many corporate taxes; can offer donors tax deductibility for their gifts; can receive government, foundation, and corporate funding that most individuals and businesses cannot; and enjoy a host of other exemptions from tax at both the federal and state levels. Because these benefits mean less tax revenue, which will have to be made up elsewhere, the government has also created a structure to hold nonprofits accountable for these tax advantages, and this structure is the board of directors.
The broad purpose of a board of directors is to govern the organization and make sure it runs effectively. To qualify for tax-exempt status, an organization must file a list of the names of people who have agreed to fulfill the legal requirements of board membership. The board members agree to make sure that the organization:
- Operates within state and federal laws
- Earns its money honestly and spends it responsibly
- Adopts programs and procedures most conducive to carrying out its mission
The best summary of a board member’s responsibility is contained in the State of New York’s Not-for-Profit Corporation Law, the language of which has since been adopted by many other states. According to this law, board members must act “in good faith and with a degree of diligence, care and skill which ordinarily prudent people would exercise under similar circumstances and in like positions.” The key here is the “diligence, care and skill” that “prudent people” would observe. These are serious responsibilities, and board members must take them seriously.
Unlike shareholders, no one can own a nonprofit, but the people who come closest to “owning” it are the board members. They are chosen because of their commitment to the organization and long-term vision for it. As the Council of Better Business Bureaus points out: “Being part of the official governing body of a nonprofit, soliciting organization is a serious responsibility and should never be undertaken with the thought that this is an easy way to perform a public service.”
The responsibilities of board members fall into several broad categories. How any specific organization chooses to have board members carry out these responsibilities will depend on the number of board members, the number of paid staff, the sources of the organization’s funding, and the history of the organization.
With the growth of the nonprofit sector worldwide, helping boards understand their responsibilities, helping board members be the best they can be, and helping organizations figure out the best structures and processes for their boards to use has become an industry in itself.
For our purposes, we need to focus on two responsibilities board members have related to fundraising that arise logically from the obligations they take on listed above.
THE BOARD AND FUNDRAISING
Board members have two jobs with regard to fundraising, and these obligations need to be made clear when people are recruited to the board. These obligations arise naturally from the structure:
- Each board member must make a donation that is significant for him or her.
- Each board member must participate in fundraising in some way that is helpful to the organization.
The reason that board members must take a leadership role in fundraising is simple: they have the most legal responsibility for the organization and are chosen because they are willing to take this responsibility seriously. Their behavior sets an example. When they give, other people will give, and when they don’t, other people don’t. When the board does take the lead, its members and the staff can go to individuals, corporations, and foundations and say, “We have 100 percent commitment from our board. All board members give money and raise money.” This position strengthens the fundraising case a great deal. Both individual donors and foundations often ask organizations about the role of the board in fundraising and look more positively on nonprofits where the board plays an active role in fundraising.
Board members are often reluctant to participate in fundraising activities because they fear they will be required to ask people for money. It’s true that many fundraising strategies require board members to make face-to-face solicitations. This is a skill and thus can be learned, and all board members should have the opportunity to attend a training session on asking for money (see Chapter Eight, “Getting Comfortable with Asking.”
With a diversified fundraising plan, however, some board members can participate in fundraising strategies that do not require asking for money directly. While some can solicit large gifts, others can conduct special events, create crowdfunding appeals, approach small businesses, give talks at service clubs and houses of worship, market products for sale, write thank-you notes or make thank-you calls, enter information into a database, and so on. Everyone’s interests and skills can be used. Board members inexperienced in fundraising can start with an easy task (“Help set minimum bids for the silent auction items”) and gradually move on to more difficult fundraising tasks (“Ask this person for $1,000”). Some fundraising strategies will use all the board members (selling tickets to the movie benefit), whereas others will require the work of only one or two people (speaking to service clubs or sending thank-you notes).
People often bring to their board service three mistaken beliefs that hamper their participation in fundraising. First, they feel that because they give time they should not be called on to give money. “Time is money,” they will argue. Second, if an organization has paid development staff, board members may feel that it is the staff’s job to do the fundraising. Finally, the board may be primarily composed of people who are described as “not having any money.” Let us quickly dispel these myths.
TIME AND MONEY
Time is not money. We all have exactly the same amount of time—twenty-four hours every day. But we have vastly unequal amounts of money. Time is a nonrenewable resource—when a day is gone, you cannot get it back. Money is a renewable resource. You earn it, spend it, and earn more. Further, you cannot go to the telephone company and ask to volunteer your time in order to pay your phone bill. You cannot pay your staff or buy your office supplies with your time. Finally, people are rarely anxious about asking someone for their time, but most people are quite reluctant to ask someone for their money, even though for many people, time is the more precious resource. In trainings, I often use this example: “If a board member is assigned to call three people and tell them about a meeting on Wednesday night, he or she will do it. If two people can come to the meeting and one can’t, the board member does not take this personally and feel like a failure. However, if this same board member is assigned to ask these same three people for $100 each, he or she will probably have to go to a training in how to ask for money before being comfortable carrying out that assignment.” I have conducted thousands of trainings in how to ask for money, but I have never been asked to lead a training on how to ask for time.
Comparing time and money is like comparing apples and asphalt. We waste the time of our creative volunteers when we don’t have enough money, and we waste the money of our donors when we don’t use volunteers appropriately. Board members must understand that contributions of time and money are very different, although equally important, parts of their role. People who want to give only one or the other are valuable to an organization, but are not suitable to be board members.
THE ROLE OF PAID STAFF
Paid staff has specific roles in fundraising. These are to help plan fundraising strategies; coordinate fundraising activities; keep records; take care of routine fundraising tasks such as renewal appeals; and assist board members by writing letters for them, forming fundraising plans with them, accompanying them to solicitation meetings, and so on. Generally, fundraising staff handle most or all of the process of approaching foundations or government entities for funding, and they provide the backup needed for others in the organization to do effective fundraising. The executive director and the development director need to be comfortable asking for money in person, and they need to set an example for board and volunteers, but it is impossible for a small staff to maintain all the donor relationships. Even if it were possible, it would be very unwise. Just as it is foolish for an organization to depend on one or two sources of funding, it is equally unwise for it to depend on one or two people to do fundraising.
The final reason for all board members to participate in fundraising is to ensure that the work is evenly shared. Fundraising is rarely anyone’s favorite task, so it is important that each board member knows that the other members are doing their share. If some members do all the fundraising while others are involved in evaluating programs or discussing policy questions, resentments are bound to arise. The same resentments will surface if some board members give money and others don’t. Those who give may feel that their donations buy them out of some work or that their money entitles them to more power. Those who do not give money may feel that they do all the work or that those who give money have more power. When board members know that everyone is giving their best effort to fundraising according to their abilities—including making their own gifts—the board will function most smoothly and members will be more willing to take on fundraising tasks.
OUR BOARD MEMBERS DON’T HAVE ANY MONEY
Social change organizations correctly want a diverse board—one that represents their constituency and so probably crosses class and race lines. We correctly want to bring in new and younger leadership, and we want to give people a chance to serve on our board who may not have served on a board before. If we have a truly diverse board, we will have some people on our board who live on very little money. They may work one or more jobs at minimum wage, or they may live only on their Social Security, or they may be paying down large student debt, or experiencing any number of financial hardships. It is easy to say of these people: “They can’t give because they don’t have any money.” However, the fact is that no one doesn’t have ANY money. To be a donor means to give something more than nothing. Hence giving one penny makes someone a donor. I believe it when board members say they can’t afford $100 or $1,000, but I don’t believe anyone can’t afford $1.00. And the evidence is very clear that poor people give away money, often at much higher percentages of their income than their wealthier counterparts. Your board members who don’t give your organization money are giving money somewhere, unless they are in the 30 percent of the adult population who don’t give at all. Board members don’t need to know how much each of the others gives—they simply need to know “We have reached 100 percent in giving. It adds up to $5,943 and so we have $87,000 left to raise.”
COMMON BOARD PROBLEMS AND SUGGESTED SOLUTIONS
Although each board of directors will have its own problems and tensions to be resolved, many boards have a number of problems in common. These problems are often not related to fundraising but the get in the way of the organization being effective with fundraising. Those problems are discussed here, along with some solutions.
Too Much Is Expected of Board Members
Small nonprofit organizations use all of their volunteers to augment paid staff. The smaller the organization, the more responsibility volunteers will have, becoming more and more like paid staff. To a certain point this is fine. But there comes a time when board members are taking on much more work than they had agreed to. When board members find themselves attending three or four meetings each month and spending hours reading and answering e-mail, or spending a lot of time on the telephone on behalf of the organization, they begin to dread hearing from anyone in the organization and to count the days until their term is up.
This dynamic can be changed or averted altogether by adhering to the following principles:
- Board members should understand that they can say no to tasks that go beyond their original commitment.
- Staff and board members should ensure that tasks given to the board have a clear beginning and end. Thus, when additional work is essential, board members should be assured that extra meetings will be called for no more than every month or two and that once that task is accomplished they will not be asked to do more than the minimum for a few months.
- A careful eye should be kept on what the whole board does with its time. Board members (particularly the executive or steering committee) should ask, “Are all these meetings necessary? Can one person do what two have been assigned to do, or can two people do what four have committed to do?” Consider having some meetings by conference call and doing routine business by e-mail.
- Boards should not be asked to make decisions or take on tasks for which they are unqualified. Sometimes consultants need to be brought in to make recommendations, or the board needs to be trained to handle tasks related to management and fundraising.
Individual Board Members Feel Overworked
Even if the board is attentive to the time limitations of board members, this problem can arise either because those people were given the wrong impression of the amount of work involved beyond attending regular board meetings, or because they are already overcommitted in the rest of their lives. In the latter case they cannot completely fulfill the expectations of any part of their lives, so they feel overworked even while not doing very much for the organization.
A clear and precise job description or statement of agreement will help with this problem. A tip: Don’t try to talk anyone into being on the board. When you ask people to serve on the board, tell them why they would be a good addition to the board and what you would expect from them. If their response is less than enthusiastic, let them go. We would not offer a job to someone who said, “I don’t know if I have the time.” A board role is a job—and it needs to be approached as such.
The Board Avoids Making Decisions
In this instance board members never seem to have enough information to commit themselves to a course of action and continually refer items back to committees or to staff for further discussion and research. This problem is generally the result of inadequate board leadership. The board chair or president must set an example of decisiveness. He or she needs to point out that the board can never know all the factors surrounding a decision and yet must act despite factors changing on a daily or weekly basis.
The person facilitating a meeting should always establish time limits for each item on the agenda. This can be done at the beginning of the meeting. Close to the end of the time allotted for an item, the chair should say, “We are almost at the end of time for discussion on this item. What are the suggestions for a decision?” If the chair or facilitator of the meeting does not take this role, individual board members should take it on themselves to call for a time limit on discussion and a deadline for a decision.
Very few decisions are irrevocable. Decisions can be modified, expanded, or scrapped altogether once they are made and put into action if they are not working out.
Decisions Are Made, Then Forgotten
When this shortcoming is at work, the board both fails to implement its decisions and ends up discussing the same issue again in a few months or years. Further, board members feel that they are not taking themselves seriously and that their work is for nothing. Three methods can be used to avoid this problem. One method is to appoint a member to keep track of decisions and remind the board of them. The secretary of the board can serve this function, or someone designated as board “historian.” A second, complementary method is for decisions from board meetings (as distinct from meeting minutes) to be kept in a notebook or a protected webpage, such as Google Docs, that can be easily accessed when setting the agenda, or even during a meeting. The decisions can be categorized and indexed so that they can be easily found. The chair and executive committee should review decisions frequently so that they are familiar with them.
Finally, each board member should read and keep a copy of the minutes of every meeting. Don’t rush through the process of approving minutes, particularly if they are recording anything that was contentious. At the board meetings, the board chair or secretary should ask members questions such as, “Rob, I want to make sure I captured your amendment accurately” or “Mary, can you make sure that I got all the budget modifications?” The board members then know they might be called on to review parts of the minutes and so will be more likely to read them thoroughly.
There Is No Accountability
Of all the problems that plague boards, this is the most serious. I have worked with hundreds of boards over the past four decades, most of them here in the United States but also in many other countries. I have watched as board members thoroughly discussed their responsibilities, solemnly signed their board agreements, enthusiastically endorsed the mission and goals of the organization, and then, one after another, board members didn’t do what they said they would do, and nothing happened.
Board members are like any group of human beings—classes, families, workplaces. Let’s say in your workplace you have a rule that everyone must clean up after him- or herself. But consistently, predictably, Gary does not. People see him leave dishes and cups in the sink. At the staff meeting, people indirectly call attention to the problem: “Someone has been leaving dishes in the sink” or “I am tired of doing other people’s dishes,” with meaningful glances in Gary’s direction. Behind his back, people say, “Can you believe him? I can’t believe his wife/partner/mother puts up with this at home.” But no one ever says, “Gary, are these your dishes? Can you please wash them?” Before long, other people will start leaving their dishes in the sink and Gary will not be the only culprit. Ditto board members. June says she will get all the food donated from her cousin’s store, but doesn’t, and the organization has to buy food for their event. Bob says he will ask five people to renew their donations, but he doesn’t, and the donors don’t renew until one of the staff asks them. Marge, who always does what she says, notices that June and Bob are still on the board and, except for some grumbling about them, nothing happens. So pretty soon Marge isn’t fulfilling her commitments either.
Accountability on a board is actually a very simple thing to put in place: when people say they will do something, it is written down, someone else reminds them to do it (reminding people of their tasks is a task), they are thanked when they finish it and praised in front of the board. If, after one or two reminders, the job is still not done, the board chair or someone else on the board calls and asks, “What happened? What could have been done differently? What would have allowed you to do your work?” And when, like Gary, a person establishes a pattern of saying he or she will do something and not doing it, the board chair meets with the person privately and asks whether he or she really wants to be on the board. Accountability is not to punish the Garys of the world—it is ensure that the work of the group gets done, in part by rewarding people who do what they say they will do and by surrounding them with other reliable people.
If you set a tone of expecting people to keep their commitments, being appreciative, and making sure work is divided relatively evenly, you won’t have to have very many difficult conversations.
MOVING PAST BOARD PROBLEMS
All of the dynamics described so far, as well as others such as personality conflicts, deep political disagreements, or staff-board conflicts, can be serious enough to immobilize an organization. The board and staff may not be able to resolve whatever the problem is themselves. Sometimes they can’t even figure out what the problem is. Board or staff members should not hesitate to seek help in such cases. A consultant in organization development or a mediator can help the group articulate and solve its problems. Although for a board to find itself in such an extreme situation is unfortunate, it is usually no one person’s fault. Not to ask for help in getting out of the situation, however, constitutes a failure of board or staff members to be fully responsible. I believe that conflict resolution training for board and staff is important, particularly before any conflicts arise.
Some conflict can be creative, and board members and staff should not shun difficult discussions or disagreements. There is built-in tension between program and finance committees, new and old board members, and staff and board personnel. As the late Karl Mathiasen stated in his book, Confessions of a Board Member, “My own feeling is that if you go to a board meeting and never during that meeting have a time during which you are tense and your heart beats faster and you know that something is at stake—if you lack that feeling two or three meetings in a row, there is something wrong with the organization.”
RECRUITING BOARD MEMBERS WILLING TO HELP WITH FUNDRAISING
There is a common belief that a board should have “movers and shakers” on it. Bank presidents, successful business people, politicians, corporate executives, and the like are thought to be people with power and connections to money, making them ideal board members. An organization needs to define who are the “movers and shakers” for its work. Many of the people perceived to be most powerful in a community would be terrible board members, even if they would agree to serve, because they would have neither the passion nor the interest in serving the organization. There are hundreds of successful organizations whose board members are neither rich nor famous and who have no access to the traditional elite, but whose connections are exactly what the organization needs. Belief in the mission of the organization and willingness to do the work required are of far greater importance than being part of the traditional power elite or being wealthy.
First and foremost, board members and new recruits must understand, appreciate, and desire to further the goals and objectives of the organization. Enthusiasm, commitment, and a willingness to work are the primary qualifications. Everything else required of a board member can be learned, and the skills needed can be brought to the board by a wide variety of people and taught to others on the board.
Prospective board members are found among friends and acquaintances of current board members, staff members, former board and staff members, and current donors and clients. Ideally, a prospective board member is someone who already gives time and money to the organization.
The chair of the board should send an e-mail to each prospective board member asking the person if she or he is interested in serving on the board and giving a few details of what that would mean. The e-mail should ask for an appointment to discuss the invitation in detail. Even if the prospect is a friend of a board or staff member or is a long-time volunteer, a formal invitation will convey that being on this board is an important responsibility and a serious commitment and that it is a privilege to be invited. Whoever knows the board prospect can follow up by talking to the person about being on the board. If no one knows the prospect, two people from the board should see the person. If the prospective board member does not have time to meet and discuss the board commitment, this is a clue that he or she will not have time to serve and should be removed from the list of prospects. It is particularly important to discuss the amount of time board participation requires as well as expectations of board members in the area of fundraising. Do not make the board commitment sound easier than it is. It is better for a person to join the board and discover that it is not as much work as he or she originally thought than to find that it is much more work and resent having had the commitment misrepresented.
THE ORIENTATION
After a person has accepted nomination to the board and been elected, a current board member should be assigned to act as the new person’s “buddy.” The current board member should bring the new board member to the first meeting, meet with him or her (perhaps for lunch or dinner) once a month for the first two or three months, and be available to answer questions or discuss any issues regarding board functioning or responsibilities and the organization’s work. New board members have many questions that they are often too embarrassed or shy to raise at a full board meeting. They will be incorporated into the life of the organization much faster if they can easily find the answers they need.
Before their first meeting, new board members should receive a packet of information, including a copy of the board job description, the organization’s by-laws, the case statement, and anything else that would be helpful to their understanding of the organization, such as an organizational chart, the current annual budget, brochures and other promotional information, and the names, addresses, phone numbers, and profiles of the other board members and of staff members.
Board members work best when they feel both needed and accountable. They will be more likely to keep their commitments when they know that doing so is expected and that others are keeping theirs. When this tone is established at the beginning, the board will function smoothly.
ADVISORY BOARDS
In addition to a board of directors, small organizations often find it helpful to form advisory boards made up of people who can help with various parts of the organization’s program, including fundraising. Although it involves a good deal of work and does not take the place of a board of directors, an advisory board can be helpful for obtaining advice from a particular group of people (such as doctors, researchers, journalists, clergy) or in expanding your fundraising team (bringing on non-board members to do a special event or to help solicit major gifts), or to serve as an editorial board for your publications. In some ways an advisory board is an administrative fiction. Unlike a board of directors, an advisory board has no legal requirements, no length of time to exist, and no purposes that must be fulfilled. Such a board can consist of one person or two hundred.
Advisory boards are variously named depending on their functions. An advisory board may be called a community board, auxiliary, task force, committee, or advisory council. Some advisory boards meet frequently; others never. Sometimes advisory board members serve the group by lending their names to the organization’s letterhead. In at least one case, an organization’s advisory board was called together, met for the first time, then disbanded, all in the same day, having accomplished what they had been asked to do.
You can form an advisory board for the sole purpose of fundraising. Since this board has no fiscal responsibility for the overall management of the organization, its members do not have to meet the recruitment requirements of the board of directors.
Some people like to be on advisory boards. It gives them a role in an organization without taking on the full legal responsibilities of a member of the board of directors.
When to Form an Advisory Board
Organizations sometimes see an advisory board as a quick fix to their fundraising problems. They may reason: “Next year our group has to raise three times as much money as it did this year. Our board can’t do it alone and we don’t want to add new board members. So we’ll just ask ten rich people to be on a fundraising advisory board, and they’ll raise the extra money we need.”
There are two main problems here. First, finding “ten rich people” is not that simple. If it were, the organization would already have a successful major gifts program. Second, a wealthy person doesn’t necessarily have an easier time asking for and getting money than someone who is not wealthy. Nor will he or she necessarily be more willing to give money than a “not rich” person.
There are, however, several conditions under which an advisory board is a solution to a fundraising need:
- Although the board of directors is already doing as much fundraising as it can, it is not enough. An advisory board works best when it is augmenting the work of an active and involved board of directors.
- An organization has a specific and time-limited project that needs its own additional funding. This can be a capital campaign, an endowment project, or a time-limited program requiring extra staff and other expenses. The advisory board commits to raise a certain amount of money overall or a certain amount every year, usually for no more than three years.
- An organization needs help to run a small business or put on a large special event every year. The type of advisory board that runs a small business is usually called an “auxiliary,” as it does not have a time-limited function.
- An organization wants help in raising money from a particular part of the private sector, such as corporations, businesses, service clubs, or houses of worship. The advisory board, composed of representatives from these particular sectors, plans the campaign, and the members solicit their own colleagues.
Forming the Advisory Board
If you decide that an advisory board is a good tool to help with fundraising for your organization, create clear written expectations for this group. Be specific: set an amount that you want the group to raise as a goal, the number of hours you expect each person on the board to work (per month, per event), and the number of meetings each will need to attend. Also suggest ways for them to raise money. If you are forming this board because you don’t know how to raise the money needed, let them know this at the outset, so that one of your expectations is that this group of people will design and then implement a fundraising plan.
Be straightforward with prospects for your advisory board. Tell them your goals and choose people who can work to meet those goals. Use the same priorities in choosing members as when forming a board of directors. Of primary importance is the members’ commitment to your organization and their willingness to express that commitment by fundraising.
Once you have formed an advisory board, the staff of the organization must provide back-up support as needed and guide the board as much as necessary. The chair of the board of directors or another designated representative should receive reports from the advisory board and frequently call or write the advisory board’s chair to express the organization’s appreciation for the advisory board’s work. Advisory board members should receive minutes from the meetings they hold, a staff person should phone each member from time to time in between meetings to seek advice or to tell the person some news about the organization, and members should generally be treated like major donors to the organization (which they are).
Allow the advisory board to develop a direction. The first few months may be slow, but once an advisory board begins to work well and carry out its commitments, its members can raise a substantial amount of money and may be willing to serve for several years.
USING OTHER VOLUNTEERS FOR FUNDRAISING
In addition to, or instead of, forming an advisory committee, many organizations have gone to a structure with a smaller board (five to eleven members) and then used volunteers who are not board members to augment committees as needed. In this structure, there are no standing committees; instead, each committee is put together for a specific time and task. For example, two board members take on a major gifts campaign. They recruit five other people to help them for six weeks to meet a goal of raising $50,000 from major gifts. These five people care a lot about the organization but can’t or don’t want to take on full board responsibility. They are willing to work hard for a short period of time. In these organizations, most or all future board members have first served on one of these ad hoc committees. Coming on the board becomes a reward for work well done.