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Not for profit new Board members
One of our team members joked last month that it must have been ‘Boards Behaving Badly Month’ because they had heard a few sorry tales of Boards doing all manner of things that were not really within their governance remit, were operational matters or were not even in the best interests of the organisation!
Now we find ourselves deep in AGM season, where non-profits of all shapes and sizes will be electing and inducting new Board members.
We thought it would be the perfect time to share our hopes for the season.
Welcoming new Board members
Our wishes for new Board members – to help avoid being a ‘Badly Behaving Board’ – are that you:
- Join your Board with an enquiring mind and enthusiasm for the organisation
- Receive a good induction, including information on strategy, risk, performance and finances, and a briefing conversation with the Chair
- Understand where governance ends and operational management begins
- Are encouraged to ask questions
- See quality reports that help the Board to focus on the key issues and risks
- Engage with the finances – each Director must be able to assure themselves of the organisation’s position and performance and know that the organisation is solvent
- Know which hat you are wearing – even on a representative Board, you are still there to act in the best interests of the organisation you are on the Board of.
Financial governance
Let’s talk a bit more about financial governance – because that is our favourite thing.
As a new Board member, how do you orientate yourself with the organisation’s finances?
First, we’d suggest getting familiar with the sources of revenue – where does it come from and how secure is it? How much discretion does the organisation have in how the various revenue streams are expended? What happens with unexpended funds – do they have to be returned?
Second, understand the key expense categories. Employment costs are probably the biggest category – how big? What percentage of your secure revenue does employment costs represent? Which of the organisation’s costs are fixed and which are variable?
Third – what are the reports like? Hopefully they are nice and concise, with the ability to get further detail if you need it. And we hope the Profit & Loss is against a Board-approved budget, and the Balance Sheet shows a comparison to end of last financial year, which should now have been audited. We also hope that the format is meaningful and that, once it is to the new Board’s requirements, the layout and information presented are consistent month to month.
Congratulations if you already have a set of KPIs built into your finance reporting to guide the Board’s attention and provide an easy view of the important measures.
Hopefully, they relate to the strategic plan so that the Board can easily monitor progress and the strategic plan is live and embedded in everyday activities.
If you don’t already have KPIs, why not have a session with the whole Board on finance strategy and agree the key metrics you want to see presented. It is best if the treasurer and senior management, including finance, are involved in this – you don’t want to end up with an enormous list or with indicators that can’t be measured.
So, those are our best wishes of the (AGM) season to all the new Board members out there and a wishlist for a high functioning Board.
Avoid the pitfalls
It’s also important that we discuss the other side of the equation… what are some of the pitfalls that you want to avoid? We have witnessed a few occasions of ‘bad board behaviour’ recently and the actions fall into two separate camps.
First: don’t get too involved in the detail. Every little variance is not worth your time – it really doesn’t matter if postage is double the budgeted amount, especially when it comes to a grand total of $640. (We don’t know why, but postage really seems to get people riled up.) Set guidelines for how you want variances to be reported – eg. variances +/- 10% and >$5,000 – must have an explanatory note. The % and $ values for each organisation will depend on the scale of your budget.
Note that we’re not saying ‘don’t ask questions’ – transparency is critical to the health of any Board – we’re simply saying ‘ask good questions’.
As well as not diving into transactional detail, we also encourage Boards to accept that the CEO and staff have expertise. The Board’s role is to drive strategy, not operations. Having a strategic plan in place is a great tool to guide the organisation’s activity and to hold both the CEO and the Board accountable.
Second: as a Board member you participate in collective decision making. Personal agendas have no place in the boardroom.
The decisions made by the Board are binding, whether you agree with them or not. Sometimes decisions will go your way, sometimes they won’t.
Sometimes those decisions will be deal-breakers – in which case you need to decide whether to work with the decision made or to exit the Board.
Whichever path you choose, tread it with dignity. Be constructive as opposed to being destructive… if you remain involved – for example, the AGM may not be the best place to air your differences.
Consider other ways to address any discord or clash of ideas, rather than provoking conflict. And we encourage all members to be aware that the internal politics within the Board have an impact on the staff and the ability of the organisation to deliver on its mission.
Embrace your role as a new Board member and always remember that the purpose of the organisation should remain above personal politics.
Read more not for profit governance articles.
