Effective Nonprofit Governance: 3 Tips for Success
Every nonprofit is different, from its unique mission to its matchless community impact. That’s why your leadership team must be properly equipped to supervise your nonprofit—their role is unique to the needs and standards of your organization!
Leaders will succeed when they have the necessary training and resources to comply with your nonprofit’s legal and ethical standards. There are three ways your nonprofit can set its leaders up for success:
Provide orientation and training for leadership.
Retain thorough and accurate records.
Regularly assess your nonprofit’s board.
By supporting your nonprofit’s leaders, you’ll guarantee effective governance that will boost the overall success of your organization.
1. Provide orientation and training for leadership.
When you started your nonprofit, you established your charitable purpose, mission, and bylaws. You’ve decided how your nonprofit will run, but you have to communicate that to your nonprofit’s leaders for them to align with your values!
Your organization’s board of directors agrees to hold fiduciary responsibility—or the legal duty to serve the nonprofit’s interests before their own. At the start of their leadership role, make your expectations for their governance clear. While specific duties will vary based on your nonprofit’s unique needs, here are three common ones:
Duty of care: Officers and board directors are responsible for exercising ordinary and reasonable care, which means working in the best interest of the nonprofit. For example, they should keep the organization’s best financial interests in mind when approving or developing the nonprofit’s budget. What would be the most financially responsible for your organization, and how can your budget further your mission?
Duty of loyalty: When it comes to decision-making, your nonprofit’s leaders should be fully devoted to the organization. They must be careful not to put their personal interests above those of the nonprofit, and should disclose any conflicts of interest if they exist. Your leaders are also obligated to protect the nonprofit’s confidential information.
Duty of obedience: Compliance with the nonprofit’s bylaws and policies is a crucial part of leadership. This also means complying with any state or federal legal requirements and ensuring the organization’s activities comply, as well.
Develop training programs and materials using similar segmentation strategies as used for donor communications: consider factors such as professional qualifications and history of involvement to determine how you’ll approach training your board directors.
For example, directors with a background in financial management careers might require a simple refresh of the nonprofit’s budgetary structure but need more thorough training when it comes to nonprofit policies or legal filings. Once you’ve identified the needs of your leaders, hold orientation and training sessions for new leaders to clearly establish their roles and responsibilities.
2. Retain thorough and accurate records.
Among other duties, your board will develop or approve the annual budget, ensure accurate accounting practices for Form 990 filing, and handle all your nonprofit’s money. Missteps hold serious, often costly, consequences. For example, Foundation Group’s guide to filing Form 990 warns that failing to file results in a $20 penalty per day that the form is late, plus compounded interest.
Prevent unnecessary penalties by keeping organized, accurate, and easily accessible records. You should maintain an effective database by:
Recording everything. To give full context on your organization and its finances, your records should be complete. Track every donation and expense, so your nonprofit’s leaders will be well-informed when approaching the annual budget.
Keeping data hygienic. Keeping track of every financial record will result in a massive amount of data to track. Make sure each data point is up-to-date and as detailed as possible by keeping your donations and transactions appropriately organized.
Being transparent. Share your finances by disclosing your financial performance in a timely and reliable manner. Make it easy for your leaders to understand by breaking the information down in meetings, supplementing financial reports with infographics, and answering any questions that arise. That way, your leaders will fully understand the situation and be able to appropriately strategize to handle your finances most effectively.
Not only does your board of directors need this information to properly lead your organization, but your other constituents can benefit from thorough recordkeeping. For example, executives need financial information to craft board reports, and staff members need to know the specifics of each program’s financial needs to target their fundraising efforts.
3. Regularly assess your nonprofit’s board.
Once your nonprofit’s leaders are fully equipped with the training and information they need to fulfill their roles, all that’s left is for them to get to work! However, it’s up to you to make sure they continue to fill these roles over time through regular assessments.
In a board evaluation, you should consider:
Committee effectiveness: Consider your nonprofit’s current goals and how the board has worked to accomplish them. How effective were your nonprofit’s leaders and in what ways could they have improved their strategies?
Strategic plan: Where does your nonprofit want to go in the future? Evaluate your priorities and set measurable goals in light of your organization’s mission. Then, assess how your board plans to achieve your future goals.
Financial performance: Observe your nonprofit’s financial position and the impact your board has had on its budget. Ensure the best nonprofit bookkeeping practices and budgetary decisions have been upheld.
Overseeing your leaders means holding them accountable. When your nonprofit’s leaders fulfill their roles with integrity, they’ll successfully lead the nonprofit toward fulfilling its charitable purpose and accomplishing its mission.
Effective nonprofit governance directly impacts the success of your organization, so empowering leaders to do their best should be a top priority! As they work to lead your nonprofit toward success, be sure to show your gratitude for their efforts.
To put even more checks and balances in place, delegate tasks to subcommittees or outsource to experts. When roles are appointed appropriately, everyone on your nonprofit’s team will work together to achieve your goals and uphold the integrity of your organization.