Not-for-profit board members should watch out for pitfalls

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Updated: August 4, 2011 4:20PM

Many people in Lake Forest and Lake Bluff make extraordinary philanthropic contributions by serving on not-for-profit boards.

Serving can provide support for worthwhile organizations that transcends monetary contributions. An individual who volunteers time for such involvement will find the work rewarding and productive while connecting people who have common interests. A young person who serves on a not-for-profit board will gain valuable insight and experience in a governance environment.

Whether a person is called to work on the board of a church, charity, hospital, museum, private school, or golf club, there are some distinct pitfalls that the new trustee or board member should consider. Some of these pitfalls are similar to those that directors face when they serve on commercial company boards. It might surprise new board members that the complexity of philanthropic organization objectives and the breadth of many organizations’ constituencies often means that these board duties can be more challenging. People who volunteer to serve on a not-for-profit board should be alert to at least three potential difficulties.

Benevolent depots

Successful leaders are people who seek to make decisions when there is disagreement around them. Whether running a large company or a new start-up business, the person in charge will often be called upon to make final decisions on matters that are controversial. This ability to make final and unilateral decisions is characteristic of good leadership. A person in charge is used to being the final arbiter in contentious or complex issues.

Boards are usually made up of a number of these forceful and decisive people. But boards must function as democratic institutions where one decision maker does not often determine the course of action. Many not-for-profit organizations have multiple constituents and a variety of different objectives that have to be balanced. A good board member in such an organization will recognize that decisions are made as a group and with the opinions of many people at the board room table.

Even in a not-for-profit organization with a strong executive director or with an accomplished chair person, good board decisions usually distill from active board discussion and democratic agreement on issues. Good board members will encourage each other’s involvement with courtesy and unselfishness and will support the final group decision. This idea of democratic decision making and consensus building can be new or uncomfortable to forceful leaders who are used to being the sole and final decision makers in other matters.

Why me?

A person who is asked to serve on the board of a not-for-profit organization must know why they are being asked to serve. What are the requirements of the role? Is the new director a marquis board member whose very name on the charity’s letter head is useful? Or is the person being asked to join simply as a funding contributor?

Many board members are recruited as a courtesy to major contributors and these contributions are expected each year. At the very least, most philanthropic boards expect 100 percent board participation in yearly development and funding drives.

Most of the time, people are asked to join an organization’s board because they bring specific functional or area expertise. This expertise could include financial or accounting skills, development and fund raising connections, or industry and technical skills. Smaller organizations would have difficulty affording similarly accomplished high powered help if skilled people were hired onto the staff. If the new board member has specific skills, there should be a preliminary discussion about the time commitment and project work that will be part of the new person’s responsibility as a member of the board.

Governance

One of the most important considerations for an independent director who serves on the board of a commercial enterprise involves the defining the border between governance and management. The same consideration applies to not for profit boards. How does the role of the board member differ from the role of the operating managers like the executive director or the other officers?

A board that extends the governance role into operating management will be in danger of losing their staff. Conversely, a board that does not fully attend to governance issues will lack fiduciary oversight and will lose strategic influence of the organization. There could be considerable personal exposure to individuals who serve on the board of an organization that lacks proper fiduciary oversight.

A good board will attend to governance issues like succession and pay of the staff, development of contributors, and proper safeguards on budgets and expenditures. This active involvement in governance will stop short of the day to day operations of the organization, which is, after all, what the staff is paid to do. A new board member should quickly acquire a clear understanding of the different governance responsibilities as compared with operating or management work.

Serving on the board of a not-for-profit organization can be rewarding. The board member provides valuable expertise and involvement with the community in a way that serves compelling causes. The board member will have an opportunity to contribute to a cause that is important to them and that will connect them with other like minded people. A person who wishes to be part of a particular worth while effort as a board member of a not for profit organization should be aware of the pitfalls and significant responsibilities of such wok.

Bob Gariano is President of RGA, an executive search firm in Lake Forest that recruits senior executives and board members for public and private companies. Bob can be reached at rgariano@robertgariano.com