A well-composed board of directors is vital to the workings of a nonprofit organization because of how many important responsibilities they have. The board handles governance matters, strategic planning and oversight, and risk management. Boards are accountable to the government, their stakeholders and their communities to adhere closely to their stated mission. In addition to advancing the organization’s mission, the board must take care to use funds appropriately and to prevent fraud. Developing a well-composed board requires having a bit of knowledge about governance and taking the time to assess the board’s current talents to determine what additional needs the board has.
Choosing Nonprofit Board Members
In gauging a board member candidate’s fitness for nonprofit board service, some nonprofits develop a short questionnaire to help them to better understand the candidate’s intent and interest. Such a questionnaire typically asks general questions, like the following:
- Are you familiar with our organization’s mission?
- Do you have a passion for our mission?
- What makes you interested in the organization?
- Are you willing to commit your time, resources and finances to the cause?
- What skills and abilities do you possess that you feel will benefit our organization?
- Do you have any financial expertise?
- Do you have any governance expertise?
- Do you feel that you have the necessary character qualities of integrity, ethics and honesty to fulfill your commitment to the organization?
- Do you understand the importance of accountability, compliance and transparency?
Additional Considerations for Choosing Nonprofit Board Members
Just as it’s important to consider which candidates will make good board members, it’s also important to consider the issues that may make someone not the best candidate for your nonprofit board. The Internal Revenue Service (IRS) doesn’t allow nonprofits to have primarily family and friends on their boards.
Wealthy or famous people often have an affinity for a cause that’s close to their heart, but that doesn’t always mean that they’re a good fit for the board. Wealthy people may want their name connected to a certain cause to enhance their reputation. That’s not necessarily a bad thing, as long as the board is on the same page as the wealthy person in regard to their role on the board. For some wealthy people, serving on a board of directors for a nonprofit is simply a matter of prestige. The nonprofit mutually benefits because they get large donations in exchange.
If it’s not appropriate to keep such an individual on the board, there are other ways that the board can get them involved in the organization. The board might suggest that the wealthy person just becomes a donor or invite them to an event as a well-publicized special guest, or perhaps, appoint them to an advisory board. As the board needs to have a well-rounded set of skills, it’s important to get the best people in specific areas, such as finance, legal, accounting and fundraising, and put other potential board candidates with similar skill sets on deck for succession planning.
Legal Compliance for Nonprofit Boards of Directors
The IRS typically requires nonprofits to have at least three members on their boards. There’s no legal requirement for board size based on the organization’s size. The average size of nonprofit boards is about 17 members.
In similar fashion, the government doesn’t specify the length of terms for nonprofit boards. However, board terms aren’t intended to be perpetual because it’s important to continually have a fresh set of perspectives coming in. Most nonprofit boards set their terms between one and five years and stagger the terms so that the whole board doesn’t turn over at once. Nonprofits spell out term lengths in their bylaws. The IRS expects boards to meet at least once a year. Best practices indicate that nonprofit boards should meet at least four times a year. Nonprofit boards are required to have at least an annual meeting at which they’re expected to pass the annual budget, discuss operational and strategic plans, and vote on any important matters.
Setting Up Your Nonprofit Board Composition Matrix
It’s nearly impossible to keep track of every board member’s skills, demographics, personal attributes, and other skills and abilities they bring to the board. A matrix provides a snapshot of what the current board brings to the table and identifies areas of skills that the board doesn’t have. Nomination committees should strive to compose a board that has a strategic combination of knowledge, experience, personal attributes, competencies, connections, skills and diverse perspectives. Annual board self-evaluations set the stage for developing a board that’s capable of sound planning, good stewardship and governing the nonprofit.
Setting Up a Nonprofit Board Composition Matrix
A matrix is just a simple grid or spreadsheet with rows and columns. Along the left side, create a column labeled skills, abilities, competencies, etc. List the specific qualities down the rows. Across the top, label the columns with the names of the current board directors. Leave a space and list the names of potential board candidates. From there, simply fill in the boxes down and across according to the skills and competencies that each board member or candidate has.
It may be helpful to list certain skills, competencies and demographics under specific categories, as follows:
- Nonprofit finance
- Nonprofit governance
- Business development
- Institutional memory
- Organizational learning
- Understanding of mission, vision, values
- Strategic thinking
- Using data, problem-solving
- Accurate reporting, transparency
- Scanning for new information
- Integrating learning, generalizing to new situations
- Faith-based organizations
Review this sample nonprofit board composition matrix to help you get started.
Board Management Software Solution for Nonprofit Board Composition Matrix
Board management software programs are designed to assist with all governance activities, including board recruitment and composition. Diligent offers a host of software solutions through Governance Cloud, including a program for board self-assessments. In addition, Diligent offers unlimited cloud-based storage for easy access to all board documents. Perhaps the most advantageous feature in a board portal system is its high degree of security and the ability to set user permissions. Governance Cloud allows nonprofit board directors to be fully mobile. The platform allows them to access documents using any electronic device in any setting. That means that board development can be a year-round activity.