Boards must engage in learning as a core competency
Marty Martin
Serving on a
board of directors is a learned skill and an art. Successful boards get that
way by learning to ask the right questions and then applying an appropriate
answer to their nonprofit’s unique circumstances. To be effective requires a
board to know and understand their nonprofit and the environment in which it
operates. Thus, a board must engage in learning as a core competency.
There are
three broad areas which a board must learn: leadership and management,
stewardship of resources, and public responsibilities. These overlapping and
intertwined areas are embedded in nearly every significant issue that comes
before board.
Leadership
and management
The board’s
first responsibility is to lead. Effective boards do so explicitly through
strategic and management direction and implicitly through modeling clear
purpose. Board members lead first and foremost by their personal and collective
example. Their actions set the tone and direction for the organization.
A board of
directors has the legal duty to manage the affairs of the corporation. For an
organization with staff, this occurs when a board delegates the authority to
act on its behalf to its senior executive. Once authority is delegated, the
board manages through its senior executive. This requires establishing performance
expectations and holding the senior executive responsible to accomplish them.
While the board may delegate its authority, the board can never delegate the
responsibility for what occurs as a result of its delegation of authority. They
are the body legally accountable for the organization.
Stewardship
Stewardship
is a board’s moral commitment and responsibility to its stakeholders and
community at large. The board is entrusted with assets derived from others.
During their tenure board members have the responsibility to manage those
assets with absolute integrity. At the same time, the board is expected to use
these assets effectively for the benefit of others.
Finally, the board is accountable for how (and how well) it
has deployed the assets entrusted to its care. Good stewardship may require
that the board maintain a higher standard than what is legally required in a
given situation—and a high performing and ethical board seeks to maintain the
highest of standards.
As stewards, boards are responsible for many different types of nonprofit resources (also called organizational capital). A nonprofit’s organizational capital consists of that unique combination of resources which result in its competitive advantage and ability to survive and thrive. Key resources include the nonprofit’s culture; integrity and reputation; human capital; social and political capital; intellectual and knowledge capital; program relevance and efficacy; and financial capital.
Too often when a board focuses on fundraising (i.e. acquiring financial capital) it fails to recognize its financial statements are lagging indicators of how well the nonprofit uses all of its organizational capital. Good stewardship and proper financial management require financial literacy, but the board must steward all elements of organizational capital.
Public
responsibilities
Most board members have had a basic introduction to the
board’s three legal duties: to act in good faith and with the dual duties of
care and loyalty throughout their board tenure. What these duties mean in a
given situation may challenge a member and the board. If violated, they become
the source of significant problems for both. Laws at the local, state, federal,
and international level (for those organizations that reach beyond U.S.
borders) also affect many board decisions and nonprofit actions. Most board
members lack the technical and professional expertise to know these two areas
and are well advised to retain experienced and independent outside counsel to
advise them whenever legal matters arise.
In addition to its legal duties, the board also has a public
responsibility on behalf of its nonprofit to sustain and improve the value
stakeholders and the general public place on the organization. Stakeholders
have both explicit and implicit expectations. Fulfilling stakeholder and public
expectations provide for the nonprofit’s continuing relevance and existence.
Finally, a board always operates in the court of public
opinion. Increasing transparency and rising public awareness and expectations
for a nonprofit and its board present continuous challenges. Boards often are
one incident away from this court. This is another reason why a board should
establish and maintain the highest professional and ethical standards (an
aspect of stewardship described above).
Educational
opportunities
An effective board first determines how best to use its
members’ skills and knowledge by systematically engaging in deep learning about
its nonprofit’s needs and capacity to fulfill its mission. It then establishes
priorities and secures resources to meet them. This is the essence of a board’s
responsibility to manage its nonprofit. No board knows everything needed to
handle its three core areas (leadership, stewardship, and public
responsibility). With skill and knowledge gaps identified, the board can avail
itself of many learning opportunities.
There are nonprofit programs offered by nonprofit
associations, universities and community colleges, IRS resources, and webinars.
Consultants and trainers can provide individualized board training programs.
Publications, articles, and websites offer useful reference materials. External
professionals can provide a board with needed expertise. Board members can also
teach one another about topics affecting their nonprofit. Many boards set aside
a portion of each meeting for some educational activity—either learning about
the organization itself or about skills that deepen its leadership,
stewardship, and public responsibilities.
A board must remain relevant and effective if their
nonprofit is to succeed and thrive. Ultimately, effective nonprofit boards
realize learning must be their core competency. Their devotion of time and
resources to education pays off in a better functioning board—and a better
operating nonprofit.
This story was first
posted by First Nonprofit Foundation.
Marty Martin, J.D.,
M.P.A., of Martin Law Firm in Raleigh provides legal services and training
related to nonprofit and tax exempt organizations. He recently presented a webinar
for Philanthropy Journal titled “How to Start a Nonprofit: A Step by Step
Guide.” It is available for download at our webinar archive.
Labels: board development, board governance, board learning, First Nonprofit Foundation, Marty Martin
1 Comments:
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