Every corporation – for profit and not-for-profit – needs a strong and effective board of directors. A nonprofit arts organization is no different. Its board of directors or board of trustees is ultimately responsible for the financial and general management of the organization. It is legally responsible for the actions of the corporation and must ensure that the organization adheres to all applicable laws and the parameters defined in its by-laws and articles of incorporation.
Simply put, the board has the responsibility to provide oversight, lead, strengthen, and support the nonprofit arts organization.
For a small or relatively young organization, the board typically serves as what is considered a “working” or “hands-on” board, doing everything the organization needs from putting up the exhibit to distributing flyers to raising money to pay the artists, in addition to its oversight activities. This board often consists of the founder(s) and a small group of his/her friends and colleagues, which begins to expand as it engages others with new areas of expertise and knowledge that help fulfill the organization’s needs.
With the addition of staff, the board frequently evolves into what is often called a “policy” board and begins to focus more heavily on governance. Governance can be defined as 'the exercise of authority to ensure a functioning method or system of overall management.' Good governance lies at the heart of great organizations because it not only protects the corporation from liability but provides an entire framework for growing the organization, dealing with change, and furthering the mission. Governance includes many functions including the hiring and evaluating of the executive director, developing and approving budgets, strategic planning, and ensuring legal and contract compliance. Governance also involves asking the tough questions that will keep the organization true to its mission, effective, successful, and healthy.
In addition to oversight, all nonprofit organizations depend on their board members to provide support through personal financial contributions, raising money, special skills and expertise, and as advocates and ambassadors for the organization in the community. While fiduciary responsibilities never diminish, it is typical for mature boards to spend a significant proportion of their time and energy on advocacy, fundraising and resource development once the core structures and systems of the organization are in place.
To get started, we've selected some resources below that provide general toolkits for boards dealing with a broad range of issues. The sub-sections that follow in this chapter explore specific functions and areas of board activity, from roles and responsibilities, to structures, development and best practices.
General Resources
Organizational and board structures vary widely based on the age, budget size, and sometimes the discipline of the organization. These structures are defined in the initial charter documents of the nonprofit organization, namely, the by-laws and articles of incorporation. However, board structures evolve over time as the organization matures and shifts key tasks and areas of responsibilities from the board to staff and vice versa. These changes require regular amendments to by-laws and may include:
In the board of directors overview, we aluded to organizational stages of development and how they can impact the work and structure of the board. "Working boards" are often associated with younger, smaller organizations, while "policy boards" are generally indicative of maturing, larger organizations. There are a number of theories about the stages of development of nonprofit boards and their organizations, and the majority of these lifecycle models are fashioned on biological analogies of birth, infancy, adolesence, maturity, and middle age.
Below are a number of links to resources that explore structures and lifecycles in more depth, and the charter documents including by-laws and articles of incorporation that should define these structures.
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The functions of governing boards and trusteeship are receiving attention as never before in the wake of the media's spotlight on transparency and internal control issues in for-profit corporations. In both the for-profit and nonprofit sectors, there is a growing acceptance of the notion that effective board governance determines organizational success. Leadership must come from both strong executives and strong boards that work together to fulfil a number of core responsibilities. BoardSource and other providers of best practices for boards summarize these responsibilities as follows:
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The recent media attentinon on board governance has given rise to a movement in the nonprofit sector to develop best practices for boards. There are a number of excellent resources to help your organization implement best practices in your daily operations. BoardSource's Twelve Principles of Governance that Power Exceptional Boards, available for purchase at the BoardSource website is a great place to start, along with the links below. There is no longer any doubt that the best practices discussed in these resources differentiate great organizations from satisfactory or ailing organizations.
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Committees allow for detailed planning and evaluation work to be performed by a smaller group of subject matter experts that reports to the full board on their findings and recommendations. Using committees in the right way can be a very effective tool for boards to work efficiently and productively.
A strong board knows when to table a complex issue for review by committee rather than trying to resolve or develop the issue at a regular board meeting. In this manner, the committee structure plays a major part in the board's strategy to manage time, make board meetings productive, and create a more efficient use of volunteers' time and energy.
A board committee's primary responsibility is to recommend policy to the full board. Committees are normally chaired by a board member and need to have at least two people but not so many that it bogs down its ability to complete its specific responsibilities in a timely manner. Some organizations include non-board members on their committees. This is a good practice to help bolster expertise and accomplish the task at hand.
The resources below outline the different types of committees and their primary functions. There is a trend to minimize the use of standing committees, and in their place, build ad hoc committees to deal with strategic priorities each year.
Recruitment
When recruiting for new board members, BoardSource suggests personal characteristics to consider:
Conducting a board orientation for new board members is an excellent way to jump start their board service and ensure that they have a clear understanding of the organization and feel a part of it. It is a key step in building a team of individuals working together toward a shared goal.
An orientation should involve all new board members, key board and staff leadership. Board members, as well as staff, need to take a role in sharing information about the organization’s programming, history, organizational structure, finances, board responsibilities and expectations, board rules and operations, and strategic directions with new members. Members need to get acquainted with the basic issues that face the organization, the board culture and style. In addition to being informational, the orientation needs to include time for members to get to know each other personally.
A binder of key organizational documents is helpful to complement the orientation and provides a good reference tool for new members. Suggested contents for the binder:
Creating a mentoring or buddy system – pairing a new director with a veteran director – can be helpful in making the new member feel welcome and integrated into the team. Some organizations require new members to serve on particular committees in their initial year to gain familiarity with the organization.
While you continue to provide opportunities for new members to “come up to speed”, don’t neglect the development of your longer tenured members. Provide opportunities for all members to learn; some organizations have integrated into board meetings presentations or discussions on pertinent issues to the organization - artistic or operational – or its particular artistic field. Others encourage board member participation in workshop and training sessions or attendance at local, state or national conferences.
Contact the Arts & Business Council of Chicago to learn more about our Board Development Consulting program, offering board training, coaching and collective capacity-buidling.
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Board self-evaluation is one of the most under-utilized and yet most important processes to strengthen the effectiveness and improve the health of a nonprofit board. When done well, the two components of this process - individual board member self-evaluation and collective board self-evaluation - can reveal significant strengths and weaknesses in the following areas:
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Every issue pertaining to a nonprofit board of directors relates to the topic of governance, the overall princple and set of practices for ensuring accountability and compliance, transparency, healthy growth and long-term security. Some of the most prominent areas of nonprofit governance today in the post-Sarbanes-Oxley world include:
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