Operations

Common Mistakes by Nonprofit Boards — and How to Avoid Them

| Updated August 17, 2018

Keep the focus on providing guidance and strategic direction

An effective board plays a critical role in helping your nonprofit achieve its mission and vision. But all too often, nonprofit boards underperform — even those with a deep commitment to the organization. To foster a strong board, understand the most common board oversights and mistakes.

Not understanding mission and vision

It's crucial that board members never lose sight of why they're there — to guide the executive director or chief executive and provide oversight and strategic direction. This calls for a deep understanding of the organization's mission and strategies to achieve it. Boards should set or review organizational priorities regularly, and come to a consensus on actions and a timeline for each. They should also implement formal processes for evaluating organizational performance, ensuring that resources are well spent.

Lack of awareness of tax legislation

Board service comes with real responsibilities and consequences for failing to live up to them, which calls for vigilance at every step. For example, eligibility for tax relief or exemption depends on compliance with certain legal requirements (depending on where you're operating). The board must be fully aware of these. Board members must also understand the penalties or concerns related to overpaying key employees or other insiders, engaging in excessive lobbying or political activities, accommodating tax-shelter transactions, and so on.

Operating with outdated governance documents

Nonprofits often shift their mission or purpose, or develop governance practices that don't comply with the original governance documents. In light of this, boards should review governing documents and bylaws regularly — and update them whenever needed.

Little knowledge of what makes a nonprofit tick

Professionals with corporate backgrounds routinely sit on nonprofit boards. As valuable as their skills and contributions might be, it's important to note that nonprofits are fundamentally different than for-profits. This makes it important to also recruit board members experienced in areas and issues relevant to the nonprofit, including volunteer management, indirect costs, fundraising, and working with constrained budgets. The most effective boards are well balanced.

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Loss of objectivity and accountability

No one owns a nonprofit organization and no single committee, director or individual can control it. That said, it's easy for boards to be swayed by a persuasive CEO, founder, executive committee or board chair. When this happens, critical thinking and objectivity may take a back seat to admiration. Similarly, if a board member is being compensated for service or receiving special perks, he or she may be reluctant to rock the boat. But in keeping with a board's role to help the nonprofit realize its mission, objectivity must prevail. The onus is on every board member to cultivate an honest and respectful exchange of ideas.

Breaking confidentiality

Maintaining confidentiality is inherent in the duties of board service. Once an issue is settled by a board vote, members who voted against the majority must present a united front. If a vote is so disagreeable that a board member can't get past it, he or she should consider resigning.

Lack of effective oversight

Boards are entitled to delegate tasks to others in the organization or to outside consultants, but only if they provide sufficient oversight — typically in the form of adhering to policies and procedures. These may include conflict-of-interest policies, executive compensation policies, travel and expense reimbursement policies, and so on. Tasks that require more time may be delegated to board committees.

Impeding the director or staff

When a board holds an executive director or chief executive to excessively high standards, gets involved in the oversight of day-to-day work, or makes direct demands on the staff, it detracts from its fundamental task — to provide guidance and strategic direction. Conversely, the director or staff shouldn't invite micromanagement by asking the board to address issues outside of its scope.

Failure to cultivate board diversity

It's not unusual for the initial board of a nonprofit to be made up of the founder's friends and advisers. But that can set a precedent for filling future vacancies with other friends and advisers, creating homogeneity instead of diversity. As with a for-profit organization, board members of diverse backgrounds and skills provide what every organization needs to do and be its best — a variety of valuable perspectives.

MissionBox editorial content is offered as guidance only, and is not meant, nor should it be construed as, a replacement for certified, professional expertise.

References

CharityLawyer: Top 10 nonprofit governance mistakes (from a lawyer's perspective) by Ellis Carter (2009)

Blue Avocado: Ten biggest mistakes boards and executives make by Jan Masaoka

Wisconsin Historical Society: Why nonprofit boards fail

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