The Little Book of Boards by Erik Hanberg Summary

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The Little Book of Boards Cover

The Little Book of Boards by Erik Hanberg
A Board Member’s Handbook for Small (and Very Small) Nonprofits

My Thoughts

This handbook is designed to be the tool board members need to understand the roles and responsibilities of being on a board of directors. Especially the board of directors of a small nonprofit.

The companion website for this book is forsmallnonprofits.com

My Favorite Quotes

  • Raising questions is an important duty of a board or individual board member.
  • A board member at a nonprofit needs to be ready to consider new ways of living its mission.
  • If a board isn’t busy developing a strategic plan, it should be occupied evaluating how it is doing at implementing the plan.

Key Questions

  • What questions should you ask?
  • Is our market changing?
  • Is the nature of the population we serve changing?
  • Are funders changing how they see our work?
  • How is technology changing how we might do business?
  • Could we widen or narrow our mission and have a greater impact?
  • How much money should we have in the bank?
  • Why is someone advocating for a position that you don’t agree with? What do they see that you don’t?

Introduction

This handbook is designed to be the tool board members need to understand the roles and responsibilities of being on a board of directors. Especially the board of directors of a small nonprofit.

In small organizations, a board that is just mildly ineffective likely means the entire organization is mildly ineffective, or worse.

In a small organization, the board’s decisions are amplified, affecting the entire organization and the success or failure of its mission very quickly.

The board of a small nonprofit that understands its role, that is focused on the right tasks, and is committed to improvement, will create an organization that is bigger than the sum of its parts.

Three Sections of the Book

  1. Part 1: How to be a Board Member
    Written for new board members who have just joined the board.
    What does the board do?
    What is your Job?
    What will your first meetings be like?
    What questions should you ask?
  2. Part 2: Covers the specific responsibilities and roles of board leadership.
  3. Part 3: Appendix
    Recommendations on bylaws, recruiting, committee structure, an overview of Robert’s Rules of Order.

Part 1: How to be a Board Member

Chapter 1: What Does a Board Do?

The core responsibilities of a board member remain fairly common throughout all nonprofits.

Three Core Responsibilities of the Board
These three form a particular legal and fiduciary core of responsibilities for governance.

  1. Mission: Ensure the nonprofit is following its mission.
  2. Policy: Set policy for how the mission is carried out.
  3. Financial Oversight: Ensuring the organization has the financial resources to carry out its mission.

Mission

Ensure the nonprofit is following its mission.

A mission is more than just a nice idea, it is the legal reason for your existence.

A board member at a nonprofit needs to be ready to consider new ways of living its mission.

Ask whether there is any tax liability for income that may not be strictly on-mission.

Raising questions is an important duty of a board or individual board member.

Setting Policy

Make sure the nonprofit is on the right path.
Set policy for how the mission is carried out.

Example: a comprehensive marketing plan is a form of policy.

Financial Oversight

Ensure the financial health of the nonprofit.

Ensuring the organization has the financial resources to carry out its mission.

A board directs how the nonprofit runs through the creation of an annual budget.

The board has a responsibility to keep an eye on the finances.

Technically speaking, the most a board gets to weigh in on the daily operation of the nonprofit is through the budget.

It is the job of the executive director [CEO] to carry out the budget within the guidelines of policy and the mission.

The CEO provides written reports and financial reports. The board does not tell the CEO how to run day-to-day operations.

Audits

An audit is one specific means of financial oversight.
Confirming that what the treasurer and executive director are reporting to the board is accurate is one part of ensuring the organization’s financial health.

This is accomplished through a regularly scheduled audit of a nonprofit’s financials.

To do this, a board should hire an accounting firm to review the books and look for any anomalies.

Not just looking for malfeasance, but also looking for ways that a nonprofit can improve.

A financial review is an alternative way to offset the cost of an audit. These can be much cheaper. Some nonprofits do an audit every three years and a financial review in the other two years in-between audits.

The audit is a procedure the board itself should be managing, not the CEO. A board should expect full compliance from the CEO and staff.

This task often falls to the treasurer by default and is handled by the finance committee.

It would be even better if a separate committee managed the audit process to protect against the outside chance that your treasurer is part of some malfeasance or is performing poorly.

With the mission, policy, and budget established, an executive director should be able to carry out the vast majority of the daily business of a nonprofit on behalf of the board.

Fundraising

Most nonprofits do fundraise, and the board should be at the center of those efforts.
Fundraising is an extension of the board’s financial oversight responsibility.
If your nonprofit is asking for donations from others, board members have a duty to give and there should be no exceptions.
The norm should be 100% board participation in giving.

For individual board members, whatever giving you do to other charitable organizations, one of your biggest gifts of the year should be to the nonprofit on whose board you serve.

Consider having board members call all donors who give more than a specified amount and thank them for their donation.

Board members’ efforts should be focused, not wasted on high-energy low-yield activities that can divert them from more important duties.

Anyone who chooses to serve on a nonprofit board should be expected to give personally and generously.

Strategic Planning and Visioning

It is the job of the board to look ahead 5 to 20 years. The board needs to know where the organization is going so that every year we can make a little bit of progress in that direction.

Organizations use different names for this plan such as strategic plan, long-range plan, 20-year plan, etc. No matter the name, the plan needs to ask the big-picture questions:

  • Is our market changing?
  • Is the nature of the population we serve changing?
  • Are funders changing how they see our work?
  • How is technology changing how we might do business?
  • Could we widen or narrow our mission and have a greater impact?
  • How much money should we have in the bank?

Strategic planning is an extension of the board’s three responsibilities of the mission, policy, and financial oversight. It is taking the work and projecting it out into the future in such a way that the organization can prevent being caught unaware by a significant change.

Strategic planning is a task often skipped by most small nonprofit boards.

If a board isn’t busy developing a strategic plan, it should be occupied evaluating how it is doing at implementing the plan.

The process of strategic planning relies on a good relationship between the board and the executive director. Mutual trust is important, strategic planning is a much harder process when mutual trust between the board and the CEO is not present.

To Hire and Fire the Executive Director

The board’s job is to hire, supervise, evaluate, and terminate the employment of the executive director.

The CEO works for the board as a whole, not for any particular board member.

Board Committees

Boards work through committees. Committees can assign work to the CEO, but an individual board member cannot.

Committees make sure other board members are in the loop, we don’t want individual board members acting on their own initiative without telling anyone else what they are doing.

The individual board member should work within the board committee structure as much as possible, and not just ask the CEO to do something.

How board committees help prevent problems within the board:

  1. A good committee structure will harness the experience and wisdom of board members into the key areas where the nonprofit really needs it.
  2. Committees allow board members to contribute without allowing a lone-wolf to establish their own agenda without input from the other board members.
  3. A good committee structure allows for experts to emerge on the board.
  4. A good committee structure respects the time of the board.
  5. Committees allow a small group to consider new and possibly controversial ideas in a relatively free environment that might have been immediately nixed by a full board.

Board members want to contribute their expertise and wisdom, they won’t volunteer their time if they don’t feel that they are helping. Committees give board members a way to contribute to work that needs to be done.

The board can rely on a small group to study an issue or a particular facet of the organization in depth.

A group is often smarter than any single person.

A board member casually throwing out ideas to the CEO can be problematic because of the supervisor-employee relationship between board members and the CEO. This is another reason it is important to work through the committee structure.

Participating in a robust committee structure is the way to be most helpful to your board. Working outside of it will create a lot more work for the CEO and your fellow board members.

The board has only one employee. The CEO is the only employee of the board, everyone else works for the CEO.

A Quick Note on Firing an Executive Director

The book has a longer section devoted to the question of terminating the executive director in the “how to be board president” chapter.

This is the responsibility of the board president to manage and lead.

What a new board member should know about the topic of firing an executive director:

  1. If another board member drops hints about possibly firing the executive director, this board member is speaking out of turn. (see below for further explanation)
  2. If there really are issues with the CEO’s performance, and the topic of firing is on the table, you might feel pressure to decide unanimously. Your duty as a board member is to vote in the manner that you feel is best. Vote what you think is right regardless of the social pressure.
  3. You should personally become familiar with the employment contract of your CEO if there is one.
  4. Once the decision has been voted on and approved by the board, now your job is to be a team player even if you voted against it.

If there are truly issues that warrant consideration of letting the CEO go, you should talk about it in only two places. One-on-one with the board president, or in executive session with the full board.

You can get an idea of how the CEO is furthering the mission by how they communicate with you, how they fix problems or mistakes, and how the overall nonprofit is doing.

A Board Manages Itself

The board manages itself in two ways:

  1. Formal Means
  2. Informal Means

Formal means include policies, term limits, governance committee, conflict of interest policy, etc.

Informal ways are often called norms or board culture.

  • Are there expectations that the meeting will start on time?
  • How does the board deal with conflict during a meeting?
  • Are there parking lot meetings after the board meeting where the real business happens?
  • Are quiet members of the board encouraged to speak up?
  • Do individual board members feel empowered?

Cultural norms are powerful and self-reinforcing. Their effect on how the board conducts its business can be strong.

Pay attention to the cultural norms and look for opportunities to make changes if there are norms you would like to improve.

Summary of the Overall Responsibilities of the Board

  1. Mission
  2. Policy
  3. Financial Oversight
  4. Fundraising
  5. Strategic Planning and Visioning
  6. Supervise the CEO
  7. Govern the Board

Individual Responsibilities of a Board Member

Memorandum of Understanding

Some nonprofits will ask you to sign a memorandum of understanding (MOU). An MOU is a good way for a board to make sure it is clear with its members about what is expected of them.

The author has a sample MOU and other helpful board documents for download at forsmallnonprofits.com/boarddocs/

Some responsibilities on the MOU may include:

  • I will communicate the organization’s work and values to the community, and represent the organization when requested.
  • I will attend at least 80 percent of board meetings.
  • I will be a member of at least one committee, and attend at least 80 percent of its meetings.
  • I will make my best effort to attend special events.
  • I will give a financial contribution to the Annual Fund, making the organization a priority in my philanthropy.
  • I will actively participate in one or more fundraising activities.
  • I will act in the best interests of the organization, and excuse myself from discussions and votes where I have a conflict of interest.
  • I will stay informed about what’s going on in the organization. I will ask questions and request information. I will participate in and take responsibility for making decisions on issues, policies, and other board matters.
  • I will work in good faith with staff and other board members as partners toward the achievement of our goals.
  • I will regularly review the financial position of the nonprofit and remain engaged when it is time to annually adopt a budget.
  • If I don’t fulfill these commitments to the organization, I will expect the board president or president-elect to call me and discuss my responsibilities with me.

Questions that a potential board member should ask before agreeing to join the board:

  • What is expected of me?
  • When are the board meetings?
  • What are the term limits?
  • How am I elected?
  • Do you have D&O insurance?
  • What documents can you give me to review before I decide?
    Try to get your hands on as many documents as possible. Previous meeting minutes and agendas, budgets, directors reports, etc.
  • Is there a strategic plan?
  • Do the minutes and the agenda show that the board is doing work you are interested in doing and that a board should be doing.
  • Do you like going to board meetings? (to the president of the board)

Chapter 2: Your First Job – Attending Meetings

Your experience on a board will be mostly spent either in meetings or reading documents in preparation for meetings.

Preparing for a Board Meeting

  • Know when the meeting is well in advance.
  • Read all the material.
  • Eat and use the restroom before meetings.
  • Show up 5-minutes early.
  • Dress up a bit.

At the Meeting

  • Listen
  • Speak up
  • Advocate for ideas
  • Voting

A board is at its best when there are debates and discussions about the important matters affecting the nonprofit. All viewpoints should be heard.

It is important to speak up or ask a question at least once every meeting.

Start your ideas with the phrase “in my opinion” or “I feel.”

A board with a variety of experiences and viewpoints produces the best results. That only works if board members are willing to listen to one another.

Why is someone advocating for a position that you don’t agree with? What do they see that you don’t?

After the Meeting

  • Avoid having “parking lot meetings” after the meeting.
  • Self-evaluation. Consider using an online anonymous poll to solicit feedback about how a board meeting went.

Ideas for self-evaluation survey questions after a board meeting:

  • Overall, how was the board meeting? (consider using a 1-5 scale)
  • Did the board spend its time during the meeting on its principle duties and responsibilities as you understand them?
  • Did the board listen to all voices who want to speak?
  • Do you have additional comments about how the board is doing or how the meeting went?

Chapter 3: Beyond Meetings

This chapter goes into specifics of each bullet point from the Memorandum of Understanding mentioned earlier.

Chapter 4: Improving Your Board

Online Resources for Nonprofits

Practical improvements that can help your board:

  • Start meetings on time
  • Try to limit meetings to 90 minutes
  • Have an annual board holiday party or summer barbeque

Remember that real change is slow.

Chapter 5: Being on a Board When there is No Executive Director

I didn’t take any notes on this chapter.

Part 2: How to be a Board Leader

Chapter 6: How to be an Officer of the Board

How to be President-Elect or Vice President
Learn what it means to be president.

How to be Past-President
Learn what it means to let go.

How to be Treasurer
The treasurer has two main jobs.

Job 1: Understand the monthly finances and look for early warning signs.
What drives revenue?
What drives expenses?
Is a bad month merely a bad month, or is there something bigger at work?
Is there something about the profit and loss statement that looks odd?

Job 2: Accurately convey the information in the reports to the rest of the board.

Other key duties of the treasurer:

  • Lead finance committee meetings.
  • Work with the executive director.
  • Research unusual financial questions.
  • Sounding the alarm.

How to be Secretary
Take meeting minutes.
Confirm the legal status of the nonprofit.

How to be a Committee Chair

  • Work with members of the committee to set a regular date and time for meetings.
  • Work with the executive director to get the information needed for the committee’s work.
  • Write and distribute the agenda for the committee’s meetings.
  • Lead committee meetings.
  • Represent the committee at the full board meeting.

Chapter 7: How to be Board President

Why be board president?

  • To influence the path of the nonprofit
  • Fulfillment

The board president is in a better position to influence the direction of the nonprofit and how it carries out its mission.

Common duties of the board president:

  • Public speaking
  • Preparing the board meeting agenda
  • Leading board meetings
  • Listening to other board members
  • Having hard conversations with board members
  • Listening to the Executive Director
  • Having hard conversations with the Executive Director
  • To hire and fire

Board presidents should often refer ideas to committees and let the collective wisdom of the group run with an idea.

The job of leading the meetings is most important during times of debate and differences of opinion on the board. You are the one who needs to make sure the debate is productive and doesn’t veer into chaos.

You have an opportunity, if not the duty, to call one someone who hasn’t said anything.
This is a good way to make sure that opposing viewpoints are heard.

Ask board members how things are going, and if they have any suggestions for things they would like to see changed on the board.

It is important to have a good sense of where the board is.

Important matters should not be discussed in the shadows, bring them into the open for discussion at board meetings.

Hiring, Evaluating and Firing the Executive Director

The board president almost always leads these discussions.

Hiring

Create a search committee to manage the process on the board’s behalf.
The search committee should seek input on the qualities and skills other board members are looking for in the executive director.

Personnel Complaints

Rely on the executive committee.
How should a board handle complaints from staff below the executive director? Employees who are dissatisfied with decisions, or operational choices of their boss, should generally not get a hearing from the board or even the executive committee.

An employee who has a complaint about harassment, discrimination, etc, should be taken very seriously by the board.

Evaluation

Rely on the executive committee.

For evaluation, the board president can ask board members three questions:

  1. What should the executive director keep doing?
  2. What should the executive director start doing?
  3. What should the executive director stop doing?

Assemble the most frequent responses and present them to the executive director.

On serious issues, don’t wait until the evaluation to bring them up. There should be no surprises on an evaluation.

Use the executive committee and board president as a filter. Not every random comment needs to be passed on to the executive director.

Avoid overly bureaucratic solutions.

To Fire Your Executive Director

Reasons you might consider firing your executive director:

  1. When the director has stolen money from the nonprofit
  2. When the director has broken the law
  3. When the director has made a serious mistake, was formally asked by the board to correct the error, and failed to do so or repeated the serious mistake again.
  4. When the director demonstrates repeated inability to perform the tasks of the job.
    Repeatedly not bringing promised documents to a board meeting.
    Repeatedly missing important deadlines.
    Repeatedly losing gifts from donors.
  5. When the director shows an inability to lead through a time of major transition.

You shouldn’t be continually making excuses for an executive director, especially if the objectives or financial needs of the nonprofit are starting to suffer.

If someone cares enough to complain all the way up the line to the board president, they are likely a strong supporter of your organization.

Using the Soft Power of Board Leadership

Your legacy will be in several thousand fingerprints that combined to nudge the nonprofit forward.

Related Book Summaries

Hope you enjoyed this and got value from my notes.
This is the 13th book read in my 2020 reading list.
Here is a list of my book summaries.

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