How Smaller Boards Benefit From Board Portals

LinkedIn founder Reid Hoffman got a gasp from the audience at a huge meeting of nonprofit executives. Linda Crompton, the executive director of BoardSource at the time, had just asked him what size board of directors he thought was optimal.

Directors of Higher Quality

Crompton and the audience were taken aback by his response: any board with more than six individuals is questionable.

But there were also approving nods. Many boards are defying tradition by having less than twelve to twenty-four members. They are finding the advantages of working in a small group. Smaller boards have been championed by governance thought leaders like Dan Hotchkiss and John Carver as suited for a variety of NGOs.

Because having twelve, sixteen, or even twenty-four directors was the standard a generation ago, some NGOs have enormous boards. With enough individuals to share the workload, these numbers divided up well to form typical committees for finance, program, fundraising, and nominations. These boards have a tendency to let structure dictate procedure, and they frequently struggle to fill the classes that open each year.

Annually electing one or two new directors allows a board to bring in just those people who are passionate about the organization’s goals and have the time, money, and motivation to see them through.

Participation of Higher Quality

Even if a big board is successful in completing its roster, the seats may be difficult to fill. With each new board member, organizing board meetings and ensuring complete participation becomes increasingly difficult. When you include cross-country travel for boards with members from different regions, things get extremely interesting. Online tools such as Doodle.com can assist, although boards with more than twelve members seldom achieve 100% participation at every meeting. Having a large group present during a meeting allows certain people to stay silent or unnoticed. It’s possible that good ideas may be overlooked, and objections—or, more significantly, hesitations—will go unnoticed. Dan Hotchkiss writes in his book Governance and Ministry: Rethinking Board Leadership that “large boards, on the whole, tend to be more passive and less able to engage employees as powerful partners.” The board’s ability to maintain a line of thought gets more difficult as attendance becomes less steady.”

Decision Making of Higher Quality

According to several studies, the ideal size for problem-solving teams is around six individuals. According to Marcia W. Blenko, Michael C. Mankins, and Paul Rogers, authors of Decide and Deliver: Five Steps to Breakthrough Performance in Your Organization, each extra person in a decision-making committee diminishes decision effectiveness by 10%. (After all, what is a board of directors if not a collection of people who make decisions?) While best practices recommend that nonprofit boards form ad hoc committees to investigate complicated topics and provide solutions to the whole board for consideration, the decision is ultimately made by the full board. The notion that a larger board equals more buy-in is frequently false.

Although a huge board may give political or social cover, it is unlikely to produce better judgments than a smaller board.

If you haven’t already, consider amending your bylaws to allow for a variety of board sizes rather than a set number of directors. The provision that “the board should include no less than six and no more than nine directors” allows the board to be flexible in addressing its governance demands. Consider changing your rules to allow for a variety of board sizes.

Four Characteristics of an Effective Board

Every board has its own culture and dynamics. Individual members’ contributions may be highly strong in the boardroom when they work together. When internal dynamics are either too weak or too powerful, the board’s work can easily get derailed, and its efficacy suffers. What are the qualities of an effective board that ensure that the board’s work is courteous and productive?

Improving Governance With A Successful Board

It’s no secret that a strong board of directors is important to a company’s success. It is critical — especially in these times — to have clear, strategic, and focused leadership that meets (or exceeds) the expectations of shareholders and stakeholders.

But what are the essential qualities that enable value generation in the boardroom? What are some of the essential ingredients for board success?

We want to present an overview of the characteristics of high-performing boards in this post.

The Correct Individuals

A really effective board requires a diverse collection of talents, interests, industry knowledge/experience, behavioral traits, and strong value systems. A perfect board of directors is made up of directors with the breadth and depth of expertise necessary to lead management while also commanding the respect and trust of their peers.

However, a variety of circumstances influence the board’s makeup, ranging from changing regulatory needs to resolving a technical skills deficit. Regardless of external or internal constraints, board member selection should be the culmination of a strategy exercise and a thorough, deliberate procedure.

A skills/competency matrix can assist you get a macro-level picture of where your board stands in terms of its composition. This may help in the evaluation, appraisal, or selection of directors by highlighting or identifying deficiencies.

Diverse Perspectives on Diversity

Norway and Germany, for example, continue to fight for female quotas in the boardroom. It is predicted that other countries would follow their lead. However, the global trend toward diversifying boards is more than a social experiment. Studies have shown that board diversity (particularly gender and ethnicity) has a favorable influence on corporate success.

Different viewpoints result from a diversified board. As a result, they are less prone to “groupthink.”

 

“…tendency for a group to make stupid or poorly thought-out decisions because its members linked themselves with one another, isolating themselves from outside opinion and reinforcing ideas they already hold,” according to the definition of groupthink. It prioritizes social cohesiveness and cooperation above intellectual individuality.

Because there are more personal, individual traits at play, a board with more varied members will be less susceptible to this pattern of thinking.

Diverse boards have a larger range of capabilities, risk/reward orientations, and stewardship methods, all of which contribute to greater opportunity identification and inventive solutions in the boardroom.

A Strong Chair for Leadership

The board, but especially the Chair, must have outstanding leadership qualities. Although this is an important part of his job, the Chair does more than that. The Chair must also be adept at managing important connections.

A successful board needs a Chair who can:

    • assist or collaborate with a strategic governance model
    • heavy emphasis on strategy creation and implementation
    • form an alliance with the CEO
    • functions as the CEO’s “critical friend”
    • communication with shareholders
    • acts as the board’s collective voice
    • have the board’s confidence and respect
    • he governs with honesty

A Healthy Culture Inside and Outside the Boardroom: Good Board Practices

Good and healthy boardroom procedures are essential for an effective board. Regular attendance, director introduction, assessing board effectiveness, and meeting management are just a few of these techniques.

Legal Responsibilities of Nonprofit Board Members

A nonprofit organization is formed in the state where it is based. In the case of charitable charities, incorporation comes before filing for IRS tax-exempt status. You won’t be able to apply for a tax exemption with the IRS until you’ve incorporated. Some small charity organizations do not incorporate, but the benefits and drawbacks of doing so demonstrate that doing so makes sense for the vast majority. Importantly, incorporation reduces the board of directors’ personal culpability.

Board of Directors Legal Responsibilities

Many states have regulations that control the responsibilities of nonprofit boards of directors and the behavior of board members. A nonprofit board, for example, must monitor the organization’s activities and ensure that its personnel and volunteers are acting legally and ethically. The following concepts of nonprofit company law are often used by states.

Obligation of Care

A board member must participate in corporate decision-making and planning. When making decisions for the organization, board members must use reasonable caution.

In a comparable scenario, a “ordinary sensible” individual would use reasonable caution.

Loyalty is a responsibility

A board member must never exploit knowledge gleaned from his or her position for personal advantage and must always act in the organization’s best interests. Members of the board must avoid or seem to avoid conflicts of interest.

Obeyance is a responsibility

A board member must be committed to the mission of the nonprofit organization. He or she cannot act in a manner that contradicts the organization’s objectives. The public has faith in the board’s ability to manage contributed finances in order to carry out the organization’s objective.

Your board must also:

Ascertain that the organization adheres to the law.

All major contracts must be approved.

Attend the majority of board meetings to demonstrate your commitment to the company.

Employ and manage the executive director, who in turn employs employees.

Examine financial policies, approve budgets, and examine financial reports to ensure the organization’s financial stability.

Ascertain that your board members are aware of and committed to their responsibilities

When your board members agree to serve on the board, make sure they understand the gravity of their responsibilities.

A sit-down discussion with the CEO and board president is recommended to ensure that a potential board member understands his or her obligations.

The sincerity of their board commitment will most likely impress the new board member or potential members at such a meeting. A summary of board obligations is especially crucial for new members who have never served on a board before, as well as those recruited from your volunteer pool.

While volunteers contribute a wealth of information about how the organization operates, they may be unaware of what a board of directors performs or that they are required to assist with fundraising.

The next phase after the initial meeting is training. A group training works effectively if you have multiple new board members. The organization’s history, mission, rules, activities, and more are all available to board members.

Include a tour of your building, introductions to key personnel, and opportunity to watch your programs in operation. Give incoming board members plenty of reading material to undertake on their own.

Match Board Members to the Needs of Your Organization

Your board can provide invaluable pro bono expertise in areas where you want knowledge but cannot afford professional assistance. Your board members may, for example, have expertise in:

  • Finance
  • Legal and human resources, as well as programmatic sectors such as social services, education, religion, and so on.