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The Handbook of Nonprofit Governance ebook

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The Handbook of Nonprofit Governance From BoardSource comes The Handbook of Nonprofit Governance. This comprehensive resource explores the overarching question of governance within nonprofit organizations and addresses the roles, structures, and practices of an effective nonprofit. The Handbook of Nonprofit Governance covers the topics that are of most importance to those charged with creating and sustaining effective leadership, including building a board; succession planning; policies; financial oversight; fundraising; planning; strategic planning processes; risk management; and evaluation of the board, CEO, and organization. Praise for The Handbook of Nonprofit Governance "This is the first book I've found that covers the topic of governance from A to Z. I knowwhat I'll be assigning the students in my governance class as a textbook next semester!"--TERRIE TEMKIN, founding principal, CoreStrategies for Nonprofits, Inc. "BoardSource has prepared an exceptional resource for nonprofit boards and leaders. This comprehensive volume offers timely and relevant information about board work and governance, including practical tools and resources that will be valuable to all types of nonprofits."--DAVID O. RENZ, chair, department of public affairs; Beth K. Smith/Missouri Chair in Nonprofit Leadership; and director, Midwest Center for Nonprofit Leadership; University of Missouri, Kansas City "If you are involved in nonprofit organizations, and if you ever have doubts about how they are best run, this is the book for you-and BoardSource is the place to turn."--FISHER HOWE, consultant, Lavender/Howe & Associates, and author, The Nonprofit Leadership Team BoardSource (formerly the National Center for Nonprofit Boards) is the premier resource for practical information, tools and best practices, training, and leadership development for board members of nonprofit organizations worldwide.

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Table of Contents
Essential Texts for Nonprofit and Public Leadership and Management
Title Page
Copyright Page
Have You Used These BoardSource Resources?
The Governance Series
The Committee Series
Other Books
Online Assessments
Acknowledgements
Introduction
About This Book
PART ONE - GOVERNANCE PRINCIPLES, ROLES, AND STRUCTURE
CHAPTER ONE - IN THE SPIRIT OF SERVICE: INTRODUCTION TO THE NONPROFIT WORLD
An Overview of the Nonprofit Sector
Monitoring, Regulating, and Governing Nonprofits
Starting a Nonprofit Organization
Incorporation and Tax Exemption
Special Types of Nonprofit Organizations
Chapter Exercises
CHAPTER TWO - WHAT IS GOVERNANCE?
Governance Defined
Why Nonprofits Need Boards
Board Members as Fiduciaries
Collective and Shared Responsibilities
Mission at the Center
Characteristics of Exceptional Governance
Governance Through the Organizational Life Cycle
Chapter Exercises
CHAPTER THREE - GOVERNANCE ROLES
Board Roles
Individual Roles
Chapter Exercises
CHAPTER FOUR - GOVERNANCE STRUCTURE
Board Size
Committees and Task Forces
Essential Standing Committees
Other Work Groups
Advisory Councils
Membership Organization Boards
National Boards of Federated Systems
Chapter Exercises
CHAPTER FIVE - THE BOARD-CHIEF EXECUTIVE RELATIONSHIP
The Board Chair and the Chief Executive
The Chief Executive and the Board
Chapter Exercises
PART TWO - GOVERNANCE PRACTICES
CHAPTER SIX - BUILDING A BOARD
The Governance Committee
Step 1: Identify the Board’s Needs
Step 2: Cultivate Relationships
Step 3: Recruit Prospective Board Members
Step 4: Orient New Board Members
Step 5: Support Continuous Board Involvement
Step 6: Educate the Board
Step 7: Evaluate the Board
Step 8: Rotate Board Members
Step 9: Appreciate Efforts and Celebrate Achievements
Chapter Exercises
CHAPTER SEVEN - LEGAL AND ETHICAL RESPONSIBILITIES
Fulfilling Fiduciary Responsibilities
Collective and Shared Responsibilities
Duties of Care, Loyalty, and Obedience
Legal and Ethical Compliance
Getting Sound Advice
A Legal Liability Checklist
Being Accountable to the Public Trust
Protecting the Board from Intermediate Sanctions
Private Benefit and Private Inurement
Chapter Exercises
CHAPTER EIGHT - FINANCIAL OVERSIGHT
What Board Members Need to Know
Financial Issues for Board Members
Major Financial Roles
Systems That Protect Nonprofit Organizations
Financial Statements and Reports
Signs of Financial Distress
Finance and Investment Policies
Financial Direction in Uncertain Times
Chapter Exercises
CHAPTER NINE - FUNDRAISING
The First Step: A Commitment to Personal Giving
Board-Staff Partnership
The Fundraising Process
Types of Fundraising
Developing Board Members’ Fundraising Skills
Fundraising Policies
Evaluating Fundraising Performance
Beyond Fundraising: Earned Revenue
Chapter Exercises
CHAPTER TEN - STRATEGIC THINKING AND STRATEGIC PLANNING
About Strategic Thinking
Getting Started
About Strategic Planning
Overcoming Resistance to Strategic Planning
Why Strategic Planning Is Important
Building Evaluation into the Strategic Plan
Approaches to Planning
Roles in Strategic Planning
The Planning Process
Leading Toward the Future
Chapter Exercises
CHAPTER ELEVEN - COMMUNICATIONS AND OUTREACH
Who Is Involved, and How
Internal Communications
Engaging Board Members in Communications and Outreach
Facilitating Collaborations and Partnerships
Positioning the Organization
Lobbying and Political Activity
Crisis Communications
Monitoring Effectiveness
Chapter Exercises
CHAPTER TWELVE - SUCCESSION PLANNING AND CHIEF EXECUTIVE TRANSITION
About Succession Planning
Developing a Compensation Policy
Chief Executive Transition
Steps in the Transition
Working with Consultants
Acting and Interim Chief Executives
Conducting the Search
Launching the New Chief Executive
Chapter Exercises
CHAPTER THIRTEEN - EVALUATION
Evaluating Organizational Effectiveness
Program Evaluation Strategies
Board Self-Assessment
Individual Board Member Self-Assessment
Evaluating the Chief Executive’s Performance
Chapter Exercises
CHAPTER FOURTEEN - BYLAWS AND POLICIES
The Context for Bylaws and Policies
Creating and Amending Bylaws
What Bylaws Include
About Policies
Types of Policies
Policy Guidance
Chapter Exercises
CHAPTER FIFTEEN - BOARD MEETINGS
Planning the Meeting
Meeting Communication and Documentation
Meeting Structure, Decision Making, and Voting
Executive Sessions
Evaluating the Meeting
Board Retreats
Toward Better Board Meetings
Chapter Exercises
CHAPTER SIXTEEN - BOARD DYNAMICS
Building Trust
Developing a Culture of Inquiry
Independent-Mindedness
Boards That Micromanage
Disruptive Board Members
Chapter Exercises
APPENDIX - SAMPLE POLICIES FOR NONPROFIT BOARDS
GLOSSARY
RESOURCES
INDEX
Essential Texts for Nonprofit and Public Leadership and Management
The Handbook of Nonprofit Governance, by BoardSource
Strategic Planning for Public and Nonprofit Organizations,third edition, by John M. Bryson
The Effective Public Manager, fourth edition, by Steven Cohen et al.
Handbook of Human Resources Management in Government, third edition, by Stephen E. Condrey
The Responsible Administrator, fifth edition, by Terry L. Cooper
Conducting a Successful Capital Campaign, revised and expanded edition, by Kent E. Dove The Public Relations Handbook for Nonprofits, by Arthur Feinglass
The Jossey-Bass Handbook of Nonprofit Leadership and Management, second edition, by Robert D. Herman
Benchmarking in the Public and Nonprofit Sectors, second edition, by Patricia Keehley et al.
Museum Marketing and Strategy, second edition, by Neil Kotler et al.
The Ethics Challenge in Public Service, second edition, by Carol W Lewis et al.
Working Across Boundaries, by Russell M. Linden
Designing and Planning Programs for Nonprofit and Government Organizations, by Edward J. Pawlak Measuring Performance in Public and Nonprofit Organizations, by Theodore H. Poister
Human Resources Management for Public and Nonprofit Organizations: A Strategic Approach, third edition, by Joan E. Pynes
Understanding and Managing Public Organizations, fourth edition, by Hal G. Rainey
Designing and Conducting Survey Research, third edition, by Louis M. Rea et al.
Fundraising Principles and Practice, by Adrian Sargeant et al.
Making Critical Decisions, by Roberta M. Snow et al.
Hank Rosso’s Achieving Excellence in Fundraising, second edition, Eugene R. Tempel
Handbook of Practical Program Evaluation, second edition, by Joseph S. Wholey et al.
Copyright © 2010 by BoardSource. All rights reserved.
Published by Jossey- Bass A Wiley Imprint 989 Market Street, San Francisco, CA 94103-1741—www.josseybass.com
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the Web at www.copyright.com. Requests to the publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, or online at www.wiley.com/go/permissions.
Readers should be aware that Internet Web sites offered as citations and/or sources for further information may have changed or disappeared between the time this was written and when it is read.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
Jossey-Bass books and products are available through most bookstores. To contact Jossey-Bass directly call our Customer Care Department within the U.S. at 800-956-7739, outside the U.S. at 317-572-3986, or fax 317-572-4002.
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Library of Congress Cataloging-in-Publication Data
The handbook of nonprofit governance / Boardsource. p. cm.—(Nonprofit and public leadership and management)
Includes bibliographical references and index.
eISBN : 978-0-470-60246-1
1. Nonprofit organizations—Management. 2. Corporate governance. 3. Boards of directors. 4. Nonprofit organizations—Management—Case studies. 5. Corporate governance—Case studies. 6. Boards of directors—Case studies. 7. BoardSource (Organization) I. BoardSource (Organization)
HD62.6.H345 2010
658.4’22-dc22
2010004073
HB Printing
BoardSource is dedicated to advancing the public good by building exceptional nonprofit boards and inspiring board service.
BoardSource was established in 1988 by the Association of Governing Boards of Universities and Colleges (AGB) and Independent Sector (IS). In the early 1980s, the two organizations had conducted a survey and found that although 30 percent of respondents believed they were doing a good job of board education and training, the rest of the respondents reported little, if any, activity in strengthening governance. As a result, AGB and IS proposed the creation of a new organization whose mission would be to increase the effectiveness of nonprofit boards.
With a lead grant from the Kellogg Foundation and funding from five other donors, BoardSource opened its doors in 1988 as the National Center for Nonprofit Boards. It had a staff of three and an operating budget of $385,000. On January 1, 2002, BoardSource took on its new name and identity. These changes were the culmination of an extensive process of understanding how we were perceived, what our audiences wanted, and how we could best meet the needs of nonprofit organizations.
Today BoardSource is the premier voice of nonprofit governance. Its highly acclaimed products, programs, and services mobilize boards so that organizations fulfill their missions, achieve their goals, increase their impact, and extend their influence. BoardSource is a 501(c)(3) organization.
BoardSource provides
• Resources to nonprofit leaders through workshops, training, and an extensive Web site (www.boardsource.org)
• Governance consultants who work directly with nonprofit leaders to design specialized solutions to meet an organization’s needs
• The world’s largest, most comprehensive selection of material on nonprofit governance, including a large selection of books and CD-ROMs
• An annual conference that brings together approximately nine hundred governance experts, board members, and chief executives and senior staff from around the world
For more information, please visit our Web site at www.boardsource.org, e-mail us at [email protected], or call us at 800-883-6262.
Have You Used These BoardSource Resources?

The Governance Series

Ten Basic Responsibilities of Nonprofit Boards, second edition
Financial Responsibilities of Nonprofit Boards, second edition
Structures and Practices of Nonprofit Boards, second edition
Fundraising Responsibilities of Nonprofit Boards, second edition
Legal Responsibilities of Nonprofit Boards, second edition
The Nonprofit Board’s Role in Mission, Planning, and Evaluation, second edition

The Committee Series

Transforming Board Structure: Strategies for Committees and Task Forces
Governance Committee
Executive Committee
Financial Committees
Development Committee
Advisory Councils

Other Books

The Board Building Cycle:Nine Steps to Finding, Recruiting, and Engaging NonprofitBoard Members, second edition
The Board Chair Handbook, second edition
The Business Professional’s Guide to Nonprofit Board Service
Chief Executive Succession Planning: Essential Guidance for Boards and CEOs, second edition
Chief Executive Transitions: How to Hire and Support a Nonprofit CEO
Culture of Inquiry: Healthy Debate in the Boardroom
Driving Strategic Planning: A Nonprofit Executive’s Guide, second edition
Exceptional Board Practices: The Source in Action
Fearless Fundraising for Nonprofit Boards, second edition
Generating Buzz: Strategic Communications for Nonprofit Boards
Getting the Best from Your Board: An Executive’s Guide to a Successful Partnership
Governance as Leadership: Reframing the Work of Nonprofit Boards
Managing Conflicts of Interest: A Primer for Nonprofit Boards, second edition
Meeting, and Exceeding Expectations: A Guide to Successful Nonprofit Board Meetings, second edition
Moving Beyond Founder’s Syndrome to Nonprofit Success
Navigating the Organizational Lifecycle: A Capacity-Building Guide for Nonprofit Leaders
The Nonprofit Board Answer Book: A Practical Guide for Board Members and Chief Executives, second edition
The Nonprofit Board’s Guide to Bylaws: Creating a Framework for Effective Governance
The Nonprofit Chief Executive’s Ten Basic Responsibilities
Nonprofit Executive Compensation: Planning, Performance, and Pay, second edition
The Nonprofit Dashboard: A Tool for Tracking Progress
Nonprofit Governance: Steering Your Organization with Authority and Accountability
The Nonprofit Legal Landscape
The Nonprofit Policy Sampler, second edition
The Source: Twelve Principles of Governance That Power Exceptional Boards
Taming the Troublesome Board Member
Trouble at the Top: The Nonprofit Board’s Guide to Managing an Imperfect Chief Executive
Understanding Nonprofit Financial Statements, third edition
Who’s Minding the Money? An Investment Guide for Nonprofit Board Members, second edition

Online Assessments

Assessment of the Chief Executive Board Self-Assessment
ACKNOWLEDGMENTS
BoardSource wishes to acknowledge the authors of the material used in producing this handbook:
Nancy R. Axelrod, Advisory Councils (BoardSource Committee Series); Chief Executive Succession Planning: Essential Guidance for Boards and CEOs (second edition); Culture of Inquiry: Healthy Debate in the Boardroom; “Curious Boards,” Board Member 15, no. 3 (May/June 2006).
Steven Berger, Understanding Nonprofit Financial Statements (third edition). BoardSource, The Nonprofit Board Answer Book: A Practical Guide for Board Members and Chief Executives (second edition).
BoardSource, The Source: Twelve Principles of Governance That Power Exceptional Boards.
Marla J. Bobowick, Sandra R. Hughes, and Berit M. Lakey, Transforming Board Structure: Strategies for Committees and Task Forces (BoardSource Committee Series). Janet Boguch, “Enforcing Give, Get, or Get Off,” Board Member 17, no. 1 (January/ February 2008).
Lawrence M. Butler, The Nonprofit Dashboard: A Tool for Tracking Progress.
Richard P. Chait, William P. Ryan, and Barbara E. Taylor, Governance as Leadership: Reframing the Work of Nonprofit Boards.
Paul M. Connolly, Navigating the Organizational Lifecycle: A Capacity-Building Guide for Nonprofit Leaders.
Charles F. Dambach, MBA, Melissa Davis, and Robert L. Gale, Structures and Practices of Nonprofit Boards (second edition) (BoardSource Governance Series).
Charles F. Dambach, MBA, Oliver Tessier, and Carol E. Weisman, The Business Professional’s Guide to Nonprofit Board Service.
M. Christine DeVita, “Constructing a Partnership,” BoardMember 15, no. 5 (September/October 2006).
Outi Flynn, Meeting, and Exceeding Expectations: A Guide to Successful Nonprofit Board Meetings (second edition).
Robert P. Fry Jr., Who’s Minding the Money? An Investment Guide for Nonprofit Board Members (second edition).
Kay Sprinkel Grace, MA, “Fundraising in the 21st Century,” Board Member 17, no. 3 (May/June 2008).
Kay Sprinkel Grace, MA, Amy McClellan, MNO, and John A. Yankey, PhD, The Nonprofit Board’s Role in Mission, Planning, and Evaluation (second edition) (BoardSource Governance Series).
James M. Greenfield, Fundraising Responsibilities of Nonprofit Boards (second edition), ACFRE, FAHP (BoardSource Governance Series).
Peter Dobkin Hall, “A History of Nonprofit Boards in the United States.”
Deborah S. Hechinger and Marla J. Bobowick, “Governance Matters,” Board Member 14, no. 3 (June/July 2005).
Bruce R. Hopkins, JD, LLM, Legal Responsibilities of Nonprofit Boards (second edition) (BoardSource Governance Series).
Richard T. Ingram, Ten Basic Responsibilities of Nonprofit Boards (second edition) (BoardSource Governance Series).
Katha Kissman, Taming the Troublesome Board Member.
Katha Kissman, Trouble at the Top: The Nonprofit Board’s Guide to Managing an Imperfect Chief Executive.
Daniel L. Kurtz and Sarah E. Paul, Managing Conflicts of Interest: A Primer for Nonprofit Boards (second edition).
Berit M. Lakey, The Board- Building Cycle: Nine Steps to Finding, Recruiting, and Engaging Nonprofit Board Members (second edition); Nonprofit Governance: Steering Your Organization with Authority and Accountability.
Berit M. Lakey, Sandra Hughes, and Outi Flynn, Governance Committee (BoardSource Committee Series).
Andrew S. Lang, CPA, Financial Responsibilities of Nonprofit Boards (second edition)
(BoardSource Governance Series).
Barbara Lawrence and Outi Flynn, The Nonprofit Policy Sampler (second edition).
Mark Light, Executive Committee (BoardSource Committee Series).
Thomas A. McLaughlin, Financial Committees (BoardSource Committee Series).
Thomas A. McLaughlin and Addie Nelson Backlund, Moving Beyond Founder’s Syndrome to Nonprofit Success.
Richard L. Moyers, The Nonprofit Chief Executive’s Ten Basic Responsibilities. Ober | Kaler, The Nonprofit Legal Landscape.
Sally J. Patterson, Generating Buzz: Strategic Communications for Nonprofit Boards. Maureen K. Robinson, “Declaration of Independence,” Board Member 16, no. 2 (March/April 2007).
Irene Rozansky, “Communicating in a Crisis,” Board Member 16, no. 2 (March/ April 2007).
Dave Sternberg, Fearless Fundraising for Nonprofit Boards (second edition).
Don Tebbe, Chief Executive Transitions: How to Hire and Support a Nonprofit CEO. Eugene R. Tempel, Development Committee (BoardSource Committee Series).
D. Benson Tesdahl, Esq., The Nonprofit Board’s Guide to Bylaws: Creating a Framework for Effective Governance.
Brian H. Vogel and Charles W. Quatt, Nonprofit Executive Compensation: Planning, Performance, and Pay (second edition).
Susan A. Waechter, Driving Strategic Planning: A Nonprofit Executive’s Guide (second edition).
Vernetta Walker, “Beyond Political Correctness: Building a Diverse Board,” Board Member 18, no. 3 (May/June 2009).
Mindy R. Wertheimer, The Board Chair Handbook (second edition).
Sherill K. Williams and Kathleen A. McGinnis, Getting the Best from Your Board: An Executive’s Guide to a Successful Partnership.
Terry Williams, “Thinking Outside the Boardroom,” Board Member 15, no. 2 (March/April 2006).
Peter York, “Are We There Yet? The Board’s Role in Evaluating Mission Achievement,” Board Member 14, no. 6 (December 2005).
INTRODUCTION
Service on a nonprofit board was once perceived as an honorary role requiring nothing more than periodic attendance at meetings and generous annual donations. But vibrant growth in the nonprofit sector has helped to change the nature of board service. Board members need to do more than just show up. They must understand and promote the organization’s work, define measures of success, and assess how well the organization performs, using both subjective and objective standards. They must generate and allocate resources, hire the chief executive, develop plans, establish policies and programs, and monitor activities—all with a sharp focus on producing meaningful results.
Within these broad roles, board members have many functions. They are guardians of the mission, they ensure compliance with legal and financial requirements, and they enforce ethical guidelines for their organization. They are policymakers, fundraisers, ambassadors, partners with the chief executive, and strategic thinkers. They monitor progress, evaluate the performance of the organization and the chief executive, and demonstrate integrity in everything they do on behalf of the organization. Because of their many roles, board members need more than enthusiasm for a cause, passion for a mission, or just good intentions. They need to understand all of their stewardship responsibilities and perform all of their duties.
Board service entails serious obligations, to be sure, but it can also deliver immense satisfaction. A board that knows what is expected of it and performs at the highest level is a strategic resource for its organization and chief executive. And ultimately, this commitment by dedicated board members translates into mission impact in our communities.

About This Book

The Handbook of Nonprofit Governance is a comprehensive overview of the principles and practices of nonprofit boards. To compile this handbook, BoardSource drew on its extensive selection of books, articles, and topic papers by leading experts on nonprofit governance.
The book is organized in two parts. Part One (Chapters One through Five) addresses basic governance history, roles, and structures. Part Two (Chapters Six through Sixteen) examines nonprofit governance practices, drawing on the experience and wisdom of BoardSource experts to review basic approaches to board responsibilities and board self-management. Consulting the handbook provides answers to the following questions:
What is the nonprofit sector, and how does governance fit in? Chapters One and Two review the history of the nonprofit sector, its function in society, and the basic tenets of nonprofit governance.
What roles do nonprofit boardsserve? Chapter Three explains the governance roles of the full board and of individual board members, broadly described as setting organizational direction, ensuring the necessary resources, and providing oversight. It links to other chapters in this handbook that explore elements of these governance roles in greater depth. Chapter Four examines board structure, including board size and the functions of committees, task forces, and other work groups. Chapter Five describes the board-chief executive relationship and offers suggestions to ensure its success.
Part Two examines nonprofit governance practices, drawing on the experience and wisdom of BoardSource experts to review basic approaches to board responsibilities and board self-management:
How does a nonprofit organization build and sustain a strong, active board? Chapter Six reviews the cyclical process of finding the best people, bringing them onto the board, and then creating an environment for board service that invites them to reach their full potential as board members. Building a board involves more than enlisting new members and training them. This chapter describes the full cycle: identifying, cultivating, and recruiting board members; providing orientation; involving all board members in meaningful work; promoting continuing education; evaluating the effectiveness of the full board and of individuals; refreshing the board through term limits and regular rotation; and celebrating board accomplishments.
What are the legal and ethical responsibilities of the board and its members? Governance is serious business, with a set of duties that are defined by law. Chapter Seven opens with a discussion of fiduciary responsibility—the board’s obligations for financial accountability and effective oversight of the organization. Exceptional boards not only follow legal requirements, but also ensure that the organization’s work is conducted in an ethical, open, and responsive manner. Legal and ethical compliance, conflict of interest, legal liability, and the concepts of private benefit and private inurement are among the issues covered in this chapter.
How does the board carry out its financial oversight responsibilities? Ultimately, the board is responsible for the financial viability, the program success, and the survival of the organization. Chapter Eight reviews what board members need to know about financial integrity and solvency, safeguards and procedures to protect the organization, and signs of financial trouble. It explains the implications of the Sarbanes-Oxley Act for nonprofits, the importance of an external audit, and the financial systems that organizations need for safe, efficient operations.
What is the board’s role in fundraising? Fundraising begins with the board, because board members understand the organization well and are committed to helping it fulfill its mission. Chapter Nine outlines the board’s involvement in fundraising, step by step. Joining with staff to generate necessary resources, the board provides strategic guidance and direction, participates as donors and as fundraisers, and is responsible for stewardship and oversight of the funds raised. Beginning with an explanation of board members’ personal obligation for giving, the chapter reviews fundraising types, policies, and techniques, with tips for raising board members’ comfort level for joining in this important activity.
How does the board engage in strategic thinking and participate in strategic planning? Strategic thinking and planning move an organization toward fulfilling its mission and creating its future. Both processes—as described in Chapter Ten—are potentially enriching and energizing for the board. When strategic thinking becomes a habit, board meetings are dynamic, discussions are challenging and thought provoking, and the board identifies crucial issues that lead to more relevant, timely, and constructive decisions. This chapter outlines the rationale for strategic planning, describes basic steps in the process, and emphasizes the need to blend planning and evaluation.
What does the board contribute to communications and outreach? For nonprofit boards, strategic communications involves big-picture thinking, a clear understanding of appropriate roles, and hands-on participation when appropriate. Chapter Eleven reviews how board members can contribute to the staff’s work through public speaking, relationship building, and advocacy. It explains lobbying and political activity by nonprofits, and it addresses communications during a crisis or controversy.
How do boards ensure effective chief executive transitions? The board’s responsibility for hiring and supporting the chief executive can have an extraordinary impact on organizational effectiveness. Chapter Twelve explains that there’s more to this responsibility than executive search. It begins with the proactive step of having a succession plan and compensation policy in place. This chapter describes the steps in a careful, thorough executive search, describes some characteristics to look for, and emphasizes the essential support that new chief executives need from their boards.
Why is evaluation important, and how is the board involved? Evaluation is a learning tool that, when embedded in an organization’s culture, promotes the achievement of mission. Chapter Thirteen stresses the board’s role in promoting continuing evaluation. Measuring organizational effectiveness, self-assessment for the full board, self-assessment for individual board members, and performance evaluation for the chief executive are all board responsibilities, described in this chapter. The staff is also responsible for evaluating an organization’s core programs and practices.
How do bylaws and policies promote sound board decisions? Chapter Fourteen reviews the details of a nonprofit organization’s governing documents (bylaws) and operating principles (policies). It explains the context for bylaws and policies and provides an overview of the issues and areas they should address. The chapter includes recommendations and examples to serve as a starting point for the documents that each organization should tailor to its own needs and circumstances.
What are the ingredients of a productive board meeting? At meetings, the board carries out its role as policy maker, sets direction for the organization, defines and follows its own ethical guidelines, oversees operations, and takes care of its own well-being. Chapter Fifteen offers recommendations for planning fast-paced, efficient meetings while maintaining the spirit of teamwork and collegiality among board members. Topics include deciding on frequency of meetings, developing an agenda, facilitating the meeting, preparing minutes, holding executive sessions, and evaluating the meeting.
How do board dynamics influence board effectiveness? The dynamics of working together on behalf of the organization can be complex, but boards need to promote a working environment that encourages collaboration, partnership, engagement, trust, respect, flexibility, and interaction. Chapter Sixteen addresses five key issues in board dynamics: building trust to support collaborative governance, developing a culture of inquiry, recognizing and avoiding micromanagement, ensuring independent-mindedness, and dealing with the problem of troublesome board members.
Reflecting on board dynamics is a fitting way to conclude this handbook. While many principles and practices of nonprofit governance are well established, the essence of board interactions is often more difficult to express. When all is said and done, the board is a group of individuals with a collective commitment. How they engage with one another can make the difference between governance that is simply good and governance that is truly exceptional. The stakes are high, but the dynamic role of nonprofit organizations in our society attests to the fact that the women and men who serve on nonprofit boards fulfill their responsibilities with seriousness of purpose, dedication to service, and passion for their organizations’ missions.
PART ONE
GOVERNANCE PRINCIPLES, ROLES, AND STRUCTURE
CHAPTER ONE
IN THE SPIRIT OF SERVICE: INTRODUCTION TO THE NONPROFIT WORLD
The only ones among you who will be really happy are those who will have sought and found how to serve.
—ALBERT SCHWEITZER
Virtually every society shows its voluntary spirit and philanthropic instinct by creating informal community groups, charitable nongovernmental organizations, or faith-based organizations and places of worship. In countries around the world, nonprofits are a vibrant, essential element of national life. They struggle to reduce poverty and bring an end to homelessness. They strive to build safe places to learn and play, create inspiring art and music, and protect natural resources.
Nonprofit organizations span a wide spectrum of mission areas, resources, values, history, and stakeholders—from small, local homeless shelters to large, international trade associations; from community foundations operating within a geographic region to educational institutions that attract students from around the country. Their funding may come from just a handful of sources or from an array of charitable contributions, membership dues, grants, fees from programs and services, and more. According to the Internal Revenue Service, the United States alone has more than 1.8 million voluntary, nonprofit, and nongovernmental organizations, with more recognized every month by the federal government as tax-exempt entities.
Economic life in the United States and many other countries consists of three sectors:
• Public-sector organizations exist to serve the public good. They are part of governmental structures and are financed largely by tax revenues.
• Private-sector organizations exist to produce a profit for their owners. To do so they must meet the needs of a constituency who will pay for their goods or services.

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