Congratulations! You have been invited to join the board of directors of a nonprofit. You love the mission. You understand the time commitment. Nevertheless, there are a number of other issues to consider before saying signing on.
No Margin No Mission.
Nonprofits distinguish themselves from for-profit companies by focusing on mission. Mission is important, but be equally sensitive to the direction of net assets. Net assets are the value of the nonfinancial and financial assets owned, minus the value of outstanding financial liabilities.
“No Margin No Mission” is a nonprofit cliché that correctly summarizes why net assets can’t be separated from mission. Institutional survival is dubious if expenses outrun income, even in organizations that call themselves “nonprofit.”
Where Can I Get a Good Perspective about Net Assets?
Ask the chief financial officer of the nonprofit for the latest version of Form 990. This form is a federal legal requirement. It provides an in-depth understanding of corporate financial structure, legal claims, and compensation paid to officers.
Give the CFO a week to respond. If the CFO is not forthcoming, you can access it for free. Go to www.guidestar.org. Another option is Tax-Exempt Organization Search (TEOS) at https://apps.irs.gov/app/eos.
Consider the CFO’s lack of timely response to your request a useful piece of information about the financial status of the organization.
Do not be satisfied by looking at the most recent Form 990. Go over the past forms for the last three to four years. Look for trends. Can you compare the trends in the organization’s net assets over the past few years to those of other nonprofits of comparable size and mission in your geographical area?
Who Am I Speaking For?
Cynthia Jarboe is a former partner with PWC, where she led a regional nonprofit audit practice. She has worked with over one hundred nonprofit corporations. In her book, A Guide to Nonprofit Board Success (2020), she says, “You may be asked to serve because you represent a particular demographic. All of that is good governance as long as you are willing to assume responsibility for that representation.”
In other words, if one of the reasons the board offers you a role is because you are a member of a certain demographic group core to the mission, you must wear two hats. Your professional perspective is necessary but insufficient. You were elected to represent a critical constituency. When you speak, others think that you are speaking as a representative of that constituency.
“Wearing My Hat”
You can supply multiple or even conflicting opinions as long as you are clear who you are representing. For example, you could say, “Wearing my hat as a senior executive in human resources, I would say X. Wearing my hat as a representative of black women in our community, I would say Y.”
This perspective also implies that you need to remain in touch with the cohort you stand for. Do not assume you know what is best for them.
Meet the Executive Committee Members.
Prior to accepting a board role, it is advisable to arrange a series of one-on-one meetings with the members of the executive committee of the board of directors. Nonprofit boards can be so large that the executive committee becomes the critical decision-making body.
If you meet the members and conclude that they have nothing to teach you, you are entering a new relationship from a stance of arrogance. If you meet members of the executive committee and conclude that there are people on the committee who could expand your business horizons and enlarge your professional network, then you want to be part of this board.
One final thought: Some nonprofit boards require annual financial contributions from board members. Make sure such matters are discussed prior to making a commitment.
By Dr. Laurence J. Stybel and Maryanne Peabody
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