It seems as if there’s always somebody at the board meeting saying, “That’s what nonprofit boards are supposed to do.” Sometimes it’s even the executive director. Here is a quick directory to the most common myths wreaking havoc in nonprofit boardrooms:
Myth #1: Nonprofits have to comply with Sarbanes-Oxley
In the wake of the Enron and other corporate scandals, this federal act of 2002 was designed to improve accuracy of disclosures by publicly held companies. Provisions include certification of financial reports by the CEO and CFO, having non-staff on the board’s Audit Committee, prohibition of personal loans to executives, and so forth.
Reality: Only two SOX provisions apply to nonprofits:
- Stronger whistleblower protections
- Longer retention of certain legal records
For more in Blue Avocado: Sarbanes-Oxley and Nonprofits
Myth #2: The best size for a board is 16.
Reality: Well, that’s the average size. (Do you want to be average?) There isn’t a “best” size for a board. Research shows that small boards think they should be bigger and big boards think they should be smaller. Size depends on:
- What the organization needs the board to do at this time in its history
- How many people the executive director and the staff can support
- The size of the room at your organization where the board meets (really!)
Myth #3: The board and the executive director should have such a good working relationship that the board never needs to go into executive session.
Reality: Executive sessions are important for:
- ED evaluation
- Airing of tentative views
- The board’s gaining a sense of itself
And whether or not the executive director is a member of the board, the board always has the authority to go into session without staff present.
For more in Blue Avocado: Should the Board Hold Executive Sessions?
Myth #4: The annual approval of the budget is the cornerstone of the board’s financial oversight.
Reality: Budget approval is often a meaningless act. Most of the time board members can’t be familiar enough with details to know whether the income is accurately projected and whether the expenses represent sound choices.
- Give guidelines to staff for where the organization needs to be financially at the end of the year
- Focus on monitoring through the year rather than trying to ferret out details in a complex budget before voting to approve it
See also in Blue Avocado:
Myth #5: Boards are supposed to raise money.
Reality: Actually, nonprofits are required by law to have boards (as are for-profit corporations) in order to hold the organization accountable to the public (not to raise money). And, in addition, boards don’t raise money. Board members raise money.
The board approves a plan for how the organization will obtain funds (in its approval of the budget) through some combination of donations, earned income, grants, etc. Then individual board members help with the plan by obtaining donations, making connections for earned income and grants, and so forth. See also:
Myth #6: It’s okay that we didn’t do an evaluation of our ED this year. She’s doing a good job.
Reality: You owe it to good executives to do an evaluation; they may not like it, but they’ll get even better. And you owe it to the community to know whether your executive is doing the good job it looks like she is. And . . . it doesn’t have to be that difficult.
Myth #7: We’re an all-volunteer organization and we can’t accomplish much until we have paid staff.
Reality: Many high-impact organizations don’t have staff, and will never have staff. All-volunteer organizations (AVOs) often represent the community at its best, and many field hundreds of volunteers every week. If you’re an AVO, take pride in what you accomplish, and don’t feel that “growing up” needs to mean having paid staff.
See also: Boards of All-Volunteer Organizations
Myth #8: Committee reports should be made at every meeting.
Reality: The best thing about committee reports is that they make committee chairs attend. Instead, consider one Annual Report that rotates to each committee and that recaps goals and accomplishments. Outside of that Annual Report only allow committee reports (other than finance) that either require a board decision or that involve board members signing up for tasks.
See also: Abolish Board Committees?
Myth #9: We’re too small to do succession planning,” or “Our ED isn’t going anywhere for awhile.”
Reality: This myth reflects an outdated view of succession planning built on identifying and grooming a successor on staff. In today’s nonprofits it means:
- Making the ED job do-able (it’s hard to replace a superhero, but it’s not as hard to replace an excellent executive director)
- Bringing staff salaries to competitive levels
- Recruiting board members who will be good at hiring, not just good at supporting the current ED
Myth #10: Boards don’t work. The whole model of nonprofit governance is broken.
Criticism of nonprofit boards (across the board) is usually one of two types:
- Outsiders who are critical of a board that has let an executive director run a nonprofit into the ground or in the wrong direction
- An insider — usually the executive director — who sees the board as standing in his or her way and additionally, as not raising money.
But most nonprofit boards work hard — if imperfectly — to both support and govern their organizations. And we should remember that boards are not mandated to raise money; they are mandated not simply to support an executive but to stand in the way of reckless executive decisions.
Reality: Despite all the reasons why boards shouldn’t work, the reality is that thousands of boards are working, everywhere and everyday.
Churchill said: “Democracy is the worst form of government there is. Except for all the other ones.” We say the same thing about nonprofit boards.
Jan Masaoka is the publisher of Blue Avocado, and she agrees with Winston Churchill, at least about this. Many of her articles for nonprofit boards can be found in The Best of the Board Cafe (Fieldstone).