Customizing Boards and Committees

1 avril 2010

( Disponible en anglais seulement )

One of the most important aspects of operating a non-profit is to have a board which can give direction to the organization. Without being comprehensive in terms of board duties, it must set policy, manage investments, handle personnel issues, raise funds and make strategic decisions, both long and short term.

But it should be pointed out that every board need not deal with every issue. A fully funded organization need not worry about fundraising. An organization which has no substantial endowment need not worry about investment management.

In putting together a board, the needs of the organization should be taken into account and this should determine who is invited to serve.

In our view, the most important single requirement of board membership is a genuine commitment to the organization over the long haul, a willingness to devote the time necessary and to make meeting attendance a priority and, in our view, a compatibility with other board members.

This brings us to a key approach which more than thirty years of work in the field has shown to be a key to successful boards. Keep it small!

There is a temptation, especially in a country as large as Canada to strive for representation from all areas where the organization operates. This may lead to very large boards which become ineffective…and then in an attempt to solve specific problems, the board creates board sub-committees. Our experience is that small boards work better if there is a commitment by the members to make meeting attendance a priority and where structures are put in place to access specific expertise.

Consider the Nunavut Trust, a trust created to invest the Inuit land claim money and to dispense the funds in a prudent manner. The organization manages about a billion dollars in capital. It has six trustees, each appointed for three years by one of the regions of Nunavut. It has just three full time employees. None of the trustees has specific expertise except that they have intimate knowledge of the beneficiaries and beneficiary organizations.

Investments are split between many investment firms in several countries. There is an investment advisory committee (IAC) of four (all of whom have been in place for fifteen years) who advise the board on investment strategy. The Board makes decisions based on the input of the IAC as to what broad investment moves will be made. They do not get involved in specific purchases and sales.

This lean structure allows all decisions to be made by a six person group which also decides how much income each year will be used for the benefit of the Inuit without making decisions on specific distributions. The recommendations about distributions is made by a separate organization which has a larger staff and which can examine specific requests, evaluate them and make decisions which are ratified by the Trustees of the Nunavut Trust.

Given that the Trust is fully funded, the six trustees have developed an efficient system for managing investments and making distributions without having a bloated board or bureaucracy.

The International Centre for Not-for-Profit Law (ICNL) operates out of Washington but carries on projects around the world. It has no endowment but gets funds from a host of government and private sector funders to carry on various projects.  Years ago, it had a large board which tried to reflect the interests in play including representation from all of the geographic areas in which it worked. Having board meetings became difficult, both in terms of getting a quorum and funding travel to a central meeting place at least twice a year. The big board also was plagued with a lack of commitment in terms of time spent.

A few years ago, ICNL reorganized. It has a board of nine (plus two senior staff who are non-voting) which meets twice a year in person and twice a year by conference call. Six of the nine are from outside North America but there is no specific regional representation per se. It also has a carefully selected Advisory Council of about 40, all of whom have agreed to be “on call” when issues relating to their areas of expertise or geographic locations come up.

The time commitment of the Advisory Council members is substantially less than that of Board Members but the group serves as a pool from which new directors may be recruited when a director leaves.

The small existing board not only gets to know each other well but is able to concentrate on strategic initiatives, not getting involved in day to day operations. The small size also allows costs of board meetings to be kept to a minimum even though it may be that it is more efficient to have a meeting in (say) Budapest than in Washington.

These two examples are just that, examples. However, they show how small boards can operate within the context of managing hundreds of millions of dollars, or operating in fifty different countries.

Things get a little more difficult where there is fundraising involved. If an organization is undertaking large fundraising efforts, likely a professional fundraiser or fundraising organization is involved. This kind of operation is separate from the board but the board must be in ultimate control of policies. On the other hand, we know of many organizations which operate specific fundraising programs such as galas. This sort of work can be done by a separate non-board committee which reports to the board.

One phenomenon that we’ve seen which tends to expand boards is the tendency to offer to major donors seats on the board. We have often felt that both the offer and acceptance are more a matter of politeness. Just because an individual makes a large gift of money does not mean that he or she really wants to devote significant time to attending meetings. One argument is that these individuals can themselves generate other major gifts. While it is true that they can often open doors, it does not mean they have to be on the board. Our own experience is that a good executive director is best suited to dealing with potential new and large donors once the door is open.

We would also accept that in the case of foundations which do nothing more than fund beneficiaries and raise large capital donations, a board which is overweight with those who have committed financially is often more than acceptable if the board is backed up by competent technical staff.

We are quite aware that there will be situations where large boards may be both useful and comparatively efficient. Nevertheless, our experience over literally decades is that “small is beautiful” if careful thought is given to board structure and membership. Even organizations which operate on a big geographic scale and those which have substantial endowments to manage need not have large boards if they are backed up by alternative mechanisms, bearing in mind that in every case, it will ultimately be the Board which makes the final decisions.

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