How to Set Up Your Nonprofit Board of Directors: Part One

With great power comes great responsibility. That’s not just comic-book stuff— it’s something that anyone in a position involving a good deal of money or influence should take to heart. We tend to associate great corporate power with entities like tech giants. But many nonprofit organizations are often dealing with significant amounts of fundraising cash, and the influence that comes with it. So there needs to be an especially responsible entity operating everything. This is, in most cases, the nonprofit board of directors.

To touch more on superheroes, it’s said that heroes aren’t born, but made. Similarly, a board of directors doesn’t spring into existence with every nonprofit organization—it needs to be set up. Assembling this team can be a daunting task. It’s easier to approach if we break down the reasons and steps. 

What Does a Board of Directors Do for Nonprofits?

In general terms, the role of nonprofit board members is to provide “governance and oversight.” More specifically, they are in place to ensure that the nonprofit is operating in line with the organization’s mission and the values that it was created to further. This means that the board of directors are the ones who check off on every plan and policy. They are also actively monitoring the performance of the nonprofit, and its activities. It’s a huge task—so let’s break it down into the components.

Selection of the Executive Director

While the board of directors oversees all operations of the nonprofit, they aren’t actively operating things from day-to-day. That is the responsibility of the nonprofit’s executive director. But it is the board of directors’ job to hire the executive director, and to provide continuous evaluation and leadership. 

Ethical Oversight 

There are more legal restraints on nonprofits than you might realize. There are filing requirements for the Internal Revenue Service, federal laws, state laws, and even industry laws. These all clearly lay out what is and isn’t acceptable for a nonprofit to do. And it's the job of the board of directors to ensure none of these lines are crossed, whether intentionally or unintentionally. 

Financial Oversight

Donations are the lifeblood of nonprofits. Potential donors should be able to trust that their charitable gifts are used in a responsible and open manner. At the same time, the nonprofit itself can only continue to exist as long as their finances are in order. Budgets and financial planning all need to be organized. Fundraisers need to be held, and donations secured. And through all this, strict compliance must be met for the IRS. The board of directors are the ones who make sure all of this goes off without a hitch. 

Public Relations 

Nonprofit boards of directors may often find themselves called upon to take up the mantle of advocates for their organizations. There is a long list of entities with which a nonprofit must maintain good and open relationships to find success. This could include local policymakers, media, stakeholders, and of course, donors. 

Program Oversight

Nonprofits are ideally always coming up with new programs and ideas to further their mission. It is the responsibility of the board of directors to review each program proposal. They need to determine if the program is going to further the mission of the nonprofit, and if it can do so in an effective and efficient manner. They’ll also monitor the program and decide later if the outcome could be considered a success. 

Strategic Planning

The board of directors can’t get lost in the weeds in every project—they need to focus on the big picture. It’s the responsibility of the board to agree among themselves on the long-term vision and direction of the nonprofit. They also need to continue to refine strategy with the executive director and other staff. This could include suggesting opportunities for growth, identifying challenges, and new methods to pursue the mission of the nonprofit. 

Succession Planning

One last thing the board needs to take care of is itself. It’s the duty of the board to add and replace its own members as is needed. It’s also their responsibility to decide what skills, experiences, and perspectives would be most useful for the nonprofit going forwards.

Does a Nonprofit Have to Have a Board of Directors?

The short answer is—yes. The longer answer is—yes, very much so! In most countries, it's a legal requirement for nonprofits to have a board of directors. Nonprofits are simply not allowed to operate without the legal and ethical oversight of a board. The board of directors is also an essential component on the checklist for qualifying for tax-exempt status with the IRS. 

The idea is that the board of directors is providing independent oversight from the operators of the nonprofit, who may have a conflict of interest in providing such oversight. How many board members you actually need varies from state to state, but a minimum number of three is a common rule.

Nonprofit Board Roles Explained

As you saw above, a nonprofit board of directors has a massive and wide-ranging number of responsibilities. Most boards break down this daunting task, having different members specialize in different facets of oversight. Every board is free to delegate as they see fit, but the following are some board roles that you’ll commonly encounter. 

President/Chair

The president (or chair) serves as the leader of the board of directors. That person is the one who takes charge during meetings and is the “face” of the board when communicating with the public and stakeholders. They also work closely with the rest of the board on developing a strategic plan and providing leadership and direction.

Secretary

The board of directors’ job is to ensure compliance, but they can’t simply declare everything is running smoothly. It is the job of the secretary to document everything to prove that compliance. This includes minutes of board meetings and records of activities. The secretary is generally the one who communicates meeting information to other board members, and who makes sure the nonprofit meets filing requirements.

Treasurer

Anything in the realm of financials falls with the purview of the board treasurer. The treasurer’s job is to manage and report on all the finances of the nonprofit organization, ensuring they are transparent and properly reported. They will also work closely with directors on budgeting, pointing out sources of risk and recommending mitigating strategies.

Other Board Members

There is a need for board members beyond those with specific purposes. There’s always a need for experts to help with decision-making, sit on committees, and help with the fundraising efforts. The larger the scope of operations of the nonprofit, the more important having more board members becomes. 

Of course, these other board members may take on specific titles depending on their roles. A vice president can sit in for the president when they’re not available. Fundraising chairs and governance chairs can focus on their respective areas of expertise. Remember—it's the job of the board to arrange itself into a form that’s most effective and hire new board members as needed.

How to Form a Board of Directors for a Nonprofit

Now that we’ve demystified exactly what it is that a nonprofit board of directors does, we’ll try to demystify the process of actually forming such a board. As with most daunting projects, it’s best to break it down into easily digestible steps: 

1. Check the Legal Requirements
   We mentioned above that a good rule of thumb is that the minimum number of directors is three. However, this number can change depending on your state, and the first step is to see what the applicable rules are regarding board size. There may also be laws regarding things such as board member term limits or conflict of interest policies that you should acquaint yourself with. It’s best you have all this sorted before the articles of incorporation are dealt with.
    
2. Draft Your Bylaws 
   The next step generally is to draft up the bylaws of the board, a legal document that outlines your internal rules and procedures. It’s essential to create a framework for smooth operation—you want to have clear answers to questions that might arise. The organization’s bylaws can provide written proof of roles, the number of board members, term limits, meeting frequencies, the quorum for meetings, and voting rules.
    
3.  Establish Governance Policies
   Along with the bylaws, it’s essential to establish what the governance policies for the board will be. These refer to the actions the board will take in the case of things like conflicts of interest, or personal disputes between board members. It’s better to write this out clearly to start, rather than have no answer later on.
    
4. Decide the Skill Needs of the Board
   As mentioned previously, every nonprofit governing body will look a little different. This will mainly depend on what your charitable organization will need from the board members. It’s best to approach this step as a checklist, deciding what skillset you’ll need the team to have. This could include requirements for expertise in accounting, the legal profession, fundraising, marketing, or communication. You may also decide you want board members to have a certain amount of expertise in the area your nonprofit operates in.
   
   Many modern nonprofit boards of directors also find diversity of the board to be important. While not necessarily a skillset, a more diverse board can bring to bear more experiences and points of view. Diversity should certainly be part of the conversation at this point. 
    
5. Reach Out to Candidates
   Now it's finally time to assemble your candidates! This section is worth essays upon essays all its own. It's likely you may have ideas for potential board members already. If not, you can start reaching out into your personal networks to start building a list, then narrowing it down. But if you see an inspiring community leader or nonprofit expert who you think would be a great fit, don’t hesitate to reach out!
   
   It is essential to be up-front about the job description during this process. Make it clear how much time and money you expect members of the board to invest. Also be very clear as to what the goals and mission of your nonprofit are. The ideal board members are the committed ones.
    
6. Establish Responsibilities
   It’s important to be straightforward about what you expect from board members when first reaching out to them. But as has been mentioned here before, it’s even better to get things sorted out in writing, with agreement from everyone. It’s a great idea to sit down with all your board members and draft out an agreement that specifies the responsibilities of each specific member.
   
   Establishing responsibilities should always include a clear indication of time requirements, including how many meetings are expected per year. It is also common for board members to be expected to monetarily contribute to the nonprofit.
    
7. The First Board Meeting
   Beyond being an important milestone, the first meeting of your board has some key procedures to get off your checklist. At the first board meeting, you need to take your voting system for a spin and officially elect your first officers for key positions. After this first meeting, you should have a president, secretary, and treasurer in place. This is also the time for everyone to sign off on the bylaws, and to start setting the first strategic goals.

Our next article will focus on fiduciary responsibilities of a board of directors and governance styles.