11 Best Practices for Nonprofit Directors

Board members should continually reflect on the organization’s mission and ensure its activities, programs and purposes continue to positively impact the communities and constituents it serves. It is the board’s responsibility to translate the mission into goals and strategies that can be measured and achieved.

Have a written investment policy and establish an investment committee, or hire outside investment professionals to manage the organization’s financial portfolios. The nonprofit’s investment policy should include an asset allocation strategy that meets the nonprofit’s long-term financial goals and takes into consideration the organization’s spending policy.

Fundraising is intrinsically linked to a nonprofit’s financial and programmatic health and its ability to carry out its mission and purposes. Therefore, the board should set the strategy from which all fundraising activities flow. Fundraising activities and tactics may include galas, annual fund drives, benefit concerts, endowment campaigns, peer-to-peer and crowdfunding initiatives, grants and direct-mail donations.

Many boards require their members to participate in fundraising and to make personal donations. Fundraising expectations for board members should be clear, measurable and achievable. The board should adopt appropriate measures of success to ensure each board member is held accountable for reaching the organization’s fundraising goals.

Active participation includes attending board meetings, participating on committees and helping ensure the board keeps proper minutes, resolutions and voting policies. Board members should have familiarity with required federal, state and local tax obligations and filings, insurance coverage for the board and the organization, employer-employee obligations and environmental liability, if applicable.

Clearly define and separate governance activities from the staff’s management and operational activities. Board micromanagement can result in unnecessary confusion and tension leading to operational inefficiencies. At the same time, the staff should understand that its role is not to “run” the organization while the board sits on the sidelines.

Boards should maintain a conflict of interest policy requiring all directors to complete a conflict of interest disclosure form annually. An established process to address potential conflicts will help maintain the organization’s best interests and avoid breaching a director’s duty of loyalty.

Assess the board’s performance on a periodic basis. This is an opportunity for directors to reflect on whether the board is meeting its responsibilities to advance the organization’s mission. This is an especially important tool if the board wants to address leadership gaps, identify training opportunities and refine participation expectations.

Ensure the organization carries both general liability insurance and directors and officers (D&O) insurance. The organization’s bylaws or trust instrument should contain indemnification provisions as well. These provisions protect a director from lawsuits and any related expenses, so long as the director acted in good faith and in the organization’s best interest.

Implement a robust orientation program that includes a board policy manual for all new board members. This will help:

• Introduce the organization’s mission, values, programs, finances and constituents;
• Familiarize board members with the organization’s structure, procedures, operations, policies and staff roles;
• Clarify expectations for board service (e.g., required time commitment, term limits, financial contribution minimums); and
• Pair new board members with existing, experienced board members or former board members who can mentor the incoming directors.

Prioritize building a strong organization infrastructure to support the next generation of leaders, at the board level and among staff. The board is uniquely suited to identify opportunities to recruit and train the organization’s successors.