Building a Successful Board for a NFP
16 August 2019 By By Professor Emeritus Barbara Van Ernst AM (EBLP’06), LV Program Speaker
Choosing the members of a Board of a Not for Profit (NFP) organisation is as important as it is fraught. Many small NFPs have begun around someone’s kitchen table, with a few passionate people with a common cause, working together to make a difference or to support each other. Before long there is a need to raise funds and then the realisation that some more formality is required. Many organisations move to become an Incorporated Association and others to a Company Limited by Guarantee. Suddenly there are external compliance and legal requirements, in particular because they are dealing with other people’s money. This transition I often describe as a move from a “cottage industry” to a “small business”. It is important to remember that the Board members are, in fact, Directors of the organisation, with a range of legal responsibilities. You may find that the “founder” of the organisation wants to remain in charge. Sometimes this makes it difficult to manage change, and needs to be addressed, possibly though upper limits on the term of office as a director.
With more formality needed, it is important to build a strong Board - a team which has the ability to plan ahead (strategic thinking), to manage and account for the money (financial responsibility), is able to engage stakeholders (communication skills) and can work through issues together (team work). So when making decisions on Board membership, it is wise to keep these ideas in mind. There is a need to understand the legal and compliance environment in which you work, but that does not mean you must have a lawyer on the Board. In the event that you need legal advice, you may be able to find assistance pro bono, or otherwise pay for the service. However, I do think it is a good idea to have a skilled accountant as Treasurer to manage the finances and risk if possible. If not, it is advisable to engage an external expert to assist. This is particularly important to ensure that you follow the new accounting standards for NFP reporting.
When seeking new Board members, it is essential that the current Board discuss the sorts of people you would like. Are there any particular roles or skills you need to include? It is inappropriate for the chair or a board member to just invite a friend. This often results in people who do not bring sufficient diversity to the Board. It also may lead to the perception that there is an inner circle.
The Board also needs to be comfortable with the recruiting process involved. Will you place an advertisement in the local paper? If so what is the wording? You may decide to use a free service such as the Institute of Company Directors Australia or Our Community.
When you receive applications, you need to consider carefully as you select. In my view transparency is one of the most important qualities of a good Board As informed decision-making is essential, it is important to develop processes for preparing good information so that everyone has the same information. You are aiming for a team which is open, collaborative, respectful and prepared to work. It is also a good idea to ask a prospective member to attend a meeting as an observer, just to make sure you have found the right new team member.
Professor Emeritus Barbara Van Ernst Am (EBLP’06), LV Program Speaker and Education Consultant
Barbara has had extensive experience in leadership roles, in universities and the community. She was Head of School at Deakin University and Deputy Vice Chancellor at Swinburne University, where her role included responsibility for learning and teaching and community engagement. She was a councillor in local government for nine years and mayor for two, chairing the council and several standing committees. She has also been a member two University Councils, and also a member of boards and government committees, mainly in arts and education.
More recently she has been an education consultant, working with Universities, TAFE colleges and quality agencies both locally and internationally. She has also worked pro bono for a number of Boards in Victoria. This has given her the opportunity to assist organisations to address good governance, including inter alia, board membership, strategic planning, policy development, risk management, financial overview and conduct of meetings.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the position of Leadership Victoria.