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Capital Acumen Issue 33

Bringing More Than Passion To Nonprofits

Serving on a nonprofit’s board of directors carries responsibilities that demand significant time and effort to fulfill.

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Those new to serving on a nonprofit board of directors often bring a fresh perspective to the organization’s challenges and a contagious enthusiasm that can energize their fellow board members. What they may not bring, however, is a full understanding of the magnitude of their responsibilities.

The primary purpose of the board is to help the nonprofit achieve its mission. Integral to accomplishing that objective is ensuring that the organization has the resources necessary to achieve long-term sustainability. As such, individual board members must fulfill several important responsibilities, which include:

  • Defining the strategic direction of the organization
  • Implementing prudent governance practices
  • Providing legal and financial oversight
  • Hiring and evaluating the nonprofit’s executive director or chief executive officer
  • Engaging in fundraising activities
  • Raising the organization’s profile in the community

These significant responsibilities are made even weightier by the fact that board members are considered fiduciaries, which means that failure to act in the nonprofit’s best interest can have legal ramifications for board members.

As national practice executive of nonprofit consulting at U.S. Trust, Joy Hunter Chaillou has worked closely with nonprofit boards and has seen how misconceptions about a member’s role can negatively affect the board’s ability to advance the nonprofit’s mission.

“I think many individuals who are new to serving on a nonprofit board may not fully understand what is expected of them in terms of acting in a fiduciary capacity and as a community advocate for the organization,” Chaillou says. “Board members are responsible for creating new community connections; developing prospective donor relationships; and being the nonprofit’s ambassador to the community, each of which is very demanding.”

Setting— or Correcting— Course

The primary role of the board is to advance, or in some cases more clearly define, the mission of the organization.

“The ultimate responsibility of board members is to establish the direction of the nonprofit and keep it on course,” Chaillou says. “It’s the board’s duty to assess whether the organization’s programs are aligned with its mission and whether those programs are having the desired impact on the community.”

"It is vital that board members be able to clearly explain the nonprofit’s mission and communicate its successes."

Over time, a nonprofit can lose sight of its original purpose, whether because of conflicting visions of its role; because the need for funding has prompted it to address donors’ objectives; or because it achieved its founding mission and needs to revisit its purpose. Whatever the genesis of the shift, the board of directors must work with executive leadership to refocus the organization on its original purpose or to define a new one.

One way a board can keep the organization focused is to refine its mission statement. A well-crafted mission statement sets priorities and drives planning, budgeting and, perhaps most important, fundraising. Donors typically support a nonprofit because its mission resonates with them. Indeed, according to the 2016 U.S. Trust® Study of High Net Worth Philanthropy,†† 97% of wealthy donors support an organization because of its mission.

Equipping Nonprofits to Succeed

Of course a clearly defined mission statement alone does not ensure success. The organization must have the resources — dedicated staff, volunteers and a strong donor base — to execute its programs. It is the collective responsibility of the board of directors and executive leadership to provide the organization with the tools required to achieve its mission. To do that, the board must:

Hirethe chief executive officer or executive director. Arguably the most important duty of a nonprofit’s board is recruiting its senior management team and establishing competitive compensation that enables the organization to attract and retain top talent. Finding the right executive director is critical because he or she is the key partner and primary liaison between the board and the organization’s staff. The board must also recruit new members who have a passion for the nonprofit’s cause and strong community connections.

Act as stewards of the nonprofit’s funds.Board members have a fiduciary responsibility to manage the nonprofit’s funds effectively. This requires board members to understand and interpret financial statements; create and review budgets; and oversee the investment of its endowment.

Raise funds.Every board member is expected to contribute to fundraising by giving to the organization personally and by tapping their personal and professional networks. The competition for donor dollars is intense, so board members must be actively engaged in development strategy and fundraising to help the organization achieve sustainability.

Serve as ambassadors.Board members are the face of the organization, publicly advocating for it by articulating its mission. Raising the profile of the organization helps it flourish by attracting financial contributions, talented staff and volunteers. It is vital that board members be able to clearly explain the nonprofit’s mission and communicate its successes.

While board members should have a working knowledge of these tasks, they need not be adept at all of them. “No board member has all of the skills and experience needed to move a nonprofit forward; that’s why you have multiple members — ideally with diverse skill sets,” Chaillou says. “Besides, it’s not just expertise that takes a nonprofit to the next level, but also a willingness to put in the time and work that serving on a board demands.”

For more about nonprofit boards, please visit ustrust.com/philanthropy or contact your U.S. Trust advisor

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