Week 7 - Signature Assignment: Write and Analyze a Case Study and Week 8 - Assignment: Create a Brochure on Organizational Planning

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N O N P R O F I T O R G A N I Z AT I O N S

The handbook of nonprofiT Governance

from boardSource comes The Handbook of Nonprofit Governance. This comprehensive resource explores the overarching question of governance within nonprofit organizations and addresses the roles, structures, and practices of an effective nonprofit.

The Handbook of Nonprofit Governance covers the topics that are of most importance to those charged with creating and sustaining effective leadership, including building a board; succession planning; policies; financial oversight; fundraising; planning; strategic planning processes; risk management; and evaluation of the board, ceo, and organization.

praise for The Handbook of Nonprofit Governance

“This is the first book i’ve found that covers the topic of governance from a to Z. i know what i’ll be assigning the students in my governance class as a textbook next semester!”

—Terrie Temkin, founding principal, coreStrategies for nonprofits, inc.

“boardSource has prepared an exceptional resource for nonprofit boards and leaders. This comprehensive volume offers timely and relevant information about board work and governance, including practical tools and resources that will be valuable to all types of nonprofits.”

—DaviD O. renz, chair, department of public affairs; beth k. Smith/Missouri chair in nonprofit Leadership; and director, Midwest center for nonprofit Leadership;

University of Missouri, kansas city

“if you are involved in nonprofit organizations, and if you ever have doubts about how they are best run, this is the book for you—and boardSource is the place to turn.”

—Fisher hOwe, consultant, Lavender/howe & associates, and author, The Nonprofit Leadership Team

BoardSource (formerly the National Center for Nonprofit Boards) is the premier resource for practical information, tools and best practices, training, and leadership development for board members of nonprofit organizations worldwide.

nOnprOFiT Gover nance

The Handbook of

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“... an exceptional resource for nonprofit boards and leaders.” —David o. renz, Beth K. Smith/Missouri chair in nonprofit Leadership,

Midwest center for nonprofit Leadership, University of Missouri, Kansas city

BoardSource, et al. The Handbook of Nonprofit Governance, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ncent-ebooks/detail.action?docID=529975. Created from ncent-ebooks on 2021-10-26 19:19:13.

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THE HANDBOOK OF NONPROFIT GOVERNANCE

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Essential Texts for Nonprofi t and Public Leadership and Management

The Handbook of Nonprofi t Governance, by BoardSource

Strategic Planning for Public and Nonprofi t Organizations, third edition, by John M. Bryson

The Effective Public Manager, fourth edition, by Steven Cohen et al.

Handbook of Human Resources Management in Government, third edition, by Stephen E. Condrey

The Responsible Administrator, fi fth edition, by Terry L. Cooper

Conducting a Successful Capital Campaign, revised and expanded edition, by Kent E. Dove

The Public Relations Handbook for Nonprofi ts, by Arthur Feinglass

The Jossey-Bass Handbook of Nonprofi t Leadership and Management, second edition, by Robert D. Herman

Benchmarking in the Public and Nonprofi t Sectors, second edition, by Patricia Keehley et al.

Museum Marketing and Strategy, second edition, by Neil Kotler et al.

The Ethics Challenge in Public Service, second edition, by Carol W. Lewis et al.

Working Across Boundaries, by Russell M. Linden

Designing and Planning Programs for Nonprofi t and Government Organizations, by Edward J. Pawlak

Measuring Performance in Public and Nonprofi t Organizations, by Theodore H. Poister

Human Resources Management for Public and Nonprofi t Organizations: A Strategic Approach, third edition, by Joan E. Pynes

Understanding and Managing Public Organizations, fourth edition, by Hal G. Rainey

Designing and Conducting Survey Research, third edition, by Louis M. Rea et al.

Fundraising Principles and Practice, by Adrian Sargeant et al.

Making Critical Decisions, by Roberta M. Snow et al.

Hank Rosso’s Achieving Excellence in Fundraising, second edition, Eugene R. Tempel

Handbook of Practical Program Evaluation, second edition, by Joseph S. Wholey et al.

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THE HANDBOOK OF NONPROFIT GOVERNANCE

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Published by Jossey-Bass A Wiley Imprint 989 Market Street, San Francisco, CA 94103-1741—www.josseybass.com

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the Web at www.copyright.com. Requests to the publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, or online at www.wiley.com/go/permissions.

Readers should be aware that Internet Web sites offered as citations and/or sources for further information may have changed or disappeared between the time this was written and when it is read.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifi cally disclaim any implied warranties of merchantability or fi tness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profi t or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Jossey-Bass books and products are available through most bookstores. To contact Jossey-Bass directly call our Customer Care Department within the U.S. at 800-956-7739, outside the U.S. at 317-572-3986, or fax 317-572-4002.

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Library of Congress Cataloging-in-Publication Data

The handbook of nonprofi t governance / Boardsource. p. cm.—(Nonprofi t and public leadership and management) Includes bibliographical references and index. ISBN 978-0-470-45763-4 (cloth) 1. Nonprofi t organizations—Management. 2. Corporate governance. 3. Boards of directors. 4. Nonprofi t organizations—Management—Case studies. 5. Corporate governance—Case studies. 6. Boards of directors—Case studies. 7. BoardSource (Organization) I. BoardSource (Organization) HD62.6.H345 2010 658.4'22—dc22 2010004073 Printed in the United States of America FIRST EDITION HB Printing 10 9 8 7 6 5 4 3 2 1

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http://www.wiley.com/go/permissions

http://www.copyright.com

BoardSource is dedicated to advancing the public good by building exceptional nonprofi t boards and inspiring board service.

BoardSource was established in 1988 by the Association of Governing Boards of Universities and Colleges (AGB) and Independent Sector (IS). In the early 1980s, the two organizations had conducted a survey and found that although 30 percent of respondents believed they were doing a good job of board educa- tion and training, the rest of the respondents reported little, if any, activity in strengthening governance. As a result, AGB and IS proposed the creation of a new organization whose mission would be to increase the effectiveness of non- profi t boards.

With a lead grant from the Kellogg Foundation and funding from fi ve other donors, BoardSource opened its doors in 1988 as the National Center for Nonprofi t Boards. It had a staff of three and an operating budget of $385,000. On January 1, 2002, BoardSource took on its new name and identity. These changes were the culmination of an extensive process of understanding how we were perceived, what our audiences wanted, and how we could best meet the needs of nonprofi t organizations.

Today BoardSource is the premier voice of nonprofi t governance. Its highly acclaimed products, programs, and services mobilize boards so that organizations fulfi ll their missions, achieve their goals, increase their impact, and extend their infl uence. BoardSource is a 501(c)(3) organization.

BoardSource provides

Resources to nonprofi t leaders through workshops, training, and an extensive Web site (www.boardsource.org) Governance consultants who work directly with nonprofi t leaders to design specialized solutions to meet an organization’s needs The world’s largest, most comprehensive selection of material on nonprofi t governance, including a large selection of books and CD-ROMs An annual conference that brings together approximately nine hundred gov- ernance experts, board members, and chief executives and senior staff from around the world

For more information, please visit our Web site at www.boardsource.org, e-mail us at [email protected], or call us at 800-883-6262.

•

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http://www.boardsource.org

Have You Used These BoardSource Resources?

The Governance Series

Ten Basic Responsibilities of Nonprofi t Boards, second edition Financial Responsibilities of Nonprofi t Boards, second edition Structures and Practices of Nonprofi t Boards, second edition Fundraising Responsibilities of Nonprofi t Boards, second edition Legal Responsibilities of Nonprofi t Boards, second edition The Nonprofi t Board’s Role in Mission, Planning, and Evaluation, second edition

The Committee Series

Transforming Board Structure: Strategies for Committees and Task Forces Governance Committee Executive Committee Financial Committees Development Committee Advisory Councils

Other Books

The Board Building Cycle: Nine Steps to Finding, Recruiting, and Engaging Nonprofit Board Members, second edition

The Board Chair Handbook, second edition The Business Professional’s Guide to Nonprofi t Board Service Chief Executive Succession Planning: Essential Guidance for Boards and CEOs,

second edition Chief Executive Transitions: How to Hire and Support a Nonprofi t CEO Culture of Inquiry: Healthy Debate in the Boardroom Driving Strategic Planning: A Nonprofi t Executive’s Guide, second edition Exceptional Board Practices: The Source in Action Fearless Fundraising for Nonprofi t Boards, second edition Generating Buzz: Strategic Communications for Nonprofi t Boards Getting the Best from Your Board: An Executive’s Guide to a Successful Partnership Governance as Leadership: Reframing the Work of Nonprofi t Boards Managing Confl icts of Interest: A Primer for Nonprofi t Boards, second edition Meeting, and Exceeding Expectations: A Guide to Successful Nonprofit Board Meetings,

second edition Moving Beyond Founder’s Syndrome to Nonprofi t Success

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Navigating the Organizational Lifecycle: A Capacity-Building Guide for Nonprofi t Leaders The Nonprofi t Board Answer Book: A Practical Guide for Board Members and Chief Executives,

second edition The Nonprofi t Board’s Guide to Bylaws: Creating a Framework for Effective Governance The Nonprofi t Chief Executive’s Ten Basic Responsibilities Nonprofi t Executive Compensation: Planning, Performance, and Pay, second edition The Nonprofi t Dashboard: A Tool for Tracking Progress Nonprofi t Governance: Steering Your Organization with Authority and Accountability The Nonprofi t Legal Landscape The Nonprofi t Policy Sampler, second edition The Source: Twelve Principles of Governance That Power Exceptional Boards Taming the Troublesome Board Member Trouble at the Top: The Nonprofi t Board’s Guide to Managing an Imperfect Chief Executive Understanding Nonprofi t Financial Statements, third edition Who’s Minding the Money? An Investment Guide for Nonprofi t Board Members,

second edition

Online Assessments

Assessment of the Chief Executive Board Self-Assessment

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Join Us at Josseybass.comJo

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CONTENTS

About BoardSource v

Acknowledgments xi

Introduction xv

PART ONE: GOVERNANCE PRINCIPLES, ROLES, AND STRUCTURE 1

1 In the Spirit of Service: Introduction to the Nonprofi t World 3

2 What Is Governance? 15

3 Governance Roles 31

4 Governance Structure 55

5 The Board–Chief Executive Relationship 81

PART TWO: GOVERNANCE PRACTICES 97

6 Building a Board 99

7 Legal and Ethical Responsibilities 127

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8 Financial Oversight 145

9 Fundraising 167

10 Strategic Thinking and Strategic Planning 189

11 Communications and Outreach 211

12 Succession Planning and Chief Executive Transition 233

13 Evaluation 255

14 Bylaws and Policies 275

15 Board Meetings 295

16 Board Dynamics 317

Appendix: Sample Policies for Nonprofi t Boards 331

Board Member Fundraising 332

Human Resources 333

Code of Ethics 335

Confl ict of Interest 337

Confi dentiality 341

Whistle-Blower Protection 342

Record Retention and Document Destruction 344

Executive Compensation 348

Investments 350

Financial Audits 356

Risk Management 357

Media Relations 358

Glossary 359

Resources 367

Index 375

x Contents

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ACKNOWLEDGMENTS

BoardSource wishes to acknowledge the authors of the material used in producing this handbook: Nancy R. Axelrod, Advisory Councils (BoardSource Committee Series); Chief Executive Succession Planning: Essential Guidance for Boards and CEOs (second edition); Culture of Inquiry: Healthy Debate in the Boardroom; “ Curious Boards, ” Board Member 15, no. 3 (May/June 2006).

Steven Berger, Understanding Nonprofi t Financial Statements (third edition).

BoardSource, The Nonprofi t Board Answer Book: A Practical Guide for Board Members and Chief Executives (second edition).

BoardSource, The Source: Twelve Principles of Governance That Power Exceptional Boards .

Marla J. Bobowick, Sandra R. Hughes, and Berit M. Lakey, Transforming Board Structure: Strategies for Committees and Task Forces (BoardSource Committee Series).

Janet Boguch, “ Enforcing Give, Get, or Get Off, ” Board Member 17, no. 1 (January/ February 2008).

Lawrence M. Butler, The Nonprofi t Dashboard: A Tool for Tracking Progress .

Richard P. Chait, William P. Ryan, and Barbara E. Taylor, Governance as Leadership: Reframing the Work of Nonprofi t Boards .

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Paul M. Connolly, Navigating the Organizational Lifecycle: A Capacity - Building Guide for Nonprofi t Leaders .

Charles F. Dambach, MBA, Melissa Davis, and Robert L. Gale, Structures and Practices of Nonprofi t Boards (second edition) (BoardSource Governance Series).

Charles F. Dambach, MBA, Oliver Tessier, and Carol E. Weisman, The Business Professional ’ s Guide to Nonprofi t Board Service .

M. Christine DeVita, “ Constructing a Partnership, ” Board Member 15, no. 5 (September/October 2006).

Outi Flynn, Meeting, and Exceeding Expectations: A Guide to Successful Nonprofi t Board Meetings (second edition).

Robert P. Fry Jr., Who ’ s Minding the Money? An Investment Guide for Nonprofi t Board Members (second edition).

Kay Sprinkel Grace, MA, “ Fundraising in the 21st Century, ” Board Member 17, no. 3 (May/June 2008).

Kay Sprinkel Grace, MA, Amy McClellan, MNO, and John A. Yankey, PhD, T he Nonprofit Board ’ s Role in Mission, Planning, and Evaluation (second edition) (BoardSource Governance Series).

James M. Greenfi eld, Fundraising Responsibilities of Nonprofi t Boards (second edition), ACFRE, FAHP (BoardSource Governance Series).

Peter Dobkin Hall, “ A History of Nonprofi t Boards in the United States. ”

Deborah S. Hechinger and Marla J. Bobowick, “ Governance Matters, ” Board Member 14, no. 3 (June/July 2005).

Bruce R. Hopkins, JD, LLM, Legal Responsibilities of Nonprofi t Boards (second edition) (BoardSource Governance Series).

Richard T. Ingram, Ten Basic Responsibilities of Nonprofi t Boards (second edition) (BoardSource Governance Series).

Katha Kissman, Taming the Troublesome Board Member .

Katha Kissman, Trouble at the Top: The Nonprofi t Board ’ s Guide to Managing an Imperfect Chief Executive .

Daniel L. Kurtz and Sarah E. Paul, Managing Confl icts of Interest: A Primer for Nonprofi t Boards (second edition).

Berit M. Lakey, The Board - Building Cycle: Nine Steps to Finding, Recruiting, and Engaging Nonprofi t Board Members (second edition); Nonprofi t Governance: Steering Your Organization with Authority and Accountability .

Berit M. Lakey, Sandra Hughes, and Outi Flynn, Governance Committee (BoardSource Committee Series).

xii Acknowledgments

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Andrew S. Lang, CPA, Financial Responsibilities of Nonprofi t Boards (second edition) (BoardSource Governance Series).

Barbara Lawrence and Outi Flynn, The Nonprofi t Policy Sampler (second edition).

Mark Light, Executive Committee (BoardSource Committee Series).

Thomas A. McLaughlin, Financial Committees (BoardSource Committee Series).

Thomas A. McLaughlin and Addie Nelson Backlund, Moving Beyond Founder ’ s Syndrome to Nonprofi t Success .

Richard L. Moyers, The Nonprofi t Chief Executive ’ s Ten Basic Responsibilities .

Ober | Kaler, The Nonprofi t Legal Landscape .

Sally J. Patterson, Generating Buzz: Strategic Communications for Nonprofi t Boards .

Maureen K. Robinson, “ Declaration of Independence, ” Board Member 16, no. 2 (March/April 2007).

Irene Rozansky, “ Communicating in a Crisis, ” Board Member 16, no. 2 (March/ April 2007).

Dave Sternberg, Fearless Fundraising for Nonprofi t Boards (second edition).

Don Tebbe, Chief Executive Transitions: How to Hire and Support a Nonprofi t CEO .

Eugene R. Tempel, Development Committee (BoardSource Committee Series).

D. Benson Tesdahl, Esq., The Nonprofi t Board ’ s Guide to Bylaws: Creating a Framework for Effective Governance .

Brian H. Vogel and Charles W. Quatt, Nonprofi t Executive Compensation: Planning, Performance, and Pay (second edition).

Susan A. Waechter, Driving Strate gic Planning: A Nonprofit Executive ’ s Guide (second edition).

Vernetta Walker, “ Beyond Political Correctness: Building a Diverse Board, ” Board Member 18, no. 3 (May/June 2009).

Mindy R. Wertheimer, The Board Chair Handbook (second edition).

Sherill K. Williams and Kathleen A. McGinnis, Getting the Best from Your Board: An Executive ’ s Guide to a Successful Partnership .

Terry Williams, “ Thinking Outside the Boardroom, ” Board Member 15, no. 2 (March/April 2006).

Peter York, “ Are We There Yet? The Board ’ s Role in Evaluating Mission Achievement, ” Board Member 14, no. 6 (December 2005).

Acknowledgments xiii

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INTRODUCTION

Service on a nonprofi t board was once perceived as an honorary role requir-ing nothing more than periodic attendance at meetings and generous annual donations. But vibrant growth in the nonprofi t sector has helped to change the nature of board service. Board members need to do more than just show up. They must understand and promote the organization ’ s work, defi ne measures of success, and assess how well the organization performs, using both subjective and objective standards. They must generate and allocate resources, hire the chief executive, develop plans, establish policies and programs, and monitor activi- ties — all with a sharp focus on producing meaningful results.

Within these broad roles, board members have many functions. They are guardians of the mission, they ensure compliance with legal and fi nancial require- ments, and they enforce ethical guidelines for their organization. They are policy- makers, fundraisers, ambassadors, partners with the chief executive, and strategic thinkers. They monitor progress, evaluate the performance of the organization and the chief executive, and demonstrate integrity in everything they do on behalf of the organization. Because of their many roles, board members need more than enthusiasm for a cause, passion for a mission, or just good intentions. They need to understand all of their stewardship responsibilities and perform all of their duties.

Board service entails serious obligations, to be sure, but it can also deliver immense satisfaction. A board that knows what is expected of it and performs at

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the highest level is a strategic resource for its organization and chief executive. And ultimately, this commitment by dedicated board members translates into mission impact in our communities.

About This Book

The Handbook of Nonprofi t Governance is a comprehensive overview of the principles and practices of nonprofi t boards. To compile this handbook, BoardSource drew on its extensive selection of books, articles, and topic papers by leading experts on nonprofi t governance.

The book is organized in two parts. Part One (Chapters One through Five ) addresses basic governance history, roles, and structures. Part Two (Chapters Six through Sixteen ) examines nonprofi t governance practices, drawing on the expe- rience and wisdom of BoardSource experts to review basic approaches to board responsibilities and board self - management. Consulting the handbook provides answers to the following questions:

What is the nonprofi t sector, and how does governance fi t in? Chapters One and Two review the history of the nonprofi t sector, its function in society, and the basic tenets of nonprofi t governance.

What roles do nonprofi t boards serve? Chapter Three explains the governance roles of the full board and of individual board members, broadly described as set- ting organizational direction, ensuring the necessary resources, and providing oversight. It links to other chapters in this handbook that explore elements of these governance roles in greater depth. Chapter Four examines board structure, including board size and the functions of committees, task forces, and other work groups. Chapter Five describes the board – chief executive relationship and offers suggestions to ensure its success.

Part Two examines nonprofi t governance practices, drawing on the experi- ence and wisdom of BoardSource experts to review basic approaches to board responsibilities and board self - management:

How does a nonprofi t organization build and sustain a strong, active board? Chapter Six reviews the cyclical process of fi nding the best people, bringing them onto the board, and then creating an environment for board service that invites them to reach their full potential as board members. Building a board involves more than enlisting new members and training them. This chapter describes the full cycle: identifying, cultivating, and recruiting board members; providing orien- tation; involving all board members in meaningful work; promoting continu- ing education; evaluating the effectiveness of the full board and of individuals;

xvi Introduction

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Introduction xvii

refreshing the board through term limits and regular rotation; and celebrating board accomplishments.

What are the legal and ethical responsibilities of the board and its members? Governance is serious business, with a set of duties that are defi ned by law. Chapter Seven opens with a discussion of fi duciary responsibility — the board ’ s obligations for fi nancial accountability and effective oversight of the organization. Exceptional boards not only follow legal requirements, but also ensure that the organization ’ s work is conducted in an ethical, open, and responsive manner. Legal and ethical compliance, confl ict of interest, legal liability, and the concepts of private benefi t and private inurement are among the issues covered in this chapter.

How does the board carry out its financial oversight responsibilities? Ultimately, the board is responsible for the fi nancial viability, the program success, and the survival of the organization. Chapter Eight reviews what board members need to know about fi nancial integrity and solvency, safeguards and procedures to protect the organization, and signs of fi nancial trouble. It explains the implications of the Sarbanes - Oxley Act for nonprofi ts, the importance of an external audit, and the fi nancial systems that organizations need for safe, effi cient operations.

What is the board ’ s role in fundraising? Fundraising begins with the board, because board members understand the organization well and are committed to helping it fulfi ll its mission. Chapter Nine outlines the board ’ s involvement in fundraising, step by step. Joining with staff to generate necessary resources, the board provides strategic guidance and direction, participates as donors and as fundraisers, and is responsible for stewardship and oversight of the funds raised. Beginning with an explanation of board members ’ personal obligation for giving, the chapter reviews fundraising types, policies, and techniques, with tips for raising board members ’ comfort level for joining in this important activity.

How does the board engage in strategic thinking and participate in strategic planning? Strategic thinking and planning move an organization toward fulfi lling its mission and creating its future. Both processes — as described in Chapter Ten — are poten- tially enriching and energizing for the board. When strategic thinking becomes a habit, board meetings are dynamic, discussions are challenging and thought pro- voking, and the board identifi es crucial issues that lead to more relevant, timely, and constructive decisions. This chapter outlines the rationale for strategic plan- ning, describes basic steps in the process, and emphasizes the need to blend plan- ning and evaluation.

What does the board contribute to communications and outreach? For nonprofi t boards, strategic communications involves big - picture thinking, a clear understanding of appropriate roles, and hands - on participation when appropriate. Chapter Eleven reviews how board members can contribute to the staff ’ s work through

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public speaking, relationship building, and advocacy. It explains lobbying and political activity by nonprofi ts, and it addresses communications during a crisis or controversy.

How do boards ensure effective chief executive transitions? The board ’ s responsibility for hiring and supporting the chief executive can have an extraordinary impact on organizational effectiveness. Chapter Twelve explains that there ’ s more to this responsibility than executive search. It begins with the proactive step of having a succession plan and compensation policy in place. This chapter describes the steps in a careful, thorough executive search, describes some characteristics to look for, and emphasizes the essential support that new chief executives need from their boards.

Why is evaluation important, and how is the board involved? Evaluation is a learning tool that, when embedded in an organization ’ s culture, promotes the achievement of mission. Chapter Thirteen stresses the board ’ s role in promoting continuing evaluation. Measuring organizational effectiveness, self - assessment for the full board, self - assessment for individual board members, and performance evalua- tion for the chief executive are all board responsibilities, described in this chapter. The staff is also responsible for evaluating an organization ’ s core programs and practices.

How do bylaws and policies promote sound board decisions? Chapter Fourteen reviews the details of a nonprofit organization ’ s gover ning documents (bylaws) and operating principles (policies). It explains the context for bylaws and policies and provides an overview of the issues and areas they should address. The chapter includes recommendations and examples to serve as a starting point for the documents that each organization should tailor to its own needs and circumstances.

What are the ingredients of a productive board meeting? At meetings, the board carries out its role as policy maker, sets direction for the organization, defi nes and follows its own ethical guidelines, oversees operations, and takes care of its own well - being. Chapter Fifteen offers recommendations for planning fast - paced, effi - cient meetings while maintaining the spirit of teamwork and collegiality among board members. Topics include deciding on frequency of meetings, developing an agenda, facilitating the meeting, preparing minutes, holding executive sessions, and evaluating the meeting.

How do board dynamics influence board effectiveness? The dynamics of working together on behalf of the organization can be complex, but boards need to pro- mote a working environment that encourages collaboration, partnership, engage- ment, trust, respect, fl exibility, and interaction. Chapter Sixteen addresses fi ve key issues in board dynamics: building trust to support collaborative governance, developing a culture of inquiry, recognizing and avoiding micromanagement,

xviii Introduction

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Introduction xix

ensuring independent - mindedness, and dealing with the problem of troublesome board members.

Refl ecting on board dynamics is a fi tting way to conclude this handbook. While many principles and practices of nonprofi t governance are well established, the essence of board interactions is often more diffi cult to express. When all is said and done, the board is a group of individuals with a collective commitment. How they engage with one another can make the difference between governance that is simply good and governance that is truly exceptional. The stakes are high, but the dynamic role of nonprofi t organizations in our society attests to the fact that the women and men who serve on nonprofi t boards fulfi ll their responsi- bilities with seriousness of purpose, dedication to service, and passion for their organizations ’ missions.

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PART ONE

GOVERNANCE PRINCIPLES, ROLES, AND STRUCTURE

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CHAPTER ONE

IN THE SPIRIT OF SERVICE: INTRODUCTION TO THE NONPROFIT WORLD

The only ones among you who will be really happy are those who will have sought and found how to serve.

— ALBERT SCHWEITZER

Virtually every society shows its voluntary spirit and philanthropic instinct by creating informal community groups, charitable nongovernmental organiza- tions, or faith - based organizations and places of worship. In countries around the world, nonprofi ts are a vibrant, essential element of national life. They struggle to reduce poverty and bring an end to homelessness. They strive to build safe places to learn and play, create inspiring art and music, and protect natural resources.

Nonprofi t organizations span a wide spectrum of mission areas, resources, values, history, and stakeholders — from small, local homeless shelters to large, international trade associations; from community foundations operating within a geographic region to educational institutions that attract students from around the country. Their funding may come from just a handful of sources or from an array of charitable contributions, membership dues, grants, fees from programs and services, and more. According to the Internal Revenue Service, the United States alone has more than 1.8 million voluntary, nonprofi t, and nongovernmen- tal organizations, with more recognized every month by the federal government as tax - exempt entities.

Economic life in the United States and many other countries consists of three sectors:

Public - sector organizations exist to serve the public good. They are part of govern- mental structures and are fi nanced largely by tax revenues.

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