10 biggest myths at the board table
Wednesday, August 23, 2017
Have you heard the one where a guy gave away his entire board packet? When the executive director asked why, he replied, "Because in a nonprofit our files are available upon anyone's request."
It is one of the many myths that circulate through boardrooms. As George Orwell said, "Myths which are believed in tend to become true."
The problem with a board myth is that the director making the statement sounds believable. Without facts, the rest of the board accepts the statement.
Here are the 10 myths and the answers to combat them:
1. "We can't take political positions or lobby."
Nonprofits can lobby, and most members expect representation to secure favorable public policy. Prohibitions against lobbying, especially in a 501(c)(6) are a myth.
The IRS states, "Organizations may, however, involve themselves in issues of public policy without the activity being considered as lobbying. For example, organizations may conduct educational meetings, prepare and distribute educational materials, or otherwise consider public policy issues in an educational manner without jeopardizing their tax-exempt status."
2. "Our records are open to anybody."
The only public records required to be provided to the public is the IRS Form 990, the IRS Letter of Determination and Form 1023 or 1024. Directors often confuse FOIA (Freedom of Information Act) requests applicable to government bodies with nonprofit organizations.
Be alert to any public record laws set by the state where the organization is registered as a corporation.
3. "When I get on the board, I'll fix the organization."
It is not one person's role to "fix" the organization. It is the board's role to govern — not fix or micromanage. Directors should be visionaries to advance the mission and strategic goals.
4. "Anybody can do the ED's job."
Beware the director who offers his administrative assistant to take the role of an executive director. Association management is a profession. It includes a set of competencies unique to nonprofit exempt organizations.
Ensure the proper partnership with the adage: boards govern, staff manage.
5. "We cannot make a profit."
A nonprofit organization can make a profit. The IRS 501(c) designation does not restrict making excess revenue over expenses. In fact, is it necessary to pay for programs that do not generate income, i.e. advocacy.
All activities should fit within the statement of purpose to avoid paying unrelated business income tax (UBIT).
6. "Nonprofits cannot have significant savings."
Savings are the strength of an organization. There is no restriction on building savings.
The common standard is to have at least an amount equal to 50 percent of the budget. Thus, if a program failed or crisis arose, the organization could survive for at least six months until it could get back on its feet.
7. "Anybody can attend our meetings."
This myth is often confused with government requirement for open meetings and allowing an audience. The nonprofit is a private corporation, and having guests is up to the board. Guests attending meetings may change the dynamics of open board discussions.
8. "Minutes must be made available."
Minutes being a public record is a myth. Meeting minutes are a document to record actions of the board. While transparency is respected on most boards, there are policies and protocols for persons asking to read the minutes.
9. "Who needs a strategic plan? We have done fine without one for 10 years."
The board has a responsibility to set a strategic direction. It is said that plans are just dreams if they are not documented on paper.
A plan promotes continuous advancement to achieve the organization’s mission. Without a plan the board is likely to think short term or wait to incoming elected president’s priorities.
10. "We don't need performance measures, we are doing just fine.”
The reply to this board member is, "How do you know you are doing fine, and what are your benchmarks?" Performance measures allow a board to understand how the organization is doing and to abort underperforming programs. A knowledge-based board relies on agreed-upon performance metrics.
When you hear any of these myths, be prepared to challenge them before they are accepted as truths.
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