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Field Guide to

Developing, Operating and


Restoring Your Nonprofit Board

Third Edition

By Carter McNamara, MBA, PhD

Authenticity Consulting, LLC


Minneapolis, MN USA
Copyright © 2008 Authenticity Consulting, LLC, Minneapolis, Minnesota.
All rights reserved. No part of this book may be reproduced or transmitted in any form or by any
means now known or to be invented, electronic or mechanical, including photocopying, recording, or
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publisher, except for brief inclusion or quotations for review.
For reprint permission, more information on Authenticity Consulting, LLC, or to order additional
copies of this or any of our other publications, please contact:
Authenticity Consulting, LLC
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800.971.2250 toll-free
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http://www.authenticityconsulting.com
Trademarks
“Authenticity Circles,” “Free Management Library,” “Free Nonprofit Micro-eMBA” and “Free
Micro-eMBA” are service marks of Authenticity Consulting, LLC, Minneapolis, Minnesota.
“Leveraging the Power of Peers” is a registered mark of Authenticity Consulting, LLC, Minneapolis,
Minnesota. “Policy Governance” is a registered trademark of Carver Governance Design, Inc.

Credits
Cover design and illustrations by Erin Scott/Wylde Hare Creative, Woodbury, Minnesota.
Photographs © 2005 JupiterImages Corporation/Photos.com, primary cover photo;
© Teri McNamara/Impressions & Expressions and © Erin Scott/Wylde Hare Creative,
secondary cover photos.
Clip art by Nova Development Corporation Art Explosion 750,000 Images.
Printed by Graphic & Printing Services, Big Lake, Minnesota.
Manufactured in the United States of America
First Edition April 2002
Second Edition June 2003
Third Edition July 2008

Waivers of Responsibility
1. Various Web addresses are referenced in this book. The author and publisher have no legal
responsibility or liability for the currency or accuracy of these Web addresses or their content.
2. Information in this book is not to be considered as legal, tax and/or financial advice as if from an
expert specifically in those areas. In-depth and technical advice needed in those areas should be
obtained from professionals in those areas.

Publisher’s Cataloging in Publication Data


McNamara, Carter, 1953 -
Field Guide to Developing, Operating and Restoring Your Nonprofit Board / by Carter
McNamara
Includes bibliographical references and index.
ISBN 10 1-933719-06-1 (paperback)
ISBN 13 978-1-933719-06-0 (paperback)
1. Board of Directors. 2. Nonprofits. 3. Governance. 4. Leadership I. Author II. Title
Adapted from “Field Guide to Developing, Operating and Restoring Your Nonprofit Board” –
to obtain the entire book, select “Publications” at http://www.authenticityconsulting.com

Table of Contents
Table of Contents ..................................................................................i

Table of Tables ....................................................................................vi

Introduction.........................................................................................vii
Audiences – New, Established and Struggling Nonprofits .............................................................vii
Guide Recognizes Diversity of Board Models................................................................................vii
Step-by-Step, Easy-to-Reference Content......................................................................................viii
How to Use This Guide....................................................................................................................xi
Frequently Used Terms in Guidebook ...........................................................................................xiii
Frequent References to Free, Useful Resources.............................................................................xiv
Sample Board Policies for Use by Owner of This Book................................................................xiv
About the Author............................................................................................................................. xv
About Authenticity Consulting, LLC.............................................................................................. xv

PART I: STARTING A NONPROFIT AND BOARD..............................1


To Govern Nonprofits, First Understand Them .................................3
How Nonprofits Differ From For-Profits – and How They Are the Same ....................................... 3
Different Types of Public Needs Met by Nonprofits ........................................................................ 4
There Is More Than One Type of Nonprofit Organization ............................................................... 4
Three Most Important Levels Within Nonprofits.............................................................................. 6
Most Important Roles People Play in Nonprofits ............................................................................. 7
Nonprofit Programs – What They Are, What They Are Not ............................................................ 8
Different Designs of Nonprofits........................................................................................................ 9
What A Small Nonprofit Typically Feels Like ............................................................................... 13
How to Start a Nonprofit ....................................................................16
What is the Purpose, or Mission, of the Nonprofit?........................................................................ 16
Consider Fiscal Sponsorship to Jump Start Nonprofit? .................................................................. 17
What Help Might You Need?.......................................................................................................... 18
What Should You Name the Nonprofit? ......................................................................................... 19
Recruit Your Initial Board Members (“First Board”) ..................................................................... 19
Hire Chief Executive Officer (Executive Director) Yet? ................................................................ 20
Draft Your Articles of Incorporation and Initial By Laws .............................................................. 20
Conduct Basic Strategic Planning for Now..................................................................................... 21
Conduct Your Initial Board Meeting to Do Approvals................................................................... 22
Do All Necessary Filings ................................................................................................................ 22

PART II: BOARD ROLES AND RESPONSIBILITIES ........................25


Variety of Board Models for You .......................................................27
What is a Board of Directors? ......................................................................................................... 27
How Much Should Your Board Be Involved in Management? ...................................................... 28

©Authenticity Consulting, LLC; all rights reserved i


Adapted from “Field Guide to Developing, Operating and Restoring Your Nonprofit Board” –
to obtain the entire book, select “Publications” at http://www.authenticityconsulting.com

What Does a Healthy Board Look Like? ........................................................................................ 29


Variety of Board Models to Consider for Your Board.................................................................... 30
Some New Board Models to Also Think About ............................................................................. 34
Typical Phases of Developing Your Board..................................................................................... 36
Other Types of “Boards” for You to Be Aware Of......................................................................... 37
Your Board’s Most Important Documents...................................................................................... 38
Board Roles and Responsibilities .................................................... 41
Fiduciary Duties (Legal Responsibilities) of Your Board .............................................................. 41
How to Minimize Liabilities of Your Board Members................................................................... 43
How to Ensure Ethical Behavior of Your Board Members ............................................................ 44
What Board Committees Typically Do (If You Use Them) ........................................................... 45
Roles of Your Board Members and Officers .................................................................................. 48
Leadership Role of Your Board Chair ............................................................................................ 48
Leadership Role of Your Executive Committee ............................................................................. 50
Board and Staff – How Do Their Roles Compare?......................................................................... 50
Organization Chart of Board/Staff Relationships ........................................................................... 52

PART III: HOW BOARDS DO THEIR WORK .................................... 53


Your Board Calendar (Your Board’s Annual Important Tasks) .... 55
Strategic Planning: Direction for Nonprofit and Your Board ........ 56
All Else Flows From Your Strategic Planning................................................................................ 56
Strategic Planning – What, Who and When.................................................................................... 57
Sample Planning Process for Short-Term Strategic Plan................................................................ 58
Developing Your Initial Strategic Plan for Now............................................................................. 60
How to Staff and Fully Equip Your Board ........................................ 65
Different Approaches You Can Use to Staff Your Board............................................................... 65
Adopt Comprehensive, Yet Practical, Board Staffing Policy ......................................................... 66
How to Identify the Best Potential Board Members ....................................................................... 66
How Potential Members Apply to Your Board............................................................................... 70
How to Orient New Members About the Nonprofit ....................................................................... 72
How to Train Board Members About Their Roles.......................................................................... 73
How to Keep Your Board Members Fully Informed ...................................................................... 75
How to Thank and Reward Your Board Members ......................................................................... 76
How to Retire Board Members ....................................................................................................... 77
How to Remove a Board Member .................................................................................................. 78
Some Frequently Asked Questions About Board Staffing.............................................................. 79
How to Organize Committees (If You Use Them)............................ 82
Advantages and Potential Disadvantages of Committees ............................................................... 82
How to Organize Your Committees (or Your Task Forces) ........................................................... 84
What Each Committee Typically Does........................................................................................... 85
How to Successfully Start Each Committee (or Task Force).......................................................... 88
Work Plan – Each Committee’s “To do” List................................................................................. 89
Board Decision Making ..................................................................... 91
Typical Types of Decisions Your Board Should Make .................................................................. 91
How to Ensure Your Board Makes Useful Decisions..................................................................... 91

©Authenticity Consulting, LLC; all rights reserved ii


Adapted from “Field Guide to Developing, Operating and Restoring Your Nonprofit Board” –
to obtain the entire book, select “Publications” at http://www.authenticityconsulting.com

How Your Board Members Can Come to Consensus..................................................................... 93


How to Be Sure Board Members Participate in Decisions ............................................................. 94
How to Govern the Nonprofit ............................................................97
How to Make Sure Stakeholders Are Always Heard ...................................................................... 98
How to Ensure Relevant and Realistic Strategic Planning.............................................................. 99
How to Make Sure Board Operations Are High-Quality .............................................................. 100
How to Verify Programs Meet Needs of the Community............................................................. 101
How to Ensure Fair Management and Productive People............................................................. 102
How to Take the Lead in Fundraising – All Kinds ....................................................................... 104
How to Effectively Get the Word Out About the Nonprofit ......................................................... 106
How to Ensure Sound Management of Finances and Taxes ......................................................... 108
How to Advocate for Public Needs – and Lobby Legally ............................................................ 110
How to Track Performance of Nonprofit, Board and People........................................................ 112
How to Identify and Avoid Risks to the Nonprofit ....................................................................... 113
How to Ensure Sustainability of Nonprofit, Programs, People and Money.................................. 116
How to Regularly Measure Overall Health of the Nonprofit ........................................................ 118
How to Ensure Transparency and Accountability......................................................................... 119
How to Have Productive Board Meetings ......................................122
How to Design Successful Board Meetings .................................................................................. 122
Questions Your Board Members Should Always Ask .................................................................. 124
Avoid “Sidebar Meetings” ............................................................................................................ 124
Roberts’ Rules of Order – The 20% Used 80% of the Time......................................................... 124
What to Document In Your Board Meeting Minutes.................................................................... 126
When to Have an Executive Session (in camera).......................................................................... 128
When to Have Open Board Meetings ........................................................................................... 128
How to Measure the Quality of Each Board Meeting ................................................................... 129
How to Ensure a High-Quality Board..............................................130
One Set of “Best Practices” for Your Board ................................................................................. 130
How to Conduct Board Retreats For Planning and Renewal ........................................................ 132
How to Help Board Members “Diagnose” Nonprofit’s Problems –
Rather than Focus on Symptoms............................................................................................... 134
How to Match Board’s Priorities to Life Cycle of Nonprofit ....................................................... 140
How Board Members Can Evaluate Their Board ......................................................................... 142
How to Ensure Full Participation of Board Members ................................................................... 142

PART IV: BOARD AND CHIEF EXECUTIVE ...................................145


How to Hire Your Chief Executive Officer ......................................147
Role of Typical Nonprofit Chief Executive Officer...................................................................... 147
Wrong Reasons to Hire Chief Executive ...................................................................................... 149
Right Reasons to Hire Chief Executive......................................................................................... 150
How to Determine Compensation for Your Chief Executive ....................................................... 150
Use an Employment Contract With Your Chief Executive?......................................................... 154
How to Recruit and Select Your Chief Executive......................................................................... 155
How to Orient Your New Chief Executive ................................................................................... 158

©Authenticity Consulting, LLC; all rights reserved iii


Adapted from “Field Guide to Developing, Operating and Restoring Your Nonprofit Board” –
to obtain the entire book, select “Publications” at http://www.authenticityconsulting.com

How to Work With Your Chief Executive ....................................... 160


Your Board and CEO Are Really In Strategic Partnership........................................................... 160
How to Ensure Effective Board and CEO Relations..................................................................... 161
How to Ensure Strong Relationship Between Board Chair and Chief Executive......................... 163
How to Evaluate Your Chief Executive Officer ........................................................................... 165
How to Quickly Replace Your CEO (CEO Succession Management)........................................ 166

PART V: RESTORING STRUGGLING BOARDS ............................ 173


Context for Successfully Restoring Your Board........................... 175
Issues to Always Watch For On Your Board................................................................................ 175
Common Types of “Broken” Boards ............................................................................................ 176
General Principles for Restoring Your Board............................................................................... 178
Why Board Training or Team Building Alone Seldom Restores Boards ..................................... 180
Specific Principles for Restoring Your Board .............................................................................. 181
Procedures to Restore Your Board ................................................ 183
One Set of Proven Steps to Restore Your Board .......................................................................... 183
How to Manage Interpersonal Conflicts ....................................................................................... 188
How to Manage Board Conflict and Come to Decisions .............................................................. 189
How to Get Your Board Members Unstuck.................................................................................. 190
Recovering From Founder’s Syndrome......................................... 192
What is Founder’s Syndrome? ...................................................................................................... 192
Leadership and Founder’s Syndrome – the Good and Bad........................................................... 193
Actions Your Board Members Must Take .................................................................................... 195
Actions Your Founder Must Take................................................................................................. 197
Actions Your Staff Members Might Take .................................................................................... 198

APPENDICES:................................................................................... 201
Appendix A: Glossary..................................................................... 203
Appendix B: Resources for Nonprofits......................................... 211
Free Management LibrarySM ......................................................................................................... 211
Free Nonprofit Micro-eMBASM Organization Development Program ........................................ 212
Organizations Assisting Nonprofits .............................................................................................. 213
Free, On-Line Newsletters and Forums ........................................................................................ 214
Board-Specific Resources ............................................................................................................. 215
Some Mega-Websites About Boards ............................................................................................ 216
Appendix C: Guidelines to Form Your Advisory Board ............. 217
Overall Benefit of an Advisory Board .......................................................................................... 217
What is an Advisory Board? ......................................................................................................... 217
How to Organize Your Advisory Board ....................................................................................... 217

©Authenticity Consulting, LLC; all rights reserved iv


Adapted from “Field Guide to Developing, Operating and Restoring Your Nonprofit Board” –
to obtain the entire book, select “Publications” at http://www.authenticityconsulting.com

Appendix D: Guidelines to Working With Consultants................219


Reasons You Might Need Consultants.......................................................................................... 219
Major Types of Consultants to Nonprofits.................................................................................... 220
Where to Get Consultants ............................................................................................................. 221
How You Can Make Consultancies Productive as Possible ......................................................... 222
Be Sure You Have "Independent Contractor” Relationship ......................................................... 224
Appendix E: Tools to Measure Health of Nonprofits....................227
How to Select the Best Assessment Tool...................................................................................... 227
One Example of a Very Good Assessment Tool........................................................................... 230
Appendix F: Goals and Objectives for Board
Development Committee ...........................................................243
Appendix G: Typical Contents of Board Manual ..........................245
Appendix H: Sample Board Policies..............................................249
Sample Board Job Descriptions .................................................................................................... 250
Sample Executive Director Job Description ................................................................................. 256
Sample Annual Calendar of Board Activities ............................................................................... 257
Sample Comparison of Board and Staff Roles.............................................................................. 258
Sample Board Committee Charter ................................................................................................ 259
Sample Board Staffing Checklist (Board Renewal Cycle) ........................................................... 260
Sample Board Member Recruitment Grid .................................................................................... 261
Sample Board Member Application Form .................................................................................... 262
Sample Board Conflict-of-Interest Policy..................................................................................... 264
Sample Board Member Contract................................................................................................... 266
Sample Board Ethics Policy.......................................................................................................... 267
Sample Board Decision-Making Policy ........................................................................................ 268
Sample Executive Director Evaluation Form................................................................................ 269
Sample Board Member Self-Evaluation Form.............................................................................. 272
Sample Board Self-Evaluation Form ............................................................................................ 273
Sample Board Attendance Policy.................................................................................................. 275
Sample Board Media Relations Policy.......................................................................................... 276
Sample Whistleblower Policy ....................................................................................................... 277
Sample Document Retention/Destruction Policy.......................................................................... 278

Bibliography......................................................................................281

Index ..................................................................................................289

©Authenticity Consulting, LLC; all rights reserved v


Adapted from “Field Guide to Developing, Operating and Restoring Your Nonprofit Board” –
to obtain the entire book, select “Publications” at http://www.authenticityconsulting.com

Table of Tables
Table I:1 – Comparison between For-profit and Nonprofit Corporations ............................................ 3

Table I:2 – Organization Chart of Typical Start-Up Nonprofit .......................................................... 10

Table I:3 – Organization Chart of Typical Small Nonprofit.............................................................. 11

Table I:4 – Organization Chart for a Typical Medium-Sized Nonprofit ............................................ 12

Table I:5 – Checklist for Starting a New Nonprofit............................................................................ 23

Table II:1 – Comparison of Common Board Models (Based on Structure) ....................................... 33

Table II:2 – Typical Contents for By Laws ........................................................................................ 40

Table II:3 – Potential Standing Committees ....................................................................................... 47

Table II:4 – Potential Ad Hoc Committees......................................................................................... 48

Table II:5 – Board / Staff Relationships ............................................................................................. 52

Table III:1 – Sample Agenda for Board Orientation Session ............................................................. 74

Table III:2 – Staffing of Board Committees ....................................................................................... 85

Table III:3 – Sample Board Meeting Agenda ................................................................................... 123

Table III:4 – Strategic Questions for Board Meetings ...................................................................... 125

Table III:5 – Cycle of Important Functions in Nonprofits................................................................ 135

Table III:6 – One Perspective On Nonprofit Organizational Life Cycles......................................... 141

©Authenticity Consulting, LLC; all rights reserved vi