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Tools for nonprofit leaders: Essential governance tools

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Discussion of not-for-profit organization governance has risen to common conversation for those engaged in associations; this includes members/donors, staff, volunteer leaders, government and more. Governance refers to the processes that govern the organization. This article reviews what they are and the tools that bind.

The Panel on Accountability and Governance in the Voluntary Sector, chaired by Ed Broadbent, identified eight tasks required of the boards of charities and public benefit not-for-profits to further develop effective governance; these apply to all types of not-for-profit organizations:

  • steering toward the mission and guiding strategic planning;
  • being transparent, including communicating to members, stakeholders and the public, and making information available upon request;
  • developing appropriate structures;
  • ensuring the board understands its role and avoids conflicts of interest;
  • maintaining fiscal responsibility;
  • ensuring that an effective management team is in place and overseeing its activities;
  • implementing assessment and control systems; and
  • planning for the succession and diversity of the board.

The following are a list of key governance tools that not-for-profit organizations should have.

1. Bylaws

A key governance tool is the bylaws; the bylaws are the rules, not just guiding principles. They dictate precisely what processes will be followed, how, when, and by whom. Best practices suggest that the details in your bylaws be minimalist. This is because bylaw changes require membership approval, while policies and procedures, which amplify bylaw intentions, require only board approval in most cases. The Canadian government offers guidelines on what should be included in bylaws: Canada Corporations Act Part II - Model By-law Prepared by Corporations Canada.

2. Policies and Procedures

High performing associations have very detailed policies and procedures (P/P). A key policy is the fiscal policy that governs the use and investment rules for the organization's money. The function of P/P is to itemize the roles and responsibilities of staff, volunteers, members, and others who serve in the association’s name. They elaborate on how to execute the bylaws. P/P can be revised by the board of directors, whereas the by-laws, as we stated earlier, typically require the approval of a quorum of the membership.

3. Conflict of Interest Guidelines

Most P/P include Conflict of Interest Guidelines. These principles set out what constitutes a conflict of interest for anyone engaged in or with the organization. The P/P should elaborate on the process involved in determining and dealing with such conflicts. If an organization has a Code of Ethics or Conduct that sets out the procedures to be used in specific ethical situations, it should include a section on conflict of interest.

4. Confidentiality and privacy policies

Your P/P should also include rules of confidentiality and go as far as to provide written agreement forms that validate that those affected have agreed to be bound by your confidentiality policies.

Privacy policies are another key governance tool that testify to how your organization will treat the information that it has access to in order to protect the privacy of the individuals involved. There are many examples of privacy policies on the Internet to borrow ideas from.

5. Employee termination and discrimination

While we all hope never to have to refer to employee termination and discrimination policies, when things go bad you will be glad you have them in place (assuming they are well prepared). Other tools under this category include:

  1. Interview guidelines (what not to ask when hiring)
  2. Employee manuals
  3. Sexual harassment policies
  4. Age discrimination policies

6. Code of Ethics

Many not-for-profit organizations publish a code of ethics that members and/or staff and others agree to abide by. See reference in section 3 of this article.

7. Record and document retention policy

A recommended policy topic is records and document retention. This sets out how long records or documents must be retained, including electronic files (such as e-mails). This also covers minutes, financial records, publications, contracts and more.

8. Use of Internet and e-mail policy

A modern-day policy that provides direction to staff is one that deals with the use of Internet and e-mail. This clarifies that office time and the computers that employees use are the property of the organization, and therefore the employer owns and has access to their files.

9. Employment reference policy

When someone provides an employment reference in their capacity as a representative of your organization, they can implicate the organization. It is advisable to have an employment reference policy.

10. Contract policy

It is prudent to set out policies that dictate under what conditions a contract may be signed that binds your organization.

11. Competition Act adherence

It is advisable to publish your organization’s requirement that anyone engaged in your activities is compelled to act in accordance with the conduct set out in the Competition Act. High performance organizations publish a specific Code of Conduct required under the Act in a brochure that is distributed at every meeting. While we do not usually recommend positioning statements in the negative manner, in this case having “thou shall not” conditions apply.

12. Board fiduciary duties

A prominent lawyer named David Goch set out nine rules modelled on the book Everything I needed to know I learned in kindergarten. They are:

  1. Attendance - Board members must attend meetings.
  2. Delegation/Abdication - The board can delegate but they retain accountability, therefore they must monitor what they delegate.
  3. Participation - They must read the relevant materials and ask questions rather than catch up on e-mails on their Blackberries.
  4. Fiduciary duty - This encompasses the duty of good faith and fair dealing.
  5. Conflict of Interest - If a member has a potential conflict of interest it should be disclosed and the member must recuse him/herself.
  6. Finance - Mismanagement of funds is the most common source of lawsuits. Directors needs to know how to read a financial statement.
  7. Profession review - Use of professionals when required (lawyers, accountants, etc.).
  8. Paper trail - Ensure an adequate paper trail is maintained.
  9. Board and employee responsibilities - The board is the decision-making body for the entity; it is legally obligated. It is imperative to delineate the roles and responsibilities of board versus staff/committees and to remember that the board remains accountable, even when it delegates.

The board must understand its accountability to the members. It should also ensure that the skills sets required to manage the affairs of the not-for-profit corporation are available at the board table; best practices suggest that board members identify what those skills are (e.g. financial, legal, marketing, fund development, event planning, etc.) and ensure the nominating committee works to find people who bring them. The board should also invest in succession planning - the process of identifying and preparing suitable people to replace key positions on the board, committees and staff.

13. Insurance coverage

The board must ensure that the organization has adequate insurance coverage; this could include General Liability Insurance, Event Cancellation Insurance, Liquor Liability and more.

14. Trademark and copyright

The board must ensure that its information assets are protected.

15. Chapter guidelines

If your organization has chapters/branches, it is important that the governing body (your board, council, governors) understand the rules placed upon chapters.

16. Communications strategy and plan

A key function of most not-for-profit organizations is communication; to their members, stakeholders, government, media, the public and more. In order to ensure the board is operating in a transparent manner, it is useful to develop a communication strategy and plan for the organization that delineates who will be communicated to, how, when, by whom, why, etc.

17. Risk management plan

A risk management plan identifies the significant risks that your organization may be exposed to and sets out ways to prevent and mitigate such risks from occurring.

18. Strategic plan

We've saved the best governance tool until last - the strategic plan. It provides a binding roadmap for the board (and others) to follow. The plan serves the mission, which should be reviewed for relevance at each strategic planning session. It should match the budget and resource allocations.

And with all of these tools, it is important to evaluate their use. Therefore you also need an arsenal of evaluation tools.

So let’s see if we have covered the tasks listed in the Broadbent Task Force:

Broadbent Task Force Tasks Governance Tools
Steering toward the mission and guiding strategic planning A mission and a strategic plan
Being transparent, including communicating to members, stakeholders and the public and making information available upon request Communications strategy and plan
Developing appropriate structures Strategic plan
Ensuring the board understands its role and avoids conflicts of interest Policies and procedures; roles and responsibilities
Maintaining fiscal responsibility Fiscal policies
Ensuring that an effective management team is in place and overseeing its activities Evaluation tools
Implementing assessment and control systems Evaluation tools; risk management plan
Planning for the succession and diversity of the board Board fiduciary duties
 

As suggested earlier, the Internet is a good source of templates for these governance tools. So, too, is our own CharityVillage Resources Library. We hope this article helps you get started.

Paulette in President of Solution Studio Inc., a consulting practice that serves the not-for-profit association community. Paulette co-authored two manuscripts on risk management & not-for-profit organizations and regularly conducts risk management, strategic planning and board development workshops. She can be reached at 1-877-787-7714 or Paulette@solutionstudioinc.com.

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