We see this issue over and over in our practice. Far more common than the hands-off, head in the sand, rubber stamp board, is the micro-managing board. The micro-managing board members show up to their first board meeting and before they have done anything of substance for the organization, they want to revamp the reports, review the nonprofit’s journal entries, question every expense, and critique the Chief Executive’s management style. One might rightly ask whether these activities are adding value. I would argue that nine times out of ten they are not.
Sometimes, micro managing board members are infused with for-profit hubris. They intuitively feel that nonprofit management practices are inferior to for-profit approaches and take it upon themselves to lead the nonprofit to the light. More often, they just don’t know how else to add value. One way to point a micro-managing board member in the right direction is to teach them. Some suggestions include:
- Engage the Board in discussions about how they can elevate the organization’s name and reputation and open doors that might otherwise be closed to the Chief Executive.
- Build agendas that focus on the big picture “ mission, vision, values, what success looks like and how they will measure progress toward their goals.
- Give the Board comfort by providing a financial dashboard that makes it easy for Board members to track the organization’s financial progress.
- Adopt an annual budget and signature authority policy that gives the Chief Executive clear direction regarding his or her spending authority. Clear direction and delegation minimizes the number of times the Chief Executive feels compelled to go to the Board to ask permission.
- Create a board action calendar of compliance and governance due dates such as the date the Form 990 is due, the date annual reports are due, goals to review policies, governing documents and the strategic plan.
- Clarify roles and divide responsibility for book-keeping, check signing, and reconciling bank statements.
- Review the Form 990 with the Board to help them better understand the financial side of the organization.
- Even if the organization can’t afford audits, consider engaging a CPA to provide periodic reviews.
If the Board still can’t get out of the weeds, address their fears about liability. Provide education regarding their insurance coverages, indemnification rights, the protection afforded by the business judgment rule to directors who fulfill their fiduciary duties, volunteer protection statutes, and other risk management protections the organization has in place.
Consider bringing in a consultant to provide board training and attempt to refocus the board on their key duties. Another possibility is adding more experienced board members who can set an example for the board members who tend to micro-manage.
Finally, the Chief Executive should take stock of his or her own performance and the performance of the organization. When there are problems, Board members tend to lean in and become more demanding of information. The Chief Executive should consider what further steps they can take to re-establish confidence and trust.
Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. Ellis advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations. Ellis is licensed to practice in Washington and Arizona and advises nonprofits on federal tax and fundraising regulations nationwide. Ellis also advises donors with regard to major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.