Linda was so excited. She had just gotten off the phone with the President of a nonprofit agency, and she had been asked to serve on the organization’s board of directors. She immediately said that she would be honored to do so. After all, she had been a volunteer for several years now and had even made an annual contribution. The next board meeting was only a few weeks away.
At her first board meeting she was enthralled to see the makeup of the board, many of who were prominent members of the community. She had been so involved in the volunteer work that she did not even know who was on the board. To sit at the same table as these people was an honor. One of the orders of business on the agenda was the treasurer’s report. As the report was being given, she learned that next year’s budget included the usual $5,000 contribution from each board member. She became petrified. This was the first she knew of this requirement, and she certainly was not in a position to make such a contribution without it straining her personal budget. Agony set in.
Could this happen to you? Not if you asked the following 12 questions.
(1) Who is asking you to serve?
If you receive a call out of the blue from someone you don’t know asking you to serve on a board you have never heard of then you might want to do some investigating. Typically, people are asked to serve on nonprofit boards because they have contributed to the organization or been involved with it in some way. Sometimes, nominating committees will just identify prominent or successful people and ask them to serve in hopes that the answer will be yes.
(2) Why are you being asked?
This is the first question you should ask if you are not told by whomever contacts you. Some boards will want your influence or your expertise. Others might just want to use your name.
(3) How much is it going to cost?
Board members of nonprofit organizations are expected to give their time, talent and money, unless the organization has some special form of funding. Ask how much board members are expected to contribute financially. If you feel that you aren’t getting a straight answer, ask how much other board members are contributing. It may not be that each board member is expected to make the same financial commitment, but it should be a red flag warning if this subject is difficult to discuss.
(4) Where was the money spent last year?
Ask for a copy of last year’s financial statement before making a commitment to serve.
(5) What is the budget for the coming year?
The annual budget and last year’s financial statement will reveal where the real priorities of the organization are found.
(6) How is the organization funded?
Look to see whether there are just a few contributors or if the funding broad-based. You will also want to know what would happen if the largest contributor decided to stop making that donation. Some nonprofits are formed because of the wealth and passion of an individual. If the organization cannot be sustained without that individual’s support, then the organization will probably die out after that person stops contributing.
(7) What is the mission and strategic plan of the organization?
You will want to make certain that the organization stands for the same things that you do. After all, your identity with the organization will affect its image just as the organization’s identity will affect your image. Also, investigate whether the organization is mission-driven or funding-driven. Some organizations will alter their missions to receive funding, especially when there is a funding shortfall. You might want to ask how the organization’s mission has evolved over time. I’ve lost track of how many organizations I’ve known that started out being proud of the fact that they were independent and would not accept government grants only to evolve into government grant recipients.
(8) What are the duties of the board members?
These should be in writing. It’s hard to find a successful nonprofit that does not have active board members. You’ll want to know what committees are available and which appeal to you.
(9) Who are the other members?
All board members do not have to be on same level professionally, financially, socially and culturally. Indeed, diversity is a good thing for nonprofits boards, which can be enriched by having board members from a variety of backgrounds. Nevertheless, you need to know on the front end if you are compatible with fellow board members.
(10) What will happen if the executive director departs?
The effective organization will have structures and systems in place that do not rely inordinately on the charisma and skills of the executive director. Be wary if the staff does so much that board members don’t have to do anything except show up at meetings and approve things that the staff has already done.
(11) Is errors and omission insurance provided for Board members?
It seems like a minor point, but in today’s litigious world this is necessary. Don’t think that just because an organization is nonprofit that its board members have no personal liability.
(12) Who audits the financials?
Don’t even think about serving on a nonprofit board that does not have its financial records audited every year.
Once you obtain satisfactory answers to these questions, then you can make an informed decision about whether you want to serve on the board.
» PHIL HARDWICK is a regular Mississippi Business Journal columnist. His email address is email@example.com.
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