There are more than 1.5 million nonprofit organizations in the United States. In any given year thousands of these organizations are forced to merge, collapse, or dissolve. What is the difference between nonprofit organizations that fold and those that grow? Oftentimes, a big determinant of a nonprofit organizations’ success is the functionality of its board of directors.

Here are key practices, characteristic of failing and thriving boards. Which list does your board resemble?

Practices of Poorly Functioning Boards

  • Failure of directors to understand and fulfill fiduciary duties
  • Failure to provide oversight of culture, ethics, legal compliance and strategy
    • Set the “tone at the top”
    • Overseers, not managers
    • Governance vs. management
  • Failure to thoroughly assess organizational, business, financial, legal and personnel risks
  • Overabundance of deference to Executive Director (ED)
    • Intimidated by ED
    • Too reliant on ED
    • Passive relative to management
    • Too close to ED, seen as either “peer” or “friend”
  • Failure to understand/monitor culture of organization
  • Failure to appreciate communicator signals about values and ethics
    • What is rewarded
    • What is sanctioned
  • Failure to observe good governance practices
  • Failure of committees
    • Governance
    • Audit
    • Compensation
  • Insensitivity to conflicts of interest
  • Failure to intentionally develop and evaluate directors

Practices of Efficiently Functioning Boards

  • Approve and maintain purpose and mission
  • Understand and approve strategic plan
  • Ensure ethical behavior and compliance with applicable law and governing documents
  • Review and approve financial plans, fundraising initiatives, human resource asset management and reputation management
  • Approve material corporate actions not in the ordinary course
  • Monitor performance against strategic, business and financial plans (oversight)
  • Hire, fire, evaluate and compensate the ED as necessary
  • Plan for management succession
  • Evaluation and improvement of board performance
  • Independent contact with key corporate advisers
  • Engage auditors, compensation consultants, other professionals
  • Engage independent board counsel when needed
  • Periodically review articles and bylaws
  • Meet regularly, use established agendas, distribute materials in advance of meetings, robust minute keeping
  • Ensure that collectively the board has these competencies:
    • Fundraising
    • Business judgment
    • Management oversight
    • Operational knowledge
    • Crisis management
    • Sector knowledge
    • Community knowledge
    • Strategy/Vision