THE BLOG

Beware of Nonprofit Boards That Don't Ask Their Directors for Money

05/21/2015 08:16 am ET | Updated May 21, 2016

It's often a red flag when a nonprofit board does not expect its board members to "give/get" a meaningful amount of money. ("Give/get" is the term for the total amount that a board member is expected to contribute -- give, and raise -- get.) Indeed, if you're a member of a nonprofit board, you should be valued for much more than your wallet and your networks. Most importantly, boards should provide legal and fiduciary oversight. And board members should bring diverse experiences, perspectives, wisdom, business acumen, and expertise to work in concert with the CEO to help the organization to envision and achieve its greatest potential in fulfilling its mission.

Achieving the organization's greatest potential. In order to help the organization to maximize its potential, the board must work with the CEO to create and achieve a revenue model for success. For every nonprofit -- regional, national, or global... arts, social services, or environmental -- the revenue model will be different depending on funding opportunities. The revenue model is likely to be a mix, perhaps including philanthropy (corporate, individual, and foundation), fees for services, and government funding.

Board composition. It's vital to build a board with the right people who can help to imagine what's possible and also to optimize funding. You might want to include a couple of people who bring expertise in the field, as well as credibility; perhaps another who is a pricing strategist if fees for services are critical; government relations experts if that's part of the equation; and people who can contribute and generate funds through their networks while also bringing valuable and diverse perspectives and experience.

Giving and getting. Everyone should have to contribute something to demonstrate their personal commitment. Most funders expect the organizations to which they contribute to show that the board is giving at 100 percent.

Giving and getting generously. In most cases, it's essential that the majority of board members give and get significantly. ("Significantly" to be determined by the board based on the revenue model.) Here's why it's essential.

  • Social services organizations that derive their funding from government require philanthropic dollars in order to be financially healthy and sustainable. Because government funding is usually paid after services are rendered; government funding does not cover infrastructure -- the administrative or technology that is required for operating expenses; it is not adequate for competitive salaries; and it does not cover the costs of "research and development" -- trying out any innovative approaches to solve problems related to the mission. Furthermore, government funds can change from year-to-year, so a program that is core to the mission could be cut leaving the organization without critical funds on short notice.
  • For nearly all nonprofits, programs that are most mission-related can almost always be expanded or enhanced with philanthropic funds. And innovations are usually funded with contributed dollars.

A red flag. I opened by saying it's a red flag when the board does not expect much of itself in terms of giving and getting. If you sit on a board where the board's expectations are modest, or if you're considering joining a board where that's the case, here is what I'd ask: In what way is this organization limiting itself in what it can achieve by not expecting more from the board financially? Even worse, in what ways is this organization at risk because the board is asking too little of itself? And what is keeping the board from asking more of itself? Usually, the answer will be that if the board expects more of itself, and is more disciplined, then the organization will be more sustainable and also have greater capacity to accomplish far more in achieving its mission. And usually, if a board is limiting itself, what's needed is leadership (perhaps fresh leadership) and process to take the board and organization to the next level.

Exceptions. First, every board should include people who bring sector expertise who might not be able to meet a high give/get; still, they should still make some contribution. Second, there are merits to include some younger people who bring valuable perspectives and expertise, but who are not yet in a position to give/get at the level to which the board aspires. Third, there are some organizations where the revenue model is such that philanthropy and board giving is simply not part of the equation; it's rare but it happens. (This post is not at all about philanthropic foundations that have enormous endowments by the way.)

The main point is that too often boards neglect their responsibility to ensure that an organization is maximizing its greater potential, which can only happen when there are sufficient funds for good salaries for quality staff, innovation, and sustainable programs. Be sure that the organizations where you are engaged are doing their utmost. If they're not, you can be a factor to help drive greater success.