Over the past few issues of the newsletter, we have provided excerpts from our upcoming book on managing the nonprofit organization. In this month’s newsletter we provide a look at the part of the book that addresses the election of officers and the preparation of the agenda and board packet for board meetings.
We trust that this will stimulate thinking as you consider starting your new charity, or going back to steps that may have been missed along the way. And as always, if we can be of help to you in this process, be sure to let us know!
There is one more task that can be accomplished by the Incorporator—the appointment of officers. However, it is possible that this task is going to be on the agenda of the second meeting of the board. If that is the case, the board can elect its own officers following the procedure set forth for election in the bylaws. If this is still the first meeting, then the incorporator can be instructed to add the election of officers to the Action of Incorporator which will not likely have been completed yet.
Although many organizations have multiple officers, California law only requires three: a President and/or chair of the board, a Secretary and a Chief Financial Officer or Treasurer. We recommend sticking with these three, unless there is a very clear reason why there should be more. Particularly at the beginning of an organization’s existence, simplicity can be very helpful.
Officers do not need to be members of the board, although very early in the history of many organizations, the officers are members of the board. This changes when the organization has sufficient funds to pay wages to the officers. When that happens, it is typical to elect secretaries and treasurers who are not members of the board, and in some organizations, even the president may not be a board member.
Getting into the details of the duties of the officers is outside the scope of this book. However, it is helpful to have some general guidance on the three main officers’ duties as part of the plan to elect the right people to these positions.
The president is the general manager of the corporation. There are no automatic powers that come with this. The president acts on behalf of the board. General responsibilities can be set forth in the bylaws, or by a resolution by the board. While there are no minimum requirements for what can be delegated to the president, the board should delegate a great deal of authority to get things done between board meetings. The board cannot be ready to act every day, so the president needs to be able to carry out the will of the board on a moment’s notice. Also, boards are not very good at making detailed plans that coherently follow a formal plan. So, an organization will work best if the board prepares fairly long-term goals, like what it would like to see accomplished in the next year. The president should be delegated the task of undertaking what individual steps need to be taken to fulfill that plan, even if many of those steps involved re-delegating some tasks back to individual members of the board.
Someone needs to lead the meetings of the board. In small organizations, it is typical to have the president carry out this task. If an organization is inclined, it can have another member of the board take on this task, and that person can be given the title of chair of the board. In organizations where the president is a paid officer, there can be good reasons to have the board meetings led by someone other than the president. However, there is rarely any reason why the chair should be someone other than the president in small start-ups. A good question to ask to resolve this issue is who is best suited to prepare an agenda for the board meetings. Generally, the answer is going to be the president. If that is clearly the case, then the president should probably lead the board meetings. If the chair calls the president every month to ask what is going to be on the agenda, then a separate chair is probably not needed.
The secretary is the officer who manages and maintains the corporation’s records, and also oversees the taking and maintaining of the minutes for the organization. The secretary’s role thus includes maintaining the history, and writing the future for the organization.
The most important documents to manage include the Articles of Incorporation and the Bylaws. Articles and Bylaws can be amended from time to time, and an effective secretary will maintain all past versions of both documents, so that it will be possible to state what the operative articles and bylaws held at any moment in the organization’s history. Many organizations do not maintain their history very well. But since your organization is new, it can set a pattern that will keep records in place for decades to come!
On occasion, the corporate secretary will be called upon to certify that a corporate record is the official record for the organization at the time the secretary signs the certification. In order to be able to do this, the corporate record books need to be kept in perfect condition, so that the certification is truly accurate.
The corporate secretary is very frequently the person who takes the minutes for the board meetings and membership meetings. However, that is not always possible. The secretary will not always be present, and other responsibilities might require passing this responsibility on to others from time to time. In those instances, the secretary still must be the manager of the minutes, assuring that the records are complete, and conform to the standards for the organization’s minutes.
On occasion, the corporation will set up committees that conduct business on behalf of the organization. The secretary will generally not be able to attend these meetings. Even so, accurate minutes need to be kept for those meetings at which decisions were made, and the secretary should maintain them. Typically, the secretary needs to ask committees for these minutes, rather than waiting for committees to volunteer them. As a result, the role of secretary requires initiative to assure that the records are complete and consistent.
California law requires that nonprofit organizations have a chief financial officer or treasurer as well. The role of secretary and CFO often overlap, and there are no clear lines of distinction between the two roles. In fact, California law allows for both roles to be maintained by the same person, although that rarely works out very well.
The CFO generally is responsible for maintaining expenses, a responsibility that involves managing the budget, assuring that expenses and revenue are accurately and effectively maintained, and assuring that proper controls are in place to assure the safety and security of the finances. In smaller organizations, the CFO may carry out all of these tasks individually, right down to writing checks. However, it is often the case that the needs for financial responsibility are more technical than some CFO’s can provide, and a willingness to rely on expert advice should be welcome and encouraged.
While the CFO maintains the financial records, there are quite a few records that fall between the roles of record management by the secretary and treasurer. These include leases, employment records and insurance and risk management records. Each organization takes its own approach, which is dependent very frequently on the skills and expertise of the individuals who are available to take on these responsibilities.
One important step needs to be taken in finalizing the officer appointments. Many organizations do not have specific time limits on how long an officer can serve. In those instances, managing the changing of officers is efficient and easy. As long as someone is willing to serve, and performs the job satisfactorily, they can continue in that role until they are no longer qualified. If the incorporator was informed of those who will best serve in the officer roles for the indefinite future, no action needs to be taken in appointing a new officer until the time becomes apparent that a change is needed.
For some organizations, however, there are term limits for officers, and some must be elected every year. That requirement can come with a steep cost, as it can take several years to learn how to be an effective officer. However, for those organizations that have an officer election approaching under the newly enacted bylaws, the board will need to determine when the next election takes place. The officers appointed by the incorporator will stay in their roles only until the first election of officers is required by the bylaws.
One of the most important functions the president or chair of the board can carry out is the preparation of an agenda for the meetings of the board. This should not be delegated to any other person. One of the biggest factors that undermines confidence in a president’s leadership is having the president acknowledge that he or she does not know what an item on the agenda is. This can be avoided by having the president or chair prepare the agenda!
Most small organizations can conduct a board meeting in one to two hours. Keeping that schedule requires discipline, however, and that discipline depends on a carefully planned agenda. The length of meetings varies widely, and several factors come into play, including the complexity of the work, and the infrequency of meetings. For those organizations with board members who live many miles distant from each other, meetings will be less frequent, and thus should be longer. For a nonprofit organization with a multi-million dollar budget, a meeting of two days or more is not unusual. However, many smaller boards that meet monthly or bi-monthly can meet the standard of care with two-hour meetings.
The reason why most board meetings go excessively long is that far too much time is spent on reports from officers and committees, which often end up being conversations that address matters that could have been handled outside the meeting. Maintaining reports so that they are comprehensive, but not too long is the measure of the effectiveness of a good chair of a board. A good goal to maintain is the 40/60 rule. That is, about 40% of the meeting should be about reports, including questions from board members to clarify the information in the report, followed by 60% of the time being spent on the board making decisions that impact the future of the organization.
A very simple agenda includes six categories of business:
- Approval of minutes
- Reports of officers
- Reports of standing committees
- Reports of other committees
- Old business
- New business
There are several ways that the president or board chair, along with the secretary, can assure that the time spent at the board meeting is as effective as it possibly can be. Central to all of these concepts is the distribution of a board packet at least one week prior to the board meeting. The packet should contain as much information to get the board members up to speed as possible, so that little time is spent at the meeting reading information, or getting data that does not need to be discussed. It is rare that a good board packet is less than ten pages. However, they can be overly long. Some boards distribute packets that are hundreds of pages long, and these are almost certainly not read in their entirety by every board member. Discretion in what to include is an art, and it also requires training of both those who submit information for the packet, and for the board members who read it!
First, proposed minutes can be distributed with the packet. If a board member sees a needed change (such as facts that are clearly wrong), then the member should contact the secretary, and ask for the change to be made before the board meeting. With this discipline, the minutes can be dispensed with in just one or two minutes at the meeting. The secretary simply distributes the proposed final form of the minutes at the meeting, if any changes were made, and points out the changes. The chair then asks if any changes are needed. If no one speaks up, the chair simply states that “The minutes are accepted as received.” There is no reason for a motion to accept the minutes. If there are no changes to be made, there is no reason to carry out the unvarying exercise of formality of a motion. The only reason for a motion to be considered is if there is a true controversy over the content of the minutes—something that is extremely rare.
Every officer should have a report for the board meeting. This is the primary means by which the board knows what is going on in the operations of the organization. Every agent of the organization should be accountable to an officer, so this is the funnel by which important information is made known to the members of the board.
Officers’ reports are often the most time-consuming and ineffective parts of the board meeting. They can take up most of a meeting, as comments from officers can cause a free-association frenzy among the board members who are reminded of non-essential matters as their memories are triggered. The key to preventing this is the inclusion of a short but factually rich written report to be included in the packet. It is important that the written reports not be propaganda, intended to sell the board on how great the officers are at their tasks. Rather, they should state how objectives which were set for the officers have been progressing, and should also include candid assessments of unanticipated challenges faced by the officers.
If the officers’ reports are properly prepared, the officers’ reports can each start with the officer asking if there are any questions about the report. An effective board will have questions. But generally, the questions will be focused requests for context and more data. An effective officer will have the data available to make sure the board members are as informed as they need to be about the background for the decisions to be made by the board.
After the officers give their reports, the standing committees (that is, the committees that are always in existence) give their reports. They are subject to the same dynamic. Their reports should be written and submitted with the board packet. Each of these committees should take minutes. While the temptation is often to just include minutes with the packet, the information that is really needed is the information board members need to carry out decision making.
After the standing committees report, other committees (often called ad hoc committees when formed for a specific narrow purpose that when completed, marks the end of that committee’s existence). The same dynamic applies to them. The board packet is the key to keeping these moving forward.
If the leadership of the board is on track, about 40% of the board meeting should be complete by now. This should allow for time for the board to actually carry out its purpose in making decisions that set the vision, oversight and audit of the effectiveness of the organization. While we have emphasized the need to keep things moving in this section, a good leader will look for cues regarding when the reporting should slow down. The board needs all the data that is necessary for its decision making. While providing this data often takes less time than board chairs or presidents typically think, this is not always the case. When the organization is facing a crisis, or even a regular challenge for which the board does not have a strong background, more time may be needed for educating the board. However, the 40% rule should be a general guide for most regular meetings.
In the old business section, the president relies on input from the secretary (who gets this data from the minutes), to carry over issues raised at previous meetings, but which were not brought to closure. Generally, these should be taken in chronological order, starting with old business from meetings long ago, and through to the most recent meeting at which unfinished business is left over. While this task is not hard work, it does require planning. A skilled secretary will be prepared for the provision of a list of old business that needs to be addressed at the next meeting.
Finally, the board should take up new business. This is the primary reason why the board meets, and should be the longest part of the meeting. New board members will wonder what there can possibly be for the board to talk about in the decision-making process. However, a well-run board meeting will include highly interesting considerations of matters of policy and planning that set the course for the organization for months, and even years, to come.
For new organizations, there are a lot of guidelines that need to be undertaken to get the organization moving forward on a solid foundation. Those guidelines are set forth in the balance of this book. Every board should take up the issues raised in the following chapters at a pace that keeps meeting several objectives each meeting, but does not consider so many items that things are rushed. Some organizations, with long meetings, can take care of as many as five of these tasks. However, many will need to take time to only accomplish one, if that is what it takes to do the task well.
When possible, preparing a draft resolution for each item of new business will help the members of the board focus on the issue to be resolved. The chair of the board needs to be sensitive to the desire of the board to amend the resolution after the reports, but the mere fact that the resolution exists keeps the board on track to accomplish the goal. The resolution can be short, often just a few lines. However, when there are complexities to the resolution, such as distribution of funds or geographic issues that take several lines to explain, inclusion of this information in the agenda can help the board make decisions in a clear and effective way.