What does it cost you to have a board of directors? Is the cost worth the effort?
Provocative questions, right?
Let’s start by acknowledging the basics. If you’re a 501(c)(3) charitable organization in the U.S., you are legally required to have a board.
There’s a thoughtful reason for this: the board is the legal owner of your nonprofit corporation and represents the community you serve. The board provides a structure (at least in theory) for your organization to remain accountable to the community.
Let’s concede that some boards fail the accountability test. Even when they succeed – and many do – what’s the actual cost?
The cost-benefit experiment
An executive director tried the following experiment.
First, she calculated the cash costs of having a board. These costs include employee time to staff the board and various committees, board orientation and training, directors and officers insurance, staff time spent on board recruitment, board fundraising support, organizing the annual retreat, food for meetings, and so on.
Then she calculated the amount of money the board had raised, directly or indirectly: through personal asks, participating in fundraising events, corporate contacts, giving their own donations, etc.
Surprise! The board was costing the organization more money than it was bringing in. It was literally a cost center in the budget, rather than a profit center.
To her credit, she shared these numbers with the board and used the data to frame a fundraising conversation. That’s courage!
Fiduciary responsibility 2.0
One basic component of board governance is fiduciary responsibility.
These are big words, and they don’t mean simply approving a budget or signing off on an audit. In the deepest sense, accepting fiduciary responsibility means integrating financial thinking into every aspect of board governance – including how the board thinks about its role and behavior.
Let’s say you’re a board member. You learn that your board is a cost center. How would you respond?
Presumably, you’d choose between two options: reducing the cost of having a board, or raising more money.
How would that choice change your behavior?
Maybe the cost is worth it…?
Beyond the legal requirements, a good board can bring immeasurable assets to an organization: wisdom, connections, reputation, creative thinking, and a team of ambassadors.
Trustees can provide a useful, high-altitude perspective, compared to employees navigating the jungle of day-to-day work. They help to ensure that the mission remains relevant. They can serve as cooler heads in times of crisis.
On the other hand, board members can be unresponsive or distracted. Some trustees require LOTS of maintenance, which is exhausting for staff.
And then there’s the ongoing challenge of boards that don’t embrace fundraising.
Is your board worth the cost? How can you improve the cost-benefit calculation?
Do the math
If you’re an executive director or staff leader, consider running the numbers.
If you’re a board member, you might ask for this data.
Use what you learn to facilitate a discussion about board responsibilities – especially the board’s role in fundraising.
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