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Nonprofits Have Many Different Governance Models And It Is Important The Board Chooses The Right One

The Different Nonprofit Governance Models

The current governance model for nonprofit organizations consists of a volunteer board of directors that hails from the community and that partners with paid or unpaid managers. This model is so widely used and accepted that most people don’t give too much thought to the design of the governance model. There is some thought among governance circles that the model of a volunteer board with oversight responsibilities and a manager who handles daily activities is flawed by design. Such a model has no checks and balances. Essentially, the board evaluates and governs itself. This model leaves the door open for either the board or the manager to become too powerful. The design also opens the door for fraud.

This issue calls into question why so many nonprofit organizations continue to use it. The reason is simple: Nonprofit organizations are hard-pressed to find anything better.

The governance model that organizations select depends largely on the needs of the organization and its members. Since the needs of organizations and their members vary to such a large degree, it’s nearly impossible to find a one-size-fits-all governance model that works for all nonprofits. This is why many organizations eventually navigate their way toward a hybrid approach.

What Is Governance?

Mel Gill, of Synergy Management and Consulting Associates in Los Angeles, defines governance as, “the processes, structures and organizational traditions that determine how power is exercised, how stakeholders have their say, how decisions are taken and how decision-makers are held to account.”

The Business Dictionary defines governance as the “establishment of policies, and continuous monitoring of their proper implementation, by the members of the governing body of an organization. It includes the mechanisms required to balance the powers of the members (with the associated accountability), and their primary duty of enhancing the prosperity and viability of the organization.”

Governance models for nonprofits typically develop over time. Here’s a snapshot of some of the more common governance models that nonprofits use.

Advisory Board Model

An advisory board model is one where a CEO or manager is the actual founder of the organization. The board serves to fulfill the legal requirement for initially registering the nonprofit and continuing to maintain it as a 501(c)(3) organization. While a CEO and managers may be the best people to manage the operation, they often need advice and guidance from other community professionals, such as people with expertise in finance, law or the industry with which the organization is affiliated. An advisory board may be the organization’s board. Alternatively, nonprofit organizations may set up an advisory board in addition to a governing board. The governing board takes responsibility for oversight and planning and the advisory board provides guidance as needed. Sometimes, advisory board directors are also people with a positive reputation, which can boost the nonprofit’s prestige and its profits.

Patron Model

The patron model was designed for nonprofit organizations that place a heavy focus on fundraising. The primary activities of the board are to arrange, facilitate and participate in fundraising activities. Thus, the board is primarily selected from among wealthy and influential individuals in the community who contribute their own funds and solicit funds through their personal and business networks. They don’t often have many board meetings for the purpose of governance. The volunteers working in the organization typically govern themselves.

Cooperative Model

Nonprofit organizations that favor the cooperative model don’t employ a CEO or manager. It’s the most democratic model because the board makes all decisions by a consensus of the board. This model doesn’t have a hierarchy, and the balance of power is equal among all board directors. Think of it as a group of individuals working together for the same cause — all with an equal stake and an equal amount of power. Organizations that use the cooperative model only form a board of directors because the law requires them to, so the board is a figurehead only. Since all board directors share equal power of leadership, all board directors have equal responsibility for the actions of the board.

Management Team Model

The management team model is a popular model for some nonprofits. Think about this model in terms of having a committee for every function that the board has. Nonprofits with a management team model may set up a human resources committee, fundraising committee, finance committee, planning committee, programs and activities committee, and other functions as necessary. Like the cooperative model, the board exists for the purpose of fulfilling regulatory requirements.

Policy Governance Model

Perhaps the Policy Governance model is the most popular governance model for nonprofit organizations. This model is much like the basic volunteer board with a CEO or manager. The difference is that the policy governance model is a little more formalized version, with standing committees and regular meetings. This model gives the CEO much latitude in making decisions and in running the organization. The board evaluates the CEO’s performance and sets compensation accordingly.

Community-Engagement Model

The Alliance for Nonprofit Management created the Community-Engagement Governance model. This model extends responsibility for governance to the constituents and stakeholders, with the idea that the nonprofit’s success positively impacts the community, so the board should share the responsibility for governing it. This model allows for nonprofits to have much flexibility to govern themselves according to their size, needs, mission and developmental stage.

Hybrid Governance Models

Time has proven that none of the governance models work extremely well for all, or even most, nonprofit organizations. When volunteer board models and policy governance models aren’t working well, the next best thing is a hybrid governance model. Boards can combine any of the above models to create a unique hybrid form of governance that dots the i’s and crosses the t’s of their organization’s specific needs.

Board Portals Help Boards With All Types of Governance

Regardless of the type of governance, all boards are interested in conducting board business in ways that are safe, secure, efficient and cost-effective. A board portal supports the board members and the staff regardless of their roles, duties and responsibilities. Board portals offer a green solution for board business that comes with high-tech security and mobile-friendly apps. This also saves time and money, which are the most valuable assets that nonprofits have.

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