Let Your Policies Be Your Guide

Hey there, friends in the nonprofit sector! Today we’re going to talk a bit about your nonprofit board’s role in policy making, and I’ve got a few tips to offer about policies that every nonprofit organization should have. But first, a quick story from the field:

A good friend of mine is the executive director of a regional nonprofit organization that works on issues of housing and housing affordability. One of her board members, a real estate agent, is constantly pitching fellow board members about purchasing investment properties or refinancing their homes with him. At her wits end, my friend asked for my advice on how to deal with this board member and encourage him to stop pestering his colleagues for business. I encouraged her to find her Conflict of Interest policy and slam it on the table with authority at her next board meeting. 

OK, I skipped the table slamming part, but the rest is true.

This story illustrates two things in my mind: first, the significance of policies to the overall governance of a nonprofit organization; and second, the importance of board members understanding (and enforcing!) the policies that are in place.   

Who Needs Policies, Anyway?

I can’t tell you how many nonprofit leaders I’ve met who have told me some version of the following: 

“I have spent so much time creating and growing my programs that I never stopped to think about policies and procedures.”

If you share this sentiment, friends, just know that you are not alone. The fact is, nobody sets out to start or grow a nonprofit organization because they’re excited about governance policies. People who get involved in our sector tend to be doers, problem solvers, program implementors….so it’s no surprise when policies get forgotten in the midst of the more exciting (and often more challenging) work of growing programs and services. 

Whether we think they’re fun or not, governance policies are so important to the long-term sustainability of a nonprofit organization. Not only do they help lay the foundation for how the business will be governed and managed on a daily basis, but they also often serve as a pathway to help navigate tricky situations when they arise. Going back to the story I shared at the beginning of this post, if my friend didn’t have an existing Conflict of Interest policy at her fingertips, who knows how much longer her board member’s inappropriate behavior would have been tolerated. With the policy in hand, she was able to successfully initiate a conversation with her executive committee and the violating board member later resigned. I know…we don’t like losing board members, but some board members simply must go. And in these types of tricky, political situations, written policies keep everyone focused on what’s best for the organization. 

Nonprofit Governance: The Board’s Policy Role 

One of the most important roles for a nonprofit board is to oversee compliance and policy issues for their organizations. This includes ensuring that the organization’s governing documents are in order, that federal and state required filings are handled, that the mission and vision statements are clear, and that the appropriate policies are in place to help the Director guide the organization on a daily basis.

It’s easier to keep board members focused on policy during an organization’s start-up phase when everything is being built. But, for those well-established nonprofits where policies have been in place for many years, it’s not uncommon for boards to get complacent about this duty…especially when there are more fun and interesting things to pay attention to, like the organization’s programs. 

Please don’t let your boards get too distracted by the fun stuff, friends. While it’s great for your board members to be curious and excited about the programmatic work, their actual job is governance, not programs. And the key to good governance is good policy. This policy duty, along with strategic planning and fiscal oversight, make up three governance must-haves for your board. 

Policies…But Which Policies?

There are many policies that a nonprofit organization might need to govern itself effectively. Personnel policies, financial policies, operating policies, the list is long. But, for the sake of this post, I’ve pulled out a few of the top policies I look for when working with a nonprofit client:

Board Member Duties Policy– documents in writing what is expected of a board member. This policy might address issues like meeting attendance requirements, giving expectations, and committee service, among other things. 

Conflict of interest Policy– specifies various circumstances that may be considered conflicts of interest and clearly spells out requirements for the disclosure and handling of these issues. This is one of the first policies an organization will create, as it is required even before nonprofit status is granted. 

Budget Policy– clarifies the budget creation and approval process and puts provisions in place regarding the circumstances under which board approval is required (or not) for spending. 

Gift Acceptance Policy– specifies the types of contributions that will be accepted by the organization and how. This policy may include gift options like cash, stocks, real estate, etc., and will spell out how these gifts will be handled, and the donor acknowledged. 

Investment Management Policy– if your organization has enough cash to warrant investment activity, there should be an investment management policy to guide it. This policy will include the types of investments that are acceptable (stocks, bonds, etc.), place limits on the percentage of the portfolio that can be invested in these vehicles, and include accountability measures for outside investment managers, if applicable.  

Confidentiality Policy– stipulates that board members and staff must maintain the confidentiality of any personal or sensitive information they acquire during their service to the organization. This policy should define what types of information is considered confidential and may also include a formal agreement to be signed by board and staff members. 

Record Retention Policy– specifies the types of records that will be maintained and for how long. This policy should be created with IRS guidance in mind, as well as any other federal or state regulations relevant to your nonprofit’s work.    

Written Policies – Check! Now What? 

If you’ve already done the work to ensure your organization has strong policies in place, fantastic! Just remember, the work doesn’t end with policy creation…this act is just the beginning of the nonprofit board’s role. Equally important is the ongoing oversight that the board does to ensure that the policies they’ve approved are being followed. 

Few things are worse than having a bunch of policies that nobody follows. Because, well, what in the world is happening if policies aren’t being adhered to? What’s happening is that your board member who is a real estate broker is pestering his fellow board members for business. What’s happening is that your staff are repeating details of confidential donor conversations out in the community. What’s happening is that your acknowledgment of donations isn’t occurring in a timely fashion. 

Am I being dramatic? Perhaps a little. But the point I’m making is that policies are in place for a reason, and without proper oversight and enforcement, the business of your nonprofit organization can go awry very quickly. 

So, how do you keep organizational policies and their enforcement at the forefront of your board’s attention? The answer: don’t just let them sit on a shelf collecting dust. Make sure each board member receives a copy of all organizational policies as part of their onboarding process. Dedicate one board meeting each year to reviewing and discussing organizational policies to ensure they remain relevant and updated. Refer to specific policies as often as possible as they relate to the day-to-day business of the organization. Keeping organizational policies front of mind takes work, but it’s so important to ensure your board members remember their role in understanding and enforcing them. 

Good governance can be cumbersome and policy creation and enforcement is no exception. But it’s all part of the joy of running an effective and sustainable nonprofit. 

We’ve got this, friends!