Is your mostly volunteer-run nonprofit ready to take the leap and hire its first executive staff member? If so, get ready for changes and challenges! Your board of directors is about to make the transition from a working board to a governing board.
The roles and responsibilities of your nonprofit board of directors are going to shift dramatically.
While most successful nonprofits go through this phase at some point, it still represents a monumental change for your organization. Whether you’re a volunteer, a board member, or a part-time staffer holding down the fort, there are a few basics that can help you navigate governance changes.
The Vital Role of Small Nonprofits and Working Boards
While the nonprofit sector and donors frequently celebrate the largest institutions, small organizations are often the backbone of our communities.
According to the latest data available, 88% of nonprofit organizations have less than $500,000 in income per year. In contrast, only 8% of nonprofits have annual budgets over $1 million.
Most nonprofits (70%!) also have very few paid staff members. 43% of nonprofits report zero employees—meaning they are completely run by volunteers—while 27% have only 1-10 employees.
In short, the nonprofit sector is powered by small, volunteer-run organizations. Nonprofit boards, which are generally volunteer positions, play an essential role in keeping organizations running. And, as we’ll see below, most of these are what are called “working boards.”
But as an organization’s programming grows, this can quickly create outsized pressure on board members and other volunteers. It’s then up to the board to decide whether and when to hire an organization’s first paid executive staff member, usually an Executive Director, which triggers the transition from a working board to a governing board.
Working Board vs Governing Board: Differences and Similarities
In a nonprofit board governance model, the board of directors is generally responsible for establishing organizational direction, providing organizational oversight, and ensuring the organization has the resources needed to fulfill its mission. However, the level of hands-on, day-to-day “oversight” the board provides depends on whether it’s a working board vs governing board.
What is a working board?
In addition to traditional governance responsibilities, a working board of directors has operational responsibilities. This means board members are responsible for not only setting organizational direction but also for carrying it out.
In a working board, there may be little distinction in roles between what a staff or board member would traditionally do. Board members may lead programs, manage day-to-day logistics, and directly manage non-executive staff members (such as a volunteer coordinator or office coordinator).
What is a governing board?
Compared to a working board, a governing board of directors is mainly focused on governance. A governing board sets the direction for the organization, and the staff carries it out, including regularly reporting back to the board on progress.
The role of a governing board is to provide the oversight, accountability, and checks and balances that ensure a nonprofit reaches its goals and remains sustainable.
How can you tell the difference between a working board and a governing board?
The moment when a board of directors decides to hire an organization’s first paid leadership position—often an Executive Director—is the same moment the transition from a working board to a governing board begins.
Signs that it’s time to make the transition from a working board to a governing board
Every nonprofit transition is different, but common indicators that it’s time to make the move from a working board to a governing board include:
- Are your organization’s services in such demand that your board, volunteers, or contractors can’t keep up?
- Do you have opportunities for increased funding, but not enough hands to fulfill deliverables?
- Are community members and partner organizations asking you to expand your services into new areas?
- Do you have a strong base of community and donor support, but not enough time to put it to use?
If your answer is yes to any of these, it might be time to hire senior leadership staff and shift your board to a governance-focused role.
Challenges When Transitioning from a Working Board to a Governing Board
Many new nonprofits begin with a working board and eventually evolve to a governing board. This shift transfers day-to-day responsibilities for the organization’s work from the volunteer board to paid staff. While less responsibility sounds great in theory, there are several common challenges we see in our work with nonprofit boards.
Letting go isn’t always easy for board members.
The dedicated core of volunteers that has been working tirelessly on a shoestring budget will have to suddenly hand over the “management reins.” Though the board still retains oversight, staff will need space to carry out the work in their own way. Operations and systems may shift. Program approaches will adjust.
It’s like when a houseguest offers to load your dishwasher. Sure, everything is in the dishwasher, but not the “special way” that you’ve perfected. The silverware is upside down. The cups are on the wrong side. The bowls aren’t organized efficiently. But at the end of the day, the dishes still get clean.
Financial pressures will increase.
Bringing on a full-time executive staff member also adds financial pressure to the organization. With salaried staff, you can’t simply hire and fire people month to month based on cash flow. You need a plan for how the organization will consistently make payroll. Before you can hire an Executive Director, you’ll need several months of operating expenses in the bank.
Managing executive staff becomes a key board responsibility.
One of a nonprofit board’s main responsibilities is hiring, managing, and evaluating the Executive Director. That means you’ll need to set baseline policies for areas like pay and benefits, which ultimately impacts staff turnover and retention long-term. If this is your organization’s first management hire, you’ll also be setting the tone for your nonprofit’s management culture.
Tools to Ease Your Board Transition
When a nonprofit is undergoing any kind of leadership transition, whether it be board, staff, or both, clarity is essential.
Are the vision and mission for the organization clear? Is everyone aligned on goals and benchmarks going forward? Is there a mechanism in place to evaluate progress based on metrics rather than feelings?
A strategic plan helps address all of these questions. You can read more here about what goes into nonprofit strategic planning, but one of the biggest value-adds of the planning process is alignment. Everyone on the team—volunteers, board members, paid staff, and other key stakeholders—emerges from the planning process with a shared vision for the organization that is written down.
Your strategic plan spells out where the organization is right now, where it wants to go, and how it will evaluate progress as it works toward arriving at its destination. This written document can be shared with volunteers, funders, contractors and consultants, new staff members, and more.
Strategic planning can also serve as a perfect kicking-off point for your board’s development and transition. Remember, even as the working board is letting go of day-to-day responsibilities, the governing board is taking on new and equally important roles. It’s critical to equip your board members with the training, tools, and know-how to govern effectively.
