There is much that can be shared between the NFP and the for-profit sectors. One very crucial area is Board Governance. Effective oversight of any company is challenging when only looking at it once a month, and even more challenging when doing it from a volunteer board member’s perspective, in the case of NFPs. The challenge is having a board that is large and diverse enough that it can have multiple committees. It is often the case that there is a small portion of the Board that does the lion share of the work, the old 80;20 rule. It is also the case that the most crucial aspect of board responsibility, proper financial oversight, is usually the area that suffers.
In the for-profit sector, many of the board members have a financial stake in the business, so the oversight of that aspect of the business is generally very strong. In the NFP sector there is no ownership in the business, and therefore the board members are acting solely on their own willingness to give back to the community or organisation. The intent is generally good; however, the boards do not have ‘skin in the game’ as with a shareholder, so there is a lower sense of urgency.
Board duties include oversight of the organisation, participating in strategic planning, major events, fundraising and dispute resolution. The challenge is that many boards are governed by the executive committee, and that committee also serves as the finance committee in many cases. This is a major issue with NFP boards, there should really be a dedicated financial committee focused solely on that aspect of oversight as it is the most important aspect of the organisation. The organisation will cease to serve the cause if it is unable to manage its financial situation and proper board oversight is a critical piece.
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