Choosing a social enterprise board is like starting a family. In this case, instead of weathering the surprises of life, you can control most variables, including the developmental stage of the child, how well you get along with the in-laws, and the financial situation you step into.
As experienced board members from the Stanford community gathered for CSI’s Nonprofit Board Governance Institute last month, we asked a number of them to share their advice for choosing a first time board. I summarize the collective wisdom below.
Fall in Love Wisely
It all starts with falling in love with a cause that deeply resonates with you. There is no better way to experience it than to get your hands dirty, volunteer and understand the programs from within. Get a chance to look into the eyes of the beneficiaries whose lives are transformed; it might seem like the most important part at first, but as a board member you will spend most of your time with the leadership team, not with the beneficiaries. It is important that you enjoy your time with them and understand what they need from you and how it maps with what you have to offer.
Pick Your Preferred Developmental Stage
Social enterprises have evolving needs as they move from idea to proof of concept, to startup, to growth, and scale. The board involvement changes significantly at every stage.
Knowing your “parenting style” as you choose a board will help you cater to how you most like to contribute and ways you feel most fulfilled. The smaller the social enterprise the more opportunities for hands-on engagement, oversight of the day-to-day operations, and the more visibility and opportunities for input into the major decisions that guide the development of the organization. The larger the organization, the more strategic and big picture the role of the board with a strong emphasis on network development and collaboration.
As described by Jeff Walker, author of The Generosity Network, the make-up and role of a board changes as the organization grows:
- Early Stage. In the very early days of a social enterprise, the board tends to attract friends and family members of the founder. In the absence of robust staffing, board members step into operational roles such as writing the organization’s newsletter or running the logistics of a fundraising gala. Hopefully the social entrepreneur also brings a couple mentors onboard. With 4 four to 8 eight members, the board collectively contributes to all aspects of the organization’s life feeling ownership over decisions that serve a joined cause.
- Growth Stage. When the organization reaches an operating budget of $2M to $5M it requires access to more abundant capital. As the organization reaches out to more specialized contributors, the board starts to grow. A typical size for growing social enterprises is 15-20 members organized in specialized task forces and committees. Members may start operating under defined “give or get” fundraising mandates. The board’s role becomes increasingly more strategic as the staff progressively takes over operations. Board members ensure that the organization remains grounded in the reality of evolving needs, ever improving science knowledge and technological possibilities, and a changing landscape of players from across sectors and disciplines.
- Scaling Stage. Organizations that understand the difference between scaling solutions versus scaling the organization engage in collective impact strategies that require developing a strong network. The board then relies on connectors across sectors and disciplines.
Design for Harmony and Efficiency
Like the in-laws make your family dynamics unique, fellow board members define your relationship with the organization you join. Only this time, you don’t have to force a way to make it work, you can choose who you’re getting involved with. Look into boards where you already know members and can gather insider perspectives. Test the waters as a volunteer before making a commitment to the board to know what you are getting yourself into. Beyond harmony, a common commitment to efficiency will make your collective experience that much more rewarding.
Over years of board engagement, my colleague Bill Meehan and our resident expert in nonprofit management has observed that consistent board effectiveness is correlated to three enduring principles. Quoting from his article Because a Better Board Will Make You Better published in the winter quarter of Stanford Social Innovation Review, below are three practices to look for when choosing a board:
- Emphasis on engagement. To be truly effective, members of a nonprofit board must engage directly and deeply in the substantive work of their organization.
- Tending to the top. One of the most important responsibilities of a nonprofit board involves hiring and evaluating an organization’s CEO or executive director.
- Cultivating the right composition. What’s the right mix of people for a nonprofit board? Perhaps the best answer to that question lies in the venerable idea of “the 3 W’s”: work, wisdom, and wealth. The goal, in other words, should be to attract board members who bring one or two or even three of those assets to their organization.
Engineer Financial Health
There are a number of steps you can take to ensure the financial health of your newly found family. Here I’ll borrow from Stanford School of Education advisory board member Laura Lauder who provided financial guidelines for choosing a board to Stanford GSB alumni during last month’s event.
- Overhead. The money spent in leadership, staff, and organizational development should hit a sweet spot that speaks to responsible financial management as well as positions the organization to retain and develop talent, ensure the stability of management, and foster innovative solutions for optimal impact. Baring field variations, 15% of overhead is typical in the nonprofit world and reflects salary levels that are significantly lower than in for-profits with a very weak commitment to professional development.
- Sustainability. Make sure to have an arm’s length relationship to the nonprofit’s endowment. Spending it down in operating expenses is not good practice. You need to ensure you have power over the long-term survival of the organization.
- Fundraising Power. Boards that give or get enough money to cover for operating expenses have the strongest fundraising position. They demonstrate their own confidence in how the organization uses its donors’ money. They also allow for all externally fundraised dollars to go towards programs, where the impact is most obviously visible and motivating.
In a Nutshell
So you want to be a board member? Find a meaningful cause and an organization you believe in. Ensure the staffing is right so you can focus on what you like and offer what you are best at. Fall in love with the people you are going to spend time working with. Foster a financially responsible environment. Be generous and have a great time!