Article About Risk Management

Just read a great article in the December 12, 2011 issue of Fortune magazine. The title of the article is “Is your Board Ready To Put Out The Next Fire?” While it is written specifically relating to corporate boards, the advice can certainly apply to non-profit boards as well.

The author, Faye Wattleton, starts out by asking what the chances are of a catastrophic earthquake striking Japan and crippling supply chains, or a volcanic-ash cloud covering much of northern Europe and disrupting air travel, or the failure of a major financial institution pushing the entire global financial system to the brink. “Until recently,” she states, “such scenarios would have been considered too far-fetched to warrant much attention…” However, she goes on to indicate that boards need to plan for risk the same way that they would plan for any other event.

“Typically boards have defined risks as strategic, operational, financial and compliance. That universe need to be widened to include intangible assets, such as a company’s [association's] reputation, or unpredictable vulnerabilities…”

The article goes on to say that risk management is essential to every board and the entire board needs to be a part of it.

Definitely a must read for board members od any organization. E-mail me if you would like a copy: sheila@totmgtsol.com

Board Governance

Has your Board of Directors been paying attetion to the new IRS Form 990? The questions on the new form should lead Board to better governance and to more transparency.The IRS asks if the organization has a Conflict of Interest Policy. It also asks if the organization has a Document Retention Policy. And, most importantly, an up-to-date set of By Laws.

The Conflict of Interest Policy should insist that anyone sitting on a Board of Directors reveal any conflicts that they may have in voting on issues that come before the Board. Do they do business with  a vendor that may make a proposal to the organization? Are they related to anyone doing business with the organization? The policy should be distributed to each Board member at the beginning of each organizational year and a disc losure form should be signed by each Board member each year.

The Document Retention Policy should outline how long the organization will maintain the documents that it produces: financial records (must be kept at least seven years); meeting minutes (forever); correspondence; publications; membership applications; database records, etc. This policy should be created and then reviewed every year or so to determine whether it is still valid.

Anyone wanting a sample of either of these policies can e-mail me at sheila@totmgtsol.com

Constitutions/By Laws and Officers

The Constitution/By-Laws of an organization should outline the duties that the association assigns to each of its officers. Some organizations may have as many as six or seven officers; some may have as few as three. All organizations should have at least a President (or Chairman, or Chief Elected Officer – CEO ), a Treasurer and a Secretary. Most organizations would add a President-Elect and two or three Vice-Presidents.

 The Constitution should also outline the method of election of these officers and their term of office. Some organizations may have the entire slate of officers elected at the same time. Some may have rotating elections. Some may have one year terms, some two. I would strongly recommend that no term of office should exceed two years, with the possibility of re-election for one additional term. Having the same person serving in the same office for more than four years creates a “fiefdom” that is hard to overcome.

 Some organizations have the entire membership elect their officers. Others provide for the membership to elect the Board of Directors and then the Board elects their officers. Either way is perfectly acceptable as long as the membership has approved of the method (usually done by adopting the Constitution/By Laws.)

 All of the above applies to membership organizations. What happens when there is a Foundation or other non-profit organization that has no members, just members of a Board of Directors or Board of Trustees? In those cases, the Board has the responsibility of electing its leaders, the number and titles of whom would be prescribed in the Constitution of the organ- ization.

 In future blogs, I will outline the duties of the elected officers.

Duties of Board Members

So, you’ve been asked to serve on a volunteer Board of Directors. What are your responsibilities?

The function of the Board of Directors is to lead the organization, set policy and approve major plans. The Board also has legal and fiscal responsibilities. The first thing that you should be doing is familiarize yourself with the constitution and by-laws of the organization. These documents spell out what the mission of the organization is and what the organization can and cannot do.  If your organization has a Strategic Plan, become familiar with that as well. Know what the goals are for the near future and the extended goals. Know what the objectives are and how you, and the work that you are doing for the organization, fits into that picture.

You are a representative of your fellow members. Even if you were elected as a Board member from a specific region or section of the organization, as a Board member you should be considering the needs of the membership at large.

It is important for you to:

- Be well informed

- Concentrate on priority issues

- Behave prudently in your role as a director

- Be constructive in your suggestions and criticism

- Work cooperatively with the organization’s staff, the chief elected officer and your fellow Board members.

- Familiarize yourself with Robert’s Rules of Order so that you can assist in keeping the Board meeting on track.

If this is your first experience as a Board member, you may feel as if you need to just sit and listen. In reality, you were elected because of you leadership, insight and judgement. Use it – speak up when you have an idea, opinion or suggestion. You owe it to your organization to be a contributor.

Good Meetings

Several weeks ago I attended a non-profit board meeting. The meeting was run by a president whose philosophy was that everyone should have the opportunity to speak, on any topic that they wished, and that even minute details should be discussed by the entire board.  There was very little in the way of an orderly agenda. The meeting lasted over three hours with very little accomplished. Had there been an agenda and an orderly manner of conducting the meeting, it probably could have been accomplished in half the time.

 Robert’s Rules of order need not always be followed to the letter. However, it is often wise to remember that they were formulated for a reason, that they have existed since 1876 and have served as the accepted standard of most societies, associations and conventions since that time.

Even in a modified form, they provide for the orderly conduct of a meeting, the opportunity for everyone at that meeting to be heard in an orderly fashion and ability to make informed decisions that can be supported by the entire body. It also enabled the taking of minutes of the meeting in an orderly fashion that can be understood in the future, even by those who did not attend the meeting.

At the very least, every meeting should have an outlined agenda that should be followed; the ability to have motions made, seconded and discussed; the ability to refer motions to a committee or other body for further study; the ability to postpone subject matter to a specific time and finally, the ability to vote yea or nay on the subject. Leaders of  associations and non-profit organizations would do well to familiarize themselves with the fundamentals of Robert’s – particularly what an agenda should look like,  how motions should be made and seconded, the order of motions and the use of time at a meeting. For references, you can go to:

            http://www.robertsrules.com

            http://www.robertsrules.org   – this will give you a summary

            http://www.constitution.org/rror/rror–00.htm

            or for a training video go to: http://www.robertsrulesmadesimple.com/robertsrules/intro2.html

Have questions? Need help? Contact:

Total Management Solutions, Inc. 1-866-544-0707 or info@totmgtsol.com     0r www.totmgtsol.com