Establish a formal board of directors as soon as possible. Ensure that the bylaws are complete. It is wise to call for professional assistance when creating this document, and to check these by-laws regularly to ensure that compliance is in place.

Forms of board governance models include:

  • Operational boards: This board does the work of the organization; it manages it as well as governs it. This is typical of a board in the startup phase of a venture.
  • Management boards: This type of board actively manages the operations—finances, personnel and service delivery. It is expected that as the venture matures, the functions of management and governance will be formally separated.
  • For-profit boards: For-profit boards are structured around proven forms of governance and regulations. Their members are a combination of friends of the CEO, experts from similar businesses, and specialists in matters such as human resources, marketing, audits, lending, and growth techniques.
  • NPO boards: These boards may be responsible for the governance of a share-capital corporation and be guided by its Articles of Incorporation, or, more commonly, they may govern non-share organizations and be guided by its Letters of Patent. NPOs may be incorporated provincially or federally.
    Their boards are made up of individuals with a variety of backgrounds but with a strong common desire to serve their community in a responsible way that is compatible with the organization’s goals and mission. They also have a responsibility to ensure that funds are provided to meet the NPO’s needs on an ongoing basis. Board members are often chosen for this key reason only. They meet the criteria known as: “give, get, or get off!”
  • Social enterprise boards: These boards have the dual responsibility of ensuring that the venture is properly funded until the surpluses from its business venture are available for its social purpose. Even then, they watch over the balance between the source of funds from operations and the need for funding from donors, businesses, foundations or governments.

Informal boards

In the rush to get the venture up and running, setting up a proper board seems like a heavy task, one that might get in the way of building the venture. Two alternate forms of governance are outlined below; they provide the owner/operator with a team of people who are available to help grow the venture without the formal structure of a board of directors. Often, after a proper board has been established, one of these advisory forms of governance may be kept in place because of the unique nature of the venture.

Usually, compensation is not paid to family council members. By avoiding the formality of a board of directors, the need for directors’ liability is avoided. Later on, when a formal board of directors is set up, this council can become the board or remain as a family support group. Regardless of this extended role, it is essential that the individuals chosen support the mission and values with experience and objectivity.

  • Family council: Often, family members act as the early advisors and form a family council. This council often includes the accountant of the firm, the lawyer, interested family members, and the founder. It is wise to keep the group small, with three to five members. This council is not used with NPOs because they are rarely family ventures.
    Usually, compensation is not paid to family council members. By avoiding the formality of a board of directors, the need for directors’ liability is avoided. Later on, when a formal board of directors is set up, this council can become the board or remain as a family support group. Regardless of this extended role, it is essential that the individuals chosen support the mission and values with experience and objectivity.
  • Advisory council: Similar to family councils, this form of governance is often voluntary. NPOs often create advisory councils to obtain the help of key individuals in the community who are proven specialists in the venture’s field of endeavour, such as medical doctors who support an NPO health charity. Similar to family councils, advisors are available for advice and consultation on an informal basis and they may be called to meet on an as-required or regular schedule. Do not expect councils to provide capital or to raise funds; their role is background support.

Expanding the shape of the board

As boards increase in size and diversity, their work may need to be divided into committees. These committees usually meet between board meetings. They provide reports to the board at the appropriate time.

The most common committees and usually the first to be set up due to their importance are finance (or audit), and human resources (or compensation). Depending on the mission of the venture, other committees may be formed. NPOs frequently establish a fundraising committee at the outset as well.

By the time these committees are required, the board should have grown in enough size and strength that each committee can consist of experts in the appropriate field. Avoid overloading board members with too many committee appointments. Keep in mind that board committees can be enhanced by including staff members and external specialists who are not on the board.

References

Gill, M. (2009, September 8). Overview of governance models and board types. Retrieved October 14, 2009, from www.charityvillage.com/cv/research/rbod43.html