Nonprofit Governance: What Is It and Why Does it Matter?

It begins with mutual appreciation and respect for one another, as well as excellent communication within the agency. In addition, the nonprofit obtains a clear mission that everyone fully embraces and supports, as it is essential for everyone to be on the same page. 

All of the successful agencies I have observed and worked with in the past exhibited these characteristics beautifully. But there is one more characteristic that is generally overlooked…

Nonprofit Governance

When someone mentions governance, I notice several sets of eyes glaze over. They immediately think of bylaws, articles of incorporation, lawyers, etc. Dry and boring! I get that. But that is no reason to ignore governance considerations. The idea of just “winging it” is not a strategy for success. 

But first, what is governance?

The term governance is a collective word generally understood to include everything that guides an agency’s performance. Anything that controls decision-making and interaction between the board, staff, and volunteers is a governance matter.

A robust nonprofit governance program is meant to outline the best way to meet the needs of your nonprofit by documenting previous decisions and establishing policies to ensure similar situations are handled in a certain way.

In addition to addressing key policies and practices, governance documents can address situations that surface infrequently, but need to be cautiously resolved and documented.

For example they may touch on… 

• How board committee positions are filled 
• accepting gifts
• lines of authority
• risk management practices
• financial processes and controls
• executive parameters
• conflicts of interest
• lobbying efforts
• emergency procedures
• performance reviews

What you include in your governance will depend mainly on the unique needs of your nonprofit.

If you’re looking to dig a little deeper into the workings of your board, check out Chapter 10 of my new book, From the Inside Out: Leading Where it Matters Most, where I discuss how to build and maintain a successful board. Get a head start and grab the first chapter for free, here! 

What Goes Into Nonprofit Governance?

An agency may have several governance documents covering a wide range of guidelines. Among these documents are your mission, vision, values, bylaws, articles of incorporation, and all governmental rules and laws. Many also include the current strategic plan, goals, and financial reports.

A wise board will compile, retain, and maintain all of its policies in one place – its Board Policy Manual. This is where all the established processes and procedures will be stored for safekeeping. This manual can serve as a receptacle for all important policy decisions the board makes. It should be brought to each board meeting for guidance and reference, as needed.

It also serves as a great board training manual for new directors or as a refresher for others.

Why is Governance So Important?

If a board fails to implement or follow its governance practices, it can find itself in real trouble.

If the goal is to be effective, your nonprofit needs to commit to well-grounded practices. Having a centralized resource to guide your nonprofit can help to avoid inconsistencies and rash decision-making.

Your board is made up of people. And people can feel pressure to give in to stressful situations.

When problems occur, your agency can refer back to documentation on how similar situations have been handled in the past. That way, your team will have a better chance of making an informed decision, when the stakes are high.

For the sake of consistency, professionalism, and efficiency, commit your nonprofit to appropriate governance practices.