Not-for-Profit governance models help guide the policies, systems, and processes used by boards to make effective and informed decisions.
Over the last few years, many not-for-profit organisations struggled through unexpected setbacks, pandemic-related disruptions, and other economic uncertainties that presented new and complex challenges.
To tackle those challenges head-on, more not-for-profit organisations across the globe are seeking solutions to better corporate governance. To help foster good governance, OnBoard, by Passageways, for example, provides an all-inclusive not-for-profit board management software with powerful features and capabilities to enhance not-for-profit corporate governance.
Even so, depending on the needs and purpose of your organisation, there are several governance models used by not-for-profits today. First, let’s briefly review what we mean by not-for-profit board governance.
What Is Not-for-profit Board Governance?
In its simplest terms, the not-for-profit governance structure combines the policies, guidelines, systems, and processes used to make effective and informed decisions and holds the decision-makers accountable. It also involves aligning the operational framework with the organisational goals and mission to help the organisation realise its vision.
There is no compromise on good governance for not-for-profit entities. Despite taking on humanitarian or environmental causes, not-for-profits face similar challenges and risks to profit-oriented businesses. Hence, good governance is essential, not only to govern effectively but to make the organisation appealing to volunteer workers as well as sponsors/financiers.
Below, we look at some governance model examples:
Five Not-for-Profit Governance Models
Not-for-profit board governance models or structures refer to how the organisation’s systems, guidelines, processes, and framework seamlessly interact to help achieve the organisation’s missions. The model also defines the working framework of the organisation, including the responsibilities of the board members and whether they’re accountable individually or as an entire organisation.
Not-for-profit boards must prioritise the organisation’s missions when overseeing and conducting the organisation’s affairs. Most board members typically offer to serve the organisation based on their willingness and desire to achieve a particular mission or help a humanitarian cause.
Below are the five most common not-for-profit board governance models:
1. Advisory Model
An advisory board model is one of the traditional methods of governance used by not-for-profits. Typically, the top brass or CEO will turn to the advisory board to seek help and advice in running the organisation. Members of an advisory board are industry gurus with the experience and expertise to provide professional services but at no cost to the organisation.
A not-for-profit may form an advisory board in addition to the organisation’s usual board. The advisory board members bring their professional skills and talents to the organisation. And since they’ve established their authority in the not-for-profit industry, they can help the organisation expand its reach, boost credibility, and elevate its fundraising and public relations efforts.
2. Cooperative Governance Model
One of the most democratic governance models, a cooperative model, exists where the not-for-profit has no CEO or president to oversee the organisation’s activities. Usually, this kind of governance model is put in place just because the law requires the not-for-profit to have a board of directors.
There’s usually no hierarchy, as all members are at the same leadership level, and decision-making is based on consensus. This model calls for each member to be equally responsible, accountable, and committed to the organisation’s mission.
3. Patron Governance Model
The patron model is somewhat similar to the advisory governance model. The key difference lies in the primary purpose of the board members. Unlike an advisory board model, which is concerned mainly with offering advice and expert services, patron board members are primarily tasked with providing financial support. They give their own contributions and use their influence to help the organisation pull more funds from the outside.
Patron board members usually have much personal wealth and influence in the not-for-profit field. Yet still, they have less influence over the CEO than the advisory board members.
4. Policy Board Model
A policy board, one of the most common governance models, is a popular governance method used by not-for-profits. John Carver developed the model in his book, “Boards That Make a Difference.”
With this model, the board extends a high level of trust and confidence in the CEO to run the organisation. It delegates and grants most of its authority to the CEO, allowing the CEO to have complete control of the organisation.
While the board may act as second in power, the CEO and the board work together and usually hold regular meetings to get updates on the organisation’s progress.
5. Management Team Model
The management team model is a well-known governance structure, even with for-profit entities or corporate enterprises. However, instead of recruiting people to be in charge of human resources, fundraising, planning, public relations, and any other area of interest, the board divides itself into department-like committees to oversee those areas.
Mixed Not-for-profit Governance Models
Although it’s not the most preferred not-for-profit governance structure, some organisations usually decide on a mixed model. With this method, the board picks the main not-for-profit governance model from the first four models above. It then adds a relevant committee or sub-board, which operates similar to the committees in the management team model.
Generally, a mixed not-for-profit governance structure consists of any of the first four models with a partial mix of the team management model. For example, a health organisation can have an advisory board to advise and help the CEO run the organisation while still forming a sub-board/committee to work on fundraising.
The Bottom Line
Good governance is essential for navigating turbulent and volatile business environments for both for-profit and not-for-profit companies. While not-for-profit boards need to take an active role in putting the organisation’s mission and goals at the forefront, they also need to take on fiduciary matters and fortify the organisation against risks and legal tussles.
Board management solutions like OnBoard can help not-for-profits cultivate and foster good governance through myriad options, such as a Governance, Risk, and Compliance portal. Such software systems offer the capabilities to help the organisation govern more effectively and attract competent board members, able staff, and volunteers who can propel the organisation’s growth.
Want to learn more about how OnBoard can help you streamline operations for your not-for-profit? Schedule a demo or request a free trial.