How to Start a Non-Profit // 03

Board of Directors

The Board of Directors

“The Board of Directors plays a pertinent role in determining a company’s social performance” (Bai, 2013, p. 174).

In this article, a study was conducted that concludes evidence that board characteristics such as board independence, diversity, number of women on the board, stock ownership (if applicable) and whether or not board members are elected, are all directly associated with that company’s social performance (Bai, 2013). In this study both for-profit and not-for-profit businesses were examined. Since I am in the beginning stages of starting my not-for-profit, I was curious to see what the differences were in structuring a board (for-profit versus not-for-profit). I was not surprised to find that in for-profit organizations, executives are provided with strong incentives to focus on short-term financial performance and tend to seek opportunities to maximize personal gain. This makes sense, as these organizations and their board members are looking for the easiest ways to make the most amount of money in the shortest amount of time. In the non-profit organizations, enhancing social performance was usually the key mission for the board.

Just as I am hoping to set up within my board, the not-for-profit boards in this study, have a respectable interface between the organization they were serving on and their communities, and in turn, exchanging information and monitoring executives to serve social needs. The article then goes on to discuss more differences between for-profit and not-for-profit boards such as compensation, perks and benefits, stock-holding, and how government officials and diversity on a board can hurt or help an organization. Overall, the article was packed full of useful information and even a great chart that can be referred back to for statistical information.

As I think about the types of individuals that I would like to have on my board; diversity, experience and innovation are the three characteristics that stand out to me the most. Since my non-profit is small, I could start out with a board that had only five or seven members. Currently it only has three. When you are starting up any type of business that requires a board, be sure to choose board members that are prepared to work hard and potentially meet often. Start-ups are not always easy and require a lot of creative thinking, branding and marking to get your mission and cause out into the public.

If you have started your own company, small business or non-profit, how did you select the members that you wanted to serve on your board? Did gender, race, and/or professional background come into play at all? If so, what was your reasoning?

For the previous posts in this series read here and here.

Sooner than later,

The Tiny Professional

References
Bai, G. (2013). How Do Board Size and Occupational Background of Directors Influence Social Performance in For-profit and Non-profit Organizations? Evidence from California Hospitals.Journal Of Business Ethics, 118(1), 171-187. doi:10.1007/s10551-012-1578.

13 Comment

  1. What great tips. This is very useful information.

  2. I was part of a non-profiit start up and member of its BOD. This is a great synopsis for those embarking on a similar venture, speaking from experience. Nicely done!

  3. cindy b says:

    Wow I had no idea. These are some wonderful tips I’m def taking note of!

  4. Heather says:

    Well I have no experience in this yet, as I am a one man show here. But I agree with you on making sure you choose the right people for your board. Race and gender wouldn’t’ have anything to do with it for me, but reliability and credentials would.

  5. Jhady says:

    My brother works for a non-profit organization where he is one of the board members. I noticed that they focus a lot in enhancing social performance through serving the community.

  6. kungphoo says:

    Our board members are selected based on what they can bring to the table. We currently have 5 board members..

  7. “Diversity, experience and innovation” << great characteristics! These would be important to me as well!

  8. As I get older I think more of opening my own business. Just need the capital. This is very good information for future reference and sharing.

    I have no experience at the moment though about being part of a nonprofit.

  9. Amanda @ Erickson and Co. says:

    I don’t have a board me directors but if I did I would pick them based on skill, trustability, and background.

  10. Liz Mays says:

    You may want to talk to Anne at mommyhastowork.com She just went through this and only had a couple helpers, so I’m sure she’d be a wealth of information for you.

  11. Felicia says:

    Thank you for that reference! I just check out her blog and will email her when I am just about to add a couple more members to my board! Thank you for the connection and reference :)

  12. We were planning for a Non profit company to start working for poor children, but it stayed in just talks. Seems, got a kick-start after reading your post. Going to contact my group and will start working on it again :)

    Thanks

  13. Great info, I never realized the differences between non profit and profit. And Diversity, experience and innovation are great qualities to have!

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