Committees Checked Out

For many people, boards and committees go hand-in-hand in the structure of a non-profit organization. Committees though, are one of the elements where assumptions often rule on what ones to have, not always to good effect.

What I will try to do is to sketch out what board committees non-profits ought to put in place, ones to be careful setting up, and what steps, like written terms of reference, can help to make them effective. Perhaps I can take the guesswork out of the picture.

The subject is “board committees” that is, bodies established by the board, made up of board members, although not necessarily exclusively board members, and accountable to the board.  The term “standing” or regular committees rather than “ad hoc” committees is the main focus.¹ My take on the subject applies to organizations with a governing or policy board and that employ an executive director/CEO.

Committees can be useful for doing work that the whole board does not have time to give to, like drafting policies, identifying options and constructing recommendations. They are also useful vehicles for engaging in tasks that require board member involvement that cannot be done around a group-meeting table. This includes research on governance practices and/or contacting and interviewing board candidates.

There is no doubt that committees are a valuable mechanism for involving people, sharing the work, ensuring that different perspectives are incorporated and cultivating volunteer leaders. Most non-profits I know require that every director be a member of at least one committee.

What committees?

Here is my list of what board committees are typically found in non-profits. I will look at each area or subject grouping in turn and offer some thoughts on whether and when a small group is needed.

1. Personnel or human resources
2. Financial management
3. Recruitment and nominations
4. Executive
5. Governance, board development or policy
6. Audit and risk management
7. Fundraising

There are other important areas of governance, like strategic planning, that can really benefit from committee-level work. I will take this up at the end of post.

1. Personnel or human resources

From my observations board committees having to do with the non-profit as employer can take three different paths, One is about helping the executive director manage staff – a personnel committee. The other two are typically about creating HR policy or else evaluating the executive director.

Of all committees on my list, the first of these variations, the personnel committee is the one that can be the most problematic. That is because it is the committee mostly likely to put the board in a micro-managing role, effectively lessening the accountability of the executive director to the board for managing staff and program volunteers. More importantly, it is confusing to those who work for the organization. Who do they really report to?

Human resource management is, for the most part, an operational area. Most non-profits have seen fit to do way with a personnel committee of the board. If a board is concerned about the work life of staff, and they certainly should be, a clear and principled HR policy, in effect a clear set of executive director expectations for creating a great workplace, is the best tool.²

If your non-profit has had staff for a while you may have already some basic HR policies in place. The development of a broader or high-level HR policy is a task for a ” policy development committee”, perhaps an ad hoc group composed of board and staff. Such a group might initially create your non-profit’s HR standards and then be reconstituted when these need to be reviewed.

I have seen HR committees that, despite the name, are mostly focused on executive director evaluation. This is a governance not an operational matter. Striking a small committee can be excellent approach to this key task, especially when they work with the ED to first determine evaluation criteria and processes. This is also an area of responsibility that can benefit from some “good practice” research by the group. Calling this an HR committee is possibly confusing to board and staff alike.

I can almost hear a few readers ask: “what do you do when you have volunteer directors who bring HR management experience to the board?” Well, be careful. One could consider establishing an operational committee, not a board committee, to advise a new ED. However it is probably better to ask a board member with HR experience to meet one-on-one with new executive director until he/she has a handle on this part of the role.

2. Financial management

Alongside HR, financial management is the other operational area where boards want to see the adoption of good organizational practices. But is there a need for a board committee?

Financial management is a worrisome and unfamiliar area for many board members so the tendency is to want more oversight than the board as a whole can provide, and more information than can be processed at a board meeting. And, this is an area that is often not the strong suite of a new executive director. These are very understandable reasons for wanting a financial management committee, but perhaps not good ones.

I think the need for a committee with a finance or accounting focus depends on what “business” one is in, the financial complexity of funding (e.g. multiple sites and programs) and the organization’s growth aspirations.  Also, non-profits providing publicly funded programs frequently have onerous financial tracking and reporting obligations to government. This requirement ought to be taken into account when boards consider the level of oversight they too need.

Like HR, this is an area that can take more than one functional path.³ The idea of an operationally-focused committee to oversee and help the executive director on all things financial often ends up micro-managing. A better alternative for a new ED might be some financial management coaching, perhaps from a board member, or by an external paid consultant.

There are some financial issues that may benefit from committee-level work. Here are three:

• Financial policies
• Budget
• Reserves and investments

And there are these ones that I will I cover under their own separate headings:

• Audit
• Risk management
• Fundraising

Few non-profits that I know of have a set of high-level financial management policies. A committee to develop these would likely be more of a board and staff team that includes the treasurer, rather than a board committee. For more on the subject of a financial management policy see my October 2020 post, De-cloaking Policies here and my sample financial management policy here.

A budget committee, that is one to construct next year’s budget, may make sense if the organization is new, has suddenly grown exponentially, or has a new executive director, Otherwise, it is up to the executive director to draft a budget for the coming year, with substantial input from program staff, and then to go over it around the board table. The treasurer should be involved in at least one budget preparation meeting and ideally be the person to present it to the board with the ED.

Non-profits often find themselves with surplus funds, either as result of good management or unusual circumstances. Some, especially those that rely on donations, might at times bank a lot of money to be set-aside for a rainy day. In either or both cases a reserve policy and an investment policy are good to have. A reserve policy is pretty common but it does not require a committee to craft it. A standing committee on investments one usually associates with foundations. They need one to look at and manage a large investment portfolio.

So you might consider a board-staff team to meet and develop a policy in each of these areas, reserves and investments.⁴ Ensure that the policies also include board reporting requirements.

3. Recruitment and nominations

Recruiting and nominating new board members is clearly a board responsibility and a board committee function. Normally such a committee would be responsible for:

• Keeping track of existing board member terms and intentions to remain involved
• Developing a set of needed board member attributes and skills (board composition)
• Designing a recruitment process – how to generate member or community interest in board volunteering
• Creating and maintaining a list of potential board candidates (ideally with a 3 year horizon)
• Designing a candidate application, selection and interview process
• Bringing candidate recommendations forward to the board for consideration before names are brought to the AGM

Sometimes the work of such a committee, because it is somewhat episodic, can be folded into the work of a governance committee. There are lots of good resources available to help with nominations and recruitment.⁵

4. Executive committee

Executive committees, made up of the Board’s officers and the executive director, is one area where there is divided opinion in the non-profit world. The main concern is that they can become a mini-board or a group of insiders. Some non-profits have done away them, others have created terms of reference for them that limits their decision-making power. More on committee terms of reference in a bit.

An executive committee with the following governance focus may make sense:

• Set, update and maintain the board’s governance calendar
• Decide what decision matters should come before the board
• Ensure the board is balanced in its focus on operational oversight and strategic work
• Determine the agenda for board meetings (in collaboration with the Executive Director)
• Determine what materials should be sent to support board meetings.
• Monitor the work of committees
• Ensure that there is a process for board succession planning
• Ensure there is a process for the evaluation of the executive director

Using the executive committee, or a subset of it, may be the better mechanism than a separate committee, for conducting the evaluation of the ED.

Should an executive committee be empowered to make board-level decisions in an “emergency” situation? I would not preclude them from doing so but would want some clear limits on the committee’s power and clear requirements for communication to the full board.

The value of having an executive committee may be less where the chair-executive director team works well as governance pair. See my June 2021 post on Board Chairs and Executive Directors here.

5. Governance committee

A governance committee is probably regarded the “sine qua non” of board committees; I never thought I would use this Latin term. It just means “essential“.

It is generally agreed that a governance committee ought to concern itself with how well the board itself is functioning. It is not unlike what might have been once called a board development committee.

There is no perfect recipe for what should be on this committee’s plate. As I indicated above, board recruitment could be one of their tasks. My list of governance committee responsibilities might also include:

• Developing clear expectations around the role of the board chair and other officers. Likely this includes creating and reviewing position descriptions for each executive position
• Creating and bringing to the board policies on board conduct, conflict of interest, in camera sessions and board minutes
• Conducting, or helping conduct, a board orientation for new members
• Ensuring the organization’s incorporation bylaws are up to date
• Ensuring the submission of the non-profit’s annual charity return
• Ensuring there are written terms of reference for other board committees
• Developing a plan for the board to review existing operational policies
• Advising the board on its size and board member terms
• Researching and recommending a tool for board self-evaluation and perhaps facilitating the process
• Assessing the value of, and organizing, a board education session or retreat

To the extent that a governance committee is charged with creating and reviewing policies, it is important to remember that both governance and operationally-focused policies are needed. Although the latter may come forward to the board from the ED, the Governance Committee should be the body keeping track of what policies need to be developed or reviewed.

And, I almost forget, if there is a board manual, the governance committee is probably its rightful steward.

6. Audit and risk management

If you keep up with non-profit sector trends you are probably aware of all the talk about “risk management” including the importance of a board committee to examine this territory. The topic has given rise to what is almost its own consulting industry.  I am not convinced by the case often made for a risk management committee, but stay with me.

There is also a tradition in the sector, at least by large charities, of having an audit committee. I am not convinced of a need for one of these either, certainly not across the spectrum of both small and large non-profits.

Can the two areas be usefully combined into a single committee?  Perhaps.

Risk management, is more or less about applying a “worry” or “what if” lens to everything a non-profit does. There are financial risks, human resource risks, client risks, and reputational risks. Some are internal, some external.  Financial risk, from what I have read, seems gets most of the attention. In almost all cases unwanted and unanticipated risks (bad things) can be “managed” by creating adequate policies and procedures. I have hinted at this remedy above, if not in many of my other posts.

Lets not forget that non-profits may have to consciously take risks in order to effectively address their mission. If yours wants to be bold, to try to break new ground, then some risks go with the territory.

Two areas of worry that I think certainly deserve attention are client risk and reputational risk. Non-profits that support vulnerable clients shoulder a lot of it.

Non-profits that are engaged in community change work, given today’s unforgiving social media environment, are susceptible to having their reputation damaged inadvertently.  Both are areas where a board conversation about “what measures are we, or can we take” to “minimize unwanted things happening” is important to have.

The annual audit is an important independent source of board information. Typically an audit committee would meet with the executive director to ensure it is prepared for the auditors to “arrive” and prepare some question for them. After the audit results are received the same committee typically meets again with the auditors to review their recommendations.

Combining the two areas under a single committee makes sense if your board’s worries are financial and the people on the committee, some possibly conscripted from outside, have expertise to offer. So you may want to consider a “finance, audit and risk management committee” with responsibility for creating financial policy as well as overseeing the audit and looking at risk management.

If you want to read more about audit and risk committees see the notes below.⁶

7. Fundraising

Fundraising usually tops most lists of non-profit board challenges. But nowhere is there more confusion over what board committees to have than in this area.

Please take note that there are experts with much more experience and more to say on this particular subject than me. I am just a reporter on this item. There is lots of advice freely available on the fundraising role of board members and committees.

When one sees the term fundraising in articles on non-profits, the authors are almost always talking about charitable donations, income received from individual donors. So fundraising and development are seen as synonymous.

It is important to remind ourselves that there are three sides to non-profit “fundraising”: the search for grants and contracts, the building of earned income streams from social enterprise activity, and the cultivation of charitable donations. From a committee perspective the three areas of work are apples, oranges and bananas. None of these, to my mind, make a good case for a “board level” fundraising committee.

Boards clearly have a role in determining what the organization’s funding model should be, or at least what model makes the most sense at its current stage. This is a big strategic question, a whole board discussion. Based on the model adopted, a board likely has work to do creating some goals and policies to help guide the implementation of the model.

If your organization is one that is currently, or is intended to become, one dependent of charitable donations then it needs a development committee responsible to staff. In other words not a board committee at all but likely one populated by some board members. In some quarters, board members are regarded as “the” conduit to wealthy donors. If this is your organization’s funding model there is lots to read on the topic. If not, that’s fine too. ((Much has been written about board fundraising committees, which I refer to as Development Committees. Here is a piece by Joan Garry, What Makes a Great Board Fundraising Committee?))

This argument against having a fundraising committee of the board is well made in the 2014 piece Lets Ditch The Fundraising Committee on the website Cause & Effect here. It is written by Gayle Gifford, a well-known U.S consultant based on the East Coast.

A board committee to plan and organize an annual fundraising event (with the assistance of staff) is an idea that can make sense, especially if board engagement is a key goal, but event fundraising is a territory unto itself. Your board will want to do some research here too.

Committee terms of reference

I have already mentioned the importance of committees having written terms of reference. They are like committee job descriptions. What should they contain? Here is my suggestion or template:

• Name of the committee
• Purpose of the committee
• Key tasks or responsibilities
• Authority
• Membership – composition, size and member terms
• Deliverables or products of their work
• Board reporting expectations
• Annual work plan

Authority in this instance refers to its ability to act on its own, within the boundaries described, on behalf of the organization and without having to seek further board approval. Its ability to act may or may not include some limited direction of staff.

One concern with standing committees is that they need more than a job description. Good group work benefits from short-term goals and timelines. This means that committee terms of reference should be revisited every year.

Other board committee ideas

First, more board committee work is often needed at the formative stage of an organization’s development, or when it is time for a organizational “reset”. A reset can, for example, happen in conjunction with the appointment of a new executive director or the decision to seek and work towards accreditation.((I already mentioned this in an earlier note but the best know non-profit accreditation program in Canada is the Imagine Canada Standards Program. Here is the link, click on the video))

Second, I know non-profits strike other committees than the ones described above. The term “ad hoc” means created for a particular purpose as necessary. Marketing committees and website committees are two of the ones that one sees. These can be useful in involving board members as “volunteers”. Certainly board members can add value beyond advising the ED and staff on such matters. Setting meetings, chairing and taking notes are welcome contributions.

The idea of a strategic planning committee as a joint staff and board initiative is one I really like even when an organization decides to hire an outside consultant/ facilitator to take them through the process, often over a period of months. Here too board members can contribute in practical ways.

Third, non-profits might broaden the language they use around small group work.  The term committees is fine but so too are teams and task groups. They evoke the idea of more action-oriented board member involvements.

Fourth, board committees and task groups are also excellent vehicles for tapping into external expertise and involving volunteers who are not, or at least not yet, board members.

The “Three Committee Model”

I recently came across an intriguing concept, the “Three Committee Model”. It seems to have been first suggested by U.S. consultant David L. Piana in a 2009 Blue Avocado article. ((see David L. Piana, Boards Should Only Have Three Committees, Blue Avocado, June 7, 2009 here )) The idea calls for a governance committee, an internal affairs committee and an external affairs committee.((Piana suggests the external affairs committee be concerned with fundraising, marketing and public relations. Instead, I might suggest somewhat differently: fundraising (if it has a development orientation), membership and stakeholder relations)). I would sure welcome reader comments on this idea.

Finally…

What board committees do most non-profits need? In terms of standing committees my answer is at least two:

• Governance committee,
• Recruitment and nominations committee.

I might add an executive committee keeping in mind its pitfalls and the important role it could play in executive director evaluation.

Depending on your organization’s business or field a finance, audit and risk management committee might also make sense. Keep in mind that fewer committees certainly means less work for staff and fewer meetings for volunteer board members. That could be good for the former but not necessarily the latter. Project oriented teams might be a better board involvement alternative,

Like all non-profit governance practice ideas, the role of board committees depends on the organization and its circumstances. There is no need however to act on assumptions about what ones are best suited to your organization.

++++ A Note On The Image +++

The image above is one of a line of people sitting in chairs on the ocean floor. They are checking out the tides of the Bay of Fundy, the world’s highest. Likely it is taken on the Avon River that flows into the Bay. When the tide is “out” there are lots of places where one can walk and explore, or sit, although keeping a tide table handy is recommended so you do not get stranded.

This image is from provided by a restaurant called the Flying Apron Inn and Cookery in Summerville, Nova Scotia. They can can arrange for a group to “Dine on The Ocean Floor” table and all. Here is the link. Image used with the business’ permission. Thanks so much

Not sure what the photo has to do with board committees. Thoughts? Perhaps, without some guidance, they too can be stranded. 

Endnotes

^1. The term “standing committee” refers to subgroups set up as continuing bodies. “Ad hoc” committees are those formed for a limited period of time to address a specific need or undertake a time limited task. Normally when the work of an ad hoc committee is completed, the committee is dissolved.

^2. For more on the HR role of the board the publication The Board’s Role in Human Resource Management by Sidney Abrams, originally published in the U.S.A. by Board Source. It is here.

^3. For more reading on finance committees see this 2017 piece Finance Committee Fundamentals from BoardSource.

^4. On the subject of investments and reserves, the Imagine Canada Standards Program (B8) requires non-profits with “investable assets over $100,000” to have an investment policy. On non-profit investments one can see this short 2020 piece The Importance of Establishing a Nonprofit Investment Policy from the U.S company Board Effect here. A resource on reserve funds, especially for Canadian charities, is this 2020 piece by Mark Blumberg, on his site, Canadian Charity Law. Another is this introduction to reserve funds from this 2021 article from Propel Nonprofits.

^5. On the subject of board recruitment see the U.S organization BoardSource: Board Recruitment (no date).

^6. Readings on the role of risk management and audit committees is readily available. With respect to risk management see the Chartered Professional Accountants of Canada’s (CPA) 20 Questions Not-for-profit Board Directors Should Ask about Overseeing the Management of Risk here  Also see The Nitty Gritty of A Risk Committee from the U.S. Nonprofit Risk Management Centre here. On Audit Committees see this 2019 guidebook from Grant Thornton Canada.