Why you need good bylaws, policies and procedures: getting started

Board governance. It's not what you signed up for when you ran for a director's position. You wanted to be involved with a group that is doing things, gain some experience, and make things better for the members of your association.

Governance feels like a lot of red tape getting in the way of productivity, sapping momentum, thwarting creativity — especially for very small or young boards. Yet, you know there must be a reason boards spend so much time talking about bylaws, policies and procedures, planning and orientation, training and professional development.

Believe it or not, well-written bylaws and policies make it easier for you to accomplish more, and they protect you from many of the negative outcomes of bad board management, which range from low productivity and member complaints to financial losses and potential law suits.

In a perfect world, you would step into a board role with the security of solid, usable, and easy-to-understand set of governance documents to guide your actions and protect you from negative outcomes.

In the real world, a good portion of operating boards have confusing, poorly-written, conflicting guidance documents, which directors must often ignore or contravene to get anything done. This strategy, however necessary it may seem, can lead to disciplinary action at the society or government level. And it's something you can blame on the previous board — it's the responsibility of every director to help ensure these documents are providing appropriate guidance.

Here are some strategies to help you get on the right track.

What is Governance?

Governance, in the non-profit sector, refers to activities and processes undertaken by a board that direct the goals, actions, and standards of the organization.

The three key factors in any governance model are authority, decision making, and accountability. A good governance provides a very clear and efficient authority structure (which includes delegation), helps with decision making and getting input from all members of the board and its stakeholders, and provides for a high level of accountability.

The primary activities of a governance board include:

• setting goals, objectives, and policies for the organization
• budgeting and managing availability of financial and other resources
• selecting, supporting, and reviewing the performance of the CEO or Executive Director
• being accountable to stakeholders for the performance of the organization and the use of resources
• setting salaries and benefits for management

Your bylaws and policies must provide structure and guidance for all of these activities, or your board is likely to spend too much time making decisions about how to handle routine tasks.

What to consider when developing policies and bylaws

What is the mandate of your organization?

Every board was created to serve a purpose or mandate, and the first step of every board should be to define what that is.

If your board has an existing set of bylaws, the mandate should be included in the first article of that document. If you are setting up a new board, you will have to define your purpose before you do anything else.

Sometimes boards fail to refer to their purpose when orienting new teams and starting planning, and this can lead to activities that fall out of the board's mandate. Just because a project is the passion of some of the directors, or seems like a sensible thing to do, doesn't always mean that it falls within your mandate and the expectations of your members.

Boards also tend to evolve over time and expand their activities and potential. If the mandate has not been reviewed in a long time, it may no longer be very relevant. Be that as it may, you absolutely must work toward the purpose stated in your bylaws or run the risk of being held liable for failing to fulfill your duties.

Before you do anything else, define your goals. No, really — clearly and painstakingly define your goals. This sounds simple, but once your team starts discussing your mandate, you may be surprised by the range of opinions on the purpose of your team. This is a key reason many boards founder despite having many enthusiastic (at first) members.

There are many processes you can use to work through the mandate development process. Do not make the mistake of starting into the board's work without doing this. Much of your effort will likely be wasted as people pull in different directions. And, if you are a membership-based organization, remember that you must be able to very clearly communicate your purpose to your members — especially if you plan to ask them for money to join. Your members have a right to know exactly what your board will and will not do, and how you will communicate your progress to them.

You must also carefully review your mandate to make sure it is acheiveable and within what your board is permitted to do. You may find that some tasks you want to pursue are not allowed under applicable legislation (e.g., condo boards have often have well-defined purposes). With a well-defined mandate, every other aspect of governance development is much easier and your board will achieve more.

What is the basic structure of your board?

There are many ways a board might be structured, but an effective board must have a focused vision of the way it operates, its role, and its sphere of authority. Often, boards that are beset by infighting, member loss, or failed projects suffer from a hazy view of the board structure.

A poorly thought-out structure also leads to radical changes in how the board operates with each incoming set of directors, as well as increased tensions within the group as each director has a different vision of the role they play. Often, directors bring with them experience on other boards and they will default to a role that is familiar to them if no other clear guideance is provided.

Role confusion can be especially hard on staff, whose job and areas of responsibility can change radically when directors change, leading to over or under work, employee dissatisfaction and confusion, job stress, and in some cases, the departure of qualified staff (who may even have a case for constructive dismissal if their job roles change radically due to a change in the vision for staff roles).

There are many basic board structures; the most appropriate choice depends on the size of your board, how long it has been in existence, the size of your staff, and other factors. A board may move through more than one model as it matures. Typical board models include the following:

• The Advisory Board Model — Advisory boards typically exist to support a CEO or small staff who need additional advice and support. They are usually appointed for their experience and expertise. Advisory boards are very effective for specific purposes, but they are quite specialized as they must provide the expertise that the CEO or manager needs. Members may also be selected on their basis of their reputation, to provide credibility to an organization.
• The Co-operative Model — In this model there is no clear power structure as the board and upper management aim for consensus. This structure may arise when a company forms a board to fulfill the requirement for becoming incorporated. This idealistic model rarely works well over the long term as members will ultimately have differing opinions and lack a clear definition of who makes decisions. Many new organizations start out with a consensus-based model, and operate very effectively as long as there is a small core group of dedicated officers and managers with a shared vision. Once these founders are replaced, such organizations often crumble. To thrive as new members come in, co-operative boards often evolve to other models to ensure the goals of the organization are well defined and communicated to newcomers.
• The Management Team Model — In this model the directors — especially the executive officers — are also the administrators and managers of the organization. This is appropriate for many smaller and newer organizations where there is a lack of funding or work to justify hiring staff. These boards may have many committees, often run by volunteers, and be very effective at leveraging the enthusiasm and skills of people with a passion for the board's objectives. A disadvantage is that the directors may not have strong administrative, financial, or technical skills so they may not produce the same quality of work as professional staff. Burnout is common, and project quality may be inconsistent as directors change and key skills are lost. Management boards may be subject to greater risks of liability if they take on human resources and other tasks for which they do not have expertise. The management model can work well with a very solid governance structure to guide directors away from areas of liability, and ensure they meet the requirements of applicable legislation. Consultation is key.
• The Policy Board Model — This is the ideal for most modern boards as it offers high levels of accountability, productivity, and consistency. To the uninitiated, policy boards may be difficult to grasp: new directors might feel that they are too bureaucratic or that an director isn't really "working" if they are not doing tangible, day-to-day tasks like answering the phones, making purchasing decisions, or hiring and supervising staff. In this model, directors set objectives and guiding principles for the organization, and formalize these in policies. The board delegates responsibility for meeting objectives and enacting policy to staff while monitoring progress and ensuring the organization is accountable. A benefit of policy boards is that they do not rely on directors having specific work skills or knowledge: the only requirement is that directors are highly committed to the purpose and values of the organization, and willing to learn.

One thing to be absolutely clear about: no matter what model your board works under, directors are all bound by fiduciary duty (that is, a position of trust) to the organization and its members.

A well-functioning board has a clearly defined purpose, and a functional, clearly-worded set of bylaws and policies, backed up by any needed procedure documents and training manuals. Developing these documents may seem like a waste of time for young boards, but without them, it is likely that your board will be less productive than it should, as members work toward disparate or even conflicting goals.

Staff often find it difficult to work for boards without firm policies, and orienting new members can be very time-consuming without written direction. You may even end up fighting legal battles if you inadvertently contravene legislation, make bad HR decisions, or are challenged by your members for working toward goals not within your mandate.

Your first step should always be to draft or review your bylaws because all of your other governance documents will build upon that key document. See our tips for drafting bylwas to get started.

The cobweb team has many years experience working with boards and developing bylaws, policies, procedures, minutes, and board and staff training manuals. Contact us if you would like more information on how we can help.