Fundraising Boards: The Role of Trustees – Volume 7

The Goettler Series: To Advance the Business of Philanthropy

Fundraising Boards | Volume 7 of the Goettler Series

Building Effective Fundraising Boards

The Role of Trustees in Development

© GOETTLER ASSOCIATES, INC. • COLUMBUS, OHIO

What is the secret of America’s spectacular success and its leadership of the free world? Other nations have developed political and economic institutions that are more or less free. But American philanthropy is unique in the world. Only here have individuals of great wealth and mighty corporations — as well as ordinary citizens and small businesses — felt such a keen and universal sense of responsibility to share their resources with the less fortunate.

Here, the principle of voluntary action — to solve common problems and improve the quality of life — took root and flourished. Here, the idea of the intensive capital campaign originated and developed — until the “Third Sector,” or “independent sector,” of our society came to be as vital and productive as government and business. Indeed, more and more Americans are realizing today that a healthy democracy and free enterprise system depend on our tradition of philanthropy and private-sector initiative.

And those who are involved with nonprofit organizations know that the vitality of the “Third Sector” depends on enlightened leaders who give freely of their own time and talents, and their personal and corporate resources, to improve their communities and benefit their fellow citizens. These leaders demand the same responsibility and commitment from their peers. To a great extent, it is their unselfish service as trustees, and their generosity as donors, that sustain and advance our colleges and universities, our museums and cultural organizations, our hospitals and human service organizations.

Those organizations which seek to enlist outstanding board members, and obtain meaningful financial support from them, must provide meaningful involvement.

In any given community, there are relatively few leaders with sufficient resources, influence and commitment to make big things happen for an organization. These leaders are so sought after that many are beginning to suffer from campaign “burnout.” Competition for their time and treasure has grown so intense that of necessity, they are becoming more selective in their giving, and in their willingness to serve on the boards of nonprofit organizations.

They know it means more than attending “a few meetings.” Frequently, it means big business and hard work. And even if the organization doesn’t often tell them so, most of today’s leaders know that accepting a position on the board carries with it the expectation of financial support. In fact, most organizations today rightly expect their trustees to both “give and get.”

In an intensely competitive environment, the vitality of nonprofit organizations — even their very survival — will depend on their ability to attract outstanding trustee leadership, and to motivate exemplary trustee performance in development. The organization with a “rubber stamp” board, made up of trustees who are asked to give little more than their names, is an endangered species. Those organizations which seek to enlist outstanding board members, and obtain from them meaningful financial support, must provide meaningful involvement.

Therefore, this article addresses not only the specific role of trustees in fund raising and development, but also the nature of an involved, committed and effective board — how it is built, and how it works.

What Is a Board of Trustees?

A board can be defined as a volunteer group of individuals giving part-time attention to a specific legal public trust, to oversee, but not manage an organization, for the full realization of its mission, goals, stability and security, on behalf of the people of the incorporating state.
That’s a long definition, but each of its terms is important. A board consists of volunteers — individuals who give freely and unselfishly of their valuable time. They are entrusted by their fellow citizens with the oversight of an organization — to see that it is managed (but not to manage it) so as to accomplish its intended purpose, and to ensure its survival and well-being.

A good trustee should understand the organization well enough to serve as an effective public advocate and articulate its case for support.

In practice, nonprofit boards function in many different ways:

  • The board of a publicly owned institution, such as a state university, typically consists of political appointees who see themselves as representing an elected official (i.e., the governor or mayor) in overseeing the spending of tax dollars. This type of board usually feels no responsibility for fund raising, and is not addressed here.
  • A quasi-public institution, such as a zoo or botanical garden, may be owned and partially supported by government — but independent on a nonprofit organization to oversee its operations and provide the additional support required to fulfill its mission. Boards with this degree of responsibility are included in the scope of this article.
  • Boards of organizations which receive their funding primarily through the United Way may be constrained from soliciting corporations for annual operating support. They often become “working boards,” expected to give only their time and talent, as opposed to “fund-raising boards.” Today, however, many such organizations must raise funds for capital purposes every five to ten years — and a “working board” is often forced to function as a fund-raising body.
  • Some organizations have a very small professional staff, or no paid staff at all. Their trustees must, in effect, function as a staff — even as a CEO. Many human service organizations and private secondary schools fit this description.
  • The boards of many organizations must actively raise funds every year to meet a substantial portion of the operating budget. This would include the boards of most private colleges, universities, and secondary schools; most private museums and cultural organizations; and some human service organizations and hospitals. It is primarily the boards of these organizations that this article addresses.
  • An increasing number of organizations have established a separate foundation, development council or financial advisory board whose responsibilities are focused on fund raising. In this way, many state universities have been able to enter the arena of “big-time” fund raising. These boards are more or less exempted from oversight of the organization’s operations.

In general, this article is concerned with the board of any nonprofit organization that depends on philanthropy for operating and/or capital support.

When an organization governed by a “working board” must rise to a major fund-raising challenge, it is often a good idea to enlist the aid of a professional consultant in determining whether the existing board should be expanded or restructured, and how; or whether a separate body, such as a foundation, should be organized. This is a delicate and “political” process that is best managed by a qualified outsider.

Functions of an Effective Board

  • An effective board interprets the organization’s goals to its various constituencies — parents, alumni, members, consumers, donors, volunteers and community leaders. A good trustee understands the organization well enough to be comfortable articulating its case for support to peers (whether or not the organization is raising money at the moment), and functioning as a well-informed, effective public advocate for the organization. A trustee who has qualms about this probably should not be on the board. A “devil’s advocate” belongs on an advisory committee.
  • An effective board sets the organization’ policies and ensures the quality of its programs. The trustee’s job is to see that the organization’s practice reflects its mission, goals and principles, and that its “product” — a bachelor’s degree, a series of exhibitions, a range of health-care services — is as good as the organization can make it. The actual planning, development and delivery of the “product” is the responsibility of the professional staff. The distinction between the two is not hard and fast — especially because a trustee who is more involved in the “inner workings” of an organization is usually a more willing and effective advocate.
  • One of the most important functions of the board is to recruit and counsel the organization’s management. The board may be involved in recruiting senior staff members and evaluating their performance — but its key responsibility is to hire and fire the chief executive officer. The proper relationship between board and CEO is that of an employer and employee. When the CEO also serves as a full member of the board, it may become more difficult for the board to exercise its policy-making and “quality control” functions.
  • More and more, part of the trustee’s “counseling” job is to keep the organization out of court — by seeing that organizational policies, practices and insurance programs do not leave it exposed to costly and embarrassing litigation.
  • An effective board must provide leadership in financial development. Trustees who approve an organization’s budget should support that budget with their own personal and corporate resources. Trustees who approve a campaign goal should contribute toward its attainment. The total amount or the percentage of the goal contributed by the board is important; so is 100 percent participation, to the extent of each trustee’s ability.

Trustees should be as generous as they expect the public to be. Anything less will send a clear signal to the rest of the donor community that those closest to the organization are unconvinced of the merits of its programs and plans. The same applies to trustees who hesitate to approach their peers with conviction to solicit support for the organization.

There is certainly some validity in the blunt assertion that trustees should “give, get or get off.” Often, the problem is that the organization fails to make this expectation clear to new members before they join the board. In fact, the subject of financial support is frequently avoided until the last possible minute — when the money must be asked for. Many organizations also fail to provide the information and genuine involvement that lead naturally to financial support.

An effective board authenticates the organization by providing distinguished sponsorship. When people of stature and substance stand behind an organization, they confer legitimacy and credibility. It is no longer enough, however, merely to lend one’s name. First of all, real leaders seek active involvement, challenge and responsibility — not just a name on a letterhead or a line on a resume. They seek opportunities to accomplish significant things, both for the good of the community and their own personal satisfaction — not just a chair to fill. On top of that, it doesn’t take the community very long to distinguish between an active, dedicated board member and one who is only “putting in time.” The key word is “sponsorship” — which implies involvement, advocacy and financial support.

The Board’s Role in Development

The board should continuously assess the purpose and performance of the organization. Are the organization’s traditional mission and goals still relevant to the needs of its present-day constituents? Are its programs and services meeting a high standard of quality? If not, how should the organization’s course be corrected? What activities should be de-emphasized or dropped? What activities should be pushed and provided with resources, and what new activities should be added? How long will it take to make the necessary changes? What will it cost, and who will be responsible for implementing them?

Trustees who approve an operating budget or a campaign goal should support those decisions with their own resources.

These are the “big questions” an effective board must keep asking if an organization is to retain its vitality. They can best be answered through an ongoing and conscious process of strategic planning.  The answers will provide the starting point for the financial development program.

  • It is up to the board to select, recruit, orient and train its own membership. These activities are preconditions to effective trustee performance, and far too important to be left to the typical “nominating committee.” We recommend that they be managed by a committee on trustees — a mechanism for self-government of the board that should be secondary in importance only to the executive committee. The functions of this committee will be described in detail later in this article.

Can the organization specify what it expects from board members? What personal and professional qualities it seeks? Are candidates apprised of the organization’s expectations before they accept a position on the board? Are new trustees familiarized with the organization, its people and its programs, so that they can make intelligent decisions and serve as effective advocates? Only a few of the best-run organizations can answer “yes” to all these questions. Being asked to serve on their boards is the kind of challenge and opportunity true leaders seek.

  • The board establishes the organization’s fund-raising policy. Will the organization seek philanthropic support for all its activities, or only certain ones? How does one decide what to do with a large undesignated gift? How does one handle gifts of property and other gifts in kind? Who approves the naming of a facility or an endowed chair? The board should work closely with the CEO and chief development officer to provide the answers, preferably before the questions arise.
  • The board develops the organization’s operational fund-raising plan. Every organization should have a structured program of capital, annual and planned giving, complete with goals, schedules, budgets and organizational charts. Key activities and required marketing tools are identified, and the plan is regularly reviewed and revised to reflect reality. The board should work closely with the chief development officer to put together this plan.
  • The board must provide volunteer leadership for the fund-raising plan. That is, when the time comes to implement the plan, the trustees must step forward first. A board whose members have participated in developing the plan is much more likely to commit itself to carrying out the plan. That board will have developed the necessary sense of ownership — i.e., the trustees will want the plan to succeed because it has become their plan.
  • The board needs to set the pace for giving through the trustees’ own financial commitment. Nothing is more critical to the legitimacy of the fund-raising effort, or more necessary to its success. In effect, the leadership of the community and the broad donor constituency of the organization depend on the trustees to validate the development effort. How many times have prospects said, “If Mr. X supports it, then it’s all right with me,” or “If she gave that much, I’ll certainly have to consider it”? Donors give in relation to what others give, and especially in relation to what the trustees give.

This is the reason that, in any major effort, the board must be solicited first. Once its members have provided a “floor” for the campaign, the support of their peers is almost certain to follow. Conversely, if the trustees fail to “set the pace,” it is most unlikely that anyone else will.

Board members should be expected to solicit peers of like affluence and influence. Provided that trustees have already made their own commitments at an appropriate level, no one is better qualified to ask their peers (socially, financially, politically) to do the same.

Again, so often we hear, “If Mr. X asks me, I’ll do it.” A trustee’s peers, in fact, expect to be solicited on behalf of the organization. If they are not approached, they can only assume that (a) the organization doesn’t need the money, or (b) something is wrong — probably the latter.

In building a board, the name of the game is power — power to act, influence, lead, advocate, support and communicate.

If the trustees will not support the development program by “giving and getting” to the extent of their abilities, the organization may have the wrong kind of trustees. More likely, however, it failed to make this responsibility explicit from the start; or it has failed to provide the authentic involvement that must precede significant support. If this is the case, the week before the kickoff of board solicitation is a little late to begin.

  • Finally, the board evaluates its own composition and performance for effective fund raising. Again, it is recommended that trustee leadership — through a committee on trustees — set high standards, make them known and enforce them. Trustees who have been properly recruited, oriented, trained and involved, and still fail to produce, should be “invited off” the board to make room for others who take the responsibility more seriously. It’s not easy to do; but a board is not a social club, made up of good friends who enjoy visiting the campus or attending openings together. Many boards, of course, fit this description rather well — and any successes they achieve in fund raising are purely accidental.

Criteria for an Effective Board

Let’s face it: In building a board, the name of the game is power — power to act, influence, lead, advocate, support and communicate. An organization must have trustees who can get things done, on their own and through others. It doesn’t hurt if the board is “representative” of the community, and if its members like one another personally. But these conditions aren’t essential to an effective board. Power is. If an organization wants a social club, a community advisory group, or a way to recognize hardworking volunteers, a different vehicle should be used.

Perhaps certain individuals need to be included on the board by virtue of their positions with related organizations. Some may be recruited for the specific talents and skills they can bring — legal, financial and the like. But as a general rule, half of the trustees should be wealthy enough to make a leadership gift to a capital program. One-fourth should be able and willing to spend a substantial amount of time on development and fund raising. And all should be willing to provide and secure financial support, according to their capabilities.

Every community has a “giving circle” of affluent and influential people who support its philanthropic organizations and serve on their boards. The number may range from a few dozen in a small town to a few thousand in a major metropolis — but the number is always limited. These are well-known and prominent people — sought after by every organization in the community, but enlisted by only a few.

Again, these leaders are essential not only for the support they can provide, but also for the legitimacy and prestige they confer. As board members, they provide stewardship for the community’s “giving circle” and its investment in the organization. Others count on these leaders to see that their money is well spent. When these people put their resources behind an organization, the community knows it’s a sound investment.

Some of these individuals can generate more money for an organization — through their connections, influence and charisma — than they can personally give. But simply giving one’s time is never an acceptable substitute for giving and raising money. An individual’s time may have a high value, but it’s not the kind of value that pays an organization’s bills or increases its endowment.

Some organizations think they can sidestep the “giving circle” by recruiting an emerging or “up and coming” generation of leadership for their boards. But while it is always important to cultivate new leadership for the future, the truth is that new leadership seldom emerges until the old leadership steps aside — by retiring, leaving town or passing away. The next generation should be recruited for a support group, where they can form an attachment to the organization and develop the habit of giving. But when an organization wants to replace or add new board members, its efforts should be concentrated on established and proven leadership.

Techniques for Building an Effective Board

How does an organization attract the best people — the same ones everyone else wants — to serve on its board? To begin with, obviously, the organization should strive to be the kind leaders are proud to be associated with — an organization that provides a high-quality service that people need and want. Especially if an organization is not well-known, it must be able to make a strong case for support — based on the distinctive benefits it provides, and presenting evidence of significant accomplishment, efficient management, sound financial practice and conscientious planning. 2
It’s helpful, of course, if top candidates for membership on the board can be identified on the basis of a demonstrated interest in an organization’s mission, the services it provides, or the constituency it serves. In any event, however, the case should provide a philosophical rationale which indicates why leaders in the community, in fact, already have a personal and corporate stake in what the organization does.

An organization’s chances will also be increased if it’s possible to chart a pathway to the candidate through present board members or friends — people the candidate knows and respects, and who are willing to make the approach on behalf of the organization. The best recruiter will be a social and economic peer of the candidate.

Beyond these factors, an organization stands to gain a definite edge if it does a better job of enlisting, training and involving its board members, and managing the board, than its competitors do. The best way is to replace the standard “nominating committee” with a committee on trustees, whose mission is to govern and manage the development of the board itself.

This committee should include the current board chairman; all past board chairpeople who are still available; and three of four key trustees — in terms of affluence and influence, as well as involvement and commitment.

The committee should be staffed by the chief executive officer. Its responsibilities should include:

  • Preparing written position descriptions for all trustees — including the personal qualities, characteristics and professional skills the organization is seeking, as well as the responsibilities of board members.
  • Continuously maintaining a list of qualified candidates for board membership.
  • Recommending candidates for membership to the full board.
  • Interviewing candidates in advance of enlistment and acceptance in order to determine their interest in the organization’s mission, and to explain all responsibilities of membership — including financial support.
  • Providing all board members with incorporating documents and bylaws — preferably written by professional managers, not legalistic attorneys.
  • Orienting all new board members to provide them with a full understanding of the organization, its people and programs. Each new trustee can be assigned to an experienced trustee who can serve as a “mentor.” Another useful tool is a “trustee in residence” program, providing each new trustee with an opportunity to become familiar with key departments, activities and managers — within, say, 90 days of enlistment.

An organization will gain a definite edge over its competitors if it does a better job of enlisting, training and involving board members.

  • Continuously evaluating the board’s organization, membership, attendance, operation and performance. The committee should recommend any necessary changes in the board’s structure, composition or methods of operation. It should also evaluate the performance of each individual board member, and have the authority to counsel, and if necessary, dismiss members who fail to fulfill their responsibilities. A trustee’s performance in key committee assignments will often provide an index of overall effectiveness.

Clearly, the advent of such a committee on trustees is bound to cause considerable consternation, and hopefully dramatic changes, at most organizations. Frequently, dramatic changes are long overdue; they have not been made for the same kinds of reasons that organizations refuse to replace staff members who are no longer productive. Consideration for personal feelings tends to override one’s judgment on what is best for the organization.

If a board has the courage to strive for real excellence, however, rest assured that once the dust settles, the perceived value of membership on that board will increase. The net effect will be to discourage those who do not take seriously the responsibilities of trusteeship — and to encourage the relatively small number of true leaders who seek opportunities to be more effective, to accomplish meaningful things, to make a difference in the community.

It follows naturally that to retain the services of these leaders, once enlisted, an organization must provide them with authentic involvement on a continuing basis. Trustees must be involved in designing the organization’s policies before they are adopted and implemented. This includes key activities like strategic planning, budgeting, fund raising and developing the case.

Only by fostering a sense of real ownership is it possible to ensure that the trustees are committed to carrying out the organization’s policies and plans. To do that, the CEO must give up some control, take some risk — in a word, trust the board to do what is best for the organization and the community.

The Board’s Relationship to the CEO

One of the chief executive officer’s most important responsibilities is to act as the administrative officer for the board — but that responsibility is seldom well defined. As a result, one of several “models” tends to develop:

  • “Keep your distance.” The CEO fears the board’s “interference” and does his or her best to relegate it to a perfunctory role in the organization’s affairs. Barring a crisis, the board may give in — surrendering its crucial role as the CEO’s employer. This approach can succeed only with a truly outstanding CEO — and then only as long as he or she is in charge.
  • The “rubber-stamp” board. Meetings are infrequent; they consist solely of reports on what has been decided since the last meeting, and automatic approval of decisions the trustees know little about. No organization can expect strong financial support from a board it provides with so little involvement.
  • The executive with full board membership. The CEO who also serves as a voting board member must be careful not to stymie the independence and initiative of the board — since the CEO votes on his or her own policy recommendations. There must be provision for reviewing the CEO’s performance in executive session.
  • The executive with a special relationship to the board chairman. Another way for the CEO to effectively disenfranchise the trustees is to develop a “cozy” relationship with the board chairman. Over time, the actions and even the composition of the board will reflect what the CEO wants — not necessarily what the organization needs.

CEOs who are secure in their own abilities, and seek maximum support for the organization from the board, view their relationship to the trustees as a partnership. As the board’s employee, a CEO is answerable to the board for his or her own performance and the performance of the professional staff.

The CEO should strive to create working partnerships between staff officers and the appropriate board committees. The CEO should actively involved the board in long-range planning, budgeting and fund raising — before decisions are made. And as the staff resource person for the committee on trustees, the CEO acts as a partner in building a more effective board.

A board made up of people of stature who are informed about the organization, involved in its important activities, and allowed to exercise their full responsibilities as trustees is a board that is prepared to provide the advocacy, financial support and unstinting service the organization needs in order to advance.

In practice, the chief executive officer may spend almost no time on fund raising (as in the case of many hospital administrators) or as much as half time (as many college presidents do). But a competent CEO must always be concerned with development in the broadest sense — that is, continuously evaluating, planning and developing the organization’s programs and services in order to better fulfill its mission, so that the organization is in a position to attract the necessary resources.

Effective CEOs view their relationship with the board as a partnership. They actively involve the board in long-range planning, budgeting, and fund raising.

And ideally, the CEO should be more than just a manager or administrator; he or she should be the organization’s most visible and persuasive advocate.

The chief development officer must be the organization’s chief planner, strategist and counselor in matters of fund raising. To be effective, he or she needs a close relationship with, and direct access to, both the chief executive officer and the trustees — not only the members of the board development committee.

Wherever the development officer may appear on the organizational chart, the job is too important to the present and future well-being of the organization to treat it as just another administrative or technical position — that is, unless the incumbent’s abilities go no further. In that case, the organization probably needs a stronger development officer.

The Financial Advisory Board or Foundation Board

Frequently, an organization governed by a publicly appointed board, a “working board” or a weak fund-raising board faces the challenge of raising large amounts of private funds — in order to compensate for the loss of government funding, expand its facilities or establish an endowment. To secure the necessary leadership for the campaign, the organization has three basic alternatives:

  • If time is available and the current trustees are agreeable, to restructure or expand the present board to include more individuals of affluence and influence.
  • If the present board members have the necessary contacts, to utilize them in recruiting a separate campaign steering committee — whose members agree to devote a limited amount of time in order to attain a specified dollar goal.
  • To establish a separate foundation board, development council or financial advisory board — whose responsibilities are essentially limited to providing and securing financial support on a continuing basis, and do not include the management oversight functions of a governing board.

A foundation is often the vehicle of choice for a publicly owned institution, such as a state university, or for a private hospital which depends on government insurance programs for much of its revenue. (The foundation allows the hospital to segregate gift income from the revenue base used to calculate reimbursement for its services.)

A foundation, of course, requires its own articles of incorporation, bylaws, board and operating budget. The organization’s chief development officer often serves as the foundation executive.

A foundation or financial advisory board provides an opportunity for an organization to enlist people of influence and affluence in its development effort — without expanding or restructuring the board or trustees, and without burdening the new recruits with the other responsibilities of governing board membership. The other side of the equation, of course, is that the members of the new body give up much of the influence board members can exercise on the CEO and the management function.

The primary responsibilities of the foundation board or financial advisory board should be:

  • To plan and carry out an annual giving program.
  • To plan and carry out both intensive and ongoing capital programs.
  • To plan and carry out a program of planned giving.
  • To select and cultivate the organization’s best prospects on an ongoing basis.
  • To plan and carry out a stewardship program — designed to see that all contributions are used for the intended purpose, and that donors are informed of the organization’s activities.
  • To manage the long-term investment of endowment funds and the short-term investment of current funds.
  • To monitor the plans and activities of the “parent” organization — in order to identify opportunities for philanthropy; ensure that contributions are used productively; and maintain an up-to-date case for support and strategic plan.

Often, the expanded interest and involvement created by a major capital or endowment campaign can provide an excellent opportunity to organize a new fund-raising body. The members of the campaign steering committee and other volunteer leaders may provide the nucleus for a more sustained and ongoing development effort.

A strong free enterprise system and a free society depend on enlightened leaders, providing their time and treasure for the benefit of the less fortunate.

The foundation, development council or financial advisory board can also provide a way to gauge the interest and commitment of key leaders, and serve as a “training ground” for future members of the board of trustees — so that the composition of the governing board, over time, comes to reflect greater affluence and influence.

Finally, this kind of organization provides an opportunity for the continued involvement of key trustees who are “stepping down” from the governing board. If no such organization exists, the status of “trustee emeritus” offers another way to maintain the involvement of the most influential people.

The Ideal Trustee

In every community, there are a limited number of socially conscious, aware and responsible individuals who provide leadership in sustaining and advancing its philanthropic organizations.  These individuals give freely of their time, talents, and energies, and their personal and corporate resources, in order to improve the community and benefit their fellow citizens. They insist upon the same awareness, responsibility and commitment from their peers, in both the social and business realms.

These individuals, as a rule, are sought after by everyone. An organization can do no better than to entrust to them its future — for they can be counted on to make it happen.

Whether or not an organization enjoys immediate success in enlisting the very best for service on its board, the qualities they possess are the ones that should be sought in all trustees.

In the final analysis, a free society depends on a strong free enterprise system — and a strong free enterprise system depends on enlightened leaders, providing their time and treasure for the benefit of the less fortunate.

Goettler Associates would like to acknowledge the writings of Arthur C. Frantzreb, consultant in philanthropy, whose ideas on board development provided much of the inspiration for this article.

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