Building a Stronger Nonprofit Board - The Power of Term Limits

Is your nonprofit organization's board thriving with fresh perspectives and dynamic leadership? If not, it might be time to consider a strategic move that is widely recognized as a best practice in the nonprofit sector—implementing term limits for board members.

The Case for Term Limits

In the world of nonprofit governance, enthusiasm and effectiveness among board members can sometimes wane over time. A board member who once brought boundless energy and innovative ideas might become less engaged or even disruptive. Such negative dynamics at the board level can trickle down, adversely affecting the organization's programs, initiatives, and financial health. On the other end of the spectrum, there are dedicated board members who pour their hearts and souls into the organization to the point of risking burnout. Term limits provide an elegant solution for all these scenarios.

Pros and Cons of Term Limits

One of the most significant advantages of implementing term limits is their potential to foster diversity within the board. Term limits allow organizations to bring in individuals with specific skills and perspectives, such as financial or political expertise, when needed. They also facilitate the representation of diverse groups within the community, including considerations of gender, race, economics, religion, and more. As board positions open up due to term limits, you can broaden your circle of dedicated stakeholders beyond the core group of volunteers.

Term limits can also counteract the issue of "power hoarding" that sometimes arises when authority is concentrated within a small, entrenched group. Such cliques may intimidate new members and staff, hindering necessary change. Regular turnover offers the opportunity to replace domineering personalities and enhance group dynamics.

Another critical benefit is the prevention of insider fraud. Long-term board members who possess deep knowledge of an organization's inner workings may have the capability to override internal controls and conceal fraudulent activities. Term limits help mitigate this risk.

However, it's essential to acknowledge the potential drawbacks of term limits. These could include the loss of institutional knowledge, expertise, and donations from board members and their networks. There's also the risk of losing significant volunteer hours. Regular turnover demands time and resources for identifying, recruiting, and training new members, as well as fostering cohesion for effective collaboration.

Setting the Right Terms

If term limits seem like a sound strategy for your organization, the next step is to establish clear rules. Striking the right balance is crucial. Terms that are too lengthy might deter potential new members, while overly brief terms might not allow sufficient time for impactful contributions. Consider options like permitting two consecutive three-year terms or a total of six years with a mandatory one-year hiatus between terms. To minimize disruption, structure board departures so that only one-third of the members step down at a time. You might also explore emeritus status or advisory boards to keep departing members engaged and supportive.

Amending Bylaws

If your organization does not already have term limits in place, you'll need to amend your bylaws to incorporate them. If you require guidance on this process or wish to discuss other governance matters, please reach out to us. We are here to assist you in building a more vibrant and effective nonprofit board for your organization's continued success.

How HoganTaylor Can Help

The HoganTaylor Nonprofit team of business advisors and CPAs is comprised of former CFOs, controllers, and industry experts with extensive experience providing the guidance organizations need to lean forward again in their leadership. If you have any questions about this content, or if you would like more information about HoganTaylor’s Nonprofit practice, please contact Jack Murray, CPA, Nonprofit Practice Lead.

INFORMATIONAL PURPOSE ONLY. This content is for informational purposes only. This content does not constitute professional advice and should not be relied upon by you or any third party, including to operate or promote your business, secure financing or capital in any form, obtain any regulatory or governmental approvals, or otherwise be used in connection with procuring services or other benefits from any entity. Before making any decision or taking any action, you should consult with professional advisors.