Governance Best Practices

Published in Insight - Spring 2016
By Rebecca DaVee 

Governance is an operating system that guides nonprofit executives in following care, loyalty, and obedience to their organization. The system provides the equilibrium between the board members’ power and their duty of protecting and advancing the organization’s exempt purpose. Whether your church has a board of trustees, directors, elders, or deacons, your organization was created with a board of individuals that are charged with a fiduciary responsibility to protect the mission and vision of the church.  

The board is responsibility for three duties that have been created by our judiciary system, duty of care, duty of loyalty and duty of obedience. These duties require board members to perform the duties as a prudent businessman, with the best interest of the church in mind. Church leaders create a management “tone” that enhances the effectiveness of the mission/vision of the church. Leadership create a framework of self- governance that relate to accountability, fairness, and transparency.  

Accountability is one of the fundamental tenets of effective governance in both the private and public sector. Accountability exists when the board continuously evaluates the effectiveness of ministry activities and ensures that the resources of the church are used to sustain and support the mission and strategic vision of the church. 

Fairness establishes a stable and reliable foundation within the church, avoiding bias towards individuals or other entities. The board should present a balanced and understandable assessment of the church’s program and supporting activities, which leads to reporting transparent operations and risk management. 

Transparency is the third and final point for governance framework. Transparency refers to the availability of information to the congregation and general public concerning policies, procedures, regulations, and executive decisions. Transparency is displayed in effective communication with the congregation, creating an open dialogue between members and executive leaders and providing accurate and timely information for good decision-making. It reduces the likelihood of there being confusion, and the outcomes are more orderly and logical.  

Governance practices have been expressed differently over the years, but three core practices have emerged: essential practices, leading practices, and compliance practices. These practices define key roles, responsibilities, policies, and procedures in governing a church.  An essential practice within any church is making sure you have a solid foundation of a committed board, with term limits, and bylaws that outline roles and responsibilities.  

Essential practices are just how they sound; they are essential to providing executive stability and sustainability.  Setting periodic meetings that includes mandatory attendance where board members are prepared should be a top or essential priority.  The difference between the church’s mission and vision is defined as the strategic plan. Having term limits keeps your board members in tune with operational shifts and establishes accountability with the church’s staff and lay leaders. Having the right people performing their respective roles and responsibilities creates purpose within your church. Organizations should develop a code of ethics that routinely measures staff and volunteer functions. 

Setting up a budget within your church is another essential practice. The budget is a measurement tool that prioritizes ministry activity. Whether your membership is growing or is declining, your budget allows your membership to understand how resources are allocated between program and supporting activities. 

Leading practices indicate your church has grown and requires “sustaining” policies and procedures that create missional diversity.  Leading practices allows the board’s executive session to communicate issues that are best discussed in private, creating trust among the board members. Keeping everyone on the same page during the executive session provides (1) confidentiality, (2) independence and oversight, and (3) trust between the board and the senior pastor and executive staff.  Creating trust within your organization leads to effective leadership and accountability. The ideal size of a board depends on many factors, such as the age of the organization, the nature and geographic scope of its mission and activities, and its funding needs.

Creating diversity within your board is also critical to the church’s mission and vision. Diversity provides accountability to stakeholders (employees and lay leaders, congregants, and the local community. Boards should consider adopting policies that encourage diversity within leadership and the workplace. 

The church’s governing documents (articles of formation, bylaws, and policies) should require board members to evaluate their performance and approve the compensation of key employees.  The ongoing process of board training ensures that new members understand the mission/vision and strategic plans plus the individual roles and responsibilities of the officers and committee leaders.
Your board of directors should adopt a conflict-of-interest policy that defines what a conflict of interest is, how it is managed and how the policy is monitored. By setting a standard to recuse a board member from participating in discussions and a vote that relate to a personal benefit.  Being an active donor and supporting the mission of the church play a significant role in leadership. Donating personal resources including time indicates loyalty to the organization. 

The board should establish clear policies and procedures setting the length of terms and the number of consecutive terms a board member may serve. Some organizations have found that such limits help in bringing fresh energy, ideas and expertise to the board through new members. Many churches find it useful to establish policies making board members eligible for re-election after taking a year or more off. It is always valuable to find ways in which members who have completed their service can continue to be actively engaged in standing committees or in significant programs and services. Churches that do not require term limits of board members should consider establishing a process for the board to reaffirm its commitment to the organization’s mission.  

Compliance practice serves as the third and final best practice and address the legal responsibilities of the board. Ultimately the board is responsible for the organization’s compliance with laws and regulations (employment, property, and operational risks). The board should meet regularly to fulfill its fiduciary responsibilities without compromising its efficiency. Most organizations should conduct an annual review of the church’s ministry objectives and strategic plan.  Creating board committees that handle the annual audit and budget process delegate the financial responsibilities to members that have training and gifts for helping in these key administrative functions. The board should create an independent compensation (personnel) committee who review the senior pastor’s annual evaluation and follows procedures for obtaining comparable personnel data in determining reasonable compensation. The committee should document their meetings and voting procedures. Creating the rebuttable presumption is the primary role of the compensation committee.  

Establishing a solid governance framework for your church is crucial. Church boards that are best equipped to serve their congregations are self-aware, function in constructive partnership with their senior ministry executives and are committed to continually improving their performances. Boards improve their effectiveness by the intentional adoption of good governance practices. These practices are not intended as a guideline for minimal compliance; rather, they articulate a strategic roadmap and resources for the church.  The role of the board member by definition is fiduciary, placing the needs of the organization above his own.  For more information regarding governance principles and practices please review “Principles of Good Governance and Ethical Practices” created by the Independent Sector Panel on the Nonprofit Sector and BoardSource Recommended Governance Practices.