www.missionbased.com

Management Tip
Is It Time to Update Your Bylaws?

Let's update our bylaws!!! Boy, doesn't this sound like fun? Almost as much as an update of your financial policies, right? I completely understand. Policies are not why most of us came to the nonprofit sector. And, if it's not broke, why fix it?

The problem is this: making sure our policies are up-to-date and in line with best practices is, in fact, part of a steward's job and, our bylaws are our most important governance policy document.

So how do we tell if it's time for a review and update? If any or all of these are the case.

It's been five years since your last review/update.
New best practices have become common and are not yet included in your bylaws.
There has been a significant change in your key funders requirements of your organization governance.
There has been a recent change in your state or provincial statute regarding nonprofit management and governance.
You feel that your actual practices are not reflected in your bylaws.

In the first instance, it's pretty easy to measure, assuming that you included the adoption date on your bylaws when you last voted on them. The second item, though, has vexed many nonprofits in the past seven or eight years in the form of Sarbanes-Oxley (SOX) regulations. SOX, instituted for large public firms but not required for nonprofit in the formal statute, has become the defacto benchmark for many nonprofits and their funders. Key provisions that most nonprofit shave adopted include an independent audit committee and bidding their audit work at least every five years.

Should you adopt SOX practices? Well, they're smart but expensive for many of the smallest nonprofits; those who can't afford audits every year, for example. But the basic checks and balances are very well thought out. If you possibly can, go with the basic tenets, particularly the audit committee and regular auditor bidding

What else might trigger your bylaws review? A change in the way you select board members, or the size of your board, or board terms, or a new committee structure, or how you can remove a board member, or the addition of your CEO to the board (a terrible idea in my opinion, by the way). ANY change in the governance model will almost certainly require an update of the bylaws, and my suggestion is that even if the needed change only small, you take the time to do a thorough review of the complete document. You may be surprised at what you find that is not in line with what you are actually doing.

Use the resources noted above and do a complete checkup. Use a board-staff committee to do the heavy lifting and have the entire board review and adopt the updated. Then, you can go back to doing the fun stuff of your mission with the confidence that your governance documents are not a problem waiting to surface.

August, 2010 -by Peter C. Brinckerhoff