I read articles for and against term limits for nonprofit directors. How would my organization decide what’s right for it?

In Canada, most nonprofits now must have or implement term limits. The new legislation for both federally incorporated nonprofits and nonprofits incorporated in Ontario sets a maximum term on a board as four years. As this non-lawyer understands it, if you do not implement term limits in your bylaws, the terms of all directors expire with each annual general meeting.

However, you still have to decide whether to limit the number of terms. Remember that even if there are no limits, all directors will now have to think at the end of each of their terms about standing for election. Organizations seeking to practice good governance will treat incumbents standing for re-election in the same way they treat new candidates, determining if they are the best fit going forward. Are their skills and knowledge a match for the current vision, mission and strategic directions? Has their performance been strong? Are they a constructive force for the organization, adding value, or a drain on resources? These functions are normally handled by the Governance Committee (some are still forced to call it a Nominating Committee under old bylaws; new bylaws should get rid of such terms) in collaboration with the Chair.

Many good articles have been written with balanced approaches to nonprofit board term limits. Check out these articles posted on The Butterfly Effect and by Volunteer Alberta. Unfortunately, the May 2012 pro and con articles in Director, the journal of the Institute of Corporate Directors, appear to be available only to members. If you don’t belong, perhaps you know someone who can lend you the magazine.

So rather than rewriting what is in those articles, let me take a different approach to answering your question. Having read the excellent arguments pro and con, how do you decide what is right for your organization?

Criteria for number of terms

1. Values

In my opinion, your first consideration is a fit with your values. Do you value democracy and civil society? Then your members need to have choices when they vote for directors, and not just an occasional vacancy when some director retires after thirty-five years on the board. Do you value diversity and inclusiveness? Then look to see how well your current board models those values. They are very difficult to apply if the board changes more slowly than the community.

Do you need more young people involved with the organization? Then letting the current group with grey hair or no hair continue to govern for what seems like forever will not serve you well. Do you value sustainability? That could work both ways. Current board members may have proven ability to bring in resources but will the next generation be ready to lead?

Look closely at your Values Statement. If the leadership group does not model the values, there is little chance the community will believe those are in fact your values.

However, you may feel that you can live up to the values better with careful, targeted recruitment for vacancies than by putting a limit on all directors. Mandatory retirement ages were removed because individuals vary in what they want and what their employers want; there is increased choice on both sides. Such choices need to be balanced with good evaluation systems. Not everyone is comfortable yet with director assessments but they are becoming more and more common. A director who does not want to be assessed can resign gracefully.

2. Candidate pool

Consider how many and what sort of people are in your candidate pool. Wisdom and leadership potential exists in almost all members of our communities. So for a social service agency in an urban setting, the pool is very large because it includes almost all adults. Good board recruitment can lead to many good candidates. You may not yet have a pool of qualified people asking to join your board, but that’s a different issue. The arguments for a limited number of terms focus on fresh ideas, eyes, energy, contacts, etc., and they should resonate strongly in such an agency.

For a hobby group with relatively few people involved in the hobby, the pool may be dozens of people rather than tens of thousands. And some of those few people may have personalities not well suited to group decision making, limited interest in organization-wide issues, or personal lives that have too much stress to make room for board service. I see organizations with passionate people serving for more than twenty years on a board that would be seriously weakened without them. There is no point deciding that fresh energy is the most important factor if hardly anyone new exists to provide it.

3. Internal relationships

One strong and quite valid argument against indefinite board service is that directors have become too comfortable with one another and with senior management. Directors need to challenge assumptions and ask hard questions. If you are not hearing different opinions being voiced, and if you see every management recommendation approved without change or good dialogue, new directors are likely key to the organization’s survival. The current group may well have been recruited from friends and neighbours in the first place and never wanted to rock the boat.

However, boards of all-volunteer organizations, or those with far fewer staff than needed for programs and services, may find themselves spending hundreds of hours together every year, not just a few hours a month. Constant challenges and differences of opinion take energy to deal with, and cause friction. The ability to get along well really matters, and frequent turnover would cause some of these organizations to fold.

4. External relationships

How dependent is your organization on personal connections? If your partners, grantors, gala ticket buyers and more are with you because they know, trust and like one board member, do you have a succession plan in place for what happens if that board member can no longer serve? Can the board member switch to another role, such as campaign chair, if they leave the board, and would they? Would you lose good access to policy makers if a particular board member is gone?

Setting a limit on the number of terms might be an essential catalyst for getting those succession plans in place. No one is indispensable. But some organizations have those plans in place despite a lack of term limits. How ready is yours?

5. Career path

Very, very few people want to step into an officer role on their first day on the board. Very, very few people can be effective as a chair if they serve one two-year term and are chair in their second year. Yet I see organizations that have set up structures that fail to give directors time to learn and understand their roles and responsibilities. They change officers so often that people barely learn the job before they are gone from it; often the changeover is annual and the person cannot be reelected or reappointed to the same role. Some boards are too small to allow any time for learning before taking on major responsibilities.

Some of those are student organizations, where people are only eligible during their short time as active students. I think many student groups do amazing work despite this challenge, but might benefit from allowing students to stay involved for a couple of years after they graduate, if interested.

Other organizations with governance structures that seem to work against strong volunteer leadership have senior management staff that appear to me to be control freaks. New officers and directors are more dependent on senior management than those who have observed the organization for several years. The frequent changes are usually justified by workload; they say no one should be asked to make a longer commitment. Yet I see the same volunteers make longer commitments to other organizations.

Mostly, they are just organizations where people don’t recognize that leadership volunteering has a career path. They haven’t thought about the value of learning, opportunities to try out new skills and experience of a couple of annual cycles with an organization at the director level. They can limit the number of terms, but really need to plan for directors being around four or more years. The return on investment in director training and education can be immense.

6. Specialized knowledge

While most board skills are generic, many bad decisions are made because board members lack sufficient knowledge of the sector in which they govern or the impact their choices will have. They may not have asked staff for the right information and analysis or the small staff may not have that knowledge either. Many Canadian nonprofits operate with a couple of administrative people who manage processes for them but do not have professional credentials or direct experience related to the issues that come to the board. An umbrella organization setting safety standards for its member groups, for example, needs directors who can properly frame the issues and ask the right questions of those member groups. In any one such technical area, there may only be a few people in Canada who qualify. Removing them after eight years could leave a major void; you usually want them around as a resource for the other directors for as long as they remain willing.

This is a good example of an issue I cannot imagine coming up in the for-profit world, where staff members normally have a depth of expertise in their business. We cannot just rely on business articles to help us with decisions about our governance approaches.

Making the decision

I believe the governments were right to mandate term limits but leave open the possibility of unlimited number of terms. Our highly diverse sector needs flexibility.

I also believe a limit on the number of terms is appropriate for most organizations. Without such a limit, too many people just stay too long and impede progress. So I suggest you review the criteria set above, and whatever criteria you add, based on limits on the number of terms as a default. Consider whether you can justify not having such a limit when the trend is so strongly towards having them.

Even if you say yes to a limit on the number of terms, that leaves you with the question of how long each term is and how many terms will be allowed. Most terms are two or three years; one-year terms leave open the possibility of everyone on the board leaving or being voted out at the AGM. Even if members want major change, losing all the history and continuity at once is rarely a good thing. I believe two year terms are becoming less common and four or five year terms more common than a decade ago. How long of a commitment will your board members make?

In terms of total length of service allowed, I haven’t seen formal research but I think six years of consecutive service is pretty close to average in the bylaws I’ve read. That’s two terms of three years or three terms of two years. Would a six year maximum work for you? Think through your reasons for more or less; there is no right answer.

Remember to also address in your bylaws how in-year appointments are counted in relation to the number of terms (normally they are excluded) and how long people have to be off the board before they can come back (one year is common) after completely their maximum time. And you may wish to give the members flexibility to grant exceptions for unusual circumstances, such as when several people in the pipeline for director or officer positions have to withdraw on short notice for personal reasons.

Since 1992, Jane Garthson has dedicated her consulting and training business to creating better futures for our communities and organizations through values-based leadership. She is a respected international voice on governance, strategic thinking and ethics. Jane can be reached at jane@garthsonleadership.ca.

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