“I’m so glad we had this time together
Just to have a laugh, or sing a song.
Seems we just got started
and before you know it
Comes the time we have
to say, ‘So long.'”
It’s a common experience for nonprofit consultants to encounter boards with members who have served for extended periods, sometimes exceeding 15 years. While some board members share this tenure with pride, it can raise concerns about power dynamics and organizational stagnation.
The Legal Landscape of Nonprofit Board Terms
According to legal sources like the Foundation Group, “Legally nonprofit boards are not restricted by prescribed term limits from the IRS.” While most states mandate set terms (e.g., 1, 2, or 3 years), very few limit the number of consecutive terms a board member can serve. This lack of mandated limits, however, doesn’t necessarily equate to best practice.
While acknowledging the invaluable contributions of volunteers to nonprofits, especially smaller organizations, it’s crucial to recognize that even positive engagements have a natural lifecycle. Board members play vital roles as advocates, champions, and contributors. They commit their time and resources to advance the mission, but their service should ideally align with the term limits outlined in the bylaws, with a planned transition afterward. Exceptions might exist for churches and nascent nonprofits where long-term board member stability can be crucial for initial survival.
Data from BoardSource indicates that 87.5% of nonprofits utilize terms, and within that group, 54% incorporate term limits. The prevailing structure involves two consecutive three-year terms for board members.
Board Service: A Commitment Demanding Engagement
Serving on a nonprofit board is a significant undertaking. It requires dedicated individuals to set aside other commitments, often for several hours monthly. Effective board members immerse themselves in understanding the operational ecosystem of their organizations. This includes developing a deep awareness of the communities the nonprofit serves and the individuals who benefit from their services – often referred to as beneficiaries, clients, or service recipients – and actively learning about their needs. Furthermore, board service necessitates financial literacy to interpret financial statements and familiarity with bylaws to ensure sound governance and resource stewardship that fosters organizational growth and positive impact for those served.
Board Service Isn’t for the Passive
Regrettably, some individuals accept board positions without fully grasping these responsibilities. Such members can be detrimental, exhibiting poor meeting attendance, lack of engagement, inadequate representation, or disrespectful conduct towards fellow members. Additionally, some fail to meet their financial pledges or volunteer commitments. Without accountability mechanisms and regular evaluations, boards can become dysfunctional and ineffective in serving their intended purpose and the community they are meant to support. Term limits, at the very least, ensure a natural turnover of such less-effective members.
IRS Endorsement of Term Limits
The IRS advocates for term limits, recognizing their value in preventing stagnant board compositions that can lead to self-serving governance rather than prioritizing the interests of the community and people served. Nonprofit bylaws should clearly define term limits and maximum consecutive terms. A recommended structure is: “Each full-term is renewable, but no one may serve more than twice in a row,” as suggested by Aprio.
Bylaws can also outline alternative roles for directors desiring continued involvement, such as Emeriti board members, Advisory Council members, or committee participants. Several compelling reasons underscore the benefits of board term limits.
Advantages of Board Term Limits
- Term limits enable individuals to contribute their expertise to a nonprofit and then transition to support other organizations, broadening their impact across multiple causes and benefiting a wider range of people in need.
- New board members infuse fresh perspectives and innovative ideas, crucial in today’s rapidly evolving world, ensuring the organization remains responsive to the changing needs of those they serve.
- Term limits facilitate the graceful exit of members who may lose interest, commitment, or time, preventing stagnation and maintaining board dynamism focused on those they serve.
- They provide a structured and acceptable way for board members to step down when needed, without creating awkwardness or conflict.
- Term limits promote balanced power distribution, opening leadership opportunities for others and fostering a more inclusive environment that can better represent the diversity of the beneficiaries.
- They create opportunities for committee members to advance into board roles, developing leadership pipelines within the organization and enhancing its capacity to serve its constituents.
- Term limits support board evolution to better mirror the changing demographics of the communities served, ensuring relevance and responsiveness.
- They expand the organization’s network and influence into diverse communities, strengthening its connection with and understanding of the people it serves.
Conversely, some argue against term limits, citing the difficulty of finding highly effective board members. The concern is losing a valuable, high-performing member for an unknown replacement.
A balanced approach suggests allowing termed-out members to rotate off for a year before potential re-election or continued involvement in advisory roles. However, it’s important to acknowledge the potential downsides of losing experienced board members.
Disadvantages of Board Term Limits
- Organizations may lose passionate and highly skilled individuals precisely when their expertise is most needed to navigate rapidly changing circumstances affecting those they serve.
- Term limits can lead to a loss of valuable institutional memory, potentially hindering long-term strategic planning and understanding of the needs of the community.
- Without a robust pipeline for new board member recruitment, attrition due to term limits can create gaps if the Governance Committee struggles to find qualified replacements to effectively serve the organization’s mission and beneficiaries.
- Governance Committees face the ongoing task of building cohesion among new and existing members to maintain efficient and purposeful board operations focused on the people served.
- Term limits, if not managed strategically, “can hinder an organization’s ability to broaden its reach, particularly in terms of diversity, equity, and inclusion (DEI),” potentially limiting its ability to effectively serve diverse populations.
“With the number of boards reporting no term limits trending downward since 1994, more boards are opting for the flexibility and strategic consistency they build into their organizations’ governance structure,” according to Onboard.
The crucial question for each nonprofit is:
What Board Term Length Optimizes Performance?
A one-year term might be insufficient for meaningful contributions. Two or three-year terms may provide a better timeframe for members to become effective and productive in their roles of guiding the organization to serve its mission and constituents. Staggering terms ensures continuity while facilitating regular board refreshment. The Governance Committee should analyze these factors, using a board matrix to identify necessary skills and resources. They should also assess the board’s workload, considering activities like strategic planning, fundraising events, board recruitment, or mergers, which might necessitate longer terms for some members to effectively contribute to initiatives aimed at better serving the community. Board size and meeting frequency are also relevant considerations.
Conducting Exit Interviews
Before board members transition out, conducting exit interviews is a valuable practice. These interviews can provide insights into board needs and opportunities for current and future members. Departing board members are a “treasure trove of information,” as noted by SideCar, offering perspectives that can guide the organization’s future direction in its efforts to serve its mission and beneficiaries.
Embrace Term Limits as Best Practice
Enforcing term limits is a recommended best practice for nonprofits. It facilitates the introduction of new talent and ideas, enhances board technological proficiency, and enables organizational adaptation to evolving trends. Term limits encourage positive change and transformation, ensuring board relevance and health, ultimately leading to a win-win scenario for the board and the people the nonprofit serves.
Term limits are not just about board member turnover; they are about ensuring the long-term health and effectiveness of the nonprofit in its mission to serve.
Christal M. Cherry is a board consultant specializing in assisting nonprofits and their boards. Contact her to discuss bylaws adjustments, exit interviews, and strategies for implementing and understanding the importance of term limits. Visit www.theboardpro.com.
BLOG RESOURCES:
Term Limits, BoardSource, May 2022
https://boardsource.org/resources/term-limits/
Aprio, Board Member Term Limits and Why They’re Important, Karen Peacey, December 2021
https://aprioboardportal.com/news/board-member-term-limits/
Foundation Group, CEO Blog, Nonprofit Board of Directors Term Length: How Long is Too Long?, Greg McRay, December 2022
https://www.501c3.org/nonprofit-board-of-directors-term-length-how-long-is-too-long/#:~:text=The%20good%20news%20is%20that,%2C%203%20years%2C%20etc)..)
OnBoard, Board Term Limits: Everything You Need to Know, Josh Palmer, February 2022,
https://www.onboardmeetings.com/blog/board-term-limits/
SideCar, Blog, Before They Get Away: Board Member Exit Interviews
John Barnes and Jose Triana, March 2018
https://sidecarglobal.com/engage/before-they-get-away-board-member-exit-interviews/
