Nonprofit boards have long debated the need for term limits, but one thing is clear: Boards that do not continually recruit for and cultivate leaders are at a significant disadvantage.
The common arguments of “our board members are great – why would we want to replace them?” or “what about institutional knowledge?” can hold your organization back from long-term success. Let’s look at five key reasons why.
5 reasons for term limits on your board
Term limits can:
- Encourage new talent acquisition and diversification, leading to new ideas and new perspectives in decision making
- Provide opportunities to work with talented community members who can devote only a limited number of years to board service
- Help the board fine-tune its membership to reflect changing needs
- Provide a respectful and organized way to separate inactive, ineffective or difficult board members
- Allow the organization to engage and foster an expanding base of dedicated volunteers
Term limits can admittedly create some challenges that need to be managed. When members roll off your board, you might lose expertise, insights gained from experience, or access to a member’s networking relationships. You might also lose members who are long-term, dedicated and effective promoters of your mission. For those individuals, consider other nonboard options for continued service after their terms have expired. Lastly, board turnover requires a sustained focus on identifying, recruiting, orienting and developing new members, to maintain board cohesiveness.
What constitutes a term?
Once you understand the benefits of term limits, consider the length of a term and the number of consecutive terms allowed.
The IRS does not provide statutory guidance for term limits. In practical terms, one-year terms can be too short while more than three years can be too long. Three-year terms are common, so that new members have time to become acclimated to the board and its workings before their terms end.
A maximum tenure is often set at three consecutive terms: The first term is to learn about the role, organization and sector; the second, to take a leadership role; and the third, to mentor and support new board members. An orderly succession plan, and staggered terms, can help avoid turning over most or all board members in any year.
You might determine that shorter term limits are appropriate for officers, to prevent them from burning out and to empower the board to adjust leadership for changing organizational needs. However, for some unique organizational types, such as churches and micro-charities, longer terms, or even perpetuity, may make sense.
In the end, the health of your board is key to your organization’s strength and success, and enforced term limit policies are a vital ingredient. While it is essential to focus on bringing strong, capable individuals onto your board, it is just as important to give them a planned exit ramp, allowing for a healthy rotation of talented and engaged members in your boardroom.
Moises is an audit partner primarily serving not-for-profit (NFP), government, and professional services firms.
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