The hidden costs of not investing in board management software for nonprofits

A nonprofit organization was working on its budget, anticipating funding cuts in their sector. Fortunately, the organization still had the promised support of one of its biggest donors. While going through the budget data, several board members noted that this donor had increased its reporting requirements for the grant money. One member suggested the organization consider purchasing board management software to help with the reporting requirements and “other governance issues we need to stay on top of,” she said.

The other board members and the executive director dismissed the idea. “We’ve never had trouble tracking requirements before,” the executive director said. “I recommend no new expenditures in this budget.”

The reporting requirements proved to be too complicated for the board administrator to follow, leading to late reports and unfinished or inadequate information. As a result, the donor pulled funding halfway through the year, leaving the organization with a huge budget shortfall when it could least afford it.

Nonprofits, community-focused groups and associations run on tight budgets prioritize spending on things that impact their mission. However, in an attempt to save money, some boards may forgo investing in board management software, instead opting to use basic digital tools or manual processes. Unfortunately, as you can see by the scenario above, this decision can lead to greater expenses and risks over time.

What are the hidden costs of not investing in board management software for nonprofits?

Operational inefficiency and lost productivity

Board management software is designed to streamline operations, making complex administrative tasks easier and faster. Without this, organizations often rely on traditional methods such as manual document management, email chains and printed board packets. Here’s how this impacts productivity and cost:

• Time-consuming processes: Manually compiling board packets, sending out notifications, and managing replies can consume hours of staff time that could be spent on other work.
• Error-prone communications: Basic tools increase the risk of missing information or miscommunication, leading to delays and reduced trust among board members.
• Administrative fatigue: Staff burdened with repetitive tasks may experience burnout, impacting morale and reducing overall output.

Data security

Handling sensitive information is part and parcel of board operations. Financial statements, strategic plans, and donor details are often shared among board members. Using email or general cloud storage solutions to share such documents poses significant security risks:

• Data breaches: Email and cloud storage lack the advanced security features of dedicated board management software. A breach can lead to financial losses, reputation damage and loss of donor trust.
• Regulatory noncompliance: Nonprofits are often subject to data protection regulations. Failure to comply can result in fines and legal issues.

Higher long-term costs

The initial price of adopting board management software may seem significant compared to free or low-cost alternatives. However, the long-term financial implications of staying with inefficient systems can be much greater:

• Hidden costs: Time spent managing board operations manually, increased risk of errors and potential security issues can accumulate into substantial costs over time.
• Lost opportunities: Delays in decision-making or misaligned board priorities due to poor communication can mean missed grants, partnerships or strategic advancements.
• Turnover and training: Employee turnover is more likely when work feels inefficient or overly complex. The time and resources spent on training new team members in outdated systems can add up quickly.

Out of step actions with strategic goals

Effective board management is not just about administration; it’s also about aligning the board’s actions with the organization’s mission. Without a centralized and efficient way to track discussions, decisions and follow-up actions, boards may find themselves out of step with strategic goals:

• Poor follow-up: Tracking tasks manually can lead to oversight, resulting in crucial action items being forgotten or delayed.
• Reduced impact tracking: When an organization lacks the tools to measure board effectiveness and track completed initiatives, it becomes harder to adjust strategies based on performance.

Diminished board engagement

An effective board is one that is informed, engaged and collaborative. Without streamlined access to resources, board members may feel disconnected or overwhelmed by cumbersome preparation methods:

• Inconsistent information access: Without a centralized platform, board members may miss critical updates, leading to fragmented discussions and uninformed decision-making.
• Limited collaboration: Legacy systems or scattered communication methods hinder collaboration. This can stifle innovation and reduce the board’s collective ability to respond to strategic opportunities.
• Difficulty with recruiting: Attracting new members to the board can be difficult without tools for engagement.

As Ellen Glasgow, General Manager, Mission Driven Organizations at Diligent points out, “Board management software such as BoardEffect is just one way that you can become more effective as a board because you can have tools that literally show you how engaged your board is. An engaged board is an effective board, and so if you have the tools to show you that someone is not engaged, they are not coming prepared to meetings, they are not contributing to the overall mission, you can use that.”

Lack of transparency

Transparency is crucial for building trust within the board and among their community members, ensuring accountability, and aligning the board’s activities with the organization’s mission. Without dedicated governance tools, maintaining a clear and transparent operation can be challenging.

• Perception of secrecy: When board operations are not transparent, employees, donors and the public may perceive that information is being hidden. This can erode trust, impact donor contributions and damage the board’s reputation.
• Limited reporting: A lack of governance tools means it can be harder to generate comprehensive reports on board activities. Transparent reporting is essential for demonstrating progress and transparent decision-making to members of the public, donors and business partners.
• Unclear decision-making: Decisions may be made informally or without clear documentation, making it difficult for board members and others to track why certain actions were taken or who supported them.

The absence of a board governance solution can lead to fragmented communication, inconsistent information sharing and reduced accountability. These issues collectively contribute to a lack of board transparency, undermining trust among board members and community partners.

Finding the right technology partner

Choosing the right board governance solution is essential for enhancing the efficiency and effectiveness of your board’s operations. With a range of software options available, it can be challenging to know how to choose the best option for your board. Here are some tips to help guide you through the selection process:

• Understand your organization’s needs: Identify specific challenges your board faces, such as time-consuming manual processes, poor communication or difficulty accessing documents.
• Look for user-friendly interfaces: Choose a solution that’s simple to navigate for users with varying levels of tech proficiency. A complicated platform can lead to frustration and decreased adoption. Check if the provider offers training sessions or resources to make the transition smooth for board members and administrators.
• Real-time collaboration: Select software that offers real-time discussions, document sharing and integrated messaging to keep everyone aligned.
• Meeting management features: Tools that allow for easy meeting scheduling, agenda creation and minute-taking can significantly improve meeting efficiency.
• Annual governance tasks: For example board resolutions, conflict of interest information, etc., are all managed in the platform.

Why choose BoardEffect

While it’s understandable for mission-driven organizations to be cautious about budget allocations, cutting corners on board management can ultimately prove to be a more costly decision. The risks of inefficiency, security breaches, disengagement and missed opportunities can eclipse the initial expense of board management software.

By investing in a comprehensive board management solution, mission-driven organizations can operate more efficiently, protect their data and focus on what truly matters: fulfilling their mission.

BoardEffect is designed with the unique needs of volunteer boards in mind. It offers a robust, “digital literacy inclusive” and user-friendly solution that enhances communication, supports secure data handling and drives greater board engagement.

BoardEffect provides many valuable benefits for nonprofit organizations, from secure communications, easy access to key documents, streamlined agenda and meeting management plus peace of mind against many risks and potential costs. Request a demo to find out more.