There is always a question as to where a Board’s responsibilities end and management’s starts. There are no hard and set rules; what works for one agency may not be effective for another. Some organizations have a strong executive director and a weak board, while others have a strong board and weaker executive director. One thing is for sure, running an effective nonprofit takes an active board of directors and a dedicated staff led by a strong executive director working in harmony to forward the mission of the organization.
Roles of the Board of Directors
In general terms, the Board of Directors provides oversight and guidance to the Executive Director and the nonprofit’s other staff members. The Board ensures that the organization stays aligned with its mission and values in addition to complying with all federal and state laws.
Specifically, the Board of Directors has oversight over the following areas:
The Board ensures that it is operating in accordance with its mission and the purpose for which it was granted tax-exempt status. Board members should constantly re-read the organization’s mission statement to ensure that everything they do on behalf of the organization is in furtherance of the organization’s mission.
As safeguards of the public trust, Board members are responsible for protecting the organization’s assets; ensuring that the organization’s control environment is effective; prudently deploying resources; and providing direction and governance.
The Board ensures legal and ethical integrity and maintains accountability.
The Board is responsible for ensuring that the nonprofit organization is operating effectively. It is the Board’s responsibility to select the Executive Director and outline his/her role; the Board supports the Executive Director and assesses his/ her performance (should be performed in a written evaluation); the Board determines appropriate compensation for the Executive Director and other executive staff members; and the Board has the power to hire and remove the Executive Director.
The Board provides proper fiscal oversight, including setting and approving an annual budget. This does not mean the Board prepares the budget, nor does it mean that the Board should micro- manage the budget process. The Board should review and gain an appropriate understanding of the budget, ensure that the organization is establishing appropriate reserves, revenues and expenses make sense and are supportable, and monitor the organization’s fiscal health and actual operations compared to budget on a regular basis. Board members need to have at least a basic understanding of how the organization generates revenue and its cost structure to be able to understand if the proposed budget is reasonable. The fiscal aspects of an organization are not always the easiest for Board members to understand, but they are the lifeblood of any organization.
Part of the role of the Board is to ensure that the organization has the financial resources it needs. As a result, Board members should be involved in helping in the organization’s fundraising efforts. Fundraising is often essential to an organization to provide discretionary funding. Many Boards require a give-or-get commitment from its Board members. This is something you should understand before joining a Board.
It is the Board’s responsibility to ensure that programs are in place to further the mission and goals of the organization. If there are specific compliance programs that the organization must follow (e.g. Medicaid), the Board should ensure a proper compliance program is in place and should be receiving regular updates of the organization’s compliance.
Roles of the Executive Director
While the Board’s role is to oversee, the role of the Executive Director is to execute the policies, programs, and initiatives established by the Board. The Executive Director is responsible for running the day-to-day operations of the organization. The Executive Director is an employee of the organization whose responsibilities are determined, and performance monitored, by the Board of Directors.
The Executive Director hires, supervises, and motivates the staff of the nonprofit. It is the Executive Director’s responsibility to ensure the organization is properly staffed, all of the staff members have appropriate job descriptions, job performance is evaluated and pay is appropriate within a predetermined scale, staff members are following organizational policies and protocols, and that everyone is properly trained and on the same page in terms of organizational mission and goals. The staff of a nonprofit traditionally comprise more than 70% of a nonprofit’s annual expenditures, so this can be a significant part of the Executive Director’s responsibilities.
Development and Management of Policies and Programs
While it is the Board’s responsibility to set policies, it is the Executive Director’s responsibility to ensure that the Board’s policies are properly implemented. In many organizations, the Executive Director may suggest policy to the Board, but ultimately the establishment of such policies rests with the Board. It is management’s role to put procedures in place to ensure that policies are effectively being followed.
Staff Liaison to the Board of Directors
The Executive Director must also keep the Board informed as to what the organization is doing. The Executive Director attends Board meetings and maintains open lines of communication with the Board of Directors.
Ensure Effective Operations
The Executive Director is responsible for running the day-to-day operations of the organization. It is the Board’s responsibility to provide the overall framework, but it is the Executive Director that steers the ship to ensure the organization stays on course. This framework is often developed jointly by the Board and Executive Director through a strategic plan which provides a road map for management to follow.
In order for an organization to be effective, the Executive Director and the Board must embrace their roles, open up lines of strong interactive communication, and develop a collaborative relationship focused on ensuring the organization’s mission is carried out in the most effective and efficient way. If the Board and management aren’t in-synch, with the Board providing governance, oversight, and monitoring organizational effectiveness, and management, building off the framework provided by the Board, guiding the various components of the organization so that they are functioning in harmony, the organization will not reach its full potential. Like with any relationship, communication and trust are essential.