Differentiating between those that manage not-for-profit organizations, versus those that sit on the board of directors has always been a rather fluid line of distinction. Both work to bring the organization’s vision to life by leading the rest of the team in doing so. Knowing who is responsible for what is important, as governing and managing are not the same.
Why is the distinction between the two so important? Within the not-for-profit space, you want to show responsibility for the cause of that particular organization; and towards your sponsors and donors.
A strong board makes sure that management thinks about all aspects of the organization, from a reputational, strategic, operational, and risk mitigation standpoint. The board is there to oversee and guide their management team, acting as a liaison between them and external organizations.
Governing vs. Managing
Members of a board of directors aren’t necessarily experienced in running operations of a not-for-profit. While they may have legal, media, marketing, or finance expertise from other industries, there may not be operational knowhow specific to a not-for-profit.
The board of directors needs to trust their management team and feel comfortable in giving them authority to be accountable for the operation of the organization the way they see fit. The dynamic in this relationship needs to be a strong one.
Responsibilities come down to things like remitting payroll, paying necessary corporate taxes, managing legal ramifications, overseeing social media presence, public relations, and public perception. For example, announcing to the public that the organization encountered a cyber attack that affects personal data, or an information leak via social media about one of the founding members.
Here’s a direct comparison of how certain functions differ between members and management:
|Member of the board||Management|
|Often carries out duties on a volunteer basis||Receives a salary as an employee of the organization|
|Decisions made through a lens of responsibility; supporting the organization’s growth, vision, and cause||Makes decisions about operational needs; through a lens of benefitting from expenditures|
|Stays focused on setting policies||Executes policies through day-to-day operations|
|Legal liability for volunteers||Volunteers treated as support staff|
|Personally liable for adherence to reporting and compliance with CRA||Accountable for financial management, compliance, and reporting|
Challenges and consequences
So, what are some challenges outside of distinguishing between roles? In the small scale of a not-for-profit organization that’s limited in resources, positions and company structure aren’t clearly defined. Some positions may overlap others—and decision-making becomes muddled as a result. For example, the CEO could also be the CFO; or someone running operations could also be running marketing.
The worst-case scenario for misunderstanding these roles is not delivering what’s expected. Valuable information could slip through the cracks because of miscommunication, and an important regulatory or filing deadline could be missed as a result.
Sometimes, for the sake of efficiency and time sensitivity, management will try to find loopholes to avoid contacting the board of directors because they don’t want to go to them too often, nor slow down decision making. However, the board is there to protect the organization and should solicit feedback from management to remove any unnecessary barriers to efficiency and timeliness.
For example, the board may have a policy to approve expenditures over a threshold and management may try to avoid board approval by keeping it under a certain threshold. In this instance, management may try and limit activities or break expenses into smaller pieces to stay under that budget, so as to not get the board involved and have decisions made faster. This type of shortcut could be detrimental to the health of the organization, with final decisions being made based on inadequate information.
Conversely, if the board simply rubber-stamps an approval and sends it back to management with little oversight or input just to get things moving, they may not know there’s a problem until they’ve encountered it later down the road—at which point damage can already be done.
It’s common for management to feel the board isn’t in line with what they want to accomplish. We often see deviations from original contracts, signed by the board, leaving the board with overages and not knowing why.
Over-involvement or micromanagement by the board throws this important dynamic off balance, too. If the board is too involved in directing the operations, the management team—who likely have operational expertise—are not able to effectively manage the organization’s needs. That’s why it’s important for management and the board of directors to trust each other. No one should be overriding decisions, as sentiments should align. Moreover, communication needs to be clear and continuous to maintain transparency.
How does this apply to operations?
Let’s look at an example to demonstrate how these roles differ: someone signs on to implement a new piece of software within the organization. These types of projects are usually expensive for NPOs—it’s a big decision to make an investment of this magnitude. Let’s assume a best-case scenario where the board and management are in agreement, have a good communicative relationship, and the organization gives this project substantial attention.
Someone in management would come in contact with the board of directors when they’re trying to get approval for such an expenditure to manifest in the early stages of the process.
Let’s say the board signs off on $100K for this project. They give their signoff and leave it to management to ensure the project is executed effectively, so their investment is successful. As this new software is being implemented, the board of directors would be doing their own due diligence to get timely progress updates on the project. This includes sitting in on steering committee meetings, timely status updates, and soliciting feedback from project team members and vendors. As they would be involved in steering the operations themselves, management would report back to the board on how things are moving along with the project.
Once the software has been implemented and gets to the point of evaluating the investment, the board would initiate a cost benefit analysis or ROI analysis to see the value this brought the organization. Typically, management would handle doing this analysis, as they have direct knowledge of the inner workings of the organization. If we invest in initiatives that allow the organization to become more efficient and better able to manage time and resources, having the feedback of these analyses helps to reinforce the value of such initiatives in the future.
How do you manage the dynamic between members and management?
The board of directors needs to be responsible to uphold policy decisions, making sure the mandate is being followed. Further, the board should challenge management to operate the organization effectively while maintaining accountability.
Due diligence on the board’s part is important to ensure policies and governance of the organization are upheld. As an example, thresholds like the ones previously discussed are put in place to provide governance but should be periodically evaluated so they don’t get in the way of good decision-making.
How do you eliminate the lack of clarity between roles?
- Clearly define the roles and responsibilities of the board of directors and the managers within the organizations. Some of these responsibilities are legal ones, where the board needs to take ownership and can’t leave it to the manager to deal with.
- Set good communication expectations between the board and the manager. Keep the manager accountable to update the board on a specific cadence, ensure the frequency is heightened when special projects are in progress.
- Set policies that ensure management is accountable to the board that allow them to operate the organization effectively.
- When their expertise is insufficient, it’s the board’s responsibility to bring in additional resources to ensure complete understanding.
For bigger decisions or projects, the board needs to be present and involved in the appropriate capacity to understand and provide guidance in their role. It’s not just about approving a dollar amount; it could be a decision to do a renovation or add a building, or take on a new initiative for revenue generation. The board needs to be involved all the way through because they provide expertise—whether legal, judicial, or general knowledge.
Advice to management for staying on track: physically attend the meetings, read contracts, and make sure to get updates that refer back to original contracts.
It’s best practice not to have crossover between board and management roles so that all the responsibilities and accountabilities are clearly defined and executed.
There’s a legal responsibility to carry out what’s determined by the board, having alignment throughout all processes. It’s important that board members understand their obligations. Because at the end of the day, the board is responsible for the actions of management.
Learn more about what goes into being on a board of directors.
Kelly Hagen, Partner, National Not-For-Profit & Education Leader