The post first appeared in the Corridor Business Journal.
As appealing as it is to think that there are hard and fast rules, the line between nonprofit governance and management is not fixed. Beyond the board of directors’ legal requirements and responsibilities, the roles of the board and staff often vary with the organization’s life stage and the conditions within the organization at a given time.
At one time or another, most boards have struggled with disagreements among members about how involved the board should be in carrying out its oversight role. Chief executives often mention micromanagement when discussing difficulties with their boards.
Because there is a grey area between governance and management, discussions about roles can be challenging. These conversations often arise during a time of change or conflict within the organization, which adds further heat to an already challenging conversation. Fortunately, there are some markers that can help nonprofit boards and chief executives distinguish between governance and management roles.
Heads and hands
Governance is a “head in the game, hands off” position. Governance activities involving thinking more than they involve doing – developing policies, determining direction and discerning the appropriate strategic position in a dynamic environment. Governance concerns itself with the outcomes and impact of the organization. The axiom, “governance is about the ‘what’ and the ‘why’ of the organization” can help chart governance territory.
Management is hands-on and concerns the activities of the organization. Management implements policies developed by the governing board, acts upon strategic direction, and develops and implements the programs that drive the impact of the organization. If the governance realm is the ‘what’ and ‘why,’ the management realm is the ‘how.’
Critical to the board’s legal responsibility?
The board is responsible for ensuring the organization’s legal compliance. Developing and regularly monitoring policies is a governance function. The board carries out this role by working with management to develop dashboards or indicators that help it easily monitor areas within its legal concerns. Developing annual compliance checklists is another method to enable the board to appropriately carry out its governance function without straying into the role of management.
The board is responsible for ensuring that the activities of the organization are in alignment with its mission. Therefore, what the organization does to fulfill its mission in the community is within the realm of governance. Program oversight—ensuring resources for mission-driven programming and tracking the impact of such programming is part of the board’s job. By contrast, program design and implementation to achieve targeted outcomes is a management role.
Size of the issue?
Management deals with the changing weather of the organization’s environment. Seismic shifts and concerning trends, however, are within the realm of governance. Issues that have a substantial effect on the organization, its budget, or its operations should be addressed by the board. Typically, the board will be alerted to these by its chief executive, who should come to the board with a clear outline of the issue and a number of recommendations for the board to consider. The response to big issues—whether they are opportunities or challenges—is within the purview of the board.
Crossing the grey line
Boards most often cross over the line between governance and management for two reasons: to operate in a comfort zone or when there is a lack of confidence or trust in the chief executive.
Boards are typically composed of people who are accustomed to doing things, so the management role – the hands-on work – is within their comfort zone. The board’s primary governance responsibilities are episodic (setting strategic direction, developing a budget, hiring and evaluating the chief executive) and responsive (monitoring the financials and tracking program outcomes).
As stated above, these are not particularly hands-on activities, and sometimes, they might not feel compelling or even important. Boards cross into the management role to feel competent and like they are actually doing something for the organization. Developing a board that acts within its governance role takes time, training, and strong board leadership that makes a conscious effort to focus board energies on the strategic and policy level concerns of the organization.
Even the most disciplined governance board can cross the line into the management role when it has lost confidence in its chief executive. Sometimes this line-crossing is necessary for the health of the organization; other times the line is crossed before there is good communication between the board and its executive to discuss concerns.
Clear expectations, regular feedback and evaluation, and open communication between the board and its chief executive can help prevent the erosion of trust between the two. Once again, this requires good board leadership and a willingness for the board to exercise its governance role, rather than to stray into the role of management.
Boards and chief executives must recognize the markers that distinguish the governance and management roles. They must also understand that these roles can shift over time through an organization’s life stages and due to various conditions. With this understanding, they will be better able to act within the scope of their roles to improve their organizations.