"Nose in- fingers out," is the commonly used guide for nonprofit directors' relationships to operations. Translated into terms of governance-management relations, it means that boards have an obligation to overview management impacts and outcomes, but they need to avoid micromanaging the operations of the nonprofit. This is a particular danger with nonprofits because micromanagement often seems to be in the DNAs of nonprofit boards.
On the operations side, strong experienced nonprofit CEOs can tend to be overly impatient and can easily make strategic or policy decisions that are the responsibilities of the board. In fact, I have seen a few CEOs step over the boundary and develop and execute board style policies.
As a result, board chairs and CEOs in the 21st century, working inside a trusting culture, need to make certain that each side understands the boundary line.
Developing the Boundary Line
Specifying the line can be accomplished in two ways. One is to detail the obligations in the bylaws and/or job descriptions. But this can result in overregulation and sometimes become confusing when being applied to certain situations.
A second way, which I prefer, is to list the functions of the board and then allow the CEO and board chair to clarify the boundary as situations arise. In this process, it is assumed that each will overstep the boundary on occasion. (After all none of us does his/her job perfectly!) If boundary crossing becomes too frequent, then the whole role of governance needs to be reassessed.
Following is one statement of board responsibilities:
A.Directs management
1.Establishes, with management, long-term organizational objectives and impacts
2.Sets overall policies affecting strategies designed to achieve objectives and impacts
3.Employs the CEO. Overviews management to be assured that qualified persons fill other management & key staff positions.
B.Judges management outcomes & impacts
1.Evaluates short-term and long-term performance of management
2.Determines whether policies are being carried out and goals/impacts are being achieved
C.Approves management actions
1.Critically reviews, approves or disapproves proposals in policy areas (for example, major capital expenditures and pension plan modifications)
2.Provides formal recognition and acceptance of executive decisions, within budget guidelines, when related to operations
D.Advises management
1. Acts in an advisory or consultative capacity on
operations when sought by management
E. Receives information from management
1.Regularly receives reports on the organization (e.g., performance, program development, external factors, concerns)
F. Acts as a public, community and industrial relations
resources to management
1.Helps keep the organization attuned to the environment
in which it operates
This approach to the boundary issue will work well when both board members and the CEO are governmentally and managerially "mature." There is a high degree of respect for the expertise of the CEO, and directors perceive their roles as over-viewing management and, with management, developing policy and strategic decisions.
Major benefits: (1) It allows the board chair to eliminate minutiae agenda items and to easily avoid meeting discussions that drift into operation details. (2) The model attracts the types of directors who want to view their roles more broadly and to contribute effectively and efficiently. (3) Management has significant accountability, and the board must provide robust assessment in terms of outcomes and impacts, not processes.
Real examples of boundary crossing
•A nonprofit CEO signs a five-year lease for office space without formal board approval. All agree the space is needed; total obligation of the lease is $30,000. The board chair tells the CEO the lease should have had board approval before it was signed because it was a long-term obligation. The CEO argues that he signs contracts for more than $30,000 in the normal course of his annual operating responsibilities. Both finally agree that the CEO has crossed the boundary and the board needs to give post hoc approval of the contract.
•A nonprofit board has designated the CEO to be the person responsible for press relations. A well-meaning board member privately contacts a print media outlet and provides a story about the organization that is totally inaccurate. The organization needs to make a public retraction. The board chair and the CEO discuss the matter with the entire board, emphasizing that all press contacts need to channeled through the CEO.