Understanding the different roles played by the Board of Directors and the CEO of a Not for Profit (NFP) Organization
Both Board and the CEO both play key roles in the functioning of a NFP organization. Sometimes the roles are blurred which could create potential conflict. Therefore, it is important to understand the important roles that each play.
Role of the NFP Board of Directors
Board members of a NFP are often volunteers who act in the best interest of the organization’s contributors, members or other stakeholders. The board of directors of NFP provides leadership and guidance to the NFP organization.
The Board defines the NFP’s mission. The mission informs the public of the goals, values, policies and procedures of the NFP. They set objectives and determine the way the NFP achieves these objectives. The board also develops policies that give overall direction to the organization and they set out by-laws addressing membership, employment and operations in the NFP.
Some of the important activities that the board is responsible for are:
- Hiring, compensating and evaluating the performance of the chief executive officer (CEO)
- Establish budgets and review the financial performance of the NFP to ensure that the organization is operating effectively and efficiently.
- Hiring external auditors to ensure that the financial information produced by management is correct.
- Ensuring positive public image and working environment
Role of the CEO
A CEO is responsible for the day to day operations of the organization.
Some of the important activities that a CEO is responsible for are:
- Hiring management to assist running the organization
- Provide expertise in developing strategies and tactics to achieve the goals set out by the Board
- Running the day to day operations of the organization
Problems that can occur between the CEO and the Board
Lack of transparency by the CEO.
As mentioned earlier one of the major roles of the Board is to assess the CEO’s performance. To avoid criticism, a CEO may be reluctant to inform the Board of important matters. For example, a CEO may hide a potential scandal until it is too late. If it was disclosed ahead of time, the Board may provide solutions that will mitigate the effects of the scandal. The Board should be supportive of the CEO and encourage open communication.
Board members can meddle in the day to day operations of the NFP. They can direct staff duties, make business transactions etc… This undermines the authority of the CEO. The more the Board meddles the more it appears that they do not have trust in their CEO. This can lead to bullying, constant criticism and bickering. Both the Board and the CEO have to respect each other and their roles.
The Board and the CEO may agree on the overall mission and objectives but their goals may not be aligned. The CEO, for instance, may receive bonuses if the NFP receives increased contributions or increase membership. As a result, a CEO may turn the focus on fundraising or membership drives rather than other important areas such as developing programs, investing in the internal growth of the organization. It is important for the board to consider the impact of the compensation structure that they have put in place for the CEO.
Respect and understanding each other’s roles will help reduce tension between the Board and the CEO. They need to work together for the NFP to operate efficiently and effectively.