Should Your Board or Executive Director Make That Decision?

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Harnessing the Power of a Nonprofit Board of Directors

Should Your Board or Executive Director Make That Decision?

At the intersection of nonprofit vision and implementation is the nonprofit board of directors. Ever wondered how the balance of decision-making powers is maintained between an executive director and the board? Sarah Olivieri, MPS, sheds light on this delicate dance of governance and offers insightful guidance on risk sharing and liability. This micro-training is a must-watch for anyone involved in a nonprofit organization.

Why Understanding Nonprofit Board Dynamics is Important

Understanding the dynamics and interplay between the board of directors and the executive director of a nonprofit organization is critical. This is not just about managing relationships, it's about managing risk and liability. Decisions, particularly those that carry a substantial risk, should never be made in isolation. Instead, they should be a product of mutual agreement.

"At the end of the day, it's all about managing risk and liability," says Olivieri. "The sweet spot is where for tough decisions, the board and the executive director are in agreement and thus they are sharing the risk."

How to Optimize the Nonprofit Board of Directors' Decision-Making Process

1. Know Who Holds the Risk and Liability

In decision-making, the party assuming the responsibility also assumes the risk and liability. For instance, if the board overrides the executive director's decision, then the board assumes all the risk and liability. Conversely, an executive director making decisions independently, especially against the board's advice, bears all the risk and liability.

2. Strive for Consensus

The ideal situation is one where both the board and the executive director agree on critical decisions. This means that the risk is shared. According to Olivieri, "You should work together to find a solution, a decision that both parties agree on."

3. Encourage Open Communication

If a particularly risky decision is on the horizon, it's good practice for the executive director to consult with the board, seeking their opinion and ensuring everyone is on the same page. Likewise, the board should feel comfortable making requests of the executive director, but only if the director agrees that the suggested course is the right way to go.

Frequently Asked Questions About Nonprofit Board of Directors

Who should make the tough decisions in a nonprofit?

The ideal scenario is where the Executive Director and the Board agree on decisions, thus sharing the risk. According to Sarah, "For tough decisions, you should work together to find a solution that both parties agree on."

What happens when the board overrides the executive director's decisions?

If the board makes a decision that the executive director disagrees with, the board assumes all of the risk and liability. The same holds true if the board micromanages the organization, bypassing the executive director's decision-making process.

Who assumes risk when the executive director takes actions without the board's knowledge?

In such a case, the executive director accepts quite a bit of the liability and risk for their decisions. If the executive director takes a course that the board has specifically advised against, they are taking all of the risk onto themselves.

MASTERCLASS

5 Simple Steps to Achieving a High-Performing Nonprofit Board

Join Sarah Olivieri, MPS, creator of the Impact Method™️, for this one of a kind Masterclass for nonprofit leaders and board members.