It's often stated that the nonprofit board's main job is to set
policy. That's all well and good, you say, but what do we mean by
policy? And aren't there various types? Well, yes. The dictionary
defines policy as "a guiding principle". Another way to
think of a policy is to imagine it as a fence: A policy statement
sets the boundaries of what the board is to do. The issue then is
one of scope, or, broader to narrower, or, to state another way,
of levels.
“A policy statement sets the
boundaries of what the board is to do.”
A good discussion on policies is provided by Richard P. Chait and
Barbara E. Taylor in Charting the Territory of Nonprofit Boards
which appeared in the January-February 1989 issue of the Harvard
Business Review. These authors define six levels of policy:
1. Major policies: "Fundamental
issues of service definition, typically involving questions of
organizational directions, values, priorities, and principles
that guide other decisions." Of course the most important
of these major policies is the organization's mission statement.
Also included here would be value statements that may contain
guidelines on such issues as inclusiveness, service principles,
and organizational vision. In other words, this is the fence around
the whole organization and the principles that have been rounded
up to help guide the organization.
“Questions of primary clientele,
types of service, delivery systems: these are the secondary
policies.”
2. Secondary policies:
"Questions of primary clientele, types of service, delivery
systems": these are the secondary policies. Often these policies
clarify the priorities of service and perhaps the methods of distributing
the organization's resources (i.e. who is eligible for service
and which programs are slated for maintenance and which for growth.)
3. Functional policies:
"Concerns of major functional operations such as planning,
budgeting, finance, marketing and personnel" make up the
scope of functional policies. The organization's personnel policies
and the role of the board and director in developing a strategic
plan would fall under this category of policies.
4. Minor policies: "Decisions
that govern day-to-day practices." Examples of these would
be those governing a director's request for calling board meetings.
5. Standard operating procedures:
Mechanisms and procedures to handle routine transactions
and normal operations." An example of these would be step-by-step
procedures for financial internal controls practices.
6. Rules: "Regulations
that guide or prescribe everyday conduct." An example would
be the rule that smoking is not allowed in the building.
“In order to determine the
board's role in setting policy, it's necessary to reach agreement
on what level of policy should be set by the board. ”
In order to determine the board's role in setting policy, it's
necessary to reach agreement on what level of policy should be set
by the board. While the board should direct, influence or restrain
action, it would be unrealistic and impractical for the directors
to be involved in all policies and rules that guide the organization.
Chait and Taylor want to see boards concentrate on major and secondary
policies, with some statements about functional policies as they
relate to board governance. For example, in the case of functional
policies, the board would want to determine its role and that of
the executive director's in budget development, but would not speak
to how the executive director goes about working with the staff
on this issue.
This is not, however, always a foolproof formula. Take the case
of personnel policies. John Carver advocates that the board establish
end-policies (goals) regarding human resources, i.e., fair treatment
of staff or stating that no one will be fired in such a way as to
jeopardize the legal status of the corporation. Management, then,
is responsible for providing the details. Although these are functional
policy statements, nonprofit boards commonly want to approve a much
more detailed set of policies for personnel than the Carver model
advocates.
“... the board should start
with the highest level, or major policies.”
Either the Carver model or a more detailed policy development approach
can work, depending on a board's involvement, value system and comfort
level with delegation. This can also be a reflection of the board's
assessment regarding the executive director's level of experience.
More leeway may be given the more experienced director. In any case,
the board should start with the highest level, or major policies.
Only when these are settled should time and energy be spent on refining
lower level issues. The bottom line, however, is that the board
should agree on what approach they wish to take regarding policy
development.
“A board will not be able
to fulfill its governing role if it attempts to set the day-to-day
rules and regulations of the agency which are the responsibility
of the executive director.”
A board will not be able to fulfill its governing role if it attempts
to set the day-to-day rules and regulations of the agency which
are the responsibility of the executive director. One obvious example
is a board that requires that all expenditures be approved by the
treasurer or some other officer of the board. The budget itself
is the fence around the director, not the day-to-day management
of it. A policy should explain the director's role in opening the
gate or rearranging the fence posts. That is all.
Sample Fiscal Policy: Fiscal Management Expenses The executive director will have the authority to manage the
organization within the parameters of the budget, seeking approval
of the board for additional expenditures that would have the impact
of increasing the operating budget by over 5% or which commit the
organization to significant obligations beyond the current fiscal
year. Salary changes are not to be considered and obligation beyond
the current fiscal year.
Contact Information
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11472 Fairfield Rd. West, Suite 302
Minnetonka, MN 55305
952-595-0432 | 612-964-4389 (Mobile)
