This post is one in a series written by nonprofit leaders who are presenting sessions at the 2017 BoardSource Leadership Forum taking place in Seattle, October 18-20. We hope you will be joining us for the conference.
When determining the role of the nonprofit board of directors in matters relating to human resources, it is critical to recognize and respect the difference between governance and management. This seemingly innocuous difference is often sticky for nonprofit organizations both large and small.
Put simply, the chief executive has primary responsibility for hiring and managing the staff, while the board’s role should be focused on governing the organization. In that vein, the board has human resources responsibilities to the organization in six main areas:
A key responsibility of the board is to oversee the hiring of the chief executive (or top paid staff member). The board should negotiate a compensation package for the chief executive as well as negotiate and execute the employment contract if one is used.
Additionally, if asked by the chief executive, board members may help with the hiring of selected subordinate positions. However, it should be made clear from the start to everyone involved that the final decision is the purview of the chief executive and that a board member’s role is that of consultant or advisor rather than decision-maker.
The board is responsible for ensuring that the organization has a well-crafted set of employment policies that comply with applicable laws and regulations and minimize organizational risk and exposure.
While the board may review the policies, the chief executive has primary responsibility for creating, disseminating, and implementing the policies for the staff. Individual members of the board may be able to leverage human resources proficiency to make suggestions when shaping or updating policies.
Then, every two to three years, the board should ensure that the policies are reviewed by legal counsel, management, and the staff to determine if updates are needed.
The board’s role in compensation matters for the staff should be limited to approving the compensation plan developed by the chief executive. This process should include ensuring that the plan aligns with organizational values, supports the organization’s recruitment efforts, and is realistic relative to the organization’s overall budget and resources. It is also good practice for the board to review the overall compensation packages of senior staff whose compensation is included in Form 990.
It is not appropriate for the board to review line-item details of individual employee salaries or to become involved in salary negotiation, although some finance or executive committees review salaries periodically on a macro level to ensure plan appropriateness.
The board’s role in performance evaluation should be limited to ensuring that the chief executive’s performance is formally evaluated on an annual basis. That evaluation process may include feedback from select senior staff, board members, partners, funders and even service recipients.
Boards are not involved with other employee evaluations as those are a management responsibility. It is recommended, however, that the board coordinate the performance review process of the chief executive with the organization’s internal HR person if one exists.
Grievances & Whistleblowing
Overall, the chief executive is responsible for all management issues. But if an individual has a grievance and has exhausted the process outlined in the organization’s employee handbook, some policies may permit individual employees to raise concerns to the board chair.
Sometimes a staff member has a serious charge against management that cannot be addressed through the grievance process. Every organization should have a whistleblower policy that provides for a confidential method to raise such concerns with a designated board member. By putting one in place, boards provide employees with a legally required mechanism for raising concerns without the fear of reprisal or retaliation.
The board should discuss any necessary financial measures like a decision to lay off staff before approving such actions by management. Although the decision of whom to layoff and when and how are management decisions, it is critical for the board and management to agree and synchronize about how the organization is responding to financial challenges and how it will communicate those actions to stakeholders and the public.
The board should not get involved unless the chief executive asks for advice or assistance, so most boards do not need personnel committees.
However, if the board feels it does need a personnel committee, the committee’s responsibilities might include helping ensure compliance with laws and ethical guidelines, competitive salaries for all staff, and staff engagement and retention. This committee also would also be responsible for determining the process the board would follow to resolve grievances brought to its attention.
But regardless of whether it has a personnel committee or not, every board should ensure that it has a diverse set of capabilities and proficiencies necessary to help a nonprofit navigate personnel-related issues, including a member with human resources expertise.
There are no strict rules for how to engage the board in matters relating to human resources. However, it is important to clearly articulate the role of the board, and always remember that the board is there to govern the organization while the chief executive is charged with managing the organization.