The mantra that “boards make policy and the executive officer executes it” has been accepted within the NPO community for decades. However, as Drucker writes, “The trouble with this elegant answer is that no one knows (or has ever known) what policy is, let alone where its boundaries lie. As a result, there is constant wrangling, constant turf battles, constant friction.”
This principle clarifies the policy-setting role of both the board and the CEO, and it sets the boundaries for them both. The board’s responsibility is to debate and decide upon policies related to governing matters of the NPO, such as the model of governance to be adopted, the mission and strategic goals of the organization, and how the board will monitor organizational effectiveness.
However, policies that are purely administrative in nature, such as office hours, banking arrangements, human resources, and payroll administration, are established by the CEO. So, while the board is responsible for policy determination, that responsibility does not extend to defining administrative policies. Purely administrative policy matters should not be on the agenda for discussion at board meetings.
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