It’s no secret that nonprofit organizations come in a variety of shapes and sizes. Likewise, the structure of their boards are made up of various shapes and sizes. As a board member, it’s important to understand what your role is in providing service to the organization. Especially for organizations without paid staff, board members are often asked to participate in a variety of roles to help the organization be successful. Governance and management are two important areas for nonprofit organizations and board members need to understand the role they play each. Let’s explore these roles and the importance of each.
What is Governance?
Governance reflects the overall mission and vision of the organization. It also reflects how organizations operate and make decisions to implement longer term goals and activities. The governance role of the board is useful in setting the strategic plan of the organization over a three to five-year period and into the future. Governance activities are typically those that are important but not urgent.
What is Management?
Management reflects the implementation of the governance decisions. It’s the daily action that must be taken to ensure the mission, vision and/or strategic plan is executed. Without management, the organization is unable to serve its intended constituents. Therefore, the policies and procedures developed through the work of governance are how the management of the organization is executed. Management activities are typically those that are important and are urgent.
All organizations need both governance and management functions and it’s up to each individual organization to ensure both functions are in place. It’s not uncommon to have a smaller sub-committee within the board act in a governance capacity and have other members act in a management capacity. All board members regardless of whether they are acting in a governance or management capacity have the same three legal duties: Duty of Care, Duty of Loyalty, and Duty of Obedience to keep in mind as they serve. For additional information on these three duties click here to read more about them.
At TDT, we work with over 350 nonprofit organizations serving social service organizations, foundation and membership organizations just to name a few. We’re always happy to share our experience and insights to help your organization implement both governance and management functions successfully.
Amanda Lane, CPA and Tax Manager at TDT CPAs and Advisors, P.C., provides an overview of governance vs. management in this quarter’s newsletter. Amanda serves social service organizations, colleges and universities, membership organizations and many others throughout Iowa.