The Importance of Decision Making Between Chief Executives and Boards

Decision making is often challenging for nonprofit chief executives. Where does the board’s authority stop, and the chief executive’s authority begin?

?The answer lies in the differences between seeking advice from the board, seeking approval from the board, or simply informing the board.

?Seek Advice, Seek Approval, or Inform

To illustrate the differences between the three constructs, a simple real-life example is used.

?A nonprofit chief executive received notification from their health insurance provider that rates were going up exponentially, and that the organization only had a brief window of time to either accept or reject the new rates.

?The chief executive called the board chair to notify them, because the rate increase was substantial and it would impact next fiscal year’s budget. An executive committee meeting was called to review the information and give the chief executive the approval to accept the new rates. In this scenario, the chief executive was seeking the board’s approval on a matter that was operational.?

In a seeking the board’s advice scenario, the chief executive could have informed the board chair and then assembled a small group of board members who have human resources, benefit management, or administrative experience. The chief executive would seek their advice on what types of rate increases they are seeing in their workplaces and if it would be worthwhile to shop prices given the short timeframe provided. The chief executive would have listened to their opinions and used that knowledge to decide on the rate increase.

In an informing the board scenario, the chief executive could have independently decided on the rate increase and simply informed the board chair and treasurer/finance chair on how this would impact the budget planning in the months to come.

All three scenarios are valid; however, it is recommended to reframe how decisions are made in an organization between the chief executive and the board. In the seeking the board’s approval example, the chief executive involved multiple board members in a decision that was operational and allowed the executive committee to decide on behalf of the full board.?

The board’s focus is on governance, strategy, and policy. If the decision is based on how to execute strategy, budget management, or resource deployment, then the chief executive is empowered to make those decisions.

When chief executives tell the board what is needed — advice, approval, or information — then board and chief executive roles can be clarified, and expectations can be met.