March 22, 2016 Board Of Directors Vs Management: What Is The

March 22 2016board Of Directors Vs Management What Is The Differenc

March 22 2016board Of Directors Vs Management What Is The Differenc

March 22, 2016 Board of Directors vs. Management: What is the Difference? Written by Jeremy Barlow While boards and management hold close ties to one another, their duties and responsibilities are distinctly different. Look to the definitions between a board and governance for the first clue as to the differences between them. “A board is an organized group of people with the collective authority to control and foster an institution that is usually administered by a qualified executive and staff.†Governance is the act, process or power of governing.

If we look at it simplistically, the board makes the decisions and management carries them out. Due to the litigious nature of our society, boards are taking a stronger interest in day-to-day management activities because of the ensuing impact on its fiduciary responsibilities. Boards need to be informed of how the organization is being managed to protect its legal responsibilities, but the board role should not cross over into performing management duties. Here are some of the basic responsibilities for boards and management:

Responsibilities of Boards

• The Board Chair leads the board in keeping with the organization’s vision, mission, and strategic planning goals.
• Choosing the CEO
• Approving major policies
• Making major decisions
• Overseeing performance
• Serving as external advocate

Responsibilities of Management

• The CEO leads the organization in keeping with the board’s direction.
• Making operational decisions
• Making operational policies
• Keeping the board educated and informed
• Bringing well-documented recommendations and information to the board

Benchmarks for Determining Board Functions

Even when you consider the basic principle that boards make decisions while management implements the plans, the complexity of today’s business world often muddies the waters. Boards function best when they focus on higher-level, future-oriented issues; but there are times that they need to get more intrinsically involved. When the board sees negative results, it’s a red flag to delve deeper into management issues to get the organization back on track in order to fulfill their duties to shareholders and stakeholders.

Following are some benchmarks for boards to better understand when a situation requires taking action:

Big Decisions

Boards should take a stronger role on big matters, such as issues that may have a negative impact on the organization or involve significant financial stakes. This does not mean direct management involvement but rather ensuring they are informed to make appropriate decisions.

Future Impact

Boards should focus on the organization’s long-term vision by forecasting how it will look up to five years into the future, focusing on quality, growth, finances, and people. Progress should be measured by initiatives and key indicators.

Relevance to the Mission

Boards must assess whether issues are relevant to the organization’s mission and ensure that activities align with their core purpose.

High-level Policy Decisions

Board members should make high-level strategic policies such as choosing whether to open or close facilities, and addressing legal matters, conflicts of interest, community benefit, executive compensation, and CEO evaluations. Management provides supporting data and recommendations for these decisions.

Overseeing Trends

Performance reports should be routinely reviewed by boards to identify trends. Boards need to analyze at least three consecutive reporting periods before deciding if action is necessary, especially in cases of unethical behavior, illegal activities, or drastic performance drops. Collaboration with management is crucial prior to intervention.

Legal and Media Matters

Management’s role includes informing the board of contacts from regulatory bodies and the media. The board is responsible for overseeing the organization’s communication strategy, especially during public issues.

Supporting the CEO

Strong, transparent relationships between boards and management are vital. Boards support the CEO in implementing strategic decisions and may intervene or assist by leveraging community networks. Excessive involvement in day-to-day management by the board can harm organizational stability and lead to turnover in executive positions.

Conclusion

The structure between boards and management was designed to promote organizational efficiency and effectiveness. By clearly differentiating strategic oversight from operational execution—where boards handle higher-level decision-making and management handles daily operations—organizations can function smoothly. When each entity adheres to its specific responsibilities, the organization benefits by aligning efforts towards achieving its mission and fostering sustainable growth.

References

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