In this article, we will analyze the structure of the board management in nonprofit organizations and the common models of the board of directors` functionality in the corporate system.
The basic principles of the board governance in a nonprofit company
The basis for the management system of an NPO is usually laid down by the legislation of the country, which prescribes the management structure depending on the type of organization. These requirements are mandatory for the management of the organization and are subject to control by regulatory authorities. However, much in the NPO management system is poorly regulated by law and is largely determined by the level of managerial culture and professionalism of the leader. And these are such important issues as the separation of powers and delegation of authority, accountability, and openness of the organization, the policy of confidentiality and conflict of interest, the ability to form a team, working atmosphere in the organization.
The specifics of the management of NPOs require the development and application of special systems for managing and evaluating the effectiveness of their activities, since, unlike profitable commercial companies, the efficiency of non-profit organizations is dual. Social results, which reflect the degree of achievement of the main goals of the activities of NPOs, must be assessed in conjunction with an analysis of the economic efficiency of their activities and competitiveness. At the same time, it should be noted that this assessment itself should take into account the specifics of property relations in the non-commercial sphere. This task also requires scientific approaches and modern methods of solution.
It is easy to see that the board governance of the NPO and its executive bodies resolve fewer issues than the same bodies of a commercial organization. This is primarily due to two reasons:
- First, the composition and complexity of the tasks solved by non-profit organizations are significantly inferior to the composition and complexity of the tasks facing an organization created for the systematic receipt and distribution of profits.
- Secondly, the decisions made by the governing bodies of a non-profit organization practically cannot affect the level of the personal well-being of its participants or members. All decisions made by them should be aimed at achieving the goals set for the non-profit organization at the time of its creation.
What are the main board governance models in the NPO?
Increasing society’s requirements for the quality of activities of organizations of the third sector implies an attentive attitude to the board management in organizations of this type, to the quality of management and, to the basic competencies of managers. One of the main indicators by which the professionalism and maturity level of a manager is judged is the ability to consciously use a variety of management methods depending on the available resources, the stage of development of the organization, the level of preparedness of employees, their psychological state and many other factors.
As for the management models of NPOs, there are six main types of management by the board of directors:
- Advisory model
- Patron model
- Cooperative model
- Policy management model
- Community engagement management model
- Hybrid management model.
The constituent documents of NPO may provide for the creation of a permanent collegiate management body, which may be responsible for resolving such issues as approving the financial plan and making changes to it, creating branches and representative offices, participating in other organizations, as well as approving annual accounts. Other issues are within the exclusive competence of the supreme governing body of a non-profit organization.