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Boards are legally obliged to exercise due diligence in ensuring that the organization fulfills its goals and has a sound strategy and doesn’t become involved in legal or financial problems. The manner in which boards take on these responsibilities differs greatly and is dependent on the situation.
Boards often make the mistake of getting too involved in operational issues that should be left to management or they are unclear about their legal obligations for decisions and actions taken on behalf of an organisation. This confusion is usually caused by not keeping up with evolving demands on boards, or from unanticipated issues such as unexpected staff resignations or financial crises. Usually, this can be addressed by allowing for discussions about the challenges faced by directors and by providing them with instructions and a simple set of documents.
A second common mistake is when the board is able to delegate too much authority and not examine the matters it has delegated. (Except in the smallest NPOs). In this scenario the board loses its ability to evaluate and no longer assess whether the operational activities are contributing to satisfactory performance for the entire organization.
The board should also create an organizational structure for governance, including how it will interact with the general manager or CEO. This includes the determination of the frequency of meetings and how board members will be selected and removed, and how decisions will take place. The board also needs to develop information systems that collect information on the past and future performance to help them make decisions.
