What Is the Responsibility of Board Members in Human Resources Matters on Nonprofit Boards?
The people side of nonprofit organizations goes beyond those who benefit from their community service. Nonprofits employed nearly 11 percent of U.S. workers in 2010, according to the Urban Institute's 2012 Nonprofit Almanac. Those 13.7 million workers add importance to a nonprofit board of directors' responsibility for human resources matters. While each board determines how it delegates HR involvement among the directors, all nonprofit boards assume two basic roles: executive staff supervision and human resources policies and activity oversight.
Small and medium-size nonprofits often rely on outsourcing an employee for HR duties due to budget constraints. To guide this individual and ensure compliance with labor and employment laws, a nonprofit board can choose to establish a permanent directors-only HR committee consisting of directors and staff members or a task force structure. Ideally, an experienced human resources professional serving on the board can offer expertise. Some boards assign specific HR duties to its committee or task force; others limit committee oversight to issues such as paid staff or strategic planning.
Alternatively, the board can assign responsibility for implementing HR policies to the organization's executive director. The board hires, compensates and manages this individual and votes on the position's salary and benefits package. Filling this leadership slot is critical for ensuring that the organization's mission is carried out and its goals are met. The executive director supervises the office employee assigned to handle day-to-day HR tasks in small nonprofits or the human resources department of large ones.
Policies for personnel may be developed by the executive director, the board through a committee or a joint effort of both. Arizona State University's Lodestar Center for Philanthropy and Nonprofit Innovation reports that boards often substitute their director personnel policy manual for an employee handbook. ASU recommends that boards provide written guidelines to make employees aware of key HR issues such as equal employment opportunities, workplace harassment prevention, worker safety and grievance resolution.
A board's fiduciary responsibility spills over into the human resources arena with respect to the strategic implications of payroll and benefit budgets. According to "The Nonprofit's Guide to Human Resource Management," as much as 75 percent of a nonprofit's budget goes toward compensation. Directors must ensure that the organization's pay scale is equitable, or at least comparable with other nonprofits of equal size and adequate for recruiting and retaining needed personnel. The HR committee reviews elements of the benefits package, such as a savings plan, health insurance and paid time off, and presents its recommendations to the board for approval. Requiring the executive director to conduct annual audits of HR activities, such as personnel file maintenance and performance reviews, ensures the board that HR practices adhere to expectations.