Governance & Leadership
The second part of your organization is the governance and leadership component; It is the literal embodiment of the mission, vision, core beliefs, guiding principles and values. In fact, an organization is just a set of ideas until you have people who are willing and ready to take on the roles and responsibilities to bring it to life.
In a nonprofit organization, this component is taken on by the Board of Directors. The board is responsible for adopting the bylaws, holding regular meetings to review the finances and operations, and setting and adopting a long-term strategic plan. In a multi-person LLC, the owners – or a portion of the owners – serve as the Board of Directors. For a program or department, an advisory committee provides similar oversight and guidance. On the other hand, in a sole proprietorship or single person LLC, the best practices and functions of a Board of Directors still hold true – except the board is a single person.
A business or organization’s bylaws and/or partner agreement provide the critical framework for the entity and establish how those who own or govern the organization are appointed or elected. It also provides certain guidelines and boundaries for the organization. Just like the U.S. Constitution is the supreme rule of the United States, the written bylaws or partner agreements often take precedent above all else for the business or organization. While bylaws and/or partner agreements are often needed for legal and accounting reasons for nonprofits and LLC’s, sole proprietor businesses can also benefit from completing a similar document. Today, bylaws and/or partner agreements tend to include a few main points regardless of organization or business type. In the Tool Box and the upcoming Build & Create section, we’ve provided templates for several organization types, including:
- Self-Perpetuating Boards for 501(c)3 nonprofit organizations (SP Bylaws);
- Membership-Based Organization 501(c)3 organizations;
- LLC partnerships; and
- Sole proprietorships.
Meetings & Decision-Making
Generally speaking, a board or partner meeting is a set time and place where the members of the decision-making body meet to provide oversight and make formal decisions on behalf of the entity. For businesses and organizations with boards or partners, it’s important to spell out how and when decisions are made. In the Tool Box, and the upcoming Build & Create Section, we’ve provided a worksheet to help you articulate the place and time of your board or partner meetings, your decision-making processes, and what needs to be voted on or included in your regular meetings. We’ve developed these based on common best practices, however, you’re encouraged to edit and make changes to suit your needs. For a sole proprietorship, it’s still a good idea to set a time at least once per month or once per quarter where you officially check in on the progress of your business either on your own, or with your chosen employees or advisors. Advisory committees for programs or departments can also benefit from these tools.
In many organization and business types its common to delegate the responsibilities for implementation of the Operations & Administration component – as well as the Programs, Products and Services component of the organization – to a CEO or Executive Director. Until an organization reaches this phase, it’s common for the President (whether in an LLC or nonprofit organization) to fulfil many of these tasks. However, once a CEO/Executive Director role is put into place, it’s important to recognize clear boundaries between the Governance component of the organization, and the Operations & Administration and Programs, Products and Services components.
The CEO/Executive Director always reports to the Board or Partners as a whole decision-making body at formal meeting rather than to a single board member or partner. In addition, simple operational tasks — like the color of the walls in the office — are rarely a governance issue (unless they clearly violate the organization’s foundations in some way).
For most businesses and organizations, the CEO/Executive Director ordinarily should not be a voting member of the board of the directors to help ensure the board or partners can fulfil their roles in evaluating and providing healthy oversight to the CEO/Executive Director. In sole proprietorships it’s common for an individual to be both the President and CEO/Executive Director. However, if the role of CEO/Executive Director is delegated to someone else, it’s important to honor the boundaries between “governance” and “operations” and allow the person to do their job.
In the Build & Create Section, we’ll review a common CEO/Executive Director job description that can be easily modified or tailored to your specific business or organization.
Build & Create
In this section, you can start building (or reviewing) your own business or organization by going over your Bylaws/Partnership Agreement needs, Decision-Making Processes, and CEO/Executive Director Job Description. You can also use the Integrity Check and Knowledge Review to make sure you’ve gotten down the basics.
Step 1: Bylaws/LLC Partner Agreements
Review or complete the Bylaws/LLC Partner Agreement using one of the templates below. These templates are based on common best practices in the field, however, you may still wish to have them reviewed by an attorney.
Step 2: Governance & Decision-Making
Review or complete the Governance Worksheet as well as the Meeting Packet Templates, which include basic agendas and reports for formal governance and leadership meetings.
Step 3: CEO/Executive Director (Acting Director)
Finally, let’s review or complete the Job Description for the CEO, Executive Director, or person who will be serving as the “Acting Director”.