De-cloaking Policies

Sometimes one of the Halifax ferries can look a little mysterious emerging out of the early morning mist. What are these craft? Do not be concerned. They are quite fathomable once one sees them up close. Getting onboard adds to one’s appreciation of their distinctive design and useful function.

The term policy board or policy-making board is often used in the non-profit sector. While the concept is understood, the specifics are foggy to many. What is an organizational policy in a governance context? What key policies ought a non-profit have? Who creates and implements them? What might a policy really look like close up?

In the last few years there has been increased demand that governing boards pay attention to managing risk, to inclusion and diversity, and to issues such as workplace harassment.  Many non-profits have embraced the need for written practices on these organizational challenges. However, not every non-profit has a good base of policies on which to put them.

There is a lot to explore here, so this topic requires two posts. The first, this one, is long. It will look at some foundational policies. The list includes bylaws, director roles and responsibilities, human resource and financial management practices. The policy guru, John Carver, will get some acknowledgement. On this site there are samples of many of the policies mentioned.

The second post, planned for early 2021, will focus on what I call “world wise” policies including ones on conflict resolution, the use of social media, public policy advocacy and in camera meetings.

So let’s get started.

What is a policy?

A policy is a written statement that sets parameters for, or expectations of, how things are to be done in carrying out a particular organizational function. Policies should be general enough to allow some room for flexibility on how they are to be implemented but be clear on the important principles the organization embraces.

Policies should also identify who is responsible for carrying out the direction they set. Procedures, at least one-step down from policies, perhaps two depending on how much detail is wanted, explain how a particular policy is to be implemented.

For example, many non-profits will have, amongst their financial management policies, an instruction that employees will be reimbursed for work-related travel at current public sector rates. The procedures associated with this policy will outline the process for submitting a claim; being paid and what current travel cost rates apply. This is likely one of a number of pieces in a policy on financial expenditures for which the executive director (CEO)  would be responsible.

Policies formalize an organization’s “way” of doing things, the practices to which everyone is committed. And, because many effective management practices are well established, even different non-profits ought to have some common ways of doing things.

Policies should exist as separate organizational documents and be clearly designated as such. A decision to approve a policy should appear in board meeting minutes, but the policy should not live there.

Why are policies important?

Policies are important for three main reasons:

1. They hold the leadership experience of the organization. Policies identify good practices that transcend changes in board and staff.
2. They are a tangible outcome of key management discussions.
3. The existence of policies addresses common leadership worries. They enable the board and the executive director to turn some attention away from their oversight role, sometimes a consuming one, toward more strategic and community concerns.

A good basic set of polices can be created all at once, ideally shortly after the first staff person is hired. Another approach may be to be add them to the board’s calendar and begin to develop them over the coming year.

Can one have too many policies?

Some people will grumble about too many rules inhibiting innovation.

Think about policies as “here is what we already know” or “with these in place we can really stretch out”, or “here is what our staff can count on”. Too many detailed policies may well be problem, an indicator of little faith, perhaps. Board’s though, do not have the time or expertise to get into the details. Executive directors and other senior management staff must.

Levels of policy

Non-profits often refer to the idea of “board policies” to identify the organizational instructions and standards of practice approved by the board. It is useful, I think, for boards and staff to embrace the idea of levels of policy.

The simplest distinction is probably that between policies and procedures. Policies can be owned by the board of directors, procedures by the executive director and, as one goes deeper in the organization, by others with management responsibilities. The line between “high-level” board approved policies and more detailed internal ones is an important determination for every leadership team to consider.

In addition to levels of policy, some policies are intended to direct the board’s own practices not just, as is often assumed, a non-profit’s internal operations.

Characteristics of good policies

I believe that well-constructed “board” or “high-level” policies ought to embrace 5 main features. They should:

1. Be general enough that they seldom need to be changed
2. Provide direction about an important organizational function
3. Identify who is responsible for ensuring that they are followed
4. Short
5. Conspicuous

Take for example this typical item from an organization’s human resource management or personnel policy: Personnel records are treated as confidential and appropriate restrictions are in place regarding their use and who has access to them. Such a policy direction is probably general enough.

The functional areas common to most non-profits will be taken up below. Operationally there are five (5) main ones: HR management, financial management, the ED’s authority and responsibility, volunteer management and fundraising.

Who, by position, is responsible should be identified in every policy document. In dealing with operational functions, for example, a policy might say: The executive director will ensure that ...”

I added short to this list. I think that high-level policies that address key functions should aim to be a page or two.

Policies ought to be conspicuous, some of them at least. They should be seen by those whose job it is to live by them. I am old fashioned and like seeing key policies on paper. Having them all in a shared electronic folder is convenient but is it good enough?

Whose job is it to create a non-profit’s policies?

It is generally accepted that it is the board’s role to ensure that their organization has a solid foundation of policies. It is also generally accepted that the board approves policies, the highest level ones certainly.

What is not so well understood is where new policies come from. They do not necessarily originate with the board. Indeed, most boards would be challenged to create a variety of policies without help and some delegation of the drafting work.

The content of policies can come from a variety of sources: board members, staff or other non-profits. Yes, staff should be relied on to help create the ones they have to implement. Examples can be found online with a little research. Indeed, examples all of the ones mentioned in this post and on this website are a result of my own investigations.

Keep in mind that policies do not have to be perfect. A lot of time can be wasted getting all the ingredients right and the wording to everyone’s liking. If a policy captures key principles and practices better than what you now have, you might want to approve it and move on.

Policy Guru – John Carver

Some non-profits have adopted the Carver model or what is officially called “Policy Governance”. It makes the case that board decisions are predominantly policy decisions whether they are creating or changing a policy.

Carver’s approach is outlined in his book Boards that Make a Difference: A New Design for Leadership in Nonprofit and Public Organizations.^[1]John Carver. Boards that Make a Difference: A New Design for Leadership in Nonprofit and Public Organizations -Third Edition, John Wiley and Sons, 2006 There are three editions of the book, the third coming out in 2006. There are also a number of companion publications authored by Carver and others.

If you are really interested in the concept of non-profit policies the publications on the Carver model are certainly worth a read. An online search of “Policy Governance” will produce pages of sources, some promoting this approach, some critical of it. Given its theoretical completeness and specifics, Carver’s recipe, to my mind, is a real model. It has had a significant influence on my own thinking about policies as some readers of this post will appreciate.

The board – chief executive relationship is the centrepiece of Carver’s model.  Some sources suggest that it has 10 characteristics. The four most distinctive elements seem to me to be:

• The concept of moral ownership^[2]For a thoughtful article on non-profit ownership, including a exploration of Carver’s ideas on this see Judith Milleson’s August 2019 piece “Who Owns Your Nonprofit” in … Continue reading
• The distinction between ends and means policies
• The formulation of executive limitations policies
• Policy compliance as a mechanism for executive performance evaluation

Carver is credited with the statement “the board has only one employee, the CEO, the CEO has the rest.^[3]Ibid p. 159. This is a useful concept to keep in mind even if you do not buy into the model.^[4]In terms of the Carver model, if your organization is interested I would recommend you find a board consultant with experience working with it and with interested boards

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Board-Focused or Board Practice Policies

It is time to get close up.

I am going to start my suggested “list” of foundational policies with ones that apply to the functions of the board itself.

• Bylaws

All incorporated non-profit have bylaws or a ” constitution” that is part of obtaining legal incorporation. Bylaws can be considered board-focused policies.They may be somewhat unique to the organization but it is far more likely they are based on a template. Bylaws seldom differ dramatically from non-profit to non-profit since they must adhere to similar incorporation laws.

What is next?

• Conflict of Interest policy

I would like to think that all non-profits have a conflict of interest policy. There is one on this website and lots of samples out there online.^[5]For a more example of a comprehensive conflict interest policy for non-profits see this 2014 one by Dionne Falconer from what used to be the Ontario Organizational Development Program. For three … Continue reading

• Board member position description, or duties and responsibilities

A board needs a outline of what is expected of all directors, officers included.  This is useful policy document for board orientation and recruirment. 

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A Note on Board Position Descriptions 

This is good opportunity to try to sort out three frequently used terms: duty, responsibility and accountability.

A duty has to do with one’s moral, legal or professional conduct, what we are required to do by law, social convention, rules and norms.

Responsibilities are the things a person has taken on or agreed to handle. A responsibility can also be what one is required to do by virtue of assuming a particular position. They are tasks or undertakings.

For example: A board chair has a duty to be loyal to the organization and, among his/her list of responsibilities, is expected to facilitate board meetings. Likely all directors have the similar duties but, depending on their position on the board, different responsibilities.

The meaning of the term accountability is a bit harder to pin down. It means answerable to authority and accepting ownership for actions taken. Accountability tends to look backward, responsibility forward. Some sources would say the responsibility can be shared, accountability cannot. Non-profit organizations cannot be accountable but their boards can.^[6]For a fuller understanding of the terms accountability and responsibility see Accountability: The Basics from the Centre for Public Legal Education Alberta site Charity Central here

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Next are the position decriptions for each of the board officers. Examples are on this website. A good position description ought to describe the power and authority of the office.

• Chairperson position description
• Secretary position description
• Treasurer position description
• Vice-chair position description

Of the above, the first is the most important. If you do not have one, start here. This particular discussion is one of the most important a board can have at any time; the policy is a byproduct. These four fit nicely together as a group.

It is generally accepted that a board chair should have no independent authority. He/she works for the board as a whole. One’s policy therefore might, for example, say:

The chairperson has no formal authority to direct the staff of the society. That authority rests with the Board, operating as whole, and then only with respect to the CEO. Like other board members, the chair is entitled to make motions and vote on matters before the board and its committees. The chair has one vote.  

The chair’s primary responsibility is the effective functioning of the Board itself.  In this role the chair will focus on…..

And then there is this one:

• Board Member Code of Conduct

My board member code of conduct policy is one of the most used of my sample resources. This may be because it is a little different and complements the more commonly seen conflict of interest policy. My code of Conduct Policy is here.

There are other board practices that may need to be captured in policy. One is more a category of policies: committee terms of reference. They are important, and like others, worthy of some research for templates.^[7]For what to include in committee terms of reference see my own 2016 resource, Creating_Terms_of_Reference for Not-for -Profit Board Committees originally published by, and included here, courtesy of, … Continue reading

A number of boards I know require new directors to sign an agreement. Sometimes this involves formally acknowledging that they will abide by the organization’s conflict of interest policy. Others I know have created an agreement form listing director duties and responsibilities. The concept of a signed director agreement seems to me to be a good one.

Operational or Internal Practice Policies

Next are the policies, board-approved at high level, that direct staff and internal operations, or day-to-day activities. These are often instructions to the executive director who has the responsibility to implement them and to be accountable to the board if they are not followed.

Sometimes a policy will say that more detailed policies and procedures will be developed at the staff level. For example: The executive director will ensure that in enacting this policy more detailed practices will be developed and communicated to staff.

In my view, there are five core functional areas. They are:

1. Personnel or human resources management

Most established non-profits with staff have a human resource management (HR) policy or a set of policies. Some organizations will have entire HR policy and procedures manual. An HR policy is important if one wants to be a good employer.

This set of policies will describe the organization’s practices with respect to hiring and promotion, job descriptions, feedback, time off and sick days, leaves, wages and salary determination. and staff training & development. The policy or policies ought to state the commitment of the organization to following government employment regulations. A HR policy will also reflect the organization’s commitment to diversity in employment. The legal requirements of being an employer are outlined in my post Law 102 for Boards. For a foundational HR policy see my sample here.

Conspicuousness is important here. Every staff person should have a copy of their organization’s high-level HR policy, and probably the details of what practices they should expect will be followed. Staff consultation will always be part of the work of creating and updating one’s HR policy or policies.

For a useful resource see this 2011 guide from CPA Canada, our national professional accounting body: 20 Questions that Directors of Not-for-Profit Organizations Should Ask About Human Resources. It is here. It contains an appendix for unionized non-profits. It is good keep in mind that a union contract is a policy given that its administration is likely the responsibility of the executive director.

2.  Financial management

The idea of having an overall financial management policy is not as common. Most non-profits have a scattering of financial management and related policies like ones on reimbursing travel expenses, the purpose and use of a reserve funds and the backing up of computer files.

This policy, or set of polices, should outline expectations about financial controls, banking, loans, budgeting and financial reporting, the signing of contracts, purchasing, and insurance. Compliance issues such as the regular submission of payroll deductions to, in Canada, the Canada Revenue Agency should also be in a financial management policy if it is not captured elsewhere.

An overall financial management policy outlines the decision-making authority of the executive director and clarifies what financial situations and information should come to the board.

For the most part, good financial management practices cut across all non-profit organizations. There are established accounting and bookkeeping standards.^[8]Accounting standards for non-profit organizations (ASNPO) in Canada are overseen by CPA Canada. See here for more information

Financial controls, a common worry, are those mechanisms that the organization puts in place to prevent theft or fraud, to catch unintentional mistakes in the recording of transactions, and keeping track of payments made to individuals and organizations.

The organization’s financial planning processes, the format and setting of the budget, also need to be reflected in policy. Example: The executive director is responsible preparing for the budget for the upcoming fiscal year and will be present it for approval at least one month before the end of the current fiscal year.^[9]Some non-profits assign their budget preparation to a board-staff committee. One of the  “good practices” to capture in the budget preparation part of a financial management policy is … Continue reading

Financial reporting, especially to the board, should be outlined as well. Regular budget updates are, of course essential but some organizations experience cash flow issues that a board will want to monitor.

There are a number of resources that can help create a good set of foundational financial management policies. ^[10]Here are two good resources on financial management policies: The Financial Responsibilities of Not-for-Profit Boards, published in 2008 by the Muttart Foundation in Edmonton, Alberta here. This is … Continue reading. My sample financial management policy takes an omnibus approach. It is here. Yours might divide up the key concerns.

Risk management, a topic to be looked at in the next policy post, is in some respects a matter of financial management. In other words, a good set of financial management policies will address some risks.

3. Executive director authority and responsibility

A non-profit ought to have policies focusing specifically on the work of the executive director. A board approved executive director job description and signed contract may qualify.^[11]For a case why an ED needs a contract see this piece by U.S, consultant Joan Garry. But in the interest of his/her duties being conspicuous, the ED should be named in all high-level operational policies. Such duplication helps set the ED’s role apart from other staff.

Separate policies should also outline the board’s responsibility for evaluating the ED and its obligation to regularly review and adjust the ED’s compensation. For example, the language in the ED evaluation process policy might include a statement such as: The review process, persons involved, areas to be reviewed, criteria, and evidence used will be determined in collaboration with the ED.

I have a sample policy on ED evaluation and compensation that may help. It can be found on my sample policies page here. It, or something similar, could be brought to the board by the ED for discussion and approval.

4. Volunteer involvement

if your non-profit depends on volunteers in its core work and not just helping out when one has a big fundraiser, you will want to give some thought to a small set of volunteer management polices. These should address role descriptions, screening, and feedback.

I have no sample volunteer policy. There are good resources elsewhere. Here is a 2016 overview, published in Charity Village, of the Seven Policies Your Volunteer Program Must Have. It is written by Sammy Feilchenfeld of Volunteer Toronto.

5. Fundraising & donations

Finally, if your organization regularly accepts money from individuals, foundations and corporations you probably need a fundraising policy. It should include considerations about dealing with gifts or other non- standard contributions, your ethical concerns around who you will and will not accept money from, and any “donor rights” practices you subscribe to.^[12]Examples of donor rights statement are readily available. Here is a one from the U.S. Association of Fundraising Professionals (AFP). Your policy on such matters may be something you will want to broadcast.

I have no sample fundraising policy of my own but here is one from the non-profit Youth Without Shelter in Etobicoke, Ontario.

I may well have missed a key policy area or a particular policy under one of the five headings. A non-profit should also commit to practices that protect vulnerable clients or establish standards of care. For some non-profits these are compliance issues, external rules tied to funding and licencing. One might also make a case that customer service concerns, and therefore policies, have a place in at least some non-profits. I plan to take these up in my companion post.

What now?

Hopefully the mist cloaking the ship of non-profit policies has dissipated. I have created a short checklist based on this post that you can use to identify where your organization may have policy gaps. Click here: Our Board Policy Checklist.

A common response might be to give policy development work to the governance committee or set up a special policy task force.  But you could also run down the list, attach a person’s name (board member or staff member) to each of (say) six different policies and schedule drafts of them to come to the board within the next 3 months. If you like, include with the assignment a link to my sample policies page.

This is not a difficult project. Maybe there needs to be a two or three person conversation about some policies away from the board table, an hour or two of research and an hour creating a draft. Don’t forget that for some, the conversation is as important, as the policy itself.

Policy reviews

Much is made of boards undertaking a regular policy review. If one’s policies are doing a good job they probably do not need to be reconsidered very often. Some, like the one describing the responsibilities of the board chair, can benefit from a board conversation when the person in the position changes. It is seldom enough just to hand a person piece of paper.

As an organization becomes managerially more sophisticated and savvy, the consideration of new policies may be a better use of governance time than fine-tuning established ones. The question is “what might we do to make our organization even better? Consider for instance, a policy, under the human resource management on employee sabbaticals and leaves.

What’s next?

My second post on de-cloaking policies will look at some other areas of good practice. In terms of board-focused policies I think I will look at five:

• Role of the Board
• Emergency ED succession
• Executive director- board communication
• Public policy advocacy (for “non advocacy” organizations)
• In camera meetings

On a world-wise front I will address some of the social issues that most call out for organizational policies. These will include:

• Whistleblower protection
• Harassment
• Conflict resolution
• Diversity & inclusion

I will also try to address the connection between risk management and policies. Stay tuned. Hopefully this will be published early in 2021,

Remember, my sample polices, which you are welcome to read and download, are all listed on the same page, It is here.

If you have a question about specific policies, thoughts on something I have missed, or have a different viewpoint on anything I have said, please contribute to this subject by writing something in the comments section below.

+++ A Note on the Image +++

Certainly one of the most unique features of my local community are the passenger ferries that cross our harbour between downtown Halifax and Dartmouth daily. They are one the nicest work-home commutes anywhere. Built In Nova Scotia there are five of them, two on each of two different crossings and one spare. The history of the ferries is outlined in this piece Rocking Our Way Across the Harbour for 263 Years by Meghan Richard. For ferry design and technical information see this page from E.Y.E Marine Consultants