Nonprofit organizations often have a board of directors that influence how the institutions are run. This board is often subject to the pressures emanating from the source of funding and the institutions itself. The board is charged with ownership of the organization and as such is allocated some functional responsibilities. The behavior and actions of the board can be explained by the use of various theories such as the agency theory, resource dependence theory, and the institutional theory.
One of the key functions of the board in non-profit organizations is to define the mission and purpose of the organization. This is where all decisions and operations stem from. All operations are tailored towards the achievement of the defined goals and mission. The board is also in charge of defending and keeping the public image of the organization. Most of the nonprofit organizations survive because of the reputation they have in the eyes of the stakeholders and shareholders. Donor aid and funding are boosted with a good public image, and thus the board is in charge of public relations (Manitoba Family Services and Housing, 2002). The board raises money. Nonprofit organizations are run using money from philanthropic organizations and individuals. The board's function is to use its personal and professional contacts to source for monetary assistance. The board is in charge of appointing the CEO whose actions shall be evaluated in accordance to the achievement of the defined mission and purpose of the organization.
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The Most of not all scholarly literature with a focus on the Board of Directors is directed towards understanding and not describing the board behavior, its characteristics, and functions. Analysis of board behavior has been theorized, and as such there are three theories that provide accurate information concerning this subject matter. These theories are the agency theory, resource dependence theory, and institutional theory. Agency theory tries to distinguish between the management and the board of directors. This is primarily for the benefit of the stakeholders whereby there is the endorsement and monitoring of resolutions that have been instigated by the management in the assurance of proper use of power and resources (Miller, 2003). Since it is built on establishing a difference between control and ownership, the board's functions are to define the mission and purpose that shall be implemented by the management and to oversee if the decisions made are in line with the defined mission and purpose.
The resource dependence theory posits that an organization shall survive when it is well able to acquire and maintain resources. The board is charged with the mandate of utilizing personal and professional contacts to get information concerning new ventures and resources that the institution’s management is trying to acquire then allow the management to make decisions. This is done to reduce uncertainty. The board is also charged with the responsibility of giving constant information updates for the company to remain competitive and functional. They also prevent interference from outside by reducing interdependency with other institutions or establishments.
Institutional theory is built from the structures and processes of an institution (Miller, 2003). Organizations often tend to institute same structures such as self-assessment and advisory councils as these have been normalized as the right way of conducting organizational business. This theory interprets these norms and practices and tries to understand why they are used and adapted by organizations. The theory posits that the similar behaviors witnessed are as a result of the institutional environment that an organization exists in. As Worth (2017) noted some organizations adopt these conventional structures and processes so as to compete favorably with significant others, to be deemed legitimate, to gain competitive advantage, through coercion and fear of sanction.
References
Manitoba Family Services and Housing. (2002). The Roles, Responsibilities and Functions of a Board. Retrieved from: https://www.gov.mb.ca/fs/childcare/resources/pubs/board_development_guidelines.pdf
Miller, J. L. (2003). Understanding the Behavior of Nonprofit Boards of Directors: A Theory-Based Approach. Nonprofit and Voluntary Sector Quarterly , 32 (4) 521-547. DOI: 10.1177/0899764003257463
Worth, M. J. (2017). Nonprofit Management: Principles and Practice . London: Sage Publications.
