Every board has three core jobs: strategy, safety, and audit. This is the third of the board's three core jobs.
Be careful with the word "audit." This is not the financial or CPA audit that larger organizations are required to have. The board's audit function is the board's own review of its key employees, senior executives, and officers, making sure the management that is on the job every day, while the board meets only occasionally, is actually carrying out the work effectively.
Trust, but Verify
The mindset comes from a phrase President Reagan used in an entirely different context: trust, but verify. The board should trust its officers. That is why it put them in place. If the board does not trust an officer, it should remove that person, and do so fairly quickly. You want highly competent people carrying out the work.
But trust does not end the board's job. It is the board's role to verify that the work is being done, not because it distrusts the executive, but because verification is the board's function. The board's assessment of how its key officers are performing is a vital part of governing.
The Board Takes the Initiative
No executive enjoys this. Nobody running an organization, confident they are doing well, looks forward to justifying their behavior in front of the board. That is simply part of the work, and it is not always pleasant.
Because of that, the board should show regard for the difficulty of the situation and take the initiative itself. Do not leave it to the chief executive to come to the board and say, "I think it's time for you to evaluate me." Instead, set the review as a regular annual activity, with the option to revisit more often if problems appear.
What to Examine
The audit does not require getting lost in daily minutiae. Look at the essentials:
- Any significant departure in the past that should be examined carefully and slowly this time around.
- Significant deviations from the ten-year plan, the three-year plan, and the budget.
- Whether deficiencies exist, and what changes would best address them.
Why This Matters
Auditing the work of highly talented employees is not a sign of mistrust. It is the board carrying out the responsibility it is supposed to carry out, the accountability of the leaders of a tax-exempt organization to a body, not just to themselves.