A well-defined Executive Director Policy is essential for nonprofit governance, ensuring clarity in leadership responsibilities, accountability, and operational stability.

One of the essential elements of nonprofit leadership is the relationship between the executive director and the board. As part of the board’s oversight, adopting an executive director policy provides clarity on the board’s responsibilities to hire, supervise, evaluate performance, and determine compensation. Without a structured policy, nonprofits may face governance gaps, unclear expectations, or challenges in leadership transitions. The following areas and suggested points should be considered for inclusion in the policy.

Hiring the Executive Director

The hiring process should be structured to ensure alignment with the nonprofit’s mission, values, and operational needs. Consider the following:

• Job Description: Is the job description up to date and does it include the required skills and experience?
• Search Process: What are the details of the search process?
  • Where will the posting be listed?
  • Will a consultant or recruiter be used?
  • What is the timeline for reviewing applicants and selecting interview candidates?
  • Who participates in interviews and who is involved in the hiring decision?
  • What are the essential elements considered – For example, culture fit, mission passion, community involvement, etc.
  • What is the process of assessing the candidates to select those to interview?
• Interview Process: How will the process be standardized?
  • What are the required elements of the interview process?
  • Who is responsible for reference checks?
  • What is the timeline for deciding and extending an offer?

Supervising the Executive Director

A strong Executive Director Policy establishes clear expectations for supervision and board interaction:

• Work Expectations: Is the job description up to date and does it clearly define expectations?
  • This should include expectations for board meetings. Does the ED attend all or a portion of meetings? Does the ED offer topics for the agenda to the board chair or submit a written director’s report?
• Authority & Limitations: If not included in the job description, are the authority and limitations of the executive director defined and documented?
• Board Chair Relationship: Will the board chair and executive director meet regularly?
• Goal Setting: Have goals and/or metrics that align with the board’s strategic oversight been identified as executive director assessment goals for the next annual period?
• Board Communication: What is the required frequency and format for updating the board on current progress and financials?

Evaluating the Executive Director’s Performance

A structured evaluation process ensures accountability and aligns leadership performance with organizational goals:

• Who: Who will be involved in preparing the evaluation and meeting with the executive director?
• What: Will a standard evaluation form be used or will it be a general narrative?
• When: What is the due date for completion of the evaluation process?

Determining Compensation for the Executive Director

To ensure the executive director’s compensation is fair and compliant, nonprofits should follow the IRS’s three-step process:

• Independent Persons: Document group or committee involved in the process and that the executive director is not part of the process
• Comparability Data: Identify source and obtain comparable salary and benefits for organizations with a similar mission, budget size, and location
• Documentation: Ensure there is documentation of who was involved in the process and recommendation to the full board

Additional considerations include:

• Who is responsible for doing the necessary research and documentation?
• Do the board minutes document the review and approval by the board?
• Is this process documented and included on the IRS Form 990?

Succession Planning

A proactive succession plan ensures organizational stability in case of planned or unexpected leadership transitions:

• Conduct Regular Assessments: Is the board or board committee responsible for regularly assessing tenure and potential retirement dates of the executive director and/or other senior leadership?
• Internal Talent: Have current staff members with the necessary skills and experience to step into a leadership role been identified? Are there tools for professional development to prepare future leaders?
• Plan for the Unexpected: Do you have an outline of interim leadership procedures in case of an unexpected departure?

Finalizing the Policy

Once the policy is drafted and properly reflects the organization’s process it should be approved by the board and noted in the board minutes.

Another best practice for all policies and procedures, including the Executive Directory Policy, is to have a comprehensive list of the policies noting date of the board meeting when policy was approved, date the policy was last reviewed, and date of the most recent update.

The policy should be reviewed on a regular basis to ensure it still meets the needs and circumstances of the organization.

A strong Executive Director Policy ensures leadership stability, operational clarity, and long-term success. If your nonprofit needs guidance in drafting or refining policies, our Nonprofit Advisory Services team is here to help. Contact us today to ensure your governance practices support your mission!