Human resources management for boards: messy, delicate, and essential

Posted on 13 Nov 2024

By Adele Stowe-Lindner

Human resources management is difficult. HR often leaves board members flummoxed, as people management is one of the most challenging aspects of any role, relying as it does on managing imperfect people.

Sometimes, too, the board’s responsibility in this realm is unclear. All of this means that board members sometimes “lean out” of HR, but this is to the organisation’s detriment. HR needs strategic oversight.

In the not-for-profit sector, the stakes are high: every decision the board and CEO make has the potential to shape lives and communities. Yet strategic leadership and good governance alone are not enough to ensure success. Boards must ensure that their organisational HR policies, such as those governing employment standards and child safety, align with both the law and the organisation's ethos.

This holistic approach is critical not only for legal protection but also for the organisation’s mission of creating lasting social change. When a board supports a person-centred HR ethos and a culture, it isn’t just improving the workplace; it’s also enabling individuals to grow, make meaningful contributions to society, and connect with a greater purpose. The legacy is larger than that of the single organisation any of us works within at any given time.

"The most effective board leadership does not only consist of strategy and governance. It also involves nurturing the heart of the organisation – its people."

I recently reconnected with a former colleague who had worked on implementing child-safety measures and volunteer compliance systems at the organisation where we had met. The organisation was well ahead of the legal requirements in Victoria, thanks to proactive board leadership. When she moved to another organisation, she was surprised by the lack of volunteer-induction and child-safety policies. She reflected on how the support she had received to build those systems had equipped her to drive similar improvements in her new role. It was a powerful reminder that the influence of strong board leadership extends beyond a single organisation and creates ripple effects across the sector.

Board leadership requires creating an environment – both for staff and in the boardroom – where innovation, accountability and integrity can all thrive. A board that engages with its HR responsibilities without stepping on the toes of the CEO demonstrates leadership by embedding and modelling a culture of openness, accountability and ethical decision-making.

While popular wisdom suggests that boards should steer clear of operational matters like HR, the reality is more complex. Boards are responsible for staff wellbeing, yet they have limited direct control over daily operations. This differentiation is critical: boards don’t manage staff directly, but they set the tone through their leadership of the CEO. By focusing on CEO recruitment, performance oversight, and shaping a positive organisational culture that is ethical and committed to legal compliance, boards can shape HR outcomes without crossing into operational territory. Legal requirements such as workplace safety, harassment prevention, and equity in employment contribute significantly to organisational culture. An experienced CEO can “manage up”, guiding the board to ask the right questions about staffing and culture and to develop its own board governance culture.

Adele Stowe-Lindner, executive director, Institute of Community Directors Australia.

Organisational human resourcing occupies an interesting place in the grey area between strategy and execution. Some NFPs have boards of management rather than boards of governance, and these boards will be highly invested in staffing issues, often in a hands-on way; for example, they may interview the candidates for new roles. Some organisations have employment policies that require them to prioritise employment of people of specific backgrounds or demand particular lifestyle commitments, and these policies reflect the vision and ethos of the organisation, which are the purview of the board.

All boards, whether management or governance, are responsible for appointing the CEO, the most important HR responsibility, as this sets the tone for the organisation. I have personally sat on the interview panel and contract negotiation committee for the CEO for two different boards. It’s a lot of pressure but also incredibly rewarding as the CEO can lead an organisation towards a significant legacy. The board’s most critical HR responsibility is overseeing the CEO – from recruitment and selection to building a fluid, effective partnership, and, crucially, ensuring the CEO's wellbeing so they can lead the organisation effectively.

Although the board does not usually hire and manage staff, it must know the right questions to ask and patterns to look for, and it must know how to hold the CEO accountable for hiring decisions. The employee turnover rate is something that should be on the board agenda, among other data points used to measure human resources activity.

Creating a psychologically safe environment is of paramount important both in the boardroom and for paid staff. Culture is established at the top, and if the board places undue pressure on the CEO or has inappropriate expectations, this can easily and quickly trickle down to the rest of the organisation. Equally, if a new CEO faces high turnover, it may signal a problem, depending on what kind of staff are leaving and why.

When staff feel safe to express their ideas and raise concerns without fear of backlash, creativity and innovation can thrive. This same principle applies to boards: when board members are encouraged to speak openly and honestly, governance can be more robust. The cost of silence on a board is too great to ignore – whether it’s perpetuating outdated practices, avoiding difficult conversations, or failing to hold leadership accountable, silence can be detrimental.

During HR restructures, particularly those affecting compliance, the CEO and the board need to collaborate. Boards must provide guidance on legal obligations when restructuring departments or creating new roles that align with strategic priorities. This partnership ensures that any significant HR changes meet both the organisation’s mission and legal standards. Mission-driven questions from the board, such as “Are we adhering to employment law?” and “How do we protect staff welfare within our budget?", are critical to ensuring the organisation remains compliant while also achieving its goals.

The board plays a critical role in shaping the organisation's values, behaviour and ethical standards. This includes making decisions on how staff performance is measured and rewarded. For instance, offering bonuses can influence the culture by defining what success looks like. Target-based bonuses also raise ethical considerations, because tying rewards to short-term targets may encourage decisions that prioritise immediate gains over long-term impact. The choice to provide a bonus, and the decision on whether this is tied to a target or provided as acknowledgement of good work without being tied to a target, has cultural, operational and strategic implications for organisations. As a result, this is something typically discussed between the board and the CEO.

The most effective board leadership does not only consist of strategy and governance. It also involves nurturing the heart of the organisation – its people. When boards actively engage with HR concepts, they create a foundation on which both leaders and staff can thrive, enabling the organisation to fulfil its mission. In the NFP sector, the board’s role in shaping culture and supporting people can truly drive sustainable, meaningful social and environmental change.