Residential communities customarily do not have board of directors members from outside the organization. Corporations normally do, but they may not be chosen by their ability to balance expertise. Non-profit organizations and independent schools often choose board members based on their ability to raise money or influence government or foundation decision-makers.
Balanced expertise on the board of directors steers the organization from multiple perspectives. Balance can be achieved with experts on larger community issues, on financial and legal requirements, and areas specifically related to the mission and aim of the organization. An independent school would have an expert in education, perhaps fundraising, perhaps child development, etc. A soup kitchen will benefit from experts in food service and preparation, nutrition, perhaps motivation, perhaps efficiency in service.
Outside expert directors can bring advice and judgements that are not influenced by possible internal biases. And they contribute new information. They cross-pollinate with ideas and cautions learned from other organizations. Condo leaders to other condo leaders. An outside expert in housing would bring information from government agencies, architects, financial institutions, etc. They may be better able to identify possible risks to the organization.
Diversity of experience is as important as technical expertise. Outside experts also relax the organization. They can confirm that the organization is following best practices and any problems are, or are not, being experienced by other organizations,
On the Board
The importance of having experts on the board of directors is the synergy created by discussion. Most organizations have a lawyer on retainer, an accountant, an insurance broker, a banker, etc. When they are on the board, however, they respond to questions and issues together, not in isolation. The legal expert comments on the advice of the food service expert. Concerns by one expert about the effect of a decision on another expert’s area can be answered in the moment. The advice of one raises concerns for another that can be discussed and resolved. The concerns of one can be resolved by a solution from another.
Even though it may seem costly and time consuming in the end it saves time. Normally a board of Directors meets 3-4 times a year for 1-2 hours. For non-profit organizations, there may be no charge for this time. In businesses, these experts are often on retainers already. In the end the time saved by not having individual meetings or telephone calls. Saved time from having to repeat conversations or making costly mistakes pay for themselves. The increased value of having more informed advice is invaluable.
With Decision-Making Authority
It is important that boards are not advisory. Decision-making authority creates accountability. Decision-makers take decisions more seriously than advisors. Some fear that decision-making power will create a board-dominated organization. That the attempt to create a more democratic organization will be undermined by “outsiders” who impose negative opinions.
However, in a sociocratic system, boards make decisions within their specific domain. The domain of the board is long-term strategic planning, financial sustainability, assessing risk, and connections to the larger environment—its market or industry. The board can be asked to make a decision when another domain is unable to resolve it. Otherwise, the board should not micro-manage or make autocratic decisions except in emergencies.
As Part of a Whole System
An organization is a system with each part having a responsibility that is essential to the whole. The whole controls its parts. The board of directors is one part of a whole system, not the controller. The board has a different responsibility than the marketing department or the kitchen or the front desk but not more power.
Outside members on the Board of Directors strengthen the organization.
(In sociocracy, what most jurisdictions call a “Board of Directors” is called a “Top Circle” to emphasize that it functions according to the rules for a circle, not the traditional rules of a Board of Directors. When a Board with the traditional rights is required by law, it is formed within the Top Circle.)