Does Trust Matter? Uncovering the Conditions by Which Boards Trust Managers in Nonprofits

Do nonprofit boards need to trust their managers in the absence of performance data about the intangible social goals promised in their mission? We found that nonprofit boards impose conditions not directly related to organizational performance to assess if they can trust their managers. These conditions focus on both managers’ actions and board actions. For example, boards trust their managers more when managers exhibit the types of skills, experience, and networks the boards believe are needed to effectively run the nonprofits, and when managers provide the type and quality of information desired by board members. Boards also trust their managers when they believe they have effectively recruited managers with the desired abilities, and have an aspirational belief that they can effectively assess manager performance despite gaps in data. However, trust in their managers has less influence on board behavior when nonprofit boards assess how well their organizations have achieved their intangible social goals, as these assessments do not appear to be influenced by the trust relationship. Our study contributes to practice by encouraging open dialogue between boards and managers to address how boards can trust their managers despite an inability to rigorously monitor performance.