Executive Director

Updated on March 21, 2024
Article byNanditha Saravanakumar
Edited byNanditha Saravanakumar
Reviewed byDheeraj Vaidya, CFA, FRM

Executive Director Meaning

An executive director is an individual who holds the senior-most position in a non-profit organization (NPO), supervising operations, managing employees, delegating tasks, and, most importantly, planning and controlling. The goal of an executive director is to provide strategic leadership and ensure the efficient and effective functioning of the organization they are leading.

Executive Director

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An executive director, also known as an executive manager, holds a leadership position within a non-profit organization. They are ultimately accountable for the organization’s operations, and their responsibilities are similar to those of a chief executive officer (CEO) or managing director (MD) in a for-profit company. However, due to the non-profit nature of the organization, executive directors typically receive lower compensation than their for-profit counterparts.

Key Takeaways

  • Executive director definition refers to an experienced individual in the senior-most managerial position of a non-profit company. This company can be a charitable trust, a religious institution, a public organization, or a private foundation.
  • Their leadership position is similar to that of a for-profit company’s CEO, MD, or president.
  • Important duties in the job description of executive directors include planning, organizing, controlling, staffing, leading, decision-making, and managing all these tasks simultaneously. Further, they must build and maintain long-standing relationships with the organization’s stakeholders.

Executive Director Explained

The executive director of a non-profit organization is similar in role and responsibility to a CEO or managing director of a for-profit company. However, leading a non-profit can significantly differ from leading a for-profit organization. Non-profits do not generate income like for-profit companies but rely on donations from supporters who believe in their cause. Despite this difference, non-profits still have expenses to manage. Additionally, executive directors of non-profits may receive lower compensation than their for-profit counterparts due to the nature of the organization.

Managing a non-profit involves creating awareness, spreading news and information, attracting people to an organization’s cause, inviting donations, and appealing to volunteers. Therefore, it is not just about acquiring customers, retaining them, and making profits. It’s much more than that. Hence, it is challenging to be a CEO but more difficult and demanding to be an executive director.

In this regard, it is also important to mention that sometimes, an executive director can also be an individual on the board of directors of a for-profit company. As it is not possible to universally define any leadership position, it is important to look into the organizational hierarchy of a particular company and understand who is where on the ladder.

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Requirements

So, having a brief idea about the executive director of non-profits, let’s move on to understanding the professional requirements for the job.

  1. An undergraduate degree is typically required, particularly in business administration or management.
  2. Professional work experience is a must. While some organizations may prefer candidates with more experience, others may prioritize younger candidates with relevant experience or an understanding the organization’s target audience.
  3. A graduate degree is often preferred or required by some organizations.
  4. Effective communication skills are important to maintaining stakeholder relationships – employees, volunteers, donors, etc. 
  5. Management skills, especially leadership quality, are probably the game-changer. The individual should be composed and able to compare and weigh multiple factors before deciding.
  6. As a leader, the person must be a good listener and hear out everyone. By considering stakeholders’ opinions and concerns, the person themselves should speak about the values of the organization.
  7. Finally, the individual should be aware of the operations of an NPO and the field the organization works. For instance, if the NPO works to save forests and wildlife, the person should have absolute knowledge about forests and keep up with recent research or news.

Roles And Responsibilities

Here is the job description for executive directors.

  • Since the executive director is a manager, they are in a leadership role. Therefore, they should lead from within or among the stakeholders, not from the front. This means they should not just pass orders or commands but also consider others’ opinions.
  • It is their job to lay out plans for important projects and activities. Considering what everyone concerned with a particular project has to say, they should weigh the options and make the ultimate decision.
  • Executive managers should regularly, if possible daily, ask for updates on each project and department. This would help them prepare for any problems and make the right call when it presents itself. This is a crucial part of controlling.
  • Maintaining relationships is another important responsibility. In this aspect listening and reacting are very significant. This makes people (employees, donors, etc.) feel valued and is a great way to reinforce stronger relationships. Further, the executive manager should be the face of the organization when maintaining public relations.
  • Work closely with the board of directors for planning, budgeting, and crisis management.
  • In any crisis, the director should put on a superhero cape and provide solutions that cushion any negative consequences. They will be looked up to at such times and must keep up the faith.
  • Budgeting is another valuable role they play. Managing finances – expenses, and income – is extremely significant for an organization involving many participants. 
  • Finally, executive managers are all in one – the human resource manager, the operations manager, the production manager, the accounts manager, the marketing manager, the customer relations manager, and any other unit needing managing.

Salary

To understand the compensation of executive managers, it is important to consider the specific rules set by the Internal Revenue Service (IRS) for non-profits. Non-profits, such as charitable organizations, religious organizations, political organizations, and private foundations, are typically tax-exempt under Internal Revenue Code (IRC) section 501(c)(3). As a result, they do not have to pay taxes on their income, and donations received are also not taxable.

Because of this tax-exempt status, executive directors of non-profits usually earn significantly less than their counterparts in for-profit companies. CEOs and managing directors of some companies can earn millions of dollars annually, while executive managers of non-profits typically do not come close to that amount. According to Glassdoor, an American employee-review website, the average annual compensation for executive managers in the U.S. in 2018 was around  $168,123.

Executive Director vs CEO vs Vice President

Let’s differentiate between these top leadership positions in organizations.

  • The main difference between an executive director (ED) and a CEO is the type of organization they work for. The former typically work for non-profits, while the latter for for-profit companies. However, the vice president (VP) role can be seen in both types of organizations. 
  • Another important difference is that the VP is typically subordinate to the ED and CEO. For example, if the ED and CEO both assume a presidential role, then the VP of a non-profit organization should report to the ED, whereas the VP of a for-profit company should report to the CEO. 
  • As discussed, the ED’s remuneration is generally much less than the CEO’s. Therefore, the VP will typically earn less than the heads of each respective organization. However, it is worth noting that the VP of a for-profit company might earn much more than a non-profit organization’s ED. 
  • Currently, there are many different organizational hierarchies in use around the world, and one company’s structure may differ significantly from another’s. However, the existence of a vice president typically indicates that a president or top executive may go by a different title, such as executive director or CEO.

Frequently Asked Questions (FAQs)

1. What is executive director vs. director?

An executive director is a senior management position responsible for overseeing an organization’s strategic direction and operations. A director is a mid-level management position responsible for managing an organization’s specific department or function.

2. What is executive vs. non-executive director?

An executive director is an employee of a company responsible for the organization’s day-to-day management. In contrast, a non-executive director is a member of the board of directors who does not have a full-time role in the company and is not involved in its daily operations. Instead, non-executive directors provide strategic guidance and oversight to the executive team.

3. What is a deputy executive director?

A deputy executive director is a senior manager who works under the executive director and helps oversee the operations and functions of an organization. They often take on a leadership role in the absence of the executive director and may also have specific responsibilities related to budgeting, staff management, or program implementation.

This article has been a guide to Executive Director & its meaning. We explain its salary, responsibilities, comparison with CEO & vice president, & requirements. You may also find some useful articles here –

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