Be a Better Board: Don’t “Hire & Fire”

It’s strange how work comes in waves – one month I’ll get a bunch of nonprofit formation work, next month I’ll get nothing but employment issues.  For the past several months I’ve been busier than a one-armed paperhanger with one board crises after another.  It’s like the stars have been aligned against effective board management.

Board crises come in all shapes and sizes.  But let me share one source of common dysfunction that keeps popping up:  nonprofit boards who mistakenly think their job is to “hire and fire” the CEO, as opposed to “select, support, and review” them.  Not only does this create risk for a wrongful termination or breach of contract lawsuit, but it also does not address the underlying root problem – failing to set up the CEO for success.

The old proverb (paraphrased for this PG-13 publication) “poop rolls downhill” applies exponentially to nonprofits because nonprofit boards – which by definition are uphill from the CEO – consist of volunteers from various professions and walks of life who are challenged to find the time and build the skills to effectively do their job as a nonprofit director.  And the most important job of a nonprofit board is to select, support, and review the organization’s CEO – which, with these latter two responsibilities, is a constant process.  I am not suggesting that every director needs to be actively involved in this process; rather, the board as a whole should make sure that the chair and any directors assigned to these tasks are fulfilling them.

Let’s examine each component.

Select:  To execute a careful and thorough selection process, you must plan well in advance how the job description should read, what your compensation policy should be, how you are going to conduct the search and attract the most qualified candidates, what qualities are essential to lead this new era of the nonprofit, which stakeholders should be consulted or included, and what your search’s timeline should be.  Then start your search to select the best candidate for the job. 

Support:  Once you have selected and hired your new chief executive, stay engaged and avoid the temptation to withdraw once the arduous hiring process is complete.  Consider a new committee responsible for supporting the new CEO through the transition into their new leadership position.  The key question:  what does this specific new CEO need to hit the ground running?

·      What coaching or development will they need?  It helps to look back at the board’s discussions other finalists for the job and note any strengths they possessed that were superior to the person you hired.  (Rarely does one candidate beat out all other candidates in every aspect.)  Does your new CEO have great management skills but lack fundraising skill or experience?  Could they be better at public speaking?  Is this their first job as a chief executive?  The world is full of qualified coaches and consultants who can help the new CEO develop and strengthen the areas where they need help. Boards have a fiduciary duty to determine if any such support would benefit the CEO; it is a compulsory task, not optional.

·      Consider the person they are replacing.  Doing so is particularly important if they are succeeding a long-tenured CEO who was a legend at the organization or are coming into a situation that involved an ouster of a CEO.  Each situation poses its own challenges.  With a legendary CEO, the board could have deferred to them quite a bit of board responsibility that it now should reclaim and resume.  After an ouster of a CEO, there very well could be some staff morale or public relations challenges for which the board will need to provide guidance and support.  

·      What contractual obligations need to be performed or completed?  Does the CEO’s employment agreement call for things like a bonus or deferred compensation plan.  Too often, lack of follow-through results in a breach of contract simply because no one on the board was responsible for making sure the promises were fulfilled.

Review:  Too many times I’ve been contacted by a board considering a CEO termination and when I ask about their last annual review, silence.  Absent some serious misconduct issue, no employer should consider terminating any employee for a performance issue if they have failed to provide feedback – let alone a CEO.  I recently had one situation where a nonprofit terminated a CEO for a performance issue in December after giving them a full $50,000 discretionary bonus just six months before.  No counselling, admonition, feedback, or discipline occurred during those six months – in fact, none occurred during the CEO’s entire tenure.  

Given the cost and pain of conducting an executive search, the board must provide feedback to the CEO during an annual review.  The best way to ensure this happens is to set forth a clear process in the bylaws and ensure that your board chair owns the issue.  A plethora of resources exist online to help construct and execute an effective CEO annual review, so it should not be a herculean task. Doing so will not only reduce risk to the organization, but will also create a more harmonious and effective relationship between the board and CEO.

As always, should you have any questions, you can reach me at tmckee@tmckeelaw.com and 615.916.3224.