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Does the Nonprofit CEO Need to Go?

Recognizing and acknowledging that the current CEO is no longer helpful to the nonprofit organization is never easy to come by. Beyond malfeasance and underperformance, obvious reasons for initiating such a discussion, there are often other indicators: modest leadership skills, ineffective discussions between the CEO and the board chair, criticism from external stakeholders, overemphasis on tactics unbalanced by a focus on strategies, etc.

The Board’s Three Major Steps

Volunteer directors are loathe to be confrontational when a nonprofit CEO has been marginally satisfactory for a number of years, preferring to avoid the “drama” that inevitably accompanies the “changing of the guard.” Yet this type of change can’t be accomplished in a clear and pristine manner—a textbook change is usually not the case. The board first needs to take three major steps.

Work with the CEO

In the best of all scenarios, the CEO’s contract may be expiring and/or she may be ready for a transition. The two parties can then arrive at an amicable agreement and timetable for change. Even in this less painful circumstance, there is the possibility that there may be resistance from some board members and staff. If the best scenario is not realistic, arrangements need to be made for the CEO’s termination, hopefully in a mutually satisfactory process.

Board to Have Its Boots on the Ground

The board needs to make an initial assessment of the qualities necessary for a successor and then move forward and decide to identify potential candidates internally or start to contact employment sources. This requires the board to have comprehensive knowledge of strengths and weaknesses of all managers now reporting to the CEO.

Board Consensus

Volunteer directors, not having a financial stake at risk, may be swayed by a jumble of emotion and loyalties. Even though there is a respectable consensus as the process begins, it is not unusual to have some fallout among the directors who may change their minds prior to taking action. In addition, be prepared with a backup plan to address the outbursts of protest from staff, outside community, and possibly industry. Involved board members may become distressed at the increased number of meetings required.

The change at best will be disruptive, but the board must remain resolute, never losing sight of the overall rationale. The CEO position needs to evolve as the board reviews opportunities to grow and increase the level of the organization’s services. If the CEO is a C-level player, the board has an obligation to seek a B-level candidate who will be comfortable with the nonprofit’s expanded scope. And if a strategic goal requires a merger or acquisition along with a mission modification, the board would need an A-level player. A realistic vision of the organization’s growth direction will dictate the strengths required to effectively recruit a new executive leader.

Calming the Waters Associated with CEO Change

Here is what I recommend:

Keep the Board Resolute!

As stated earlier, volunteer directors can become emotional and succumb to outside pressures and protest. Be sure that they stay “on message” whether or not the vote was unanimous. Pay special attention to the relatively new board members who may not have internalized the organizational history as deeply as others.

Keep the CEO Informed

Once the decision is firmly approved, inform the CEO as soon as possible and in person. Do not notify by letter or email. Be mindful of the contributions he has made to the organization and provide reasonable incentives (bonus, references, etc.) to help during the transition. Determine if it is politically wise to keep the outgoing CEO in the organization should his skills be needed.

Treat Outgoing CEO with Respect

The outgoing CEO has made contributions and needs to be credited for them.

Move Quickly

Even if the outgoing CEO stays in place for a while or an interim CEO is appointed, set a goal for finding the replacement in a matter of a few months.

Avoid Litigation

Legal counsel may be needed to review the termination process to be certain all legal bases are covered.

A change of CEOs is a complex and emotional process. But when the board has identified a significant deficit in the CEO’s intellectual and managerial skills that may impede stability or further growth, it is of paramount importance that the right CEO is in place. And it is the right time to make that happen.

Dr. Eugene Fram

About the Contributor: Dr. Eugene Fram

Dr. Eugene Fram is Professor Emeritus, Saunders College of Business, Rochester Institute of Technology. A well-established nonprofit author, consultant, board chair and volunteer director, he has served on 12 nonprofit boards and a number of business boards. In addition, Fram is the author or co-author of more than 125 journal articles on marketing, nonprofit and corporate governance issues. He is also the author of the new third edition of Policy vs. Paper Clips, a book that describes a trust-based nonprofit governance model that has been adopted or adapted by thousands of nonprofit organizations. His book can be located at: http://amzn.to/eu7nQl.

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