Standing Beside Alaska's Non-Profits

The Board’s Most Important Job

If we were to ask what is the board’s most important job, no doubt many would respond, “fiduciary duties,” which means acting in trust for the organization’s assets on behalf of its beneficiaries and community. That is not the wrong answer because, in fact, ensuring directors act in good faith in accordance with state and federal law, mission, and policies is the legal requirement for all boards.

In the Foraker Nonprofit Sustainability Model; we suggest that to be truly sustainable an organization will eventually need staff. At that point the staff becomes responsible to the board to ensure that the organization is in compliance. While that does not shift the board’s liability, it does mean that the CEO shares responsibility with the board to make sure that the organization does what is right. There is no way most nonprofit boards could meet adherence standards without the right staff leader. They must find someone they trust to manage the day-to-day activities.

Therefore, we think that the most important job of the board, once they determine they need staff, is to hire the right staff leader – the CEO, President, Executive Director, General Manager, whatever the nonprofit calls their lead employee.

Once they find the right leader, the second most important job of a board is to work as partners with that staff leader. When the board is successful in securing the right leader, and maintains a supportive relationship, they can be more certain that their legal job, the fiduciary responsibility, is accomplished.

The reason that finding and keeping the right CEO is so important is rooted in the message we have provided in many of our recent articles about trends to expect for the sector. One trend is the inevitable lack of human resources our sector will face over the next decade. We entitled the trend as “the crash of the herd.” With 7,000 nonprofits in Alaska, we already face a shortage of responsible board members, and that will get worse as Baby Boomers retire.

We also have pointed out a shortage is looming because of a much smaller pool of individuals in Gen X and the young age of the Millennial Generation, where over half are still in high school or college. This will most certainly have an impact on available candidates for jobs in the sector. Bridgespan Group has reported that at least 60,000 new nonprofit CEO’s will need to be secured in the coming years to replace retiring Baby Boomers – and that’s if no new nonprofits are formed, which we know will likely not be the case.

When Foraker was founded in 2001, we observed that it took boards around 3 months to recruit a CEO. Today, we see boards continue the search past three months, many to six or even twelve months before eventually settling on someone that candidly many on the board feel is a step down from their prior executive.

The bottom line is that when a board finds the right person, they need to nurture that relationship.

Please take our word. It is not as easy as one may think to find someone to trust and who is competent to lead the organization. The steps in finding the right person are not that different from historical searches – the timing is just longer. When a board is looking for the right staff leader, we suggest these steps:

  • Have the board and possibly staff, key funders, and partners identify the characteristics they seek in the new CEO. Alignment to the mission and values of the organization should always trump other qualifications. While we need people with education, credentials, and experience, those qualities alone do not assure the person has what it takes to work with a board, manage staff, and ultimately succeed.
  • Review the job description and make sure the characteristics and qualifications are clearly stated.
  • Review the salary and benefits to make sure they are competitive.
  • If not already familiar with the changing values of the younger generations, read-up – especially if you are looking for a leader from those generations – the times, and the values about work-life balance, “are a changing.”
  • At this point you may want to identify a professional executive search firm to assist. Foraker can also serve as a resource for searches.
  • Recruit an ad hoc committee to manage the search process.
    • Develop a timeline and process for the search, remembering that it may take longer than you think.
    • Identify potential candidates.
      • Conduct a session to identify individuals on your staff, on other staffs, or those seeking a career change that have the qualities you seek. It is rarely a good practice for a member of the board to seek the position. In most cases, if selected, that individual and the board will have to adjust to new boundaries for the relationship to work – many fail in that attempt.
      • Publicize the position. We can list it on the Foraker website. Listing in area newspapers, Monster, Craig’s List, and in any sub-sector publications is also a good idea.
  • Review the applicants using the characteristics and identify five to eight candidates for a preliminary interview.
    • Develop a series of questions for the candidates.
    • Conduct this interview on the phone. Since many good candidates may live in another community, it is only fair that all receive the same treatment at this stage.
    • Reduce the pool of finalists to the number your organization can afford to bring to an in-person interview. If such an expense is beyond your capacity, we would then suggest all finalists be interviewed with Skype, or another video format. Being able to see the final candidates is important, but using the same process is only fair.
  • Conduct the finalists’ interviews.
    • Determine who will interview the finalists.
      • Search Committee (for sure)
      • Entire board (if feasible)
      • Key constituents, like funders, partners, volunteers, etc. (if desired)
      • Staff (if desired, only as advisors)
    • Develop a new series of questions – probe more deeply into alignment of values and experience.
    • Conduct interviews. If individuals other than the board are engaged, develop a process for their participation in the search committee.
    • All feedback is reviewed by the search committee, which develops a recommendation for the board.

Following this process, the board reflects on the committee’s recommendation and approves the finalist. The committee, or the board’s chair, negotiates the terms with the finalist. And the new CEO starts.

Unfortunately, we are hearing more and more stories about boards that followed a process but in the end had no viable candidate. In those cases, they had to start over.

Another consideration for any board that struggles to find the right staff leader would be to consider a strategic alliance with another nonprofit with a similar mission and values. The Foraker Group has assisted nonprofits with such arrangements. Or maybe it is time for the board to consider merging with another organization.

(While CEO search and support is the focus of this article, candidates for other key positions such as finance directors or development [fundraising] directors are also limited. The Foraker Group’s financial shared services now provides financial support to over 50 nonprofits around the state. There are ways to develop strategic alliances to build capacity other than mergers.)

If the search process is successful, the board can’t rest. The second most important job for a board – maintaining the right relationship with that CEO – is just beginning.

Many of the practices of high performing boards have been covered in prior articles. In summary, it is critical to understand that the board selects the person (CEO) they entrust to follow policy, implement the board’s direction, and manage the day-to-day operations. While nonprofit CEO’s must be held accountable for the board’s expectations, if the board or any of its members think it’s their duty to tell the CEO what to do and how to do it, they will quickly learn they will lose that partner.

Recently we observed a board that publically said the right things about their relationship with the CEO. However, we also observed communication between the board and its CEO did not reflect what they said. The board’s communication seemed controlling and condescending. If that persists, they will eventually need to look for a new executive because few competent CEO’s will tolerate that kind of management for long.

Obviously, a board should provide more oversight for a new CEO. A number of years ago one significant nonprofit secured a new executive after a long-time, very effective leader retired. They made the mistake of only monitoring the new CEO’s actions, as they had grown accustomed to doing with their prior executive. Unfortunately that nonprofit went through dissolution (it went out of business) within three years. The lesson – boards need to increase monitoring the actions whenever they hire any new executive.

Monitoring means periodically meeting with the CEO and checking on how things are going. Discussion points could include:

  • Are goals being met?
  • Is the staff performing as needed?
  • Is the budget being managed as expected?
  • Are the funders, constituents, and clients pleased with the performance?

Monitoring also includes more diligently reviewing financials and other corporate documents with a new CEO. The point is that managing is when we instruct people what to do. Monitoring is when we observe what is being done and then check from time to time to verify our observations.

The only time a board should tell their CEO what to do or not do is when it establishes policy after meeting and collectively making a decision. When an individual board member, without the consent of the other directors, tells a CEO what to do, a boundary has been violated. The relationship between the board and its CEO can be damaged by breaking the traditional boundaries about who does what. No member of the board, unless instructed by the board as a whole, has the right to tell the CEO what and how something should be done. It happens all the time and that is a major reason CEOs become disgruntled and resign.

Most boards delegate the responsibility for ongoing oversight of the relationship between the CEO and the board to the Presiding Officer, the Chair or the President. For a seasoned CEO, checking in every month or so is the norm. With a new CEO, checking in weekly is advised until trust is developed. When the board becomes more confident that the new CEO is performing as required, the check-ins can become less frequent. If the board has to tell the CEO what to do too often, it may not have made the right hiring decision. Or maybe the board did make the right hiring decision but is now unwilling to allow that new partner to do his or her job.

Here’s another example. An organization reported having fundraising issues. The CEO is certain that the wrong person is in the development position, someone she inherited. She thinks it’s time for a change. The board will not allow the exec to do what she thinks is best for the organization, which is to find a new development director. That board is managing, not monitoring, unless they really have a legitimate reason to suggest otherwise. And if that’s the case, they need to jointly make a decision about what to do in concert with the CEO.

The purpose of this article is to show that it’s becoming increasingly difficult for nonprofits to find the right CEO. There are many reasons for this predicament – some are in our control, others are not. Until the sector restructures and we have a more sustainable number of nonprofits in Alaska, we will have this problem. Restructuring the sector, or creating new strategic alliances, are big tasks – beyond the control of any one organization or individual.

What we can control, however, is doing our best to find the right board and staff leaders and then establish and maintain appropriate boundaries. If we do this well, the scarcity of staff leaders will not become more of a problem than it already is.

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