Richardson Development

 

A marriage made in heaven.  Once was a time when chief executive officers could expect a rich, long relationship with their governing boards -- these were marriages made in heaven.  Staff and board would meld into a partnership of ten, fifteen, twenty, and more years; tenures known for accomplishment and growth. 

 

These days there are no marriages in heaven or anywhere else.   Executive managers seem to enjoy less job security and more performance risk than anyone else in the organization.  Why?  Why are so many chief executives losing their jobs?  Why is the world of the CEO a volcano of great stress and volatility?  What is happening to the board - CEO relationship?  And, what can you do to stabilize your own organization whether you are management or volunteer leader.

 

War stories.  A young executive director, having given exemplary service to her* organization for two years, was charged with grievous complaints of impropriety.  She faced the charges and had them dismissed as unfounded by her institution's governing board.  Nonetheless, two weeks later her antagonists persuaded her board to bring a vote of "no confidence in leadership" and she was asked to resign.

 

During a performance review, another executive was told by his reviewers that there was a quality about him that made the trustees "uneasy." As evidence, they noted how he sat in his chair during presentations, sitting on the edge as he argued points.  Apparently, members of the board were not relating to him very well and it was strongly suggested that "something" be done immediately.  Little mention was made of the performance of his duties.   

 

These are not atypical scenarios.  In the Boston Sunday Globe and the Maine Sunday Telegram between September 1 and December 1, 1994, approximately 30 percent of all advertisements for nonprogram-related jobs at nonprofits were executive searches.  Without searching too deeply, many in the field can find at least a half-dozen agencies that have hired more than one executive director in the past three years; it is not much more difficult to hear of nonprofits that have seen as many as three.

 

What is going on?  Increased competition, for one thing. Competition for dollars, donors, clients, staff, and leadership intensifies by the day.  Recent statistics indicate that charitable nonprofits have been growing at the rate of 11.6 percent in the years between 1965 and 75 and 5.9 percent between 1975 and 1988.  Since 1984, the death rate of nonprofits has averaged only 2.3 percent.  Of the 1.1 million nonprofits registered with the Internal Revenue Service, approximately half are donation-seeking public charities[1].

 

These numbers have impact in human terms.  Greater competition demands more time, better skills, more sophisticated systems of management and governance, better technology, more and better of everything required of leadership.  In the face of such pressures, stress and anxiety build, shortening both the personal and professional life of the CEO.

 

Organizations need strong leadership to compete.  But, leadership of what sort?   The sort that comes from a strong relationship between  governance and management.

 

Governance vs. Management. Governance is the task of setting policy by forming a vision of an organization and determining its universal principles and values for conducting business.   Boards meet the challenge of that vision by holding itself  accountable to the community, by leading by both decision and example.  In essence, governing boards invent the future.  Management, on the other hand, is the act of implementing policies and making decisions that commit resources to fulfill the mission:  the commitment to carry out today the tasks that will lead to tomorrow.  In a profound sense, management is the process of inventing today.

 

Organizations require both governance and management for healthy growth and vitality.  Management without governance is form without substance; governance without management is essence without form.  Governance and management, then, link together in a partnership that leads the organization.  This is the only CEO -- board relationship that works.

 

The relationship of governance and management expresses a balance of contributions and frailties and needs and power.  When that balance is tipped and no longer functions, the relationship deteriorates, and often ends with the CEO moving on.  Boards and CEO alike find themselves stunned and wondering, "How did things go so wrong?"  The search for reasons may need go no farther than our own limitations.

 

Who we hire.  Some rather benign tendencies may contribute mightily to unhappy circumstances between CEO and board.  Consider, for example, who gets hired and how.

 

While nonprofits seem to recruit the CEO they think they can afford, they do not often get the executive they need.  Once the candidate is hired, boards become frustrated that the new executive director does not have basic knowledge of operating procedures or basic accounting skills or basic fund raising techniques.  Learning the work of a chief executive while operating an organization is a very difficult task.

 

Sometimes, the board has not formed a clear picture of who the CEO ought to be.  In the rush to fill the position, boards often press for hiring a new executive before assessing the current needs of the organization.  Subsequently job descriptions are ambiguous, candidate interviews do not discuss critical issues, board/ceo roles are unclear.  Months later all are astonished to find the experience of the CEO is not broad enough nor skill level deep enough to respond to complex issues.

 

In some circumstances, executive searches may tend to emphasize one set of skills over another.  Search committees may say, "What we really need is a fund raiser,"  or  "We've got to have someone with knowledge of the program field," or they might latch onto another set of skills as essential for salvation.  Candidates are evaluated on their knowledge of specific issues rather than their ability to manage.   Such hiring practices invite disaster. A new CEO may find the job the board has hired her to do is not the task in need of the most immediate attention.  Peter Drucker in Managing the Nonprofit Organization proposes that one of the essentials for success for the nonprofit leader is to ask "What are the key tasks?" and subjugate his own interests to accomplishing those tasks.    Accordingly, boards may find it more productive to hire a CEO who is willing and able to grasp the situation at hand and fill those tasks in greatest need.

 

CEO Role Confusion.  Some of the troubles between boards and executives may rest in the confusion CEOs experience regarding their roles.  Here are a few examples.

 

CEO as Messiah.  Both board and executive fall into the trap of thinking the new CEO will solve all the problems, raise the money, and set things straight in the first "100 days".  The new director is looked upon as a messiah who can save the organization.  The pitfalls of this thinking are fairly obvious.  Executives tread water more often than they walk on it.

 

The trouble comes when messiahs attempt to answer issues largely from their own experience.  The horizons of such experience are generally narrow and disappointing.

 

Bridging the gulf between board and staff, CEOs develop people who often have more status and power and nurture people who have considerably less status and power.  In the face of such visibility, inexperienced executives attempt to always know everything.  Such an expectation isn't possible, let alone practical.  You can never be smarter than you are.

 

The mark of the leader is to listen carefully from the bottom up and top down; to make a decision or suggest an action based on merit regardless of who makes it. What is required of leadership is the willingness to make the final decision and once made, to commit the resources of the organization in the agreed upon direction.

 

CEO as protector.  Another example of role confusion can best be explained as "CEO as protector of the board".  An executive falls into this trap when she begins to sort out which critical issues to present to the board and which ones should be "held onto for awhile".  This thinking is generally not an attempt to organize information in a way that is easily accessible to the board, it's an attempt to decide whether to tell the board of a critical issue.

 

Speaking about failing solicitation efforts due to lack of board participation, a CEO has said, "if we get into that it will simply overwhelm the board and clog up the meeting."   When discussing a strategic planning process, one executive recently asked me, "How much time will the board be expected to invest?  I can't ask them for too much time; too many meetings and they get annoyed."

 

The chief executive need not protect his board from "taking up too much time", or "clogging up meetings" to discuss complex issues.  If the executive wishes to protect her board, she should protect them from wasting their time on minutiae, help fend off the lure of micro-managing themselves into apathy, and keep them safe from losing sight of their mission.

 

Symptoms of Systemic Disease.  The trouble with CEOs may be only symptomatic of larger issues eating away at the board.  The varieties of these cancers are legion and a surprising number of them are curable by re-focusing on basic governance.

 

Abdicated governance.    Boards or individual board members sometimes seduce themselves into thinking governance is management in black ink.  It is far easier, and less risky to oversee the buying of pencils than to decide when and how and who should pay for expansion in the homeless shelter.  One hears all the "right" reasons for the discussion on pencils:  resource conservation, financial accountability, providing assistance to the executive director.  But, the fact remains that pencils are an easier issue to resolve.

 

By the same token, hearing a staff grievance from a beloved icon of the corporate culture is more fun and a much easier task than determining appropriate board policies regarding unethical treatment of staff.

 

The result of both scenarios is the abdication of governance.  When a board has taken to routinely making management decisions it has abdicated the role of governance.  The danger is not whether or not the board can manage.  Most boards are constituted with corporate and community leaders who have highly developed management skills.  The danger, and often the tragedy, is that only the board can govern; only the board can fill that unique leadership role.  Executive officers who are attempting to govern (to make policy and hold the vision) while managing, eventually do neither very well.

 

Leadership by crisis.  While traumatic times often produce heroes, or at least, leaders for a season (Drucker, 1974, p. 9, and others),  some governing boards take the axiom too far.  In difficult times, boards attempt to manage their way out of crisis.  A case in point is the plight of a small community development organization.  When the executive director took another position, the board went into a panic.  They immediately assumed all duties of executive management, suspended the planning of an important fund raising program, forfeited all strategic planning and undertook an executive search.  Three months later they were exhausted, still in crisis, meeting weekly to handle the "business",  and disappointed in the quality of candidates for the position.  When asked, "Why don't you stop managing and go back to leading your organization?"  One board member, dismayed, replied, "There isn't time.  There's simply too much to do!"

 

He's right.  There is quite a lot for that board to do; not much of it has to do with paying electric bills.  This board might consider: revisiting their mission statement as the initial stage of conducting an internal assessment of the organization, suspending for a very short time program services, using that internal assessment to determine the key tasks (both now and within the next three years) to be performed by the new CEO, writing a job description to respond to those tasks and soliciting candidates based on this clearer idea of the needs of the job, and concentrating on garnering community support for their recovering agency.  While not as simple as keeping the books, these tasks would set the organization on the path toward solvency without depleting precious resources.

 

If a board is to lead an organization through crisis, such leadership seems best accomplished by holding to the mission, making policy that asserts the essential value system of the organization, and inventing the future (Carver, Boards that Make a Difference, 1990, p 17 - 30).  These are the same tasks required of boards in times of normalcy.  Crisis simply makes accomplishing these tasks a more intense activity.

 

Too many chiefs.  Boards often fall into a trap of creating committees to oversee every activity of board and staff.  Too many unnecessary committees establish an atmosphere of too many chiefs and too few leaders.

 

Many, many times, a committee of one or two people is more effective than any entity larger.  Such a committee may not hold formal meetings, may not keep prescribed minutes, but will do the task asked of them, report their activities to the board, and if the task is completed, will disband (O'Connell, The Board Member's Book, 1985, p. 86).  These characteristics are indicative of effective governance.

 

Executive committee as executive manager.  Boards and board members appear to believe in a great need for the executive committee to work with the executive officer.  Yet, when asked about the activities of this group, the answers are usually vague or cover the responsibilities of the CEO.

 

We have all heard many notions or myths about the need for executive committees:  they assist the executive director in the highest level of management decisions; they make board decisions in crisis; they oversee executive management and report their findings back to the board; they meet to investigate issues in greater detail than is possible at a full board meeting.

 

One board member suggested that an executive committee was needed to "manage the board".  The question came back, "Do you mean in terms of effectiveness?"  "Well, no, but there are some people who need guidance," was the reply.  She continued, "Would you have board members making decisions on their own?"  My reply: "If these decisions were being made at a board meeting, I think it's o.k."   "What if they make the wrong decision?"

 

There is only one legitimate reason to have an executive committee.  In very unique circumstances, the "executive committee" becomes the nomenclature of the governing board.  This assertion is particularly true in organizations that foster unwieldy, unusually large trusteeships.*

 

Otherwise, memory does not bring to mind any executive committee that had genuine responsibility or accomplished measurable tasks.  The danger of executive committees is that they tend to usurp the role of either the board or executive management.   Boards quickly place unfounded trust in their executive committees and rubber stamp most committee proposals.

 

If decisions or crises facing the organization are of such value and stature that they can not be answered by the executive director and can not wait for a regularly scheduled board meeting, circumstances surely dictate that the depth of knowledge and talent of the full board is required.  Prudence suggests that a special session of the full board will be the more efficient method of meeting the threat or opportunity.

 

If the desire of your organization is to have an executive committee, the board should pay particular attention to making policies that set the life span of this committee, describes its limitations, and clearly defines its purpose. 

 

Governance by personality.  This is possibly the most common cause of organizational mismanagement.  It is unfortunate and self-defeating, but many  organizations attempt to manage by personality.

 

This term may apply to the personalities of those holding key positions.  If the chief volunteer officer (or some other important board member) has a strong, dynamic personality, she is looked upon as a leader and the rest of the organization pays homage to her agenda; if the CEO can gain approval by wit or charm, he may acquire the power to put through his own objectives.

 

The problem here is that the task of the institution is subjugated to the personality performing the task.  Competition between board and executive may break out, splitting the organization.  What is a more benign but worse leadership position occurs when proposals submitted by the key personality do not get proper scrutiny.  Board and organizations become engrossed in committing to action bad ideas simply because no one questioned them.

 

The same thing can happen between the CEO and board as a whole.   Executive officers are deeply aware that they serve at the discretion of the board.  They know that boards tend to fire people based on personality. In general, executive managers are likely to address even the most trivial requests of individual board members before attending to the crisis at hand.  If promulgated by a board with a strong personality, management tends to agree to what might otherwise be absurd or preposterous assessments; they will certainly accept uninformed suggestions; and worry over unwarranted criticism, however slight. 

 

At other times, undue attention is paid to the personality of a large donor.  At a variety of board meetings, one hears, "Mrs. ___________ has been very generous in contributing a million dollars to the outpatient clinic, shouldn't she have a say in who becomes its new director?  Should we set up meetings with her and the finalists?"  Unless Mrs. ____________ is going to sit on the legitimate governing body of the new outpatient clinic, there is no rationale for including her in the selection of its director.  Such inclusion invites her to rule when, as her gift indicates, she wishes to lead.

 

In another setting, we might hear, "My foundation is paying the salary of the new executive director.  I'll interview the three finalists before they go to the board.  Of course, the board will have the final decision, but perhaps the search committee would like the benefit of my advice."   Other than exerting indirect control over the institution, what purpose would this person's advice serve?  

 

In the hiring process and, to even a greater measure in the firing process, boards pay too much attention to personality.  First impressions help form our initial subconscious assessment of an individual.  Is she funny? Is he sexy? Is that one a mousey bookwormish type pouring over accounts for answers?  Is this one power-driven, willing to do anything for self-gain? 

 

We say, "Sam has good chemistry with his board."  That is, Sam's personality and the board's collective personality agree with each other.  It seems unlikely that we would hire anyone on a positive assessment of the person's ability to do the job if we did not like them initially.

 

Since attention to personality is such a universal human trait, what's wrong with using it as prime criteria for hiring and firing?  The focus is not on the organization and what might be accomplished, the focus is on those who are purported to lead the organization.  In such cases, mission can quickly get lost, clients are forgotten, attention falls to gaining and keeping power, boards are reluctant to make decisions for fear of incurring wrath, executive directors are reluctant to manage for fear of incurring wrath, it becomes easier to spend time on the trivial, and supervising the purchase of pencils again becomes an accomplishable task when envisioning tomorrow is hopeless.  Frustration builds, fundraising wanes, opportunities slip past, threats loom large, boards become apathetic, and executives lose their jobs or leave voluntarily.  All of these things happen -- all of them are avoidable. 

 

Stepping around the traps.  Boards and executives can avoid some troubles by simply avoiding the traps.  There are a few simple, common sense approaches to nurturing the relationship between board and CEOs that are often overlooked until crisis strikes.

 

Take a little time to learn the territory  This advice applies both to executives and board.  Before accepting a position, CEOs should read the mission statement and program descriptions, review financial statements, and look through the strategic plan.  As soon after being hired as possible, they should speak individually with all board members to get an idea of individual agendas and objectives.

 

Boards, on the other hand, should conduct at least a preliminary institutional assessment to determine the critical issues, examine institutional goals and objectives, and decide the key tasks.  Such knowledge will describe the depth and strength of leadership required of the next CEO.  This information will provide a platform from which the board can draw up a suitable job description with specific qualifications and position objectives.  The executive search committee, then, will have measurable criteria to use in the search.

 

When evaluating candidates, set priorities for criteria.  Decide on what is absolutely indispensable, what is necessary, what is prudent, and what may be trained.  Agree on a qualitative ranking order for these attributes and rank each candidate after his interview.  This should become the basis for each candidates eligibility.  (O'Connell, 1987, p. 72, 73).

 

Do not accept a candidate primarily on pet issues such as the importance of having experience in the program field or the importance of being from the community.  These may seem to be genuine concerns, but they should not be compared to years in management, number of people supervised, or specific achievements as a manager. 

 

Let governors govern and managers manage.  Keep the roles of management and board distinct and separate.  Boards should let those who order pencils do it;  the work of the board is much more important than that.  If your board is obsessed with tasks related to holding the mission, resources, and future of the organization in trust for the community, there will be little time or talent for ought $else.  As we have seen, executives are better off managing the organization instead of manipulating the board.

 

Become partners in leadership.  The board and executive are colleagues, equal partners in leadership.  As the board is accountable to the community, the CEO is accountable to the board.  Nowhere is Benjamin Franklin's admonition more appropriate, "...now, we must all hang together, or we shall surely hang separately."

 

Hold to the mission.  Organizations that do not define success generally can not attain it.  If we are to resolve our troubles, we will subjugate our own ambitions and agendas to the task of the organization.  We will hold the mission out front and commit every shred of leadership ability we have to the service of that mission. To do otherwise is a waste of time.

 

The trouble with CEOs.  Anyone who has survived the experience will agree that changing executives in the best of circumstances is a careful and taxing process, in the worst case such transitions become an ongoing crisis exerting tremendous drain on institutional finances, energy, commitment to mission, and personal stamina. 

 

If we develop anything, if we produce anything, we develop people.  We develop clients, volunteers, staff, boards, and even chief executive officers.  The trouble with CEOs may not merely be poor judgement in the hiring or inexperience in the CEO.  If we look deeper for our answers, we may discover that dissatisfaction with our CEO may be symptomatic of deeper problems with the organization.  A search for meaningful answers is the first step in making a recovery.