A Nonprofit Board Has A Problem With A Recently Hired CEO – What To Do? Revised/Updated

A Nonprofit Board Has A Problem With A Recently Hired CEO – What To Do? Revised/Updated
By: Eugene Fram

With some possible variations, is the following scenario is one that is frequently repeated elsewhere?

• The nonprofit board had engaged, Joe, an experienced ED, as President/CEO of human services counseling agency. The prior ED had been in place for 25 years, and was evidently unwilling to move to meet changing client needs. For example, the agency only offered counseling services five days a week, 9 am to 5pm, with hours extended to 8 pm on Thursday night. There were no client options for emergency calls during nights or during weekends.
• Joe had been in place for about 6 months making some changes, evidently in an authoritarian manner. The board heard about the staff’s dissatisfaction with Joe’s management style, met with Joe and the staff together and decided to leave Joe in place. It was assumed that he and the staff were capable of healing the rift.
• However, three outside forces then came in to play. First, a trade union heard about the staff’s dissatisfaction and assigned a recruiter to enroll the professional staff as a chapter of the union to bargain for wages, benefits and working conditions. (The union already had a local governmentally supported human services unit as a member chapter.) Second, the agency was a very old one, and a group of community leaders,
fearing this problem would cause the termination of the agency, formed an unrequested advisory group called, “Friends of ABC.” Third, the United Way gave the agency 6 months to provide evidence that the problems were subsiding, or it was going to substantially reduce, the large portion of the agency’s budget it provided.
• Joe’s management style did not change. He was terminated with a six-month pay package in order to avoid a legal suit.
A strong president/CEO then was fortunately hired, who was well known in the community, was an experienced social worker, and had union negotiating experience.
• The professional staff decided to join the union.
• The new president/CEO remained at the helm of the agency for 25 year, bringing innovation and change. However, the professional staff remained in a union chapter. Mistrust was hard to breach.

This is a case with which I was involved as a board member. Based on your experiences, to what extent have you noted a similar pattern?

• A nonprofit board misjudges the requirements for filling the chief executive position.
• Organizational discord becomes a problem.
• The board is slow in taking action, by trying to give the new executive time to resolve the problem.
• The board then terminates the chief executive for failing to meet objectives or because there is substantial organizational discord.
• Groups in the community become involved in the organization’s internal problems.
• The chief executive is fired.
• A new chief executive brings change, but there is still a feeling of mistrust that permeates the communications of the agency for decades.  The union continues to be the bargaining spokesperson for the professional staff, long after most staff members involved with the situation have retired  or taken other positions.

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22 comments

  1. Gene, I have experienced almost this exact situation. The CEO had a personality that was different depending if on the audience. When discord and leadership collide, it has to be a serious discussion as the mission maybe in jeopardy. Trust with donors, trust with staff and trust with the Board far out weighs the interest of one.

    It was a stressful situation as the board had believed they hired the best candidate for the position. He actually did very well in re-focusing the organization unfortunately he did it at the expense of 100% turnover and up setting the international organization. Cultural fit is paramount when bringing in new senior executives.

    Tim

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  2. I have observed this happen first hand on 2 occasions, once the flaw lied with the CEO and the other with the board. Many older organizations which were created to enhance the lives of various subgroups were forked by parents or other advocates in an effort to provide unmet needs. At some point, one must truly become a professional board yet these individuals were advocates/parents and community representatives who had heart but not the business acumen necessary to not only keep an organization stable but to help them soar to the next level and so on. A good organization will have both a professional yet invested board with the experience and knowledge enough to be able to fill a CEO level position with the best possible outcome. A good CEO will work with a board together to ensure the best possible outcome

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      1. Perhaps more of this discussion regarding all too common leadership shortfalls could/should focus on the board/staff relationship? Some will say this does not exist/should not exist, yet an ED/CEO must deal with this every day whether it is identified or not.

        I stepped in to chair a board that was weak for too many years; staff, led by a well loved ED that had not been managed by the board had been accustomed to making all decisions regarding programs, demographics served, strategic plan and even policy to a large extent, all without regard to outcomes or evaluation. Problematic on every level you can imagine. When changes began at the board level, the ED resigned and staff were entirely distrustful of all decisions going forward. Enter a new ED and it became an even bigger mess.

        Although training was necessary for both the board and the staff regarding roles, I was highly aware that we needed staff buy-in. After a rocky start, the rest was implemented with careful work to restore relationships. (We used the premise of Peace Maker Ministries–highly recommend).

        It cannot be overstated that staff and board members have responsibilities which require careful training to understand. When they don’t, there is an enormous amount of perplexities that can arise.

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      2. Julie: Exactly the same type of situation I encountered. You are to be congratulated≤ for your leadership. What most people don’t realize is that nonprofits are often “flat” organizations and staff is one one two level distant from the board, which changes frequently. They can fear that any board change can affect their jobs or status.

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  3. I agree that the importance of culture cannot be overstated, but it is also difficult to know what skills are required at what stage of organizational development. I would also add that anyone who became CEO of an organization under those circumstances (a 25 year previous reign) and tried to make changes was likely to encounter significant resistance — though it appears that the personal style of the CEO in this instance exacerbated the problems. It seems to me that the central question is whether the the Board could realistically have known better? I think the answer is likely “no.”

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    1. The board should have anticipated the problem. It included a number of experienced well-educated people, including the HR VP of a Fortune 500 company.

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      1. This was done, upon the abrupt firing of the dysfunctional ED. Fortunately, he was a well-known veteran manager about to retire from a neighbor agency. Was in place six months and met with a board committee monthly.

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  4. I was involved once in a similar situation where I served as the hiring committee chair. Interesting enough, the social service agency staff came to us during the process requesting to be part of it. I recall meeting with the key managers, about 12 or so, and it became evident that their input was not only valuable but critical to the success of our process. Fortunately we made the right hire.

    I have never forgotten this and always recommend that staff be represented in the process. The culture shock of having a new CEO after many years is very hard for staff to accept and adjust, even if the individual is the right person. There is always one or two who cannot handle the change.

    Allan Schneiderman

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    1. Allan: Excellent suggestion. Also may help to develop a better partnership between the board, management and staff, if handled properly.

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  5. Interim CEO’s are usually a good idea, especially after a long tenure by a CEO. One thing an interim should do is thoroughly assess the situation and help the board and staff plan for changes that need to be made to respond to the environmental, policy and demographic changes.

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  6. This is a good example of why the use of Interim Executive Directors is evolving to be a best practice in the non profit field. The board benefits from an objective assessment, done internally, the staff benefits from someone coming in, usually more experienced than the organization can afford, who has no agenda other than giving the board and staff the way forward for a healthy and sustainable organization.

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    1. Janice: Agree. It also requires a non;profit board to have identified potential interim successors. In his instance, the board was very fortunate to have a person ready to retire who worked two blocks away!

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  7. How long should an interim ED be in place? Should it be a set period of time predetermined by the Board, or is it left to be an open situation? What would you consider to be the primary goals of an interim ED?

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    1. Joan: Depends on the need to complete the search for the new chief executive. Can be as short as several months or as long as several years. It is a situational decision. Depending on the need- to develop stability or to keep the organization on a planned stable course until the new chief executive can be hired.

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  8. It sounds to me that both the board and the CEO were being reactive instead of strategic in advancing the organization. This is a common problem in nonprofit and profit-based organizations. If the organization had done the work properly to focus on Vision, Mission, and Values and create a strategic plan and organizational alignment around that plan that advances Vision, Mission, Values, then it is likely these problems would have never surfaced.

    The organizational strategic assessment needs to be a part of the hiring process and then an organic plan of which everyone takes ownership is developed in conjunction with the new CEO.

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