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When a CEO Exits (or Should) – What Are the Board’s Options?

CEOs of for-profit and nonprofit organizations typically come and go. Those executives that for an extended period may be highly valued for their demonstrated skills and accomplishments. One CEO I know has reached a 30 year anniversary and is still innovating. Other CEOs, including organization founders, may remain on the job past the point of growth. The nonprofit environment can be a comfortable workplace—a board member I once interviewed remarked that his long-serving CEO had a great “deal.” He meant the nonprofit wasn’t even close to its potential.

I’ve even encountered CEOs who admit that they can run the organization on automatic, convinced that new challenges will be similar to those of the past.

Perceptions like these call for a board to engage in some form of succession planning to both prepare the organization for a time when the CEO must be replaced—and to periodically assess his/her performance in terms of position tenure. These discussions may be difficult, particularly when a long-serving CEO is accorded a high level of deference for a number of overt or subtle reasons:

  • With the average board member having a median tenure of four to six years, directors can take on a short-term view of their relationship with the organization. Succession planning is not a high-priority topic unless it is forced on the agenda by termination or resignation.
  • Based on likable characteristics, some long-serving nonprofit CEOs

May have simply “minded the store.” Performing with little creativity but satisfying board members with a stable operation that meets financial standards. This includes low single-digit growth levels with revenues meeting expenditures and perhaps a modest surplus.

  • Often the CEO is the only one who has the organization’s “institutional memory” of past successes and failures that board members are hesitant to challenge.
  • Even under egregious circumstances, boards may be hesitant to remove a long-serving CEO. In some cases, boards themselves have had to be removed by the state attorney general when they have refused to terminate a CEO with an overt fraud record.

The CEO’s Behavior and Succession Planning.

In my opinion, most nonprofit boards will rarely replace a long-serving CEO performing to modestly acceptable standards. However, a well-developed succession plan can be a vehicle for motivating change. The board and the CEO need to annually review the projected requirements of an executive director to head the organization.

Interim Succession of the CEO

Every nonprofit board needs to have this plan in position in the event that the CEO is incapacitated for a long period or has given short notice to take another position. The discussion usually has to center around whether or not a current staff person can be appointed or an outside interim person(s) needs to be identified.

Staff Succession

Every nonprofit board has an overview responsibility to be able to identify promotable senior talent in the organization. As part of this responsibility, the board has to become aware of the strengths and weakness of those who can be promoted to senior management positions

CEO Succession

Annually the CEO needs to be asked to outline plans to creatively approach continuing challenges and/or experimentally address new ones. In addition, both the board members and CEO need to have a discussion on the skills or abilities the CEO should have three to five years from now.  This places the board in a position to recruit a new CEO if the current one resigns. It also allows the CEO to think about opportunities for his own growth.

Dr. Eugene Fram
Dr. Eugene Framhttps://non-profit-management-dr-fram.com/
Eugene H. Fram, Ed.D., is an expert in nonprofit governance, a business consultant and an award-winning emeritus professor of the Saunders College of Business at Rochester Institute of Technology (RIT). He is also the author of six books and more than 125 published articles and has been widely quoted by national media on topics ranging from business to high-performance nonprofits. His blog platforms on nonprofit governance have in excess of 3500 followers. He is a past recipient of RIT's highest award for outstanding teaching and one of a very select group awarded the Presidential Medallion, given to those making exceptionally significant contributions to the university. In 2012, a former student anonymously contributed $3 million to endow an RIT Chair in Critical Thinking in his name, an honor Dr. Fram describes as "a professor's dream come true!" Over his distinguished career, he has served on 12 nonprofit boards overseeing diverse community, national and professional organizations, and also has served on five for-profit boards. His particular passion is helping nonprofit boards perform at high levels as more is expected of these boards today than most people realize. He is the author of Going For Impact – The Nonprofit Director's Essential Guidebook: What to Know, Do and Not Do, and POLICY vs. PAPER CLIPS - How Using the Corporate Model Makes a Nonprofit Board More Efficient & Effective.
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