Category Archives: Great Boards Blog

Does a Nonprofit Executive Director or CEO Need an Employment Contract?

I’ve had a very interesting and challenging couple of months this summer!  I supported the board of a mid-sized nonprofit in their efforts to find a new executive director.  I’ll share more about the process, what we learned, where the problems were and how we overcame them in a future blog post.

One of the most challenging parts of this process came right at the end. It involved drafting and negotiating the employment agreement (it is a contract but is usually called an “agreement”) with the successful candidate in the search and selection process.

The big question is “Should an ED/CEO have a contract?” This question applies equally to newly hired EDs and to EDs who’ve had years or decades in their roles.

It appears that the default and long standing answer for most nonprofits has been “no contract required”.  This is because it feels daunting for board volunteers, time consuming, expensive (lawyers are involved) and perhaps even unnecessary (we are a trust-based sector are we not?).

Truth is, the vast majority of long serving EDs have never had a contract and likely feel that it is wholly unnecessary to create one after five, ten or even twenty years. Contracts appear to be more common among very large nonprofits, some of which have a national or international scope.

While “no contract” is the most common practice in the sector, it certainly does not represent best practice ( which is what we are moving toward).  Anecdotal data suggest that new EDs are asking their boards to negotiate a contract.  Some long term EDs are also asking their boards for employment contracts as well.

Contracts for employment should not be confused with “contracted employees”, who may be self-employed, interim, acting or temporary in their roles, and “contractors” who perform specific tasks or complete projects or services.

EDs who have a contract or employment agreement are in fact salaried employees who are entitled to normal employee benefits. The agreement or contract spells the details or conditions of employment including important items such as notice or severance if the ED is dismissed without cause.

Without doubt, to ensure that both the employer and the new ED understands what is being negotiated and agreed to , contracts should be in plain language. However, during my most recent experience, it was not easy to find legal counsel with expertise in employment law who also understood how to craft a plain language contract. It would be folly for anyone without legal expertise to attempt to draft a plain language contract.  I also drew a blank when I contacted several executive directors whom I knew had signed contracts recently – none came close to meeting a plain language expectation.

My advice is pretty simple:

  • To anyone who is considering a new position as a nonprofit ED, ask for an employment agreement and carefully read, seek independent legal counsel and negotiate any clauses to protect your best interests.
  • To any nonprofit board who is hiring a new ED, spend a little money (a decent traditional agreement should cost no more than $1,500.00 to draft) to protect the interests of your organization.
  • To any organization, board of directors and current EDs (regardless of your years’ of service), open a conversation with each other about whether an employment agreement could be mutually beneficial and whether it could prevent misunderstandings or legal issues down the road.

In my next blog, I will share with readers a few of the lessons learned from the ED search and selection process I helped out with this summer. Stay tuned!

The Toughest Issue Facing Nonprofit Boards Today?

 

It’s often the elephant in the room. Many board members think about it, but no one wants to bring it up. It often falls to the executive director to broach the topic and when she/he does, there’s a mix of relief and fear.

What is this issue?

The retirement or pending exit of your executive director or CEO.

If you’ve already talked about the fact that this day will come – that’s awesome – you’ve taken the first step.

If you have a written succession plan (not a “successor plan” – they are very different) for both emergency and planned departure of your executive director, then you are ahead of more than 80% of nonprofits.

Doing succession planning is kind of like knowing you should eat healthier and work out. It’s easy to know you should get started NOW, however it’s much harder to take real action. This is especially true when both the board and the ED are not entirely sure what the process is and what the end result should look like.

When I began to research my latest book Following the Leader – Executive Succession for Your Nonprofit, it was immediately clear that we have very little real-life experience with the process and the product, namely the written succession plan itself.

Despite the fact that about 9% of executive directors in the sector are retiring or resigning each year, the majority of nonprofits are doing no advance succession planning.  Search and selection for new EDs is getting more difficult as competition for qualified senior executives increases.  In Canada more than 10,000 new executive leaders are needed each year.

While I’d encourage you to check out Following the Leader at www.silvercreekpress.ca, let me give you some quick tips to get you started on the succession planning process.

  1. Start talking about the “what, when and how” for both an emergency succession plan (ESP) and planned departure succession plan. The executive director should create the ESP, identifying who will be appointed in her/his short-term expected or unexpected absence. The plan should include cross-training of this person (who is often a current senior manager) and back-filling the acting ED/CEO’s workload. This plan should go to the board for a motion of approval. The ESP should be reviewed and if necessary, revised annually.
  2. The board must work with the ED/CEO to develop the planned departure succession plan. Leaving it all to the board to complete means it will be a long tough slog for volunteers. If resources allow, hiring an outside expert to facilitate the process will keep things on track making the outcome 100% certain within a reasonable timeframe of three to six months. In most organizations, it is the ED/CEO who initiates the process, so she/he should take some time to first become educated on the steps required. Sharing information with the board will help make the task less overwhelming and make board members more willing to step-up and become involved. A planned departure succession plan can be developed a year or more in advance of the ED/CEOs departure. Details can be added and the plan tweaked when the actual date of departure is known.
  3. Prepare to spend both time and money on recruiting a new ED/CEO. Most mid- to large-sized nonprofits are choosing to use executive search firms to guide the ED/CEO search and selection process. Ask for quotes (proposals) from two or three firms or individuals who have experience doing executive recruitment in the nonprofit sector. A word to the wise, for board volunteers without paid staff support, the search and selection process can be time consuming and difficult. It is important for candidates to have a positive impression of the board and organization during this process.
  4. Prepare to negotiate salary, benefits, professional development, vacation time, travel allowances and a host of other details. Engage competent legal counsel in preparing a contract that spells out the conditions of employment.
  5. Plan for a period of transition but do not make the overlap of the exiting and incoming ED too long. A couple weeks is usually sufficient, especially if the exiting ED/CEO can be available by telephone or email for quick questions for a month or so following her/his departure.

How about signing-up for 3 free online board workshops that kick-off Great Boards – The Video Course? You’ll receive the 3 workshops plus a free ebook copy of Great Boards – Plain and Simple.

Head on over to:

https://videos.learningforleaders.ca/p/great-boards-ebook-3-workshops

 

If you have comments or questions on this or other topics, please drop me an email to [email protected].

All the best and keep on learning!

Paula

 

 

Some Great Questions from Nonprofit Leaders!

 

It seems that spring is the season for all things board- related to be popping up in my inbox.  In addition to doing live and online training with nonprofit leaders, I have a pretty lively coaching practice.

Coaching nonprofit leaders (be they executive managers or volunteer board members) is my “candy”.

Seriously, who can resist the really cool questions like:
  1. Do we need a board motion to hire our new Executive Director?
  2. Should our board have a personnel or HR committee?
  3. What is the right way to handle a budding romance between a board member and staff member?
  4. Should a board member be given access to employee names and home phone numbers?
  5. What’s the right way to do an employee satisfaction survey?
  6. Who does the Executive Director officially report to?
In order, the answers are:
  1. Yes a motion and vote is necessary for legal reasons. Ideally the vote to appoint to the new ED should be unanimous.
  2. If you are a policy board or a policy governance board, HR or personnel matters belong to the paid senior managers and no personnel committee is needed. However, if your board is an operational (hands-on or grassroots) board, then a personnel committee may exist, but have a lively board discussion to be sure you actually need this committee. Discuss the possibility that one or more managers would be more efficient, effective and knowledgeable in HR matters than a committee of board volunteers.
  3. Does your Code of Conduct governance policy (you do have one right?!) speak to this possibility? If not, the board member should step down. She/he could be appointed to a committee or to another volunteer role. If the personal relationship ends, she/he could be re-elected to the board at the next AGM. The delicate part is often deciding who talks to whom. The “right” way is for the ED to meet with the board chairperson to identify the issue. The board chairperson could address the issue either directly (and tactfully) with the board member (face-to-face of course), or she/he could call a meeting of the executive committee or finally may hold an in-camera session at an upcoming board meeting. And now that you have it all figured out, write a new bit of policy for your Code of Conduct guidelines.
  4. If your board is a policy or policy governance board then the answer is No, she/he cannot have a list of employees and their home phone numbers. I cannot imagine a legitimate reason for a board member to have access to this highly confidential information. If there was one, employees would still have to give written consent before the information is released.
  5. It depends … best practice for surveys now use an automated platform such as SurveyMonkey – making responses anonymous and confidential which also helps increase return rates. Results are faster (but not fast) to summarize. If you are thinking about revamping your survey and need a bit of help (I’ve done hundreds for a variety of nonprofit organizations)… send an email to [email protected] and we can chat about best practices.
  6. The ED reports to and is accountable to the board as a whole. The chairperson or president of the board is not the ED’s immediate supervisor or “boss”, however the volunteer in this position often has frequent contact and the strongest relationship with the ED. This sometimes gives the impression that the chairperson is the immediate supervisor of the ED and can be the source of some uncomfortable confusion about who reports to whom!
This brings me to another interesting question:
Who should be your in-house expert in your organization on matters related to board governance and best practices?
Answer: It is the executive director or CEO.  It’s the only leadership system that works – the ED is the repository of organizational history and is the only true constant (for years or decades) at the most senior level of leadership. Board members will rotate every two or three years, and it is the ED who will step up to support new members learning, consistent practice, orientation to governance policies and a host of other agency related things.
So, if you are an ED reading this blog keep being curious, keep reading, keep watching videos. (Oh, nice segue …)
You can sign-up for a copy of my best-selling book Great Boards Plain and Simple (ebook for the full book) and for 3 free board training workshops at:
3boardvideos.learningforleaders.ca
You can also sign-up for 3 workshops for nonprofit supervisors and managers at:
3freevideos.learningforleaders.ca
And, you can check out my 6 books for nonprofit leaders at:
silvercreekpress.ca
All the best,
Paula