by Dr. Kevin Dean, President & CEO, Tennessee Nonprofit Network
You’ve seen it happen before: a board member of a nonprofit organization resigns from the board to become the CEO of the nonprofit. While this may happen often, the optics of this aren’t always….um….great from the perspective of fairness and transparency, especially without great communication that lays out the process for stakeholders. So let’s say you have a leadership position available at your organization, and an eager board member has their eyes on the CEO prize. While this isn’t necessarily a red flag, it definitely requires careful handling to ensure fairness, transparency, and maintain that good ol’ community trust.
Wearing Two Hats Can Be Problematic for a Board Member Who Also Becomes a Staff Member
First, let’s address the even stickier situation of a board member wearing two hats at once as a board member and a paid staff person. Can a board member be a paid CEO at the same time? While it might be tempting in some situations, it’s generally not a good idea. It’s like trying to play the drums and the bass at the same time – it’s just too much! The potential for conflicts of interest, blurred lines of accountability, and damaged trust usually outweigh the benefits. If it’s absolutely unavoidable in the short term, make sure you have strong governance practices in place, including independent board members, clear conflict of interest policies, and open communication with everyone involved. Don’t ever forget that the goal should always be to separate those roles eventually to keep the band playing in harmony.
When a Board Member Wants to Resign from the Board to Become the CEO
But back to the board member who wants to resign from the board and become the CEO. What does this situation mean? Think of it like this: your nonprofit is a rockin’ band, and the board is the band manager, making sure everyone hits the right notes and the music keeps flowing. Now, imagine the guitarist suddenly wants to be the lead singer! It could be awesome, they might have the chops for it, but it definitely changes the band dynamic.
Here’s why this situation needs extra attention:
- Accountability Jam Session: The board’s main gig is to keep the organization humming and the CEO in check. But if a board member becomes CEO, who’s going to provide that oversight? It’s like the drummer trying to critique their own solo – a bit awkward, right? This lack of checks and balances can lead to power imbalances and potential missteps, which can damage trust and hurt the organization in the long run.
- Money Matters: The board also handles the dough, including the CEO’s paycheck. If a board member suddenly becomes the CEO, it can raise eyebrows about whether decisions are being made for the good of the organization or to line someone’s pockets. Transparency is key here to avoid any “funny business” vibes. Your auditor and CPA will definitely not love this Sarbanes-Oxley stickiness.
- Insider Info Overload: Board members are in the know. They have the inside scoop on the organization’s strategies, finances, and maybe even some juicy gossip. This gives them a major advantage over other candidates vying for the CEO spot. It’s like knowing the questions on the final exam beforehand! How can you have an equitable hiring process if applying former board members have the advantage?
- Favoritism Frenzy: Even if everything is done by the book, the optics of a board member becoming CEO can create a perception of favoritism. People might think it was a done deal from the start, and that can erode trust and make folks feel like the process wasn’t fair. Awesome applicants may not apply because they assume (rightfully) that the board member will probably get the job? We’ve seen it happen again and again.
Okay, so how do you navigate this potential minefield and ensure a smooth transition? Here’s your guide to rocking this change:
1. Honesty is the Best Policy:
- Shout it from the rooftops! Don’t keep it a secret. Let your staff, volunteers, donors, and the community know that a board member is interested in the CEO position. Explain why this might be a good fit and how you’re going to ensure a fair and transparent process.
- The interested board member must resign immediately. Once the board member expresses interest in the position, they should resign from the board immediately.
- Lay down the law (nicely, of course). Clearly define the qualities and experience you’re looking for in a CEO. Make sure everyone knows what the “rockstar” criteria are.
- Have a transparent and open executive search. Create an executive search plan and stick to the process! Keep it fair, and treat the board member like any other applicant. You will definitely want to consider an outside search consultant or firm to keep this process fair.
- Keep a record. Document everything! Keep track of applications, interview notes, and the reasoning behind your final decision. This shows you’re serious about the process and helps avoid any “he said, she said” situations later on.
2. Level the Playing Field:
- Assemble the A-Team. Create a search committee made up of independent board members, community representatives, or even outside experts. This crew will be responsible for leading the search and ensuring a fair process. Again, consider bringing in an impartial consultant to guide the process.
- Think outside the box (and the boardroom). Don’t limit your search to people you already know. Cast a wide net and actively seek out diverse candidates with a variety of backgrounds and experiences.
- Go incognito. Use screening techniques to remove names and identifying information from applications during the initial review. This helps prevent unconscious bias and ensures everyone gets a fair shot based on their qualifications.
- Keep it consistent. Develop standardized interview questions and evaluation criteria to ensure every candidate is assessed on the same playing field. Think of it like a structured jam session where everyone gets to play the same song.
3. Communication is Key:
- Create a communication plan. Map out how you’ll keep everyone informed throughout the process. Provide regular updates, offer opportunities for feedback, and make sure people know how to voice their thoughts and concerns.
- Keep those lines open. Encourage open and honest communication between the board, staff, and the community. Create a safe space for people to share their opinions without fear of being silenced or ignored. People have the right to be concerned and ask questions. Limiting, prohibiting, or punishing concerns is a BAD look, especially when a board member is in the running.
- Be a responsive roadie. Answer questions and address concerns promptly and honestly. Show everyone that you’re listening and that their input matters.
4. Avoid Conflict-of-Interest Chaos:
- Step aside. Any board members who are close friends or have a personal connection with the candidate should recuse themselves from the hiring process. This means no participating in discussions, reviewing applications, or voting.
- Take a breather. Consider a “cooling-off” period between the board member’s resignation and their potential start date as CEO. This helps create a clear separation between the two roles and avoids any appearance of impropriety.
- Money talks, but independently. Have a separate group of independent board members determine the CEO’s salary and benefits. They should use market data and compare similar positions to ensure the compensation is fair and reasonable.
Sure, having a board member become CEO could be awesome. However, it could also be a nightmare if it is viewed as unfair and inequitable by your stakeholders. You have to create a fair process and stick to it, and your entire organization must be on board with the process (one board member sharing information with the former board member/applicant, for example, destroys trust and transparency). Just remember to follow these tips and embrace transparency and open communication so that you can navigate this potentially tricky transition with grace and ensure your nonprofit continues to rock on!