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Responsibility #2: Selecting the Chief Executive

June 06, 2013

The CEO is the Captain of your ship, choose wisely.

The second most important job of the not-for-profit Board is the selection of the organization’s chief executive. This may be the executive director, or the president; but regardless of the title you place on this position, it is clear that this is the highest compensated position at the not-for-profit organization.

Many organizations start out with no employees and the Board actually performs two functions. They are the governance Board and a working Board since all of the activity at the organization is performed by Board members or other volunteers under the direction of one or more Board member. Sometimes these organizations will make an initial hire (the first compensated organization employee) and that person is more of an administrative job rather than being the CEO. So, the first concept that I want to plant is that an organization’s initial hire may not necessarily be the chief executive position as this blog will use that term. Boards in this situation should be careful in that initial hire so that both the employee and the Board realize that this is not a CEO position.

When an organization hires a true chief executive, that individual is primarily responsible for carrying out the strategic plans and policies established by the Board. That individual reports to the Board. In larger organizations, the Board interacts with the organization only through the CEO. The CEO may request that a Board member with a certain skill work with a specific employee for a time, but conceptually, the Board directs the CEO and the CEO directs the rest of the organization’s employees. An organization chart should have a direct line from the Board to the CEO and no lines from the Board to any other employees.

The first step that the Board must address in hiring a CEO is to reach a consensus on the CEO’s responsibilities. This will be documented in the form of a job description. Some of the CEO’s role that will be described may include their leadership role: advising the Board; advocating for the agency; and supporting and motivating employees.

The Board should decide on the degree to which the CEO should be a visionary guiding both the Board and employees on the organization’s future challenges and opportunities. Another key role is that of decision maker. To what extent will the CEO involve the Board in decisions? The fact that this may change and evolve over time does not mean that the current state need not be documented in the current job description.

The CEO’s role as manager is one quality that is frequently misunderstood by Boards. The tendency is to select an individual with specific expertise related to the organization’s mission. That might be an environmentalist, human service professional, athlete, etc. However, all not-for-profit organizations are primarily businesses with a not-for-profit mission rather than a profit goal. The need to manage the organization’s human, financial and physical resources toward the achievement of the mission is the primary CEO responsibility. If finding a mission-experienced individual with managerial expertise is difficult, I suggest Boards discount the need for mission experience in favor of managerial talent.

The last role that I believe should be considered when designing the CEO job is that of Board developer. While it is true that Boards are self-perpetuating and must attend to their own evolution, the CEO is best suited for identifying the Board-level needs of the organization. In addition, regardless of the experience with which a new Board member comes to an organization, that individual still needs to be introduced to the organization and brought up to speed on its history. This is a task that is best suited for the CEO rather than a Board committee.

I like to think of the CEO as the captain of the ship. The entire organization will take explicit and implicit direction from this person. Apart of establishing the overall direction for the ship, hiring the captain is the most important task facing the Board.

Read more on not-for-profit boards:
Responsibility #5: Ensuring Legal and Ethical Integrity and Maintaining Accountability
Responsibility #4: Accessibility of Resources
Responsibility #3: Providing Proper Financial Oversight
Responsibility #1: Mission & Purpose

As one of the largest CPA firms in Boston, KLR is unique because they service over 220 not-for-profit organizations with compliance and consulting services. We have extensive experience helping Nonprofit organizations regarding boards, and board responsibilities, charitable contributions, taxes and 990 filing requirements. The KLR Nonprofit team is active in our local community and not-for-profit organizations, visit our Facebook page to see photos from our latest volunteer event.

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