Step 5 – Employ and support a chief executive
Step 5 – Employ and support a chief executive
Nine Steps to Effective Governance
When boards of fully volunteer organisations find that growing governance and operational demands are beyond them they recruit their first paid employee. They often then struggle to let go of the operational reins.
The board needs to ensure that it really wants a CE (or equivalent) and is prepared to genuinely relinquish operational control.
Finding the right chief executive
Boards should:
- come to a shared definition of leadership
- resolve strategic and political conflicts
- actively measure the ‘soft’ qualities (people/relationships) in chief executive candidates
- beware of candidates who act like chief executives
- recognise that real leaders are threatening
- know that insider heirs often aren’t the best option
- not rush to make a decision.
The board needs to be explicit about the organisational culture that the CEO will be expected to model and lead.
Most hiring decisions are made primarily on the basis of easily identifiable or recognisable characteristics. Subsequent ‘firing’ decisions are almost always made on the basis of attitudes and aptitudes.
Process steps
What sort of person?
Develop an agreed description of the qualities of the preferred candidate.
There are four important sources of this information: staff, volunteers, board members and external stakeholders.
Searching and shortlisting
Which is the more expensive option – a thorough and professional recruitment process or years of organisational underperformance and/or a messy and expensive termination?
Use an external recruitment agency, if possible. Interviews and testing against agreed criteria will produce a shortlist for consideration by a board subcommittee.
Full board consideration
Have the full board meet the leading candidates and make the final decision.
Induction
Brief and thoroughly prepare the new CEO via a formal induction process.
Relationship with the CEO
It is important that the board is in agreement about what sort of relationship it wants with the chief executive.
For this to be successful:
- the role needs to be clearly defined
- mutual expectations should be explicit and realistic
- the CEO’s role at the board table must be understood
- the board must be kept apprised of all risks faced by the organisation
- delegations should be recorded and adhered to.
Delegating to the chief executive
The board’s operating assumption should be that the chief executive is capable of managing and overseeing all operational matters and the board should formally record the extent of its delegation to the chief executive.
The limitations approach is the most commonly used way to define the board’s delegation to the chief executive.
This requires the board to define what must be achieved (ends, outcomes, results) and then to set limits to the chief executive’s freedom to choose the means to achieve those ends.
This is more empowering for a chief executive than a prescriptive approach. With the board outlining what is unacceptable or unallowable, the chief executive can manage with the assurance that all other actions are permitted.
Preceding the specific categories in the delegation such as finance, marketing, public relations and membership should be overarching statements that set the wider boundaries of the delegation. These might include that the CEO must:
- not breach any statute, regulation or bylaw
- not act in an unethical, unprofessional or imprudent manner
- act in accordance with normal business practices and standards.
Whichever method of delegation is chosen, there should be no room for disagreement about what is or is not delegated and what it is intended to achieve.
Relationship with the chair
It is important that the chair and the chief executive have an effective working relationship but this should not be at the expense of the wider board-chief executive relationship. Preferably this relationship should be documented, setting out its purpose and limitations.
Supporting material
Approaches to documenting the board's delegation to the CEO (PDF 233KB)
Board-CEO relationship (PDF 176KB)
Chief executive performance criteria (DOC 72.0KB)
Chief Executive Performance Management - a three-part article on managing your greatest asset (and risk): Part 1 (PDF 159 KB), Part 2 (PDF 107 KB), Part 3 (PDF 118 KB), Issues 20-22
Chief executive's individual employment agreement (DOC 64.0KB)
Delegations and limitation policies (included in board charter) (PDF 74KB)
Eight basic expectations a chief executive has of his or her board (PDF 182 KB)
Is It Time to Intervene – Has Your 'Pitcher Been in The Game Too Long'?
Letter of expectation to incoming chief executive (DOC 24.0KB)
Performance review form (simple) (DOC 52.5KB)
Selecting the right chief executive (PDF 191KB)
Simple risk register (DOC 515KB)
Six ways boards undermine chief executive accountability (PDF 189 KB)
