Unfortunately, there are times when a nonprofit board is forced to initiate the parting of ways with its executive director.
In some situations, the cause is clear and urgent, such as illegal acts or other gross misconduct. In other instances, such as those involving performance issues, there may have been a gradual buildup of the reasons and rationale. Whatever the cause, here’s what the board should do before the termination. (Click here for advice on what to do after you’ve fired your executive.)
- Make sure you’ve exhausted all reasonable and practical options. Of the 120-some executive transitions that I’ve helped nonprofit boards navigate, regrettably, some have involved terminations. It’s always an out of the ordinary and challenging experience for the board — they’re venturing into unknown territory. So, my initial advice, especially if the termination is for “performance reasons,” is to ask what actions the board has taken to turn the situation around. In other words, have they exhausted every reasonable and practical option, and is firing the executive their only alternative?
- Ensure that your process is fair, compliant, and advised. My next questions for the board are: Is there an employment contract? What do your personnel policies say? And have you talked to an employment lawyer?
- Your personnel policies and the executive’s employment contract are your roadmap, but an employment lawyer should be your navigator. (Note that I said “employment lawyer” and not the lawyer who happens to sit on your board, a former classmate who practices securities law, or your next-door neighbor who is a criminal defense attorney!) Some nonprofit leaders take pride in penny-pinching; now isn’t the time for that. Consult with an employment lawyer who is licensed in your state.
- Employment law changes, and who knows when your personnel policies were last updated or whether they were legally compliant in the first place. A lot of nonprofit “employee handbooks” are cut-and-paste masterpieces better suited to a scrapbooking competition than a legal process. An employment lawyer can help you make sure that you comply with both your policies or employment contract and the law.
- Just because the personnel policies authorize an action, that doesn’t mean it’s the best course of action. For example, let’s say that your policies allow for immediate termination in certain situations. Cut and dried, right? Not so fast. An employment lawyer may recommend a more deliberate process that ensures fairness (and risk mitigation) beyond what your personnel policies require. Moreover, because of the executive’s gender, race, age, disability, or other factors, under various federal laws, your action could raise the specter of discrimination. It’s complicated. The advice of an employment lawyer can make sure that your process is fair, compliant, and well-advised.
- Map out a plan. Every transition needs a plan. If the cause of the termination is urgent, the board should focus on the immediate tasks: attending to the legalities, ensuring leadership continuity, and managing communications.
- Identify an acting or interim executive. If your organization has an executive backup plan, then you’ve probably already identified someone from the staff to serve as the acting executive. If not, then the board will need to designate someone or reach outside the organization for an interim executive. In many communities, there are former nonprofit executives — many of them former CEOs — who’ve made it their profession to serve as intentional interim executives. Your nonprofit’s trade associations and professional societies, community foundation, and United Way can help you identify a skilled interim.
- Outline a communications plan. Good communications are a critical part of every executive director transition, and they’re especially important in the case of a messy departure. (For more on this, see the “Take the high road” tip below.) And especially important is how the news is delivered to the staff — the board chair should deliver it and it should be done in-person, or on a conference call if that’s not practical. And this should be a conversation with the staff, not just an announcement. The chair or another board member should be available to hear the staff out and help process their reactions. (In my experience, staff reactions can range from outright shock over the termination to “what took the board so long to figure this out and take action?”)
Here’s some additional advice from Melanie Herman, Executive Director of the Nonprofit Risk Management Center (nonprofitrisk.org):
- Be candid and transparent across the board. The risks arising from an executive director termination are worsened when either a board faction spearheads the termination or when some members are kept in the dark. Governance is a form of shared leadership. No one board member has the authority to direct the mission or the executive. Even with a large board, it’s essential that all board members understand the reasons for the termination and support the timeline and approach. Keep in mind that the full board will want assurance that they are handling this delicate matter effectively.
- Check the record and check it again. Before delivering the termination message to the executive, the board should carefully review all relevant documents, including the hire letter, the executive’s employment contract (if applicable), the employee handbook, and recent performance reviews. The purpose of this review is to identify what the nonprofit must, at a minimum, offer the departing executive. For example, six weeks’ pay in lieu of notice? Accrued vacation? What promises has the nonprofit made to the executive?
- Keep the board and executive cool and take the high road. When it’s time to discuss a termination, there is bound to be some anger and frustration on the board. Except in cases where the executive has been indicted for fraud or some other illegal act, the departure announcement should be kind. The board may be irked that the executive left the job after only six months, but stakeholders need to hear, “We wish Mary all the best as she embarks on this exciting new opportunity. We thank her for her service to the nonprofit.” Don’t include passive-aggressive statements that make the board look small-minded, such as, “At the May board meeting, the board decided to go in a new direction. Mary will, therefore, be leaving at the end of the month.”
- Check with an employment lawyer. (This is so important it’s worth repeating.) Terminations are the riskiest phase of the employment relationship. One tool that can help reduce worry about disparagement on the part of the fired executive and the risk of a wrongful termination claim is reassurance from a skilled employment attorney. In addition to helping the board be fair and thorough, an attorney can advise whether the nonprofit should offer its departing executive a termination agreement and release in full. A typical agreement contains promises not to sue or disparage the nonprofit and offers clarity about the departure. To be enforceable, the agreement must include consideration — monies the executive would not otherwise receive. Because of the specific language that is necessary in order for these agreements to withstand legal scrutiny, get expert help by engaging an employment attorney to either draft or review the agreement.
- Update the succession plan. Every nonprofit with a paid executive needs an up-to-date succession plan describing the steps the board will take upon deciding or learning that the executive will depart. Most plans do not name a sure successor but focus instead on process. Even if a nonprofit has a brand-new executive, it needs a succession plan. In most cases, the board won’t get to decide when the current executive will leave for greener pastures. While memories of a difficult departure are still fresh, resolve to update the executive succession plan without delay. Make “next time” easier for the board that will succeed the current board and task force. (Click here to download a free step-by-step guide to “succession essentials,” which includes fill-in-the-blank templates and a free video that walks you through the planning steps.)
- Make sure the personnel policies are compliant and up to date. Now that the board has been through this process, you recognize the importance of the personnel policies and making sure that they comply with current best practices as well as federal and state laws. And, put them on the board’s calendar for an annual review.
The departure of a nonprofit chief executive can be difficult under any circumstances. But when the executive is asked to leave, awkwardness, tension, and even a bit of chaos can rule the day. The above tips can help the board better manage the process and the risks. For what to do next, after the termination, see the related articles below.
The Board’s Pre-Termination Checklist
We have reviewed:
- The personnel policies/employee handbook.
- The executive’s employment contract.
- The executive’s employment confirmation letter. (It could be considered a de facto employment contract depending on its contents.)
We have determined that:
- Termination is our only course of action. We have exhausted all reasonable and practical actions such as progressive discipline or putting the executive on a performance improvement plan as appropriate. The executive has exhausted their “last chance.”
- The executive doesn’t have a plausible explanation for the actions or performance. We’ve conducted a thorough investigation, including hearing the executive’s explanation. And we’ve considered whether a neutral third-party would find the executive’s explanation persuasive.
- Our action is reasonable. A neutral third-party would agree that termination is reasonable given the nature of the performance issues or conduct.
- Termination is consistent with our previous actions. We haven’t recently given the executive a glowing performance review, a merit-based salary increase, or a performance bonus.
- Followed the personnel policies and employment contract to a “T.”
- Ensured that any disciplinary measures that have been applied are consistent with the personnel policies or employment contract and with how other employees have been treated.
- Received the advice and counsel of an employment lawyer.
DISCLAIMER: The content of this article is offered for educational purposes only. It’s not legal advice nor a substitute for advice from qualified legal counsel. Consult with your organization’s employment law attorney.
About Melanie Lockwood Herman and the Nonprofit Risk Management Center. A prolific author of more than two dozen books on various risk management topics, Melanie has delivered countless workshops, seminars, and keynote presentations for organizations simply unwilling to leave success to chance. The Nonprofit Risk Management Center (nonprofitrisk.org) enables nonprofit leaders to identify and manage risks that threaten their missions and operations while empowering them to leverage opportunities and take bold, mission-advancing risks.