We sometimes see tension between employed chief executives and volunteer boards of management, particularly in the not for profit sector. This includes the operational chief executive whether described as a CEO, general manager or coordinator and the governing body whether a board, management committee, council or similar. However described, CEOs consider that they should be left to run the organisation and boards should stick to overall supervision and strategic decision making. Problems can arise when board members want to get involved in hands on issues, whatever their motivation, or do not properly manage the CEO relationship.
So what are the basic rules? Most Not For Profit organisations usually take the form of an incorporated association or public company limited by guarantee. In either scenario, it is the members at a General Meeting that have the ultimate decision making power. Boards generally act on behalf of the members in between general meetings and further delegations can occur to board sub committees or particular board members (eg president, secretary, treasurer). In a legal sense, any employee, including the CEO, only has the powers that are given to them by the board. There should be a clear delineation of responsibilities between the CEO and the board reflected in a well written position description and measurable key performance indicators (KPIs). Ideally, the CEO should be left to deal with day to day operational responsibilities and the board should set strategic direction (usually with input from the CEO) and exercise a supervisory role. Board members have ever increasing responsibilities under legislation but they should not descend into micromanagement. Appropriate supervision is important however and tensions commonly arise where a previous board has taken a too hands off approach and then a new board is elected with different ideas.
The Board’s primary role is strategic governance. However, CEOs should appreciate that it is ultimately up to the board (and the members) how they wish to run the organisation, for better or for worse. CEOs of course have their own responsibilities but in any battle, the board will usually win. CEOs should also remember that their employment duties are different to any membership they may hold in the organisation. It is theoretically possible for a CEO, disgruntled by a board decision, to organise an extraordinary general meeting of the organisation for the purpose of reversing the board decision. However, this is a course fraught with danger and should generally be avoided (not least of all because the numbers can rarely be guaranteed).
Employee complaints can be a particular area of tension. Employees have been known to raise complaints at board level where they haven’t obtained a satisfactory outcome internally. Boards should resist the temptation to get involved in employee complaints and employee complaints should be directed to the CEO to manage in accordance with employer policy. Complaints about the CEO themselves sit in a different category. Each issue needs to be considered on its own merits and less serious matters may be able to be addressed, at least initially, by seeking to resolve the matter at a workplace level which may include an offer of mediation. In more serious cases, it may be appropriate for an external investigator to be appointed to investigate the facts. However, boards cannot abdicate their responsibilities for decision making. In particular, boards should be very cautious about “culture surveys” involving anonymous feedback. Employees will feel free to unload their gripes in a general and non specific way. Boards should be conscious of the potential for upwards bullying or employees ganging up on leaders who are actually doing their job.
Boards should also be conscious that CEOs are employees and they have a duty of care and responsibilities towards the CEO as with other employees. CEOs are entitled to procedural fairness and to not have action taken for an unlawful reason as much as other employees. If a relationship breaks down, the CEO may take personal leave, lodge a workers compensation claim, make a formal complaint to the chair and potentially take legal action such as an application for stop bullying orders or a breach of general protections rights claim alleging retaliatory action. This type of conflict is counter productive and disruptive.
Boards and CEOs could consider the benefits of:
- A clear understanding by both parties about division of responsibilities;
- A clear position description and relevant and measurable key performance indicators;
- Board members undertaking training to fulfil their responsibilities;
- Informal and formal performance reviews and regular discussions between the CEO and chair/president;
- A system of external peer mentoring or professional coaching for the CEO;
- Giving consideration to the CEO’s own professional development needs;
- Raising concerns early rather than letting issues fester and couching any criticism in precise but non derogatory terms referring to particular factual situations (not examples). There is nothing more guaranteed to sour a relationship than general criticism;
- Regular and open personal contact and communication – relationships cannot be sustained by purely written communication;
- Avoiding the adoption of a fixed and entrenched position where possible and the appearance of arbitrary decision making;
- Appropriately involving the CEO in decision making and consultation and explaining reasons for decisions;
- Obtaining expert assistance (such as mediation) when necessary. A falling out does not have to be the end of the relationship. If necessary, the board should engage expert help, not with a view to disciplinary action but to build a bridge with the CEO to endeavour to maintain the relationship and perhaps assist with their own communication style.
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