Nonprofit organizations (NPOs) face the challenge of maintaining strong leadership in today’s capricious economic environment. Many NPOs are experiencing a decline in contributions and funding and lack clarity in what their organizations have set out to achieve.
Bottom line—they are barely managing to stay afloat.
NPOs struggle to attract strong leadership, and once the Board of Directors does hire a promising candidate to lead the organization, it often cannot manage to keep them there for long.
Leading an NPO is a tough job that rarely compensates well for the amount of work required. It calls for a special type of person and must be a true labor of love. It's possible for an NPO to achieve clarity and purpose if it has a strong Chief Executive Officer (CEO) and strong Board of Directors (BOD) in place. Regardless of the formal title, the CEO of the NPO is the highest-ranking executive officer within the organization and is accountable for overall management of its day-to-day affairs under the supervision of a board of directors.
We found an NPO willing to share its success with its mission and governing style. Cypress Christian School, an accredited K-12 private Christian school in northwest Houston serving more than 570 students, has been operating under a Board Governance model for nearly eight years. Consequently, the school has realized vast improvements in its overall performance, CEO retention, and growing student body.
The BOD of most NPOs reacts to the difficult economic environment and struggles to retain worthy talent by micromanaging their organizations. With a lack of true experience at the BOD level in running an NPO, the BOD’s response is often to hire a CEO and micromanage them for fear of losing control of the organization. With many favorable career opportunities available outside the organization, the CEO leaves because they aren't given the autonomy to run the organization as desired. The BOD then hires an under-qualified CEO willing to deal with the BOD’s micro-management for the short term, until they obtain the requisite experience and also moves on to another organization. The micromanagement trickles down to the staff under the CEO and outstanding performers eventually leave the organization. It's a perpetual cycle that results in underperformance of the organization.
How do NPOs combat the highly prevalent issues of finding and retaining exemplary CEO talent?
Many of the complications associated with CEO talent retention in the nonprofit sector could be alleviated by organizations mastering and integrating three interrelated objectives: attracting the right leaders, board delegation, and the board operating model. We visited with Stephen Novotny, the Executive Director (CEO) of Cypress Christian School, to gain his first-hand insight on CEO talent retention and organizational leadership. The school’s BOD focuses on a strategic decision making/setting policy while providing Novotny the autonomy and freedom he needs to run the organization. Novotny shared about his experience at Cypress Christian School and provided excellent insight in regards to establishing a healthy board governance strategy.
There are two necessary components to attracting the right CEO for the organization:
When searching for a favorable CEO candidate there are three fundamental characteristics that boards should look for: potential, cultural fit, and heart for the cause.
Potential indicates that the individual has what it takes to achieve positive results if given the opportunity. One important caveat to consider is that there is no such thing as a perfect candidate. Novotny provided excellent advice when he said, “An NPO shouldn’t look for a perfect person because it will never find one. Everyone has their own strengths and weaknesses, so it's important to look for people with the right qualities for the job.” The board must find the right balance between a candidate having too much versus not enough experience. While a candidate may not possess every quality you're looking for, if they have the right mix of characteristics and past experience they will still be capable of taking on new challenges, particularly those faced by your organization. Novotny offered his experience at the school as a great example of this because, “although [he is] not a classically- trained educator, [he has] been able to learn, adapt and create success in [his] role at Cypress Christian School.” Novotny arrived at Cypress Christian School with no CEO experience at a school. However, he was a strong cultural fit, a natural-born leader, and shared the school’s vision and mission. Given the opportunity to acquire new skills within school administration, the school has benefitted from Novotny’s leadership and has grown its enrollment and donor base by nearly 20%, increased the quality of its faculty, and strengthened school programming.
On the other hand, don't get too excited about candidates who are over-qualified for the job. Seasoned talent that has been there and done that will likely get bored and leave the organization as soon as they receive a better offer. High performers are often driven by their desire to master new skills and build expertise. If the job can provide the CEO with these continual growth opportunities, they will be much more successful in both attracting and retaining strong leadership talent.
When asked what the essential characteristics of a successful CEO are, Novotny said, “A CEO must be smart enough to know how to evaluate and ask the right questions of an organization’s subject matter experts and also have a solid understanding of how an NPO operates before he or she can be successful in running it.” Novotny, in past roles and his current role, has made a point to educate himself on the front-line operations, systems, processes, and other key components of the business in order to gain a holistic understanding of how the organization operates. This curiosity and understanding has allowed him to lead with confidence and make decisions that align with the overall goals as well as the business needs of the NPO. Distinguish the essential qualities for a CEO to be successful at your organization from the nice-to-have qualities. While an NPO will need to weigh the pros and cons of each candidate on a case-by-case basis, determining the critical success factors upfront will improve the effectiveness and objectivity of the NPO’s talent search.
Cultural fit is a crucial factor that many boards may not recognize. Novotny describes an important aspect of a good CEO as being a “people expert,” and knowing how to manage interactions and provide leadership for different types of people and personalities. If NPOs desire to change the current culture of the organization, the new CEO is the ideal leader to spearhead the transformation. According to Novotny, “A CEO must have a clear view of the mission of the organization or what that mission should be.” Even if the new CEO doesn’t fit in with the existing culture or vision, they could be the right person for the job if they demonstrate their ability to change it for the better. Find someone who embodies what the NPO desires the organization to become and who will be a catalyst in achieving those ambitions.
The third, and arguably the most important, characteristic to look for in the NPO’s search for a new CEO, is a heart for the cause. Novotny shares that he was drawn to Cypress Christian School because he "knew it would provide [him] with the ability to train the next generation of leadership and that [he] would be able to work where [his] own children went to school.” He has a passion for working with children and strongly believes in the mission and goals of the school, so much so that he was willing to send his own sons there to receive an education. When asked to share what motivates him to do his job well and to stay at his organization, Novotny’s heartfelt response was, “ I love the idea of influencing the future through people, and there is nothing more exciting than helping kids grow personally and understand truth.” When an individual finds themselves working in a role that supports a cause they are deeply passionate about, it's highly self-motivating and gratifying. No amount of money is more motivating than being able to pursue one’s innate passions and desires. If an NPO can find promising CEO talent that either strongly aligns with their mission and vision or is passionate about the cause, the organization has found an ideal candidate!
While finding and acquiring strong talent is not an easy task, retaining it may be the biggest challenge of all. One critical component of keeping a CEO happy and motivated is having a healthy balance of board delegation to the CEO.
The relationship between the board and the CEO can make or break an organization. John Carver, author and former CEO of several non-profit organizations, developed a board governance model known as Policy Governance ("Carver's Policy Governance® Model in Nonprofit Organizations" by John Carver and Miriam Carver). Many NPOs have adopted board governance models to effectively retain the right CEO and leadership team and to improve the overall effectiveness of the organization. Cypress Christian is a great example of an NPO that has experienced the benefits of operating under Carver’s Policy Governance model.
In Carver’s model, the BOD sets end expectations and provides the CEO with freedom to use any means he chooses to reach those end goals— as long as he stays within the overarching BOD policies. The CEO oversees and provides direction for the staff, instead of the BOD. This allows the BOD to focus on the most important, strategic matters while simultaneously strengthening the role of the CEO. The CEO carries greater weight in the organization and is given the autonomy needed to run the business as desired. Novotny exercises his freedom to “create layers of competency throughout the organization and to build strength in managerial leadership, so that if [he were] to leave suddenly the school could operate for a year or two on their own until they found another leader to take over.” Less micro-managing of the CEO and lower staff levels by the BOD leads to greater accountability, and individuals who do not meet performance expectations can be identified and weeded out quicker; thus resulting in a more effective and efficient organization. Novotny is “held accountable for the financial and academic performance of the school, as well as the school’s social and spiritual climate. The board funnels everything through [him], and does not bypass him or involve themselves in matters that fall under [his] purview.” Empowering the CEO in his job fosters a greater sense of pride and ownership in his work and ultimately leads to better results. When asked if his compensation is evaluated and adjusted based on his performance, Novotny laughed and responded, “You bet. If I don’t perform, I will be out of a job. It’s as simple as that.”
Novotny describes his relationship with the board as being “phenomenally positive.” The school has achieved this mutually beneficial relationship through its adoption of Policy Governance. In terms of board interactions with the CEO, Novotny “formally meets face-to-face with the BOD four times per year and provides the board with performance reports and a summary of operations performance on a monthly basis. All other interactions occur informally, such as scheduling impromptu meetings with the board when important decisions need to be made and meeting sporadically with board members and the Board President. It works quite well.” Novotny fosters transparency in his interactions with the board and the information that he shares with them. The members of the board provide him with the accountability he needs to ensure that he is meeting performance goals and running operations in line with the overarching policies as set out by the board. He obtains board approval for high-dollar expenditures and all major decisions based upon a well-defined delegation of authority, while having the autonomy he needs to run the school and perform his job successfully. The relationship between the BOD and the CEO, as described above, provides an excellent balance in delegation of authorities to allow for efficient and effective operations.
Across the for-profit and nonprofit sectors, board meetings have a reputation for being long, unorganized, and ineffectual. Below are some effective practices for running strategic, punctual, and effective board meetings that will lead to higher CEO satisfaction and performance:
Reduce the frequency of board meetings. For example, Cypress Christian School moved from holding one board meeting per month to one per quarter. Novotny describes his past experience with monthly board meetings as repetitive and unnecessary. As soon as the meeting was over, he was already starting to plan for next month’s meeting. Once the BOD reduced the number of board meetings, he was pleased to find that "the length of the meetings also decreased and the school was able to increase the number of interested board candidates, since the board prospects knew they would not have to meet as often.” In addition, cutting the number of board meetings also reduced the administrative costs associated with running the meetings.
Rotate topics for each board meeting on a scheduled basis. For example, the first board meeting of the year is focused on the budget, the second is focused on development, the third is focused on operations, etc. Novotny commented further on the value of having pre-determined topics used by the board: “Everyone knows the time to speak up is now or never, and a decision will be reached by the end of that meeting. We are actually able to get things done.” Using the rotating topics method, each board meeting fulfills a distinct purpose: promoting higher attendance and allowing for more achievable, timely results.
Rationalize CEO reporting needs. The BOD should work with the CEO to define what should and should not be reported. Many nonprofit CEOs decide that more is better and overload boards with too much information. Novotny experienced this dilemma in his early years at Cypress Christian School. He inherited a process that consisted of producing pages of highly detailed financial reports. During board meetings, Novoty found that someone would find an anomaly in the minutiae and the discussion would go from strategic to the insignificant very quickly. The BOD worked with Novotny to create a two-page financial report for the board, providing highlights instead of pages of granular details. The BOD financial review went from two hours of unprofitable talking to 20 minutes of effective strategic discussion and decision making. Novotny now describes formal board reports as “succinct and efficient.” He reported they achieved efficiency because “the directors at Cypress Christian School are cognizant of what the right level of detail for the board is, and they try to keep as close to that level as possible.”
Review BOD composition and how board work is assigned. Board diversity is essential for a board to be well-rounded and run effectively. Maintaining balance and recognizing the value of difference in qualities and backgrounds amongst board members, as well as finding board members who are committed to the cohesive mission of the board, are key aspects to an effectively run board meeting. When asked what makes an ideal board member, Novotny prescribed this member as one who “committed to the mission of the organization, clearly understands the difference between the role of the board and the role of the CEO, and is able to put aside any personal agenda they may have stemming from their own personal involvement in the organization.”
The Policy Governance model will enable the BOD to find the right CEO and offer them greater autonomy and a sense of meaning and purpose. The BOD will be able to operate strategically rather than getting mired down in details of everyday business. By running board meetings more efficiently in a well-structured manner, the BOD and CEO will yield powerful results and decisions in a fraction of the time. Efficiency breeds results, and results breed a healthy BOD and CEO relationship.
Novotny ended the discussion with an interesting theory about board delegation. He insists, “When an organization has proper NPO Board Governance in place, the following phenomenon occurs: If an effective CEO is absent, the organization can function for a substantial amount of time without feeling negative repercussions due to the layers of competency throughout the organization that were developed by the effective CEO. However, the long-term effects of not having the right executive leader are devastating to an organization. They can take a substantial amount of time to correct. Conversely, if a front-line employee is absent, the effects on operations are felt immediately but are limited to that employee's specific area of responsibility and can be remediated easily with minor to no long-term ramifications for the organization as a whole.”
So consider this question: How long could your organization operate without your CEO in place?
