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Sharpen Your Board Management Skills

Because association CEOs must simultaneously manage the board of directors and report to them, working effectively with the board can be tricky.

But it’s also a necessary part of their job. As board dynamics shift, new technology gets introduced, and other overarching forces affect how associations and boards operate, it’s up to CEOs to ensure that their board stays focused, decisions are made, work gets done, and the right conversations are taking place. Here are some of the roles that CEOs need to play—each involving core management skills—to make that happen.

Conversation Facilitator

While CEOs may be inclined to lead the conversation with the board, they should manage it instead.

“I think there is a very subtle difference there, and the outcomes are very dtifferent depending on the approach,” says Culture Marketing Council Executive Director Horacio Gavilan. This includes getting the conversation back on track when it’s been derailed, paying attention to tone, and making sure that the environment of the conversation stays positive.

CEOs should also be mindful of how board members are interacting—and aware of potential warning signs, such as one person dominating the conversation, says Sharon Anderson, principal and CEO of Anderson & Associates, LLC. In that case, the CEO should “find a way to make certain your introverted members have a vehicle to provide feedback as well.”

This includes being a good listener. Gavilan says he tries to notice not just what board members are saying but also how they’re saying it. Listening and observing “helps me understand their framework of thinking,” he says. “The moment you understand where they’re coming from, everything that comes out of their mouth makes more sense.”

Managing the board’s conversations also requires emotional intelligence. To build this skill, says Ann Turner, FASAE, CAE, CEO of the American Association for Laboratory Animal Science, “the first thing I had to do was recognize emotions in myself, as to what triggers my anger, disappointment, and frustration, and then how to handle that. The next step is to learn to recognize those emotions in other people.”

One example is recognizing the phases that board presidents go through toward the end of their tenure—they might have a hard time letting go, or they might push the association to do too many things at once. If you can read their emotions, you can help them through it, Turner says.

Honest and Open Communicator

Communicating clearly with board members about their work throughout their term is key. “One reason board members can get mired down too much is that they come on the board because of their passion, which is great, but then you have to channel that energy and help them understand what their roles and responsibilities are,” Anderson says.

When you’re kicking off a new year, make it clear to the board what they’ll be working on, as well as what’s coming up. “You want to make sure everyone is as much on the same page as possible,” she says.

What about when you’re in crisis mode? “When a problem arises, the immediate instinct should be transparency,” says John Barnes, president of Barnes Association Consultants. Particularly if the problem involves the CEO’s mistake, telling the board right away builds credibility down the road.

“When a board hires you to be the top staff person for the organization, you’re immediately thrown into kind of an artificial relationship with a group of 15 people,” Barnes says. “The very moment any one of the 15 thinks you’re dishonest or manipulative or being political, you’re dead.”

Gavilan says he has asked himself this question many times: Should I be saying this? “The answer is always yes, in my opinion,” he says. That’s because, most of the time, the board will realize you’re telling them because it’s in the association’s best interest.

By nature, board members can be very tactical people, and one of my challenges is to keep them strategic

Horacio Gavilan, Culture Marketing Council

Strategy Setter

When board members get tangled up in details, it can be a challenge to guide them “so that their time and their talents are being utilized so that they feel fully engaged—and sort of lifting that engagement to a higher, more strategic level,” Anderson says. (See “First Steps to Strategy.”)

To that end, how board meetings are designed is important, she adds. She suggests “finding a way for each meeting to have a strategic or challenging piece on the agenda, to help elevate the work they’re doing.”

Gavilan exercised these skills during his association’s two-year name change process. He needed to make sure the board members were being patient enough to handle this change the right way. “By nature, they can be very tactical people, and one of my challenges is to keep them strategic,” rather than diving immediately into tactics, he says.

Similarly, when conflict arises between the CEO and the board, looking at the big picture may be helpful. CEOs should be able to determine “when it’s worth trying to convince them that something needs to be done or not done” and when it’s not going to make much of a difference in the end, Turner says. You need to know when to act and when to trust other people’s opinions.

Personality Pluses

A few personality traits can help CEOs work well with their organization’s board. Some come naturally, and others might take some effort to develop.

Humility. “The job of the association CEO is to get the best out of everyone that they work with, including the board, and then stepping back and letting them get the credit,” says John Barnes, president of Barnes Association Consultants. In other words, CEOs need to be comfortable letting the spotlight go to others.

“Whenever I hear a CEO refer to the board as ‘my board,’ I always take that as a signal that there’s potentially a problem. It is not your board; you are their CEO,” Barnes says.

Sense of humor. A little self-deprecating humor builds trust and makes the work more fun, Barnes says. However, “everybody thinks they’re funny, but not everybody is.” If this type of humor doesn’t come easily, a lighthearted remark can set the same tone.

Optimism. “It’s human nature to look at things from a negative standpoint, and I really think it’s important for the association CEO to be that person in the room to always say, ‘We can do it. Let’s go, let’s get this thing done,’” Barnes says. CEOs who are not naturally optimistic can ask for input from someone on their staff who is.

Time Manager

Although CEOs have widely divergent standards for how accessible and responsive they will be, Barnes says all chief executives should set expectations with their board. Will they be checking email all weekend and late into the evening? When they go on vacation, will they be completely unplugged, or will they check in every morning? The lack of boundaries—or lack of respect for boundaries—is “a pretty systemic problem that I’ve seen in large and small associations, and every profession and industry,” Barnes says.

Managing time well includes keeping communications with the board timely. For example, Anderson says getting information into board members’ hands so that they have enough time to review it before a meeting shows that CEOs respect their time and talent. It also gives members an opportunity to prepare.

As associations have changed over the last couple of decades, members seem to have less time, and some traditional face-to-face gatherings, like retreats, have fallen by the wayside, Gavilan says. It’s harder to cultivate a cohesive board if they don’t really get to know each other, so he has “tried to create other situations in which they can have some sort of connection.”

For example, he held a board meeting following an industry meeting where half participated in person and the other half by phone. “As the executive director, part of my job is to help them be more efficient and to help maximize their time,” he says.

Not all of these skills come naturally to every CEO, so it’s essential to identify those that need strengthening. Inviting feedback from both staff and the board can help with that. An annual evaluation with the board is an essential part of the process.

In addition, executives should build relationships with their CEO peers to learn best practices. “It’s important to identify a forum or an arena that will help you make sure you’re staying ahead of the game and you’re aware of what’s coming down the pike,” Anderson says.

Identifying weaknesses and then working to strengthen them will help CEOs serve as essential partners to the association’s volunteer leaders. It’s hard work, but effective board management yields dividends in high performance, strong relationships, and progress toward fulfilling the mission.

The Most Important Call a CEO Can Make Each Week

call

It was an idea that I heard many years ago—call your board members on a regular basis. 

Outside of scheduled board meetings, I thought it was a great idea, but I had no clue how to make time for these conversations. After all, association executives are busy people, and I couldn’t even imagine adding one more to-do to my weekly schedule. 

But one year later, as I was going through old notes to take care of unfinished business, I realized something rather obvious. I have 11 board members and quickly knew that I could make time for three to four calls with each individual person if I scheduled them once per week across a year. 

These calls have become my most treasured time each week. It’s one-on-one time I get to spend with board members who are spread coast to coast. I think it’s hard to get to know individuals during board meetings and retreats—or at conferences when the time is at a premium for peer-to-peer networking.

I’ve also discovered a lot through these one-on-one calls, from learning about my board members’ families to insights about their day-to-day jobs and focused feedback on association programs, projects, and my performance as CEO. 

These calls have become my most treasured time each week. It’s one-on-one time I get to spend with board members who are spread coast to coast.

One call with a board member provided feedback on a pricing structure. It was an opinion that he didn’t want to relay during a committee call out of concern that it may have deflated the committee’s feelings of progress and excitement at what was a potential revenue source. 

By relaying his thoughts to me, I was able to schedule one-on-one conversations with the rest of the committee, which resulted in a shared understanding that the pricing model was indeed too expensive. 

That single phone call saved us so much staff time and thousands of dollars in marketing material development, production, and distribution. It also gave us the chance to course-correct and deliver a product at a much more palatable price point. That’s both a win for members and staff and, of course, the committee that had the original idea.

Even if I didn’t get this great feedback, I still cherish the time spent with the volunteers of my association’s community, getting to know and understand them as human beings.

If a bunch of phone calls feels daunting to you, I would suggest starting with one call per month. Start with your executive council or start with your board president. It doesn’t matter where or how you do a check-in, but I suggest starting one soon.

How to Deal With Bad Board Behavior

Difficult board members do crop up. The reasons why may be obvious or creep up over time. They frequently miss board or committee meetings or show up completely unprepared. They display antagonism toward staff or disrupt meetings with a toxic attitude. They lack sufficient financial literacy to help make informed business decisions, or they’re staunchly opposed to using new technology when preparing for a board meeting.

More subtle signs might involve a board member getting burned out over time, becoming distracted by personal issues, or participating more passively in board meetings with a simple “go-along-to-get-along” approach to performing their duties.

In either case, a difficult board member can adversely affect a board’s productivity and decision-making efforts, and ultimately cost your entire organization time and money.

How do you address these issues? There are options. Establishing term limits or outlining an official impeachment process might help to better define board member roles. Conducting individual board surveys and peer reviews, or scheduling a performance review for the full board, can help to establish a process that you can all work on together.

The most involved, diligent, value-adding boards create a virtuous cycle in which the good qualities of one board member build upon another.

No matter how you address trying board behavior, it’s important to identify and correct it early on, so it doesn’t continue to fester, and eventually infiltrate the entire board. Let’s explore the options.

Determining If Behavior Is Counterproductive

All boards should have ground rules and expectations for their members. While answers to questions like “Do they attend board meetings regularly?” or “Do they bring financial literacy skills to the boardroom” may shed some light on how effective board members are, they don’t necessarily provide the full picture when trying to correctly identify a troublesome board member. To do that, it’s important to dig into the social aspect of a board or how individual members work together as a group. Consider the following questions:

  • Do you label some board members as “troublemakers” when they’re really engaged dissenters seeking to make a positive contribution to the board? 
  • Do certain board members develop backchannels to staff because they’re trying to undermine your CEO, or are they simply seeking further clarity or information from the people affected by their decisions? 
  • Are board members developing political factions in a takeover attempt, or simply seeking consensus for a shared opinion?

As you can see, there’s a fine line between what some consider good board members versus bad board members, and it takes more than just a glance at past attendance records to reach any strong conclusions. That’s where polling, full-board evaluations, and peer reviews can help.

Conduct an anonymous survey of individual board members on occasion to see whether any factions are forming, if they trust the information provided by the CEO, or if they display confidence in the competence of your management team. Ask your governance committee to perform a full-board evaluation that includes individual directors’ self-assessments, along with their peer reviews of one another, to determine how they feel about their own performance as well as their colleagues.

The most involved, diligent, value-adding boards create a virtuous cycle in which the good qualities of one board member build upon another. They develop trust and mutual respect, and they challenge each other by asking intelligent questions in a spirited give-and-take environment.

Managing Bad Behavior

If you do come to realize that you are dealing with a toxic board member, many boards wonder how to ask that person to resign. While that is one outcome, there are other ways to work around a board member’s counterproductive behavior. Here are some tips:

  • Find the source. Are they truly a troublemaker, or are they raising legitimate concerns? It’s OK to be passionate about a topic, as long as they remain respectful to others.
  • Do damage control. Are they recruiting allies and planting seeds of doubt, or simply asking for more information and transparency? Present facts with honesty and transparency and avoid personal attacks.
  • Limit the offender’s role. If your bylaws prevent you from removing a repeat offender, try reducing their involvement in certain areas. Sometimes, the bullies will give up and go home.

Whatever you do, don’t simply ignore bad board behavior. It’s better to address the issue head-on with the individual board member, rather than developing workarounds or impugning the entire board for one person’s bad behavior. Gather evidence, confront the board member with facts, and then work to help them make any necessary changes.

From Where I Sit: Governance as an Asset

abe

“Congratulations and welcome to the board!” New board members often hear these words with a myriad of emotions ranging from “What did I get myself into?” to “I can’t wait to shake things up!”

Accepting a board position for a tax-exempt entity is a unique opportunity to be an asset to the organization. Boards are seeking better resources to carry out the oversight role, which requires association leaders to realize the strategic benefits of good board governance. 

One key aspect of board participation is the opportunity to develop and build leaders. This is valuable for the organization and for board members themselves, who often are leaders in their industries or professions but don’t have previous experience serving on tax-exempt boards. That’s why the process of finding good board chairs and selecting, building, and developing volunteer leaders needs to be well-structured. In addition, organizations must strive to attract and retain qualified directors and board leaders who understand the organization’s needs and make the time commitment required. 

Volunteer boards are a unique and critical component of tax-exempt entities, yet governance often is viewed as impeding the organization’s or the CEO’s ability to achieve objectives. Good governance should be an asset that is actively evaluated, measured, and managed. Boards need leadership in governance, and association CEOs are uniquely qualified to provide guidance in this critical area. However, it’s a shared responsibility between board leadership and the CEO to push for active management of governance. It should be part of the annual evaluation process of goals and objectives.

Another area that associations need to actively manage is the issue of diversity at the board level. This includes diversity in multiple facets: gender, age, race, sexual orientation, professional status, and diversity of thought. Numerous studies have shown the benefits of diversity within groups for decision making and management. Too often, boards tend to be homogenous and not reflective of the current or future membership of the association. 

If associations are to be models of leadership, actions need to speak volumes about what we stand for and what we stand against. ASAE has been at the forefront of diversity and inclusion, not only at the board level but also in its supporting committees and its commitment to developing diverse future leaders through the Diversity Executive Leadership Program. 

Board members need to ask themselves the following as they consider their board roles: What does the board say about the association or profession? How can I contribute to creating a productive and rewarding experience? And how can I ensure that we have the quality and quantity of board members needed to support the organization today and for the future? 

The active management of governance sets the stage for organizational success at all levels.

Three Tactics for Communicating Difficult Budget Issues to Your Board

To have effective budget and financial communications with a board, you must focus on building confidence and trust. When confidence is strong and trust is high, difficult discussions evolve into constructive and collaborative conversations. 

Regular, interactive communication with your board is the key to keeping confidence and trust high. Always try to avoid random, unexpected communications as they foster feelings of unease that bad news is coming and important information has been withheld. 

Use these three strategies to communicate difficult budget issues, improve message delivery, and encourage positive collaboration.

Monthly Financial Reporting

Establishing monthly communication patterns is the key to success. Do not rely only on communicating budget and financial information and reports just before board and finance committee meetings. 

During difficult periods of disruption and uncertainty, regular communication channels provide reassurance and comfort. They are especially useful for supplying a steady stream of budget and financial information between formal board meetings to keep board members informed of evolving situations and management’s tactics to align resource utilization to meet changing circumstances and manage overall budget performance. 

Have protocols in place for when a difficult budget issue arises that can be consistently applied depending on the priority level of the evolving circumstances.

With monthly financial reporting, consider including a finance update memo. Keep the memo short and to the point. Organize the memo around three sections: continuing activity, radar-screen issues, and management recommendations. 

The continuing-activity statements should outline key substantive issues and how they have progressed during the past month. Radar-screen issues should cover new challenges that have appeared that will grab board member attention and establish early baseline notification of new issues. End the update memo with management recommendations and action plans. Be concise with recommendations and forthright with action plans. If the best course of action is to monitor and stay alert, communicate that just like any other recommendation explaining why this is the best course of action now and assure action will be taken when appropriate.

Regular Check-Ins

After regular monthly financial reporting, the best tactic for sharing difficult budget issues is to have regular check-ins with the board chair and treasurer. Use multiple messaging channels, including regularly scheduled conference calls, emails, and text messages. Plan to favor verbal two-way communications for complex and perceived difficult budget issues. Verbal messaging opportunities, while appearing less formal, encourage two-way sharing of comments, probing questions, and ideas for tactics and solutions. These tactics will help you better tailor communications to satisfy board member expectations and concerns. 

When difficult budget issues arise, it is best to message through senior board officers. Issuing joint communications with the board chair, treasurer, and senior management will be more reassuring and better received than if they had come from just senior management. The optics of a joint communique will raise confidence that transparency is being fully honored and that information is being shared timely. 

Priority Messaging

Finally, be prepared and plan for the unexpected. Have protocols in place for when a difficult budget issue arises that can be consistently applied depending on the priority level of the evolving circumstances. Like disaster action plans, have trigger mechanisms in place to message senior management-driven action alerts, key board officer or executive committee notifications, and updates to the entire board. 

Develop a three-tier priority messaging system for notifying the board when a difficult budget issue appears. Reserve tier-one messaging for high-priority budget issues that arise quickly and need immediate attention and action, such as cancellation of an event, response to a fraud occurrence, or unexpected loss of platinum sponsorship. Use tier-two messaging for medium priority budget issues that are material in nature but do not need immediate attention and action, such as a sharp drop in membership renewal rates, large increase in employee benefit costs, or nonrenewal of a long-term grant. Save tier-three messaging for low priority budget issues, such as rising costs related to safety measures at events, expected increase in occupancy costs for next year, and the effect rising interest rates will have on future debt service expenses. 

Incorporating even one or two of these forward-looking financial management budget communication and messaging tactics will enhance confidence and trust that financial information is being shared honestly and timely.

Four Ethics Guidelines for Leadership Transitions

You’re an association executive director, and you’ve decided to take a new job—or maybe you’ve decided to retire. At this time, why should ethics come into play? Because leadership transitions can raise a series of ethical issues, and an outgoing executive who fails to navigate them properly can hurt the organization in the long run.

Ethics are always complex, and individual situations require specific evaluation. But following a few general guidelines for outgoing—and incoming—executives can help you stay on an ethical course during a leadership transition.

Leave a complete record of how the organization operates. This record should include policies, timelines, and deadlines for various projects; bank account and other financial information; passwords and codes; and a list of important contacts. Withholding critical information is as bad as giving incorrect information, and both are unethical. 

If certain dilemmas are likely to remain unresolved when you leave—a conflict with a vendor over a contract, for example—tell the board or the next executive what they are. It is unethical to hide these issues and let them “explode” under the new executive. You don’t want to prejudice the new executive about a troublesome situation, but you do need to inform him or her that the issue will need resolution.

Ensure an open search for a successor. If your organization is using a search firm to recruit a new executive, the association’s search committee or board should ensure that the chosen firm is highly ethical. This means that the firm doesn’t simply pull from past contacts and candidates to whom the firm owes a favor. Although a good search firm will have strong candidates to recommend, it should be willing to do an open search to find the best candidate for the job. 

If certain dilemmas are likely to remain unresolved when you leave—a conflict with a vendor over a contract, for example—tell the board or the next executive what they are. It is unethical to hide these issues.

Stay out of the search. It is unethical to advocate for a particular candidate for your position, especially if you do so because you believe that person will follow exactly in your footsteps and ignore needed improvements or changes. It is OK to answer questions about a candidate or the candidate’s qualifications, if you are asked. For example, if the search committee doesn’t understand what the certified association executive (CAE) credential is or how much work goes into earning it, then your knowledge can be useful.  But it is unethical to advocate for a candidate who merely will protect the projects and programs you started. 

Also, it is unethical for you or the board to withhold or misrepresent key performance indicators—a decline in membership numbers, conference attendance, or revenue, for example—in an effort to attract a better candidate or hide the true nature of the task ahead of the new executive. The successor should know exactly the size and financial situation of the organization. 

A word for the incoming executive. If you are the new executive, it is unethical to blame your predecessor for problems that face the organization when you arrive. Granted, if you find that the previous executive committed malfeasance, then you have a responsibility to tell the board. But short of that, if an issue wasn’t handled the way you would have handled it or if an initiative didn’t achieve the results desired, then the issue or project is now yours to resolve or pursue.

Blaming others won’t fix the problem, and you probably don’t have all the information that your predecessor had when he or she made the decision that seems questionable to you. Your ethical responsibility is to move forward and address the problem rather than continuously blaming others.

While an outgoing executive’s tenure in an association is almost over and the new executive’s work is just beginning, both have an obligation to hold themselves to a high ethical standard during the transition. Doing so ensures that the handoff of leadership goes smoothly, avoids disrupting operations, and supports continued organizational success.

Four Lessons for Today’s Aspiring CEOs

At ASAE’s Virtual Annual Meeting & Exposition in August, I was joined by three other executives who, like me, have held the top job in various organizations. During our session, we shared lessons we’ve learned and wisdom we’ve gained throughout our careers. For any association professional aspiring to the c-suite, these four lessons in particular can serve as preparation for a leadership role and offer guideposts when you get there.

Expect the Unexpected

No matter how much you prepare for this role, things will unfold differently, sometimes beyond your control. Be prepared to listen—to what is said and to what is not said—learn and communicate. Be sure to give yourself some grace as you navigate this challenge. 

“It’s going to be a lot of work, so you will need to scale back a lot of the expectations you have for everything you are going to accomplish,” said Tamela Blalock, vice president of cooperative relations at NCBA-CLUSA.

“Don’t ever promise that you won’t make any changes in the first few months or year. That promise will surely be broken as times may call for you to make swift and important decisions,” said Pamela Green, executive coach and consultant at Pamela J Green Solutions.

No matter how much you prepare for this role, things will unfold differently, sometimes beyond your control. 

Be Prepared

The best way to ensure success is to be prepared. It is not enough to do your homework before taking on the big job. Go beyond and invest time in your research, making sure that you have all the qualitative and quantitative data you need.

When looking at organizations, I make sure to tap into my network to find out what the 990 forms and websites like Glassdoor or Indeed won’t tell me. You can go on LinkedIn, look for former and current staff, board members, volunteers, or anyone who might have had experience with the organization. What does their profile reveal about them?

Former board members can be a good source of institutional memory and strategic intelligence. Looking back, I was so eager to take on the challenge of my first executive director role that I might have dismissed a few red flags too quickly. Examining each interaction with anyone from the organization might seem like overkill, but it will allow you to put the pieces of the puzzle together and spot anything that might be missing.

Stick to Your Standards 

“I approach this as I would any long-term relationship,” Blalock said. “I have some standards: How does the organization present itself? Do they have reserves or a financial plan? What’s their philosophy in life? Do they have healthy governance? What is their board composition? Is the board future-focused, or do they like to get in the weeds? Do they want to be a partner or rule over you?”

Team dynamics, climate, and culture are some of the most important signs to look for, according to Mariama Boney, interim executive director of Advocates for Children and Youth and CEO of Achieve More, LLC. “How do they refer to one another? How are they talking among themselves? Is there gossip? Is there accountability? You will be doing a lot of talking but don’t forget to do a lot of listening in these situations when the stakes are high,” Boney said.

Cultivate Board Commitment and Accountability

As the CEO, you cannot do it alone, so it is not only about your development but your board’s development, too. “Sometimes boards say they want something and when they get someone who is a driver, a decision-maker, they don’t know what to do with them. As a new CEO, as soon as you walk through that door, the culture is going to shift,” cautioned Green. For Blalock education is key. “Go beyond written materials and add educational sessions at every board meeting. Make sure they understand governance and financials, but at the same time allow for flexibility and include topics that are important for the organization, such as conflict resolution, diversity and inclusion, or innovation,” she said. 

While there are no shortcuts or magic tricks guaranteeing that you will land a perfect CEO role, doing your due diligence, building a solid foundation and a partnership with your board, investing in education and communication, and understanding the dynamics of the board will likely lead to your success. More importantly, taking these steps will contribute to your job satisfaction and career longevity. 

CEO succession: How associations are strengthening leadership planning

CEO succession planning is a crucial topic for all corporate boards, and well-governed companies treat it as a continuous process of collaboration between the sitting CEO and the board.1 However, trade and professional associations—groups that represent industries and professions—have not generally had a process as formal or rigorous as corporations do. Association CEO tenures have often been far longer than is typical at companies; succession plans have been less formal or nonexistent, and those plans that do exist often cover only emergency successors. CEOs’ leadership skills and capabilities weren’t assessed against current and future scenarios. These differences are all the more interesting because most association board members are also corporate executives or work in for-profit settings where this kind of process is common.

Our work, and recent conversations with eight association CEOs and board members, suggest this may now be changing. Though significant differences continue to exist, some associations are beginning to adopt more formal, thorough, and continuous succession processes, and are adding a focus on leadership development for their staff. The benefits they are seeing as a result are greater business stability and continuity over time, minimized risks, and stronger leadership engagement.

A more formal and constant process

Though it is the responsibility of the board to choose the CEO, strong association CEOs proactively support those efforts and play a leading role in driving succession planning, in part because many board members have short term limits and may have no experience with succession in the association context. 

Association CEOs provide a deep understanding of the unique context related to succession planning in associations as well as consistency and stability throughout the planning process. Pat Blake, CEO of the Heart Rhythm Society, an international nonprofit organization that represents medical and science professionals who specialize in cardiac rhythm disorders, explained that she drives the succession plan so that the board doesn’t have to think about the details. However, she emphasized, the board “is ultimately responsible for who is chosen.” Blake also noted the importance of both the process and the outcome: “Succession planning is a form of risk management, so the process behind the plan has to be deliberate.” 

One association CEO said he keeps a list of internal candidates who he thinks can fill the role and keeps an eye on external talent who could be recruited into the role. At the Society of Actuaries (SOA), an organization representing actuaries around the world, CEO Greg Heidrich said that his board is the driving force of their succession plan. He supports the effort by developing a set of recommendations that he reports on to the board three or four times a year, working in plans for best- and worst-case scenarios. He said: “We originally thought about succession in terms of a crisis; now we also have a plan for an anticipated departure.” 

Stephen Gold, president and CEO of the Manufacturers Alliance, a nonprofit manufacturing leadership network for manufacturing companies, also said that he leads the development of his succession plan. He shares his thinking with the board as they “want to know the plan, recommendations, as well as have insights into my leadership.” The chair of another association explained that ongoing talent reviews are part of broader executive succession planning, rolling up to their CEO: “Each leader is responsible for citing who could replace them in one, five, and more years. And ongoing talent development is a mandate for any leader.”

The timing of CEO succession planning can look quite different depending on the organization—as late as when a CEO has announced a retirement or as early as the beginning of the first contract renewal. According to the CEO of one association, “It’s not something you think of right away as a new CEO, but it’s an important responsibility for any leader of any organization.” Some association CEOs worry that beginning a conversation with their board about succession planning may send the signal that they are thinking about leaving or have lost interest in the role. But it is important to understand that CEO succession planning well in advance is a standard procedure.  In research we have conducted on corporate boards, we found that 27% of them restarted succession planning immediately after naming a new CEO and another 20% started more than five years out from an expected succession.2     

Gold also stressed the big role that governance plays at the Manufacturers Alliance and noted that the bylaws “set the legal and policy frameworks” for CEO and board succession. Indeed, many associations have put into place specific succession policies. At another association, the CEO said that their bylaws outline that the president is appointed by the board, and in the event of an unplanned vacation, the COO is appointed as acting president. With a planned vacancy, the board institutes a formal search process for which the compensation committee serves as the search committee. He explained: “Our job is to make their job as a volunteer leader as easy as possible. You want them to be successful so having a process in place gives boards relief.” However, in too many associations, these policies and processes are not spelled out or communicated clearly.

Frank Hugelmeyer, CEO of the National Marine Manufacturers Association (NMMA), noted that his organization didn’t have an annual best practice structure in place for CEO succession planning when he started in the position, but now has one that works well: a clearly written, transparent CEO succession action plan that is reviewed annually by the executive committee and includes key employee three-year development plans, a compensation review, and transition plans for all internal senior roles in succession. “Reflecting our members is my goal,” Hugelmeyer said, “and adopting their best practices is always a strategic advantage.” He added that “governance is closely linked to strategy. Any board work is completely aligned to where we need to go as an organization and industry.”

Whether CEOs draw up their own succession plans or the board takes the lead, CEOs stressed the importance of plans being frequently reviewed by the board—at least once a year. Hugelmeyer stressed the importance of such reviews to organizational readiness. The Heart Rhythm Society’s strategic succession plan is also updated annually, according to CEO Pat Blake, and is reviewed by the compensation committee. This is in line with her philosophy that organizational stability is the most important factor in succession, regardless of what happens to her. The chair of another association added, “Our board term is only three years and the chair term only one, so we have to have succession reviews often.”

Finding leaders with the right skills and capabilities for the future

Associations are affected as strongly as other organizations by factors such as rapid changes in society and technology as well as economic and geopolitical volatility. We are beginning to see the retirement of long-tenured association CEOs, and we expect to see shortened tenures going forward. The average tenure of a corporate CEO is 7.4 years,3 and we expect to start to see similar tenures in associations. Bottom line, we believe today’s association CEO needs a very different mix of leadership skills as well as very high resilience and agility to keep pace. 

That said, Bill Yeargin, chair of the NMMA, doesn’t feel that CEO skills and competencies have fundamentally changed over the years. He characterizes skills by three Cs: character, competency, and chemistry. “Competency: can they do the job, galvanize the team, hire the right people, and so on? Character: do they have integrity; do they treat people well? And, chemistry: do they have the ability to get along with others?” 

Yeargin added that “there are two parts to our secret sauce: culture and strategic planning. Value comes through culture, so you need a leader who can identify with the values, model them, and communicate them clearly. And then, a CEO needs to be able to identify what is important to the organization; they need to have a higher purpose, a higher mission.”

The NMMA conducts an annual review and evaluation of the CEO, and CEO Frank Hugelmeyer adds that he thinks every CEO needs a personal development plan: “I think about what competencies I need to develop, and I share this not only with my senior leadership team, but also the entire staff every year—transparency gives others permission to feel safe.” 

Greg Heidrich, who has been the SOA CEO for 17 years, said, “I think about what the association will need in the future; we anticipate as best we can. For example, our strategic plan may tell us we have a skills gap we’ll need to fill in a specific timeframe.” His association has a generous professional development budget that includes deep-dive development for the senior team and individual coaching to help aspiring internal candidates develop specific skills. Another CEO seconded this focus on developing leaders internally, stating that it’s important to train and create opportunities to grow your star players so there is movement for others in the organization: “The role of a leader is to help your staff develop the skills that can be transferred elsewhere if there aren’t any openings within your organization.”

Indeed, most CEOs see great value in developing leaders internally even though doing so can have some special challenges at associations. One board chair stressed that associations often don’t have the same talent mobility as corporations, which can lead to talent hoarding. Another concern for some CEOs about internal development is that many associations have relatively small staffs, which is a key reason there’s relatively little mobility. There are also typically significant compensation differences between association CEOs and even the most senior staff members, which can encourage people to move when they have the chance.

Manufacturers Alliance president and CEO Stephen Gold recommends what he believes are essential skills and competencies to his board: integrity, ability to lead, strategic vision, and resilience, among others—but explained that his board is not too insistent on potential CEOs being internal candidates or even having association management experience elsewhere, though they are definitely open to those candidates. “Internal succession is a quicker path as internal people have institutional knowledge, but they have never been CEOs. That specific leadership competency could well be needed,” he said. He added, however, that an internal person could still be ideal as an interim CEO to ensure stability and have the immediate respect of staff. One board chair added that internal candidates have individual development plans, while external benchmarking of talent also takes place.

Beyond experience as an association executive, there are differences of opinion among CEOs about how important industry-specific experience is. NMMA’s CEO Frank Hugelmeyer stressed that every organization can benefit from bringing in fresh eyes; the marine industry has unique capabilities but that doesn’t mean it can’t bring in someone from outside. SOA’s CEO Greg Heidrich, however, noted that “It’s helpful to know the industry.” Similarly, the chair of another association thinks some domain expertise is necessary, though he stressed even more that a CEO needs to be passionate about acting as an ambassador for the organization, with the ability to engage stakeholders. “The person has to have empathy, be respectful of diverse opinions, be inclusive, be an active listener, and be willing to recognize they don’t have all the answers,” he said.

NMMA’s chair Bill Yeargin also sounded a cautionary note: “One of the biggest mistakes I’ve seen with CEO successions is that boards look at the previous leader’s deficiencies and work so hard to cover those that they actually overlook the things that leader was good at. So make sure you’re not only looking at the former CEO’s deficiencies but also at the association’s needs.”

Looking ahead

As associations seek to continue to improve their CEO succession planning, the one topic almost all the leaders we talked with stressed was the importance of communication. Leaders agree that being willing to have difficult conversations is critical, for both the CEO and board. “There needs to be transparency and open communication between the board and CEO, and don’t be hesitant to expedite the succession,” said the Manufacturers Alliance’s Stephen Gold. 

The Heart Rhythm Society’s CEO Pat Blake focused on communication with the C-suite and other staff. For her, it’s not just about who’s next in the role; fundamentally it’s about ensuring the organization runs smoothly. “Try to help people understand that a succession plan is not only needed when people are leaving; it’s about risk management and preparation,” she advised.

NMMA’s CEO Frank Hugelmeyer also underscored the importance of finding new ways to develop leaders internally, for example through greater rotation in roles and responsibilities within the senior leadership ranks. “This type of rotation is not common within the association space, but it gives leadership a full enterprise view. And have those uncomfortable conversations about succession. They’re needed to ensure that there is the best possible talent within the organization, giving the board two to three strong candidates from which to choose, when necessary.”4 

One board member summed up that what would make the most difference is “ensuring that the succession plan is intentional and formal, structured like a public company’s, and has governance at the board level.”

While every association is different, all the association CEOs and board chairs we talked with emphasized the importance of having and improving CEO succession planning. The conversations may be tough, the considerations complex, and the decisions difficult, but getting it right is the best way to ensure continuity and maintain trust with their member organizations. 

We suggest starting by asking yourself these questions:

  1. Do your board and CEO talk about succession regularly, collaboratively, and frankly?
  2. Does your board regularly review the skills and capabilities the CEO and senior leaders will need to meet the strategic plan?
  3. Is your organization investing in the professional development of its leaders and teams?
  4. Does your organization have detailed governance processes in place?

References

1 For more on our perspective on corporate CEO succession planning, see “Route to the Top: Today’s CEO,” Heidrick & Struggles.
2 Proprietary Heidrick & Struggles data from an online survey of more than 100 board members in the United States, conducted in spring 2023.
3 BoardEx data of S&P 500, small-cap, and mid-cap companies, accessed May 30, 2024.
4 For more on how this approach can be helpful in corporate roles, see Mark Jackson, “Financial services: Ensuring the next generation of risk leaders is ready,” Heidrick & Struggles; Stephen Krupp and Amy Miller, “Developing future-ready leaders: From assessments to strategically aligned learning,” Heidrick & Struggles.

Employment Contracts: Term, Termination and Compensation

Hiring a new executive, especially a president or chief executive officer, is always a major undertaking for any association. A great deal of time and effort, and often monetary resources, are invested in finding quality candidates, interviewing the most promising ones, and making a decision about to whom to extend an offer. 

During the courtship process, neither party, understandably, wishes to think about, or talk about, the divorce. But, sooner or (hopefully) later, the relationship between the executive and the association will end. For the protection of the association, as well as in fairness to each party, it is important that the possibilities of when and how the relationship can end be clearly expressed in the written agreement and that the executive candidate be presented with the material terms and conditions of their newly offered employment prior to their acceptance of the offer and, importantly, prior to the time they notify their existing employer that they are leaving (or prior to the time that they decline other offers). 

This article touches briefly on three key elements of association executive employment contracts – term, termination (including severance pay), and compensation. While it does not endeavor to cover all of the material considerations or possible ways to address these aspects of employment contracts, it highlights some of the issues that tend to be the most important to consider. Finally, note that the provisions regarding term and termination need to be coordinated and read hand-in-hand; they are intimately related.

The Term of the Agreement

Initial Term. Often, the initial term is two or three years. A key factor for associations (and indeed, the executive) to consider when assessing the length of the term is the variety of ways in which the term can end prior to expiration, which is discussed below.

Renewal Term. The agreement should specify clearly what happens at the end of the initial term. There are several options.
 
First, the agreement could simply expire upon the end of the term, with no obligation on either party to continue employment (remember that parties are always free to negotiate extensions if both parties desire to continue the relationship; sometimes it is advantageous for one party or the other to set up such a renegotiation).
 
A common provision in executive agreements is an automatic renewal in the absence of some affirmative notice to the contrary. For example, if one party does NOT provide notice at least 180 days prior to the expiration of the initial term, the agreement might renew automatically for one year.
 
It is important that both the executive and the association’s board remain aware of any approaching deadlines for notices and adhere carefully to the specified procedures for providing notice, as set out in the agreement. This need is particularly acute when, as is typically the case in associations, there are significant changes in director and officer composition year to year. 

Termination of the Agreement

Notice by the executive, no cause or reason. Although by no means required, many agreements have provisions that allow the executive to terminate early—without the need for a reason or cause—by giving certain notice. Typically, an executive candidate will want such a provision, particularly if the association will have a similar right. If the association agrees to such a provision, the notice period should take into consideration the hiring cycle and lead time required. That is, if the search process takes six months, the agreement might specify a notice period of six months.
 
Notice by the association, no cause or reason. Associations should carefully consider including in the agreement a provision that allows the association to end the agreement early without cause. Establishing cause sufficient for terminating an agreement can be difficult and costly, and result in public embarrassment to the association and the executive. See the discussion below regarding severance pay that typically accompanies such a no-cause termination.

Termination for cause. The agreement should contain a provision for termination for “cause.” Cause should be defined. Typically, it includes such things as malfeasance, breach of the agreement, fraud, embezzlement, dishonesty, or gross negligence. Be careful of definitions of cause that require convictions of crimes; no association wants to await the outcome of a criminal proceeding. Drafting cause provisions requires a balancing of the need for protection desired by both the executive and the association. Generally, with a termination for cause, no severance is paid to the executive, which is why the definition is so critical.

What happens when the agreement terminates? The agreement should specify what happens in each of the circumstances under which the agreement can end; in the examples outlined above, this includes four contingencies:

  1. Expiration of the term (and renewal terms, if any); 
  2. Executive gives notice; 
  3. Association gives notice (termination not for cause); 
  4. Termination for cause.

The interests of the parties here are clearly distinct; the executive is looking for as much security as he or she can get, and the association wants to have as little expense as possible tied up in a person who is no longer performing services for the association. The negotiations should find the right balance between the needs of the parties. 

If the agreement is ended early by the executive giving notice, typically there is no compensation due beyond that due during the time the executive works for the association. If the agreement expires, or if the association gives notice prior to the end of the specified term (without cause), there are two alternative approaches that are often taken. Under one approach, no compensation is due beyond the notice period and severance might be included under the second. However, it is increasingly the norm for associations to provide some severance pay in the case of separations based on both the expiration of the term and termination without cause. Severance pay is another area in which the needs of the parties need to be carefully balanced. Many factors may need to be considered, including length of service of the executive, the expected lead time for the executive to find new employment, and the impact on the association to be paying both the departed executive and a new executive, among other factors.

If the executive is terminated for cause, the agreement typically provides that the executive receives nothing beyond what was due prior to termination.

Compensation

Obviously, base salary should be clearly set out in an agreement. Typically, an initial salary is specified, with provisions made for future adjustments. However, associations should be cautious about specifying guaranteed increases for future years. While an executive will want some degree of security, that interest must be balanced against the uncertainty of future budgets, the economic environment generally, and the undetermined performance of the executive. Moreover, as the past two years have demonstrated, it can be very awkward for an association to grant significant pay increases to executives while staff members are subject to pay freezes, or worse, layoffs.

Many agreements also provide a bonus opportunity, often tied to the attainment of yet-to-be-specified goals. It is important, however, that the agreement specify that other factors may be considered by the board or its designated committee. From the association’s standpoint, it is important to retain discretion with respect to payment of bonuses, and to clearly spell out in the agreement that discretion is retained. The executive often will seek some level of objectivity in the bonus measurement, generally in terms of meeting specified goals or goals to be mutually determined each year. Both associations and executives should be careful regarding trying to established fixed goals in an employment contract, as it can be very difficult to project what factors may become more or less significant in future years.

Associations also must be careful if providing medical, dental or retirement benefits to an executive that are more generous than the benefits provided to non-executives. Associations should consult with a qualified benefits attorney to assess whether the associations’ plans permit such benefits and whether the benefits might run afoul of non-discrimination requirements, with potentially adverse tax consequences. Deferred compensation arrangements—more common in larger association executive employment agreements—also have to be carefully structured to not violate the IRS’ strict rules in this area, governed principally by Internal Revenue Code (“IRC”) Section 409A.

Bear in mind that total compensation provided to an executive of a tax-exempt association—whether exempt under IRC Section 501(c)(6) or 501(c)(3)—must be “reasonable” (at or below fair market value), under the IRC proscription against private inurement. Serious violations in this area can put the tax-exempt status of the association at risk. Executives of Section 501(c)(3) and 501(c)(4) organizations also are personally subject to potentially severe “intermediate sanctions” penalties should they receive either compensation that exceeds fair market value or non-business-related benefits, perks and the like that are not treated as taxable income. In addition, board members and other association leaders that approve such arrangements can be personally subject to intermediate sanctions penalties. There are certain steps that an association can take to minimize the risk that a compensation package will be deemed unreasonable (i.e., approval of the compensation by a group of disinterested decision makers, reliance on appropriate benchmarking or comparability data, and contemporaneous documentation of the same). Finally, the newly revised IRS Form 990 reporting requirements mandate disclosure of certain executive perks such as first-class travel and the payment of social or health club dues. When discussing compensation and benefits for a new executive, remember that certain extras added to sweeten the deal may be subject to public scrutiny.

There are typically many other components in an executive employment contract that are beyond the scope of this article. Some of those components include conflict of interest and ethics provisions, confidentiality, non-competition and non-solicitation, and the like. Some contracts contain alternative dispute resolution procedures, including arbitration provisions. As with the topics covered in this article, it is to the benefit of executive and association alike to have a clear understanding of those rights and obligations prior to the executive candidate accepting employment, and prior to the public announcement of the new executive’s hiring; fruitful, thoughtful negotiation and a comprehensive, well-prepared contract will address these issues and find the appropriate balance between the needs of the parties.

Create a CEO Succession Plan for Voluntary and Involuntary Exits

The popular PBS show Victoria opens in the first episode with the teenage Alexandrina Victoria succeeding the late King William IV as Queen of England. Succession to the British throne was predetermined by a number of rules related to descent, legitimacy, and religion, among others, but even with a detailed succession plan, Queen Victoria’s ascent was a little rocky with nefarious advisors.

Succession plans aren’t just for British royalty. Associations need them too. “[Associations] are risking wasted time, effort, money, and potential financial disaster if they’re not prepared for the loss of a key employee—especially the CEO,” says Ronney Reynolds, head of the accounting firm Reynolds & Franke, PC.

Unlike for-profit businesses, in which individuals can make rapid decisions, associations have to coordinate with their boards on hiring, firing, revenue allocation, and more. “It just takes longer,” Reynolds says.

However, a written and approved succession plan can ensure that the board of directors and executive committee are on the same page, and that association operations aren’t unduly interrupted in the wake of an outgoing CEO. Here are a few tips for creating a succession plan for your organization no matter the circumstances.

[Associations] are risking wasted time, effort, money, and potential financial disaster if they’re not prepared for the loss of a key employee—especially the CEO.

Voluntary Exit

Well before a CEO decides to resign or retire, the executive team should decide how much leave notice is necessary—that number should be included in the succession plan. Reynolds recommends that associations think about how much time it takes to replace and hire a CEO, along with whether the incoming CEO will spend time shadowing the outgoing one.

Other considerations include identifying the members of a CEO search committee and determining whether to hire a third-party employment firm to assist in the recruitment and vetting process. Reynolds also suggests setting a deadline on the hire and figuring out whether the outgoing CEO will serve as an acting CEO or consultant for a period of time.

Involuntary Exit

A nuanced plan is needed for a CEO who is asked to leave. In this case, the succession strategy should identify an action plan for approaching general counsel to determine if there is just cause to terminate a CEO. This plan should also include a process for seeking approval of the termination by the executive committee, informing the association staff of the termination, and identifying an interim CEO (or denoting the process for selecting and approving one). In addition, it should incorporate a deadline—Reynolds suggests two weeks after the announcement—for when the search committee will convene to start the hiring process for a new CEO.

Disability or Death

For cases where a CEO is disabled and unable to continue in his or her capacity to serve, the action plan should include a long-term disability policy. In these circumstances, the executive committee should consult with the CEO and his or her doctors about the likelihood of the CEO returning to work. The plan should also include procedures for calling together a special board meeting to discuss the situation and, if necessary, possibly approving an interim CEO. If a CEO dies, the plan should identify an interim CEO and a procedure for informing staff.

Finally, Reynolds recommends reviewing and updating the succession plan each year to keep it top of mind. The association board needs to approve and familiarize itself with the succession plan, he says, so if they need to use it, there’s no question about the steps to take.