Some 20% of Vermont’s economy and much of our social safety net depend on Vermont’s nonprofits. Yet the governance principles that help them achieve their missions are widely misunderstood or ignored by the 6000 largely unregulated organizations licensed to operate in Vermont.
Recently, we’ve seen several nonprofits falter, followed by charges and countercharges with the blame falling on the Executive Director – or E.D. – when it’s the board which bears responsibility for the performance of their chief executive, their organization’s effective delivery on mission, and its fiscal and ethical integrity. An E.D. serves solely at the will of the board and when he or she has failed, by definition it’s a board failure.
The annual performance review of the executive director is one of the most fundamental and important roles of a board. Perhaps, because the idea of judgment is uncomfortable to some, reviews are often ignored or not given the attention they deserve. Ironically, good leaders welcome regular performance reviews. They’re preventive medicine and ensure continuous improvement in leadership skills.
Any discomfort around making hard judgments disappears when all parties understand the process and observe it with regularity. Leadership feedback is distilled by a board committee from directors, staff, and mission constituents; then it’s presented objectively under three categories: “areas of success,” “areas for improvement,” and “areas needing immediate attention.” Performance inputs remain anonymous. Ideally, these “areas” correlate to management objectives or strategic goals agreed upon by the board and leader in the prior year. Often the E.D. is asked to write his or her own review as a starting point, correlating objectives and achievements. This becomes part of the personnel record and review.
Too many nonprofit boards are unaware they share responsibility with the E.D. for organizational integrity, well-being, and delivery on mission. And when an E.D. is deemed to have failed, usually the board has long since failed. Regular feedback between the board chair and the E.D. is the only way to integrate continuous improvement and mutual understanding of expectations.
Furthermore, it’s the responsibility of the board to remove an E.D. when his or her performance shows continuous decline, or inconsistencies emerge between the job description and actual achievement. Too many boards tolerate substandard leadership for too long, fearing legal consequences, when the most serious legal consequence comes from not doing annual reviews or not removing a failing leader.