Does The CEO Fit?

As a member of a Board your challenges are many, but probably the most critical is the appointment of the CEO. http://www.governance.com.au/board-matters/fx-view-article.cfm?lo adref=2&article_id=3602510C-6E21-476A-918649DA236E8382

Glenn was more passionate about the idea than any of us- he drafted the funding submissions, attended all of the meetings with bureaucrats and politicians, and began drawing the resources together before we even had a centre. He was working full-time as a community worker, but spent many of his nights and weekends lobbying, writing letters, following up with supporters and building the membership base. When the government funding finally came through he was the obvious person to appoint as our first CEO.

It was first’s all round, as this was my first Board. As the Board’s Secretary I worked well with Glenn. Our Chair was a good leader, and respected in the field, but she didn’t have the time for much of the hands-on work.

Glenn and I learned together. I was impressed with Glenn’s entrepreneurial skills- he found a very accessible office site and negotiated excellent lease conditions, he found furniture and computer equipment at great prices, and he was brilliant at letting people know about the start of the centre. During the first three months we had double the client visits required as a Key Performance Indicator by our funders. More and more material became available, and our library was growing.

I first became concerned when our Treasurer told us at a Board meeting that she could not report, as the material was not prepared. Glenn verbally took us through the financial situation in detail, but said he had not had time to prepare the written documentation.

As a new Board member, I tried to make myself available to both members and clients, without getting too involved in the running of the centre- noses in, fingers out, being the golden rule for Directors. About six weeks later, I was approached by an unhappy member, who told me that he had made a significant donation to the centre on the 10th of June. His receipt was dated 5 July. This meant he could not claim it on his tax this year as he had intended.

I spoke to Glenn about this, encouraging him to delegate the receipting and financial record-keeping to our Admin Officer. He told me this was a good idea, but when I checked with her a month later it had not happened.

The work of the Centre was increasing, and our funders were pleased. Glenn applied for an extension of our grant at the end of twelve months, and was successful. We were able to employ an Advocacy Officer and a Librarian. The Board, and our clients, were very happy.

Six months later, our Admin Officer resigned. Glenn advised the Board that she had obtained another job at higher pay. However, one of the Board members told me two weeks later that her new job was at the same wage, and she had much further to travel. Apparently Glenn had delegated responsibility for all financial matters to her, not provided her with any training, and then accused her of being responsible when the books would not balance. We employed another Admin Officer, and I ensured that the Board approved payment for a one-day course on our finance system.

More staff trouble occurred six months after that. Both of our new staff approached the Board Chair, telling her that they were having real problems with Glenn’s micro-management, and were thinking of leaving. The next day Glenn approached our Chair to advise that he had just completed performance appraisals for both staff, and that they were not doing well. Glenn’s report seemed significantly different from what we were hearing from the clients.

The Chair and I talked to Glenn, and encouraged him to do some management training. We found an independent person to do some staff mediation, and things seemed to settle down.

The final crunch came when our main funder took me aside after a meeting we had both attended. He told me that he thought the Centre was going really well, and was therefore surprised that our funding submission for the next year had not arrived by the closing date last Friday. I asked for a seven-day extension, and went to talk with Glenn.

I discovered that – contrary to reports to the last Board meeting – work on the submission had hardly commenced. Glenn had been so busy on library and advocacy issues, as well as monitoring the book-keeping, that he had not had a chance to work on it. We worked together for the next three evenings, and lodged the submission on the last possible day.

However, during that process, I discovered more problems-
financial, client record-keeping, and much staff unhappiness. Clearly, Glenn was a great entrepreneur and community worker. But he was not a builder, or a good manager. It was with great sadness that – two weeks later, after consulting the Board – the Chair and I terminated Glenn’s employment.

This story happened thirty years ago, but I still remember the details as if it were yesterday. I learned so much from my experiences on that Board, and have been building on that knowledge ever since.

Where had we gone wrong? Had we chosen the wrong CEO, or had the role changed so that it no longer met Glenn’s skill set?

The Australian Institute of Company Directors http://www.companydirectors.com.au have established ten Good Governance Principles. Let’s look at the areas where we, as a Board, could have improved our performance.

Principle 3. Purpose and Strategy- Perhaps under this principle we could have been clearer about where the Centre was going, and the subsequent staffing and management requirements. Glenn’s role had significantly changed, from entrepreneur at the start, to builder and manager two years later. Attempts to get him to improve his skill set had been unsuccessful. He was no longer the right “fit” for the job.

Principle 4. Risk- Recognition and Management- As the Centre grew, and Glenn’s role changed, we could have put some risk management in place. Were the risks of growing the organisation listed and assessed? Did we have a plan for CEO succession?

Principle 5. Organisational Performance- With a three-fold increase in staff during two years, were we adequately monitoring the Centre’s performance? Could we have found more internal signs of Glenn’s lack of skills, and assisted him to enhance those skills?

Principle 7. Integrity and Accountability- Were we too prone to accept Glenn’s shortcomings because of the other excellent skills he brought to the organisation? Should we have done more when the earlier signs became clear?

Principle 8. Organisation Building- This is an important function of the Board, particularly in smaller organisations. Whilst Glenn was clearly a great entrepreneur, should we have foreseen his weaknesses in staff and financial management, and acted to address them?

As members of Boards we can always do better. And stories such as this can be an instructive way to avoid mistakes already made by someone else.

Let me know how you would have handled this situation?

Graeme Innes has been a Company Director for more than thirty years, but finds every Board meeting an excellent opportunity to enhance his skills.

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