Is Your Small Nonprofit Ready to Become an Employer?

Once a group reaches a certain level, it is tempting for board members to think they are ready to hire their first executive director (or CEO), but in truth it can take a year or more to complete the groundwork. There are many things to think through, decide, and do to ensure a consensus understanding of expectations and communicate those expectations clearly to the new hire. Giving any of these steps short shrift may well result in a kneecapping of the new E.D. before he or she has even begun. Ready? Here we go!

Step One: Ensure a Strong Board of Directors is in Place

An executive director – even a great one – is not a substitute for a weak board. Unless and until a strong board is in place, with skilled and committed members who are ready, willing, and able to perform their governance role well, a new executive director cannot make the organization successful. Strong boards and strong executive directors are interdependent.

Everything we talk about in our Level Up Nonprofit Accelerator * program – being clear about the roles and responsibilities of the board, having the right people, developing your policy infrastructure, building strong committees, ensuring adequate resources – are all fundamental preconditions to becoming an employer.

When a board is ready to begin the process, special consideration should be given to recruiting a board member with Human Resources (HR) training and experience to assist.? Another option is to create an ad hoc personnel committee or task force and include someone with HR experience who is not a board member but is willing to take a leadership role on this one project.

Step Two – Strategic or Transition Planning

My grandma often said, “Plan your work and work your plan” and she was right! The hiring of an E.D. is not an end in and of itself but rather it is a means to an end, a strategy for achieving the mission and vision. All boards should work to establish their short- and long-term goals. When the group’s goals cannot be achieved by the board and available volunteers alone, then it is time to pare back on the goals or hire an E.D. to take on the operations and programs. Planning is the act of choosing and prioritizing the goals, strategizing about the correct set of action steps to achieve those goals, and identifying the available resources – including people hours.

Sometimes a group will engage in true strategic planning and discover what they really want to achieve is beyond them as an all- or mostly all-volunteer organization. At other times, the need for paid professional staff will be obvious, but a plan must be worked out to get the group from its current status to its future desired status. This type of transition planning would be focused on a single objective: prepare for and hire an E.D. Identify the action steps, outline who is responsible for what, and specify the timelines.

Step Three – Assess Resource Needs

How much would it cost to have an executive director? What is the salary range for comparable positions in your area? What would be the outlays associated with payroll taxes, fringe benefits and the like? What new expenses would be incurred? Payroll processing? New space, furniture, or equipment? These are the things the treasurer/finance committee must research as part of this process. A solid and comprehensive budget is not optional.

Step Four – Identify Resources

If the organization has carryover reserves, what amount must be kept in savings as a rainy-day fund and what amount could be invested in hiring an E.D.? These are critical boardroom conversations.

Another aspect of identifying resources is projecting how much more could be raised through fundraising if a qualified professional were in place to guide it. In other words, what is the anticipated increase in revenue in the first and second years after hire?? It’s important to be prudent here: expecting a new E.D. to launch a fundraising campaign sufficient to fund their own position in the first year is probably not realistic.

The annual cost of a new E.D. minus the amount of cash reserves available plus the amount of new revenues the new hire could reasonably be expected to achieve in year one equals the amount a board must raise before hiring.

Step Five – Create Employment Policies

Whenever a board of directors employs staff, they must make a number of decisions that are collectively called employment policies. These include things like what behavior standards they expect their employee to uphold and what their philosophy of discipline would be for breaches of those standards. What schedule is expected? What allowance do we make for time off? It’s a lot to think through.

Samples and templates for standard nonprofit personnel policies can easily be found (including in the LUNA resource library) but even a good template cannot substitute for the important committee and board discussions required to make policy decisions. There are a lot of issues to think through so give yourself time to give each policy the consideration it deserves. ?

Step Six – Develop a Position Description

Here is where a board spells out exactly what will be required of the new hire, along with the qualifications and experience deemed necessary for success. As with personnel policies, templates and samples for E.D. position descriptions can be found in many places, but each must be modified according to the unique situation of a specific organization. The process of crafting a position description helps a board continue to think through its requirements, what specifically it needs the new E.D. to do, what success would look like.

No position description is complete without the salary being offered. “Commensurate with experience” is a thing of the past. These days, many qualified professionals refuse to respond to potential employers who do not disclose what amount of pay is being offered. You must be clear. Also, it is a common practice to list a college degree in the qualifications section but think about whether that is something that is truly required. Could someone with equivalent experience and skills fill the role effectively? In many cases the answer is yes, so don’t limit your incoming applications by not thinking through what you really need.

Conclusion

The importance of having a strong board in place cannot be overstated. The group cannot be successful in the long-term if it sees the hiring of an executive director as a blanket solution to a general lack of resources or available volunteers to carry out its mission-related tasks. Building the board to the point where it can effectively perform the steps described above is mandatory.

In Part 2 we will go through the steps of hiring and onboarding a new E.D. and in Part 3 we will share some of the most common traps boards fall into.

*The Level Up Nonprofit Accelerator was developed as a way to help board members and staff of small organizations build up their capacity to achieve more mission. The 28-week program includes live sessions on governance, finance and fundraising delivered within a wraparound learning community full of curated resources, direct access to the trainers, and peer networking. Applications are now being accepted for a cohort beginning June 13. Full scholarships are available for organizations that qualify. Visit our website at www.LUNAExperience.org for more information and apply now.