The resignation of nonprofit’s executive director can be an opportunity to bring fresh insights and talents to the organization’s leadership team. At the same time, an organization that is unprepared for changes to its leadership group can be left scrambling to tie up loose ends before the ED departs. A disorderly resignation risks confusion and loss of important institutional knowledge, and in the worst case can leave doubts about an organization’s legal responsibilities and liabilities.
The executive director position can be a source of confusion for people who are new to the nonprofit world. Although the word “director” is in the title, an executive director typically is not a member of the nonprofit’s board of directors. Instead, the ED is usually the highest ranking officer of the organization. There is no rule against the top officer of a nonprofit also serving on its board, but in such cases the convention is to give that person the title of president rather than ED. For purposes of this article, our focus is on executive directors who are serving only as officers.
Every nonprofit needs to have a transition plan in place to guide its process when an executive director leaves. No one can predict with certainty when leadership changes will happen. Ideally, an ED provides plenty of warning before leaving. But a sudden illness, changes in family circumstances, or an unresolvable conflict of interest could all put an officer in a position of needing to resign on short notice.
Among other things, a transition plan should include these steps:
- Reach consensus about the transition process. The board of directors must reach a consensus about how the transition will be completed. This process includes an examination of the organization’s governing documents to understand the technical requirements for an executive director’s resignation and replacement. It also requires an examination of the departing officer’s responsibilities to ensure that important jobs are handed off in a logical way. In some cases a departing executive director’s unique abilities may need to be replaced with temporary outside help.
- Compile a comprehensive record of the executive director’s activities. Good recordkeeping should be a goal for everyone in a leadership role. For many organizations, especially those without fixed offices, keeping all records at a central location can be a struggle. When an executive director keeps separate records offsite, such as at home, the organization may need to ask for access to those records to ensure that it has a complete set of information about the ED’s activities on behalf of the nonprofit. This process may require thoughtful coordination with the departing officer, who likely will want to retain copies of records as evidence of compliance with fiduciary obligations and other matters. An exit interview conducted early on can help the organization identify potential gaps in its institutional knowledge.
- Control messaging about the transition. A nonprofit’s constituents, especially donors, will be interested to hear about changes at the top. Regardless of the circumstances of the change, it’s important that the board craft its messages with care. Where possible, the outgoing executive director should be included in the process to ensure that the communication strategy does not inadvertently harm his or her outside interests. If the ED is resigning under negative circumstances, messaging becomes even more important.
The Church Law Center of California advises boards of religious and secular nonprofits on matters of governance, compliance, and risk management. We can help your organization develop a transition plan to prepare for change at the top. Call us at (949) 689-0437 or reach out through our contact page.