- If your organization is a 501(c)(3) or 501(c)(4), having an arms-length, open search process is crucial in order to avoid IRS Code Section 4958 (“intermediate sanctions”) concerns and possible violations. [I can go into more detail on this advice relating to conflicts of interest, excessive compensation, and private inurement involving what the IRS calls “disqualified persons” (insiders) if you like.]
- Whoever is under consideration for the interim position should *not* be eligible to apply for or be considered for the “permanent” (full-time ongoing) position. In the past I have had an interim candidate withdraw from consideration because they wanted the ongoing position and was ultimately hired for the ongoing position after applying for it. The interim CEO has an inherent and unavoidable advantage in being considered for the ongoing role.
- One thing to watch for with interim CEOs is a tendency to do more than the job requires. Ideally, they should right the ship if there’s turbulence, calm the waters, and investigate the organization’s medium- and long-term needs while keeping the organization operating as smoothly as possible. When a nonprofit is in transition to a new CEO it is a *terrible* time to launch new initiatives, hire staff, change vendors and suppliers, revamp policies and processes that are generally legal and ethical, etc. The exception to this is that it *might* be a good time to terminate problem staff, depending on circumstances. The major exception to this is one I hinted at above. If illegality or corruption is discovered, it must be dealt with promptly and all board members must be kept apprised in a timely manner.
- Expect that the board will need to meet more frequently and work harder than typical through the interim CEO and CEO search processes. Especially if the transition is sudden, drama-laden, controversial, etc., don’t be surprised if some board members resign or just disengage in the face of the stress and increased workload.
- DO NOT allow the board to delegate all the work to the executive committee or an ad hoc committee. The board members who do not participate in the transition are far less likely to renew their active board participation once the transition is complete. They will have developed the habit of letting others do the work or be so frustrated at being left out of the “real work” that they’ll be disaffected.
- The interim CEO should *not* be involved in the CEO search process, except in the role of support to the board’s search committee and any consultants retained to assist the board and its selection committee in the search. The interim CEO and any consultants used in the search process will leave once the new CEO is selected – it’s the organization’s leaders and members who must live with the choice. *They* should be driving the metaphorical bus.
- The interim CEO should be retained on a contract and paid under a 1099, not hired as an employee. The contract should have definite start and end dates, with limited opportunity for short-term extension if necessary. Expect the interim’s contracted rate to be at least 125% of the full-time compensation for the CEO, with any short-term contract extension priced at a higher rate. It’s in both the interim CEO’s interest and the organization’s interest that the interim’s time in service is shorter rather than longer.
