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Managing Crises: Dealing With The Unexpected

I. Reactive Boards Lacking Wisdom and Adequate Training

Reactive boards are not analytical, do not think clearly under stress or in a crisis and they lack wisdom, the most important quality that should be sought in board members.

Reactive boards often create crises rather than manage them or learn from them. These boards may behave as “hysterical” boards, and more often than not they are parent dominated where “wearing the parent hat” tends to be the behavior that drives the decision- making. On the other hand, unexpected and often very serious crises can arise and are not board-driven at all but generated externally. Managing this kind of unanticipated event requires the same degree of trustee wisdom and a measured, carefully calculated response on the part of the board.

Recent articles in the United States about executive compensation in the nonprofit realm have prompted boards to worry about potential public relations fall out in anticipation of uninformed parties accessing head of school compensation data in the public domain. Yet some boards are caught completely off guard, for example, either when a parent or group of parents accesses the information via Guidestar.com or when the local media researches it and publishes it.

Unfortunately the information in the public domain is not current, lacks important explanatory details and is easily misunderstood by the average “researcher”. The average researcher, for example, has no knowledge of current trends in head of school compensation; what it costs to recruit or retain a valued head; or what a deferred compensation payout means.

How could a board plan for this? First, the executive committee of an independent school board in the US needs to understand how the CFO has reported executive compensation on the IRS Form 990. In the case of more complex or higher total compensation packages for the head of school, the executive committee needs an even more sophisticated knowledge of that reporting. Another way to obtain that knowledge and to be prepared adequately for questioning is to utilize the services of an informed and experienced outside compensation consultant who will also provide the board with documentation attesting that the package complies with “safe harbors”.

An example of good planning on this topic was a Board’s preparation of a statement to its school community about the Board’s recognition and appreciation of its Head’s 30 plus years of outstanding service including fundraising and building accomplishments. It also explained in layperson’s terms his deferred compensation payout and how the total accumulated not only through the School’s annual contributions to the 457(f) plan with a substantial risk of forfeiture, but through the Head’s own significant annual contributions to the plan and a savvy investment strategy. The Board had the statement ready in case it was needed.

II. Tragedies for Which a Board Cannot Plan

Many schools experience terrible tragedies, i.e. sudden death of the head, a scandal involving a teacher or pedophile, or a student(s) possibly involved in a drug bust. All schools suffer major tragedies and upsets, and dealing with these requires a different set of skills for the board chair and head than simply having in place formal policies on bullying, evacuation, security, harassment, etc. These kinds of tragic events are those that cannot be anticipated or prepared for in any formal way, but how the board reacts to them defines that board and tells a story about how well or poorly it has been trained in governance over time.

While boards with chairs and/or members who serve too long and become complacent or out of touch may not react with wisdom, the much greater risk of reacting poorly to a crisis comes from high board turnover. Sometimes these newer, less experienced boards are more likely to engage in rash behavior.

One beloved Head of School was killed on campus by an employee whom she had terminated justifiably. Parents were terrified as the news spread. Very quickly the Board communicated with the parents and the press thoughtfully and carefully. The details that surrounded the death of the Head were never discussed in the media or in public. The Board immediately asked the recently retired and former long-serving School Head to return and bring the necessary healing and stability to the School. Those deliberate and responsible actions have allowed the School to recover. This Board was a mix of alumni, long term and new trustees, and the Chair who carried the School through that crisis is now in his fifth year in that role. Nothing could have prepared this Board and Chair for this event, but this Board believed that regular governance training was important. One Head of fourteen years has spent the better part of ten of them dealing with a pedophilia scandal that preceded him. He has handled negative media coverage and the anger of wounded alumni. He was charged with protecting the School while also acknowledging its previous mistakes and ensuring that the current policies protecting children are firmly in place and understood. This particular Board and the Board Chairs have supported fully the Head who had nothing to do with the issue and is simply trying to manage the crisis. A truly well trained and wise board does not toss the head to the wolves, but recognizes that such behavior further undermines the successor head as well as any moral ground the board might have staked out.

The thoughtful, wise and mature way that these Boards and Board Leaders reacted is related to their level of maturity, wisdom and sophistication due to effective governance training that guided them about how to respond under fire.

John C. Littleford
Senior Partner