The Fiduciary Responsibility of a Board - Coursework Example

Non Profit Reflection Succession planning is part of the fiduciary responsibility of aboard Succession planning is the process of managing internal people who would become capable employees of the future. This is to keep an on-going preparation of the roles that would become available so that no opportunity is lost. (Quarry, Sherry, & Curlis, 2009) Succession planning is a fiduciary responsibility of the board since they need to be answerable to the stakeholders who vote for the board and ensure their job positions in the board. The job of the executive is to ensure that stakeholders get the maximum return out of their investment, and therefore even though succession planning isn’t highlighted as something extremely important, but it does impact an organization a great deal since it affects financial returns. And stakeholders need an assurance that wherever they invest, they will be secure, not only in the short run but also in the long run. For example, Apple with the demise of Steve Jobs has no successor, and therefore its stocks have come down to 5% simply because of the fact that Steve Jobs was great when he was here, however investors feel insecure about the company due to the fact that there is not successor to Steve Jobs. Apple could have saved itself the trouble of plummeting stocks if it had invested in succession planning. And this succession planning could similarly be for any other employee and not just a leader. For succession planning, an organization should realize that it is something that requires devotion and commitment from all levels in the organization, regardless of the hierarchy or flatness of its structure. It is also essential to be abreast with the talent in one’s organization and keep a record so that they can be honed into whenever the need may be. At the same time, it isn’t an activity that is just performed outright; all the potential employees as well as the shareholders need to be kept informed about the plan so that they can aspire to be in particular post. And it isn’t a once in a year activity that the organization performs but rather an ongoing activity that must be done and polished and repeated so that the perfect person can fill in the perfect shoes. A great deal of anxiety and stress can be avoided before-hand if this process is conducted before the need falls. This is because leaders can retire or expire unexpectedly, and the market is full of fluctuations and any change can occur without anticipation and the company can be left in dismay. This is where succession planning helps the organization. And it is the duty of the board to act for the company in case of risky situations and with diligence, keeping the best interests of the company in mind and to have good faith for the company in order to allow it to prosper. They must not only plan in case of the normal course of an employee or a leader expiring, but also in case of an emergency situation, they need to have an emergency plan. Most boards may be confused about what exactly succession planning is, however it doesn’t take away their responsibility from it. They face a great deal of obstacles such as a lack of clarity and resistance from the current leader of CEO. They may also want to be sensitive to the CEO especially if the company is in a good position at a particular point. However board need to have a planning process in their mind and be clear on what they have to do to keep the company afloat. And furthermore, despite the good health or ill health of the company, they need to keep the process ongoing since anything could happen. Lastly, the board needs to take into account the certain rights that shareholders have in the company, and this makes their proposal important for the board as well in succession planning since they need to know the reactions of the stakeholders. (Carey, Ogden, & Roland, 2000) 2. How do the roles of governing board and CEO interact during the stages of a nonprofit life cycle? Who should take the lead if renewal is necessary? A non-profit organization is essentially an organization which doesn’t believe in profits or dividends and even if it makes surplus money, it inputs it in moving towards its goals and achieving its aims. A membership organization elects a board and meetings are held where as a board only organization has a board which has elected itself and this increases the importance of the board in the organization. However, it is still and organization and goes through its phases; that it, it has a lifecycle. The major phases of an organization are: infancy i.e. start up or starting over again, which could also be called renewal, juvenile stage, that is the stage when it is growing, adolescence is when it has its spurts whether they be good or bad and maturity is when the organization has become established and can stay in that stage for a long period of time till it begins to decline or does something new. In all phases, the role of the board and the CEO are different. In all stages however, both have to realize which stage the organization is in and work accordingly. In its initial stages, the board functions on the grass root level and mainly consist of the founders who try to raise funds and come up with long term strategies for the company. The CEO, at this point may have more knowledge than the board and therefore may shape the organization and assist the board. The board also consists of different members initially and also the board appoints the CEO, so there needs to be an interaction between the two so that a good decision is made. Similar would be in the case of a renewal. However, in the case of a renewal, the company would need some guidance and direction, so the board’s role would be more important than the CEO. They will set down the rules and the policies; however the CEO will direct the company so that it has some lead and some aim, otherwise chaos and anarchy will follow. During the juvenile stage, the focus becomes on a more formal organization and more employees are taken on board, however the board has a main aim which is to focus on operations and this continues in this particular stage as well. As the stages progress, the organization has more clearly defined roles and a structure that becomes important, with different roles being assigned to different employees, and more employees being hired as the company progressed. The role of the board still remains important and board meetings are conducted, however, the roles of the organization also become important. They need a backing from the board and they look to the CEO from the board, and the board will always elect the CEO, that is why the two are interlinked, and their paths cross all the time in the organization, even if the important of one over the other varies over the span of the company. The board is important in time of renewal since they decide the roles and functions of the people in the organization and therefore in case of a renewal there needs to be a redefining of roles and clarity in the organization and therefore the board will be more in action and the CEO may or may not persist in the organization. In case he/she does, then the CEO will preside over the company in the future segments of the life cycle, but the board is predominant in some cases. (Fishman & Schwarz, 1995) 3. What are the elements of an effective crisis management plan? Give an example Crisis management deals with those problems that are a potential threat to the organization, the stakeholders of the organization or of any harm to the public due to the organization. These crises usually take the company by surprise, and give them a short time period to decide on their course of action. Before coming up with a plan; the company must take into account the perception and the reality of the crisis; whether it is media hype or an actual crisis that is important to consider for example. And the entire contingency plan should be communicated throughout the entire organization. Also, one must sit beforehand and imagine the worst possible thing that could happen to an organization and come up with different solutions via trial and error and this would make the crisis management plan much easier. There are different types of crises as well; however there are to aspects in managing any crisis; these are preparing and responding. Every crisis comes with a blow however if there is preparation, it will cushion the company’s fall. A company must first conduct a SWOT analysis to be clear about the entire scenario of the crisis and then take a lead on it. This should be done before the crisis even occurs, but even if it isn’t, it should certainly be done after the crisis has occurred. In this case, the organization should then sit and brainstorm as to what should be done to resolve the crisis. A team should then be formed for the purpose of handling the crisis only. This is part of the response. Ideally someone should resume the role of a decision maker, who makes decisions in case of a crisis, a person who handles the public as a spokesperson and a person who handles all the internal communication in the organization. Then the crisis management team should actually be triggered off so that they can actively solve the crisis. And this action should be recorded so that history shouldn’t be repeated, and to see how previous problems were tackled. An example that has been used rampantly in history is Johnson and Johnson’s recall of 100 million dollars’ worth of Tylenol by their CEO and rapid introduction of better, impenetrable packaging. This example is one of good crisis management. Rather, than letting their consumers suffer, and let their brand deteriorate further, the CEO took immediate action and recalled the product and everyone was notified; there was media everywhere spreading the news as Johnson and Johnson wanted. In response to the global financial crisis, the UK government has swiftly cut down spending and increased taxes, seeing the economic slump around the world and the burst of the housing bubble in US. This means that they surveyed all the threats in their environment and took immediate action. This involves both the aspects of a good crisis management plan, planning and responding. (Gottschalk, 2002) Bibliography Carey, D. C., Ogden, D., & Roland, J. A. (2000). CEO succession. Oxford University Press Inc. Fishman, J. J., & Schwarz, S. (1995). Non profit organizations : cases and materials. Foundation Press. Gottschalk, J. (2002). Crisis management. Capstone Pub. Quarry, P., Sherry, A., & Curlis, J. (2009). Succession planning. Training Point.Net. Read More