Shared Leadership: A Lawyer’s Perspective

In March, the Nonprofit Quarterly hosted a powerful webinar on nonprofit leadership transitions presented by CompassPoint Nonprofit Services CEO Jeanne Bell and consultant Tom Adams. Bell and Adams pointed to the continuing low rate of internal leadership succession and advocated for greater consideration of shared leadership models to encourage leader development, organizational stability, compliance with organizational values, and effective transitions. NPQ further explored this topic in a follow-up article, “Five Insights from Directors Sharing Power,” coauthored by Bell and her colleagues at CompassPoint. Nonprofits considering a shared leadership model would be well advised to review these materials while recognizing that people who talk about shared leadership are not always discussing the same things. In some cases, they use it to designate a two- or three person coequal group of executives; at the other end of the spectrum, it refers to a culture where taking leadership is encouraged, nurtured, and mentored at all levels.

Co-CEO Model

Shared leadership is often considered in the framework of having co-chief executive officers (or co-executive directors). This construct has been used for decades in certain types of organizations even while it has been seen as bizarre in other types. Many are confused about the idea of having more than one liaison with the board or having more than one person involved with being the “last authoritative word” on staff, but this may have more to do with the dominant paradigm of hierarchy as the go-to organizational structure than with any actual legal risk.

Of course, there are questions raised by having two CEOs that should be discussed and preferably settled in advance while allowing for modifications as the co-leadership model evolves. The first question is how the areas of responsibility will be divided among the co-CEOs. The next question, which may be tied to the answer to the first question, is who has the final decision-making authority. This may change circumstantially. While collaborating on such issues may be encouraged, it is important to plan, before a conversation is begun on a critical issue, what should happen when the individuals have differing opinions.

Co-CEOs may look to resolve their differences themselves and make decisions by consensus, or they may try to maintain separate domains of authority, though there will no doubt be areas of overlap. A key to this model of shared leadership will be the ability and desire of the co-CEOs to work at working together day-to-day and vis-à-vis the board.

Some in these dual leadership models have commented that having two executives does not reduce the workload, but it creates the ability to get more done and it is less lonely.

Still, of course, there are risks, particularly if the relationship goes sour, including inefficiencies resulting from two individuals performing duties that might otherwise be performed by one, conflicts, delays in decision-making, and opportunities lost due to those delays. Also, boards must factor the potential early-stage confusion the model may create for staff, volunteers, and external stakeholders. A common complaint of such arrangements is that it’s not always clear whose authority is controlling on a particular matter and who should provide directions on a particular task or initiative. In many jurisdictions, either co-CEO may have sufficient apparent authority to bind the organization in any contract she or he signs, regardless of whether the particular co-CEO had such independent authority.

CEO and COO

A very common shared leadership model consists of a CEO and one or more other c-suite officers, typically including a chief operating officer (COO). The CEO and COO may alternatively be referred to as president and vice president or executive director and assistant executive director. In this model, the other c-suite officers may be subordinate to the CEO but may be delegated with broad decision-making authority within their respective spheres with little interference from the CEO. The CEO and the board of directors would generally have the right to intervene as they believe would be appropriate.

While a COO’s duties and powers vary widely across organizations, they tend to be focused on the management of internal operations. This allows the CEO to focus more on external affairs like strategic partnerships, fundraising, advocacy, and public relations. However, the division of responsibilities in any particular organization may more logically follow the relative strengths and experiences of the officers.

CEO and Board

The law generally requires that the activities and affairs of a corporation be managed and all corporate powers be exercised under the ultimate direction of the board. While the board is permitted to delegate management to a CEO, particularly in all-volunteer organizations, the board may reserve certain management tasks for itself.

For example, the CEO, often the board chair in an all-volunteer organization, may manage the administrative tasks, and the board members may collectively manage the programmatic and fundraising activities. Because official board actions can only be taken if certain formal requirements are met, like those for notice and quorum, boards generally act informally in managing activities that require quick decisions and actions. Individual directors may volunteer to manage specific parts of an overall activity with the full board convening only to approve the division of labor, address serious problems, and listen to summaries of their accomplishments.

In these organizations, especially if they are early-stage or low-budget, systems can tend to be sparse and with many hands in the leadership pot, this leaves organizations open to problems.

In these circumstances, boards must be careful not to delegate important responsibilities without careful consideration of the volunteer’s abilities and capacity. Directors’ fiduciary duties require them to delegate authority with due care, in good faith, and in the best interests of the corporation.

Program Autonomy

A growing trend in shared leadership models involves small groups of employees empowered to manage particular programs or segments of the organization. The CEO may have no authority to overrule the decision of any group, and the board may also avoid interfering so long as the groups are all operating within the scope of their delegated authority consistent with any policies and plans set forth by the board. In “The Future of Nonprofit Leadership: Worker Self-directed Organizations,” Simon Mont of the Sustainable Economies Law Center describes this model as follows:

Instead of leadership flowing from the top down, small groups are empowered to lead within clearly defined zones of autonomy, and systems are built to coordinate their activity without placing anyone in a position of hierarchical authority.

The groups or subgroups may each have a designated leader, and an employee may participate in multiple groups and in multiple roles—sometimes as a leader and other times as a follower. This form of distributed leadership, which includes but is not limited to holacracy, may reflect the way certain things practically work in complex organizations. It also appears to be very attractive to younger generations with its shift in focus from individual leaders to systems. However, constructing and implementing a system that works well with an organization’s current composition of employees may be a great challenge.

In “Beyond the Holacracy Hype,” Ethan Bernstein, John Bunch, Niko Canner, and Michael Lee describe how self-managed groups, called circles, manage, design, and govern themselves under holacracy. Leadership is distributed among roles, not individuals, which generally results in the need for more leaders. The authors note:

You might assume that the three goals of self-management structures—designing roles that match individual capabilities with organizational goals, making decisions closer to the work, and responding to emerging market needs—would make leaders less relevant. Yet one of the greatest challenges of implementing the goals at scale is insufficient leadership. When leadership is a shared responsibility, everyone must understand and practice it.

Collaborative Leadership Across Organizations

Shared leadership may also cross across organizational boundaries. This may involve formal partnerships or joint ventures, collaboration agreements or memoranda of understanding, or informal coalitions. In “Collaborative Advantage: The Art of Alliances,” professor Rosabeth Moss Kanter discusses the “dense web of interpersonal connections and internal infrastructures” required for productive alliances. On leadership, she asserts:

Alliances benefit from establishing multiple, independent centers of competence and innovation. Each center can pursue different paths, creating in turn new networks that go off in new directions. Flexibility and openness bring particular advantages at business frontiers—in rapidly changing or new markets or in new technology fields.

Documenting mutually-agreed-upon policy directions and core procedures will help to facilitate the necessary integrations at all levels and prevent future misunderstandings.

The legal risks associated with collaborations are often discounted. In a general partnership, one partner may be held jointly and severally liable for the acts or omissions of another partner. Without appropriate vetting and a clear understanding of the partnership, this may not be desired. In such cases, collaborating parties may enter into an agreement specifying that they are not partners or co-venturers, but the language of the agreement does not in and of itself determine whether or not a partnership has been formed. The parties may be held responsible as partners with respect to a program or project if they represent they jointly own and are jointly operating the common enterprise. Creating a separate limited liability entity for the joint venture may be one solution. Another possibility is utilizing a fiscal sponsor in which the program or project can be housed.

In Summary

There are indeed risks to instituting or becoming involved in shared leadership models, but in the future, not being able to manage one’s self or one’s organization in a shared leadership environment may leave one ill prepared to attract young leaders or exciting partners. Strict hierarchy and siloed leadership have their own constellation of legal (never mind moral) problems—we’re just more used to them. Shared leadership, on the other hand, is a work in progress. Core to its success is probably excellent foresighted designation of processes and responsibilities, as well as transparency and many of us are getting better at those every day.