HR Insights Winter 2021

WINTER 2021

HR INSIGHTS SARC’s Human Resources and Labour Relations Newsletter

ISSUE 14

WINTER 2021

In this issue, consultants explore the topics of succession planning, leadership governance, and the legal responsibility of directors of a nonprofit organization.

HR Insights Welcome to SARC’s Human Resources and Labour Relations Newsletter.

Join SARC Consultants each quarter as we explore topics important to managing employees and HR/LR risk.

1

Contents Succession Planning Marrion Wolff

4

Succession is one of the best ways that an organization can prepare for future changes within senior management, whether planned or unplanned. In this article, SARC LR Consultant, Marrion Wolff, discusses the steps organizations must take to implement succession planning.

Leadership and Governance Leanne Zacharias

6

Unexpected departures occur in every organization. When they occur within senior leadership positions, steps must be taken to ensure the organization runs smoothly.

In this article, SARC HR Consultant, Leanne Zacharias, explains what organizations must do to prepare for this possibility.

Directors of Nonprofit Organizations: Roles and Responsibilities

8

Aaron Haight Directors of nonprofit organizations have many responsibilities including fiduciary duty, duty of care, and duty of loyalty. Aaron Haight, lawyer with MLT Aikins, dives into this topic and how directors must comply with the legal duties that come with their position in the organization, including the requirement to act in the best interests of the nonprofit.

2

About the consultants

About Marrion Marrion can assist SARC’s Regular and Associate Members with a variety of LR/HR issues, including progressive discipline, performance management, and duty to accommodate for unionized and non-unionized organizations. She can also provide specific support in collective bargaining for unionized organizations.

Accessing this service is free of charge and can minimize organizational risk. Having a quick check-in or a review done before decisions are made can save you time and money in the end.

Marrion Wolff SARC Labour Relations Consultant

About Leanne Leanne is available to assist SARC’s Regular and Associate Members who would like to have additional expertise on a variety of HR topics.

Whether you have an internal HR professional or not, organizations can contact Leanne for best practices in the sector to strengthen your workforce. Areas of service include recruitment and retention, organizational structure analysis and workforce planning, job descriptions, HR policies and procedures, compensation and total rewards, and succession planning.

Leanne Zacharias SARC Human Resources Consultant

About Aaron Aaron Haight is a corporate-commercial lawyer based out of the Saskatoon office of MLT Aikins. Aaron works with businesses and non-profit organizations to ensure that their corporate structure makes sense both practically as well as from a tax perspective.

When he is not at the office, you can find Aaron riding on a tractor on his family’s farm, playing with his three children or taking in the prairie scenery on his bicycle.

Aaron Haight L a w y e r , M LT A i k i n s

3

SUCCESSION PLANNING Marrion Wolff

SARC Labour Relations Consultant

S

uccession Planning is one of the best ways an organization can prepare for the inevitable changes to senior management positions that it will face. These changes can either be planned, for example, when a senior management person is retiring, or it can be unexpected due to illness or leaves of absence.

Whatever the reason for the change, employers are far better off having a plan in place that can be enacted when needed.

Plans will take some time to create initially; however, once in place, they require only periodic updates. It is a planning process that is worth the effort, as it: •

•

• • • • •

4

Ensures continued smooth operations in case of sudden vacancies Supports the transfer of knowledge and vital information Highlights any gaps in training Promotes good morale Allows for long-term planning and retention Allows organizations to recognize internal candidates Protects the employer’s reputation and brand integrity

There are many templates that can be utilized for this process and most will contain the basic steps to be followed:

1

Identify the critical roles: This will include the Executive Director and possibly other managers/positions, depending on the size of the organization.

Be sure to include positions in finance and payroll where a sudden vacancy can be very problematic to your operations.

2

Determine the competencies for each position: Review each position’s job description as well as their day-to-day activities and decide which are vital for success.

3

Identify who may be a successor: When considering potential successors for each identified position, review employees’ current skill and experience levels and compare those to the competencies identified for the targeted position. Consider if anyone has already done some coverage in a position. Remember, though, that each person’s desire for career growth may be different, and you may be surprised if you make assumptions. Be sure to ask employees to share their career plans within the

organization, either through performance appraisals or other conversations.

4

Do a gap analysis of each successor: During this analysis, you will note where training and education are lacking in each case and develop a plan to provide what is needed.

5

Implement the development plan: This can include job shadowing, assigning of projects, and various types of training options both provided internally and externally, such as university classes. The cost of the plan must also be considered and budgeted for.

6

Evaluate and monitor: This type of plan requires ongoing review to determine if successors have achieved the training they need and to adjust for any changes in staff that may have occurred since the plan was last reviewed.

At some point during the succession planning process, the employer needs to decide who to promote, and this can be a difficult decision. Determining criteria for promotion ahead of time can simplify the process.

The following is a sample of criteria that can be used:

• • •

•

Experience in the position or a similar position High ratings in recent performance evaluations Possession of the skills and competencies identified for the position The display of personal motivation in good attendance, punctuality, meeting deadlines, willingness to take on new and additional responsibilities, and being open to change.

Employees may not understand why they weren’t considered as a successor to a position and feel the decision made was possibly biased or unfair. This situation can be avoided or minimized by being very clear as to what the competencies are for each position and including the employees in the gap analysis process. This will clearly illustrate which employees are closest to being qualified for any position and exactly what others are lacking in regards to the competencies. One employee may be doing a fantastic job at their current level; however, that might not mean they have the skills or talents needed to move into a more senior position. Transparency and good communication will help ensure that the process does not negatively affect employee morale.

The entire management team should be aware of who is being considered to take over which positions within the organization when departures are planned and in cases of unexpected departures. Being prepared for either eventuality is key to your organization’s continued success.

5

I

t’s a situation that no nonprofit wants to be in – the Executive Director (ED) leaves or is unable to act in their leadership position and the position becomes vacant. There could be a variety of circumstances that might lead to this situation, such as illness or accident, resignation, termination, retirement, job abandonment, leave of absence, etc. The length of the absence may be unknown, or there may be an expected end date.

Ideally, an Executive Director’s departure is planned and with sufficient notice, but this is sometimes not the case.

So, in the event there is a gap in leadership, how will the organization continue to operate?

Succession Planning The value of succession planning becomes apparent in situations like this. The Board may have an emergency succession plan in place to guide them through an unexpected absence. Or, there may be time for a gradual transition with a planned resignation or retirement. For more information on succession planning, see Marrion Wolff’s article in this issue of HR Insights.

Potential Options The plan to cover the gap in the ED position will somewhat depend on the circumstances.

Mainly, the length of the leave, if the notice was sudden or planned, and whether it has a defined end date in the short or long term.

For example, a 6-week unplanned medical leave may have a different plan than a 12-month planned parental leave of absence.

LEADERSHIP AND GOVERNANCE Leanne Zacharias

SARC Human Resources Consultant

6

The first option to consider is recruiting for an Interim ED to fill the gap. This is a temporary role to fill the position until a permanent ED can be hired or returns from a leave of absence, usually longer than 6 months. The Interim ED may be an internal candidate or an external hire, but would typically go through an interview process before being hired.

In shorter term situations, another option could be to select an Acting ED. This is a temporary position of higher duties, usually filled internally. If there are multiple employees that could fill the role, a brief selection process may be needed, as there is usually sudden or immediate need.

In all situations, refer to your succession plan and recruitment policies. To avoid any confusion, the details of the employment should be in writing as either a letter of offer or amendment to their contract. This should address pay, scope, and end date of the temporary position. Extensions may be needed, but you don’t want to leave this openended indefinitely.

Can a Board Member step in?

•

A Board Member who is qualified to perform the duties can fulfil the Executive Director role; however, they must step down from the Board if they are taking a paid position at the organization.

Can the ED duties be shared?

•

The job duties can be shared among staff members as a co-management team. For this to be successful, roles and responsibilities must be outlined and lines of communication and reporting clear. For instance, who is responsible for what duties; how will decisions be made?

Can a former ED come back?

•

While this can be done, it may not be ideal and should be considered within the context of potential challenges it could present for the Board, the exiting ED, and the rest of the staff.

Handling Pay In the event that a current employee fills the Interim ED position, the question of compensation needs to be discussed and agreed upon in writing.

This may or may not be already addressed in policy, so be sure to check there first. Typical adjustments to compensate may include the following: • •

•

Managing the Transition If the Board is appointing an acting ED instead of holding an open competition, be aware that perceptions will exist about procedural justice and fairness of the selection process, so carefully consider these in the context of your organization.

The Board has an obligation to make its best judgement in any hiring decision and have a clear case to support that decision.

If there is an interim ED from within the organization, be prepared to have a conversation about the recruitment process for the permanent position. Filling an interim position is not a guarantee of the permanent job, and both parties need to be aware of what assumptions they may be making. For example, the person filling the interim role may not be interested in the permanent position. Board Members also need to be sure not to make any promises, as this could lead to potential constructive dismissal if they were promised the job and then seemingly demoted.

Lastly, periods of transition and change can be stressful on the interim or acting ED, as well as other employees and the people supported by the organization. A season like this may also require more Board involvement, which also needs to be recognized. Taking the time to plan ahead to handle gaps in leadership of the Executive Director can help ease the pressures of the situation and lead to a smoother transition.

A bonus payment or perhaps paid time off to acknowledge the additional duties and responsibilities of the acting ED. A percentage pay increase in salary for the duration of the interim appointment. The level of pay should be reflective of how substantial the additional work is and whether they are working in their current position during this period as well.

An increase in salary to the ED level based on the current ED compensation grid or range.

Once the interim or acting position ends, the employee would return to their previous salary.

Again, this should be in writing.

7

DIRECTORS of NONPROFIT ORGANIZATIONS: ROLES and RESPONSIBILITIES Aaron Haight Lawyer, MLT Aikins LLP

I

ndividuals who serve as directors of nonprofit organizations must navigate a variety of competing concerns as they provide leadership and oversee the nonprofit’s operations. These individuals typically have a long-standing relationship with the organization and, while this involvement provides valuable experience, it can also influence (positively or negatively) how the individual views the organization’s priorities and the other leaders of the organization. As volunteers, directors must fulfill the responsibilities that come with their position while at the same time juggling the demands of their daily lives. And directors must comply with the legal duties that come with their position in the organization, including the requirement to act in the best interests of the nonprofit. This article provides an overview of certain aspects of these legal duties.

What is a Fiduciary Duty?

A director of a nonprofit has a “fiduciary duty” to act in the best interests of the organization. A “fiduciary” is someone who is required to act for the benefit of another person on all matters within the scope of their relationship. For example, parents are considered to be fiduciaries of their children; similarly, physicians are in fiduciary relationships with their patients. In the nonprofit context, directors are required to exercise their powers with competence (or skill) and diligence, and in the best interests of the corporation. At its core, this duty is an obligation of loyalty, honesty and good faith.

8

In Saskatchewan, the fiduciary duty of directors of a nonprofit organization is codified in section 109 of the The Nonprofit Corporations Act, 1995 (the “Act”):

and how the organization’s assets are being used in its operations or preserved for future use.

Every director… in exercising his or her powers and discharging his or her duties, shall (a) act honestly and in good faith with a view to the best interests of the corporation, and (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

The duty of loyalty requires a director to act honestly and in good faith in the best interests of the organization. Among other implications, this means that a director is not allowed to profit from their office. Directors may be reimbursed for expenses incurred in fulfilling their duties but their role as a director should not be used to generate personal profit. Directors must also avoid situations in which their duty to the organization conflicts with their personal interests.

A director’s fiduciary duties can be divided into two main branches: (a) the duty of care; and, (b) the duty of loyalty.

The Duty of Care The duty of care imposes on a director’s duty of competence or skill. Directors must exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. In practice, this may include a director reading materials and preparing questions in advance of board meetings, maintaining awareness of all matters being considered by the board and those approved by the board, only making decisions after considering all of the required information (including seeking professional advice where needed), and exercising independent judgment when voting on any and all decisions.

It is generally accepted that directors of a charitable not-for-profit corporation owe a heightened duty of care because they are overseeing the use of donated funds and inattention could result in a loss of charitable status. This heightened duty of care means that directors should view themselves as trustees of the nonprofit’s assets. Directors should take proactive steps to ensure they understand the current financial position of the organization

The Duty of Loyalty

A conflict of interest may arise in a situation where a director is tempted to place their private interests above their loyalty to the organization. For example, if a director is involved in a business and the nonprofit requires services that the director’s business would be able to provide, a potential conflict could exist. On one hand, the director’s business may be able to provide the services to the nonprofit at a reduced rate, an obvious benefit to the organization. On the other hand, the existence of a contract or proposed contract between the director’s business and the nonprofit organization could cause observers to question whether the director has competing loyalties.

Proactive Steps to Avoid and Manage Conflicts of Interest The potential for conflicts of interest often exists in nonprofit organizations. The key is that the organization and its directors can and should take steps to prevent and navigate potential conflicts of interest. Failing to do so can expose directors to personal liability and undermine the credibility of the organization.

First, directors should consider

and be mindful of their own potential sources of conflicts of interest. Organizations should also implement a code of conduct or conflict of interest policy for its directors that defines a conflict of interest and outlines the process to follow when a potential conflict is identified. Educating directors and others in the organization can help prevent conflicts from arising and provide the necessary tools to deal with conflicts that do come up.

Second, once a potential conflict of interest arises, it must be disclosed.

Section 107 of the Act requires an organization’s directors and officers to disclose in writing, or have a record made in the minutes of a meeting of directors, the nature and extent of the individual’s interest where the individual is a party to, or has a material interest in a party to, a material contract or proposed contract with the organization.

Transparency allows the other directors and the organization to determine how best to respond to the potential conflict.

Third, the directors must determine appropriate steps to avoid the conflict of interest. At a minimum, a director should recuse themselves and not take part in a discussion or decision in respect of which they are conflicted. If the conflict of interest may arise on an ongoing basis or cannot be appropriately managed, the director may need to consider stepping down from the board.

Conclusion Directors play a vital role in the health of nonprofit organizations.

But their position of responsibility also requires them to exercise their authority within certain legal limits.

Directors should take steps to educate themselves on their roles and responsibilities so they can ensure that proper procedures and practices are in place to protect the organization and themselves.

9

10