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Why Colleges Should Avoid Abrupt Terminations

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By Raymond D. Cotton

In an essay published in the Kalamazoo Gazette on March 14, James P. Holden, chairman of the Board of Trustees at Western Michigan University, wrote that the university was "in the midst of a transformation" caused by state financial pressures. While that transformation would be stressful, Holden wrote, the university's president at the time, Judith Bailey, and her administration "have the board's backing as they plan and implement this transformation."

Just five months later, on August 17, The Chronicle quoted Holden, explaining why the board had fired Bailey: "We supported her as long as we could. Our patience ran out."

When I began negotiating and drafting presidential contracts in 1981, there was no discussion of bonuses for college and university CEO's, nor indeed, for any leader of a nonprofit organization that I was aware of at the time. Nowadays, however, many nonprofit governing boards offer, or at least discuss, signing bonuses, performance bonuses, or retention bonuses with candidates for the top job.

Where did those bonus ideas come from? They have migrated from the business world as more and more business executives have become college and university trustees. According to the Association of Governing Boards of Universities and Colleges, more than 50 percent of trustees now come from the business world. And as those individuals join nonprofit boards, they are bringing their business concepts with them -- such as strict goal setting for new presidents, higher compensation, insistence upon presidents being more "CEO-like" in their management style, and a willingness to quickly terminate a president when their expectations are not met.

Some of those ideas have proven helpful to academe, but some have not. And one that has not is the idea of quick terminations. Which brings me back to the situation at Western Michigan. (Neither Bailey nor Western Michigan is a client of mine.)

What happens if a governing board -- applying common business philosophies -- reviews a president on a quarterly basis and decides that what was acceptable last quarter is unacceptable this quarter?

Western's trustees had fully evaluated Bailey, the university's highly regarded and experienced incumbent president, in December 2005. The board then concluded she was doing such an excellent job that it granted her a raise and a bonus, and extended her employment contract from 2008 to 2009.

At the time the board recognized that Bailey, while being successful on many fronts, was faced with several challenging problems including declining enrollment, budget problems, and faculty disaffection. Nevertheless, the trustees assured her that she was moving in the right direction and had their support.

In March 2006, Holden, the board chairman, publicly reiterated his support in the opinion column he wrote for the Gazette. Soon after, however, Holden, a former CEO of DaimlerChrysler, and other trustees, began to grow impatient with the time it was taking Bailey to turn things around. At the same time, a majority of the faculty attacked the president for her cost-cutting measures and for her "lack of bedside manner."

Five months after announcing his strong support of her presidency, Holden did an about-face and notified her in early August that five of the eight members of the board had voted to fire her. They had not even waited until the normal evaluation time, which would have been in December.

The board chairman then offered Bailey about a third of the value of her contract, and when she balked, he quickly and publicly announced that she had been fired. Subsequently, he has been quoted in several newspaper articles trying to justify the board's hasty action.

This case raises important issues for trustees and presidents throughout academe: How much time should a board give a president to turn things around? Is it wise for trustees to act as though they were running a for-profit company and review the president on a quarterly basis?

Unlike for-profit corporations where an executive's survival depends upon the annual, and sometimes even quarterly, net profit of the enterprise, university presidents are expected to raise money from private donors and governmental sources based upon personal relationships that often take years to develop. Moreover, universities value shared governance and tenure -- concepts that contribute to institutional stability but are foreign and probably anathema to for-profit companies.

When a university president is abruptly replaced, it can take a year or more to find a new permanent leader. A president's departure frequently results in changes at the vice presidential and even deanship levels, too. Important programs started by the ousted president are often halted or at least redirected. Talented administrators become restless and may leave for more stable environments. And recruiting top scholars can be interrupted, as the best candidates are generally not interested in universities where the leadership is not certain to be in place from year to the next.

Moreover, even if the president is not performing as well as the board would like, is it in the best interest of the university for a board to publicly announce the firing of a president when no wrongdoing was involved? Generally speaking, presidents who have been terminated in such a precipitous manner have a lot of trouble finding future employment as high-level administrators in higher education.

Furthermore, in a case like this, where the board decided not to honor the full severance provisions of the contract it had signed, what effect will that have on the willingness of potential presidential candidates to put their careers at risk while trying to deal with the same difficult problems that Bailey faced? Will it look to potential presidential recruits like the board has scapegoated the president?

The Western Michigan case, which is as close to being a perfect storm as you can get, has an added disadvantage: A presidential employment agreement that has no specific provision authorizing the board to terminate the president's contract "without cause." Nor does the contract specify what severance would be paid in such a termination.

So not only are the parties left to muddle through, but they are muddling through in public.

I am an advocate for strong board-president partnerships. However, since the board is the employer, I also recommend that presidential contracts always include a clause that would allow the board to sever the relationship if, in its opinion, the partnership is not working.

At the same time, though, boards must understand that university presidencies today are very, very difficult jobs. Almost all of the presidents I work with tells me that they are on call 24/7 and that they have never had a more challenging job in their professional lives.

Presidencies are demanding, stressful positions that burn people out at an alarming rate. It seems to me that the least a board can do if the partnership fails is to allow the president to exit with grace and dignity, and certainly in accordance with the severance provisions of his or her contract.

Not only is that the humane course of action, but also the one that most benefits the university, since very soon after getting rid of one president, the board will be recruiting another. Sought-after presidential candidates tell me that they closely review how a board dealt with the previous president when deciding whether to accept an offer.

So wherever possible, a parting should be an opportunity to enhance the image of both the university and the departing president.

Firing a president is always a traumatic event for a university, and, of course, for the president. What guidelines should a board follow in such a circumstance? Here are some of the most important ones:

• The board should make sure its employment contract with the president has either been drafted -- or at least reviewed -- by a lawyer who has had experience with nonprofit presidential contracts. I have seen too many ambiguous, defective contracts.

• Unless there is serious wrongdoing on the part of the president, the termination should always be negotiated behind the scenes and announced publicly only after the board and the president have reached agreement on what the severance terms will be.

• Candidates for the presidency will be contacting the previous leader to ask questions like "How is it to work with this board?" For that reason alone, it is important for the board to be sensitive to the needs of the departing president and to treat him or her with a generosity of pocketbook and spirit.

• Terminating the president, even under the best of circumstances, will be front-page news in the local newspaper, and perhaps even in national publications such as The Chronicle. So after the board has decided it wants to fire the president and has secured competent legal advice, the next step should be to consult with a public-relations professional who understands the university and who has good relationships with the media.

• And finally, the board should appoint a transition committee with a twofold mandate: Assist the departing president, and take the necessary steps to prepare the new leader and the university for a successful presidency.

One of the most important responsibilities of any board of trustees is to hire, evaluate, and if necessary, fire a president. Trustees are not born knowing how to carry out those responsibilities, but they can secure helpful advice from outside experts in higher education and from organizations like the Association of Governing Boards of Colleges and the American Council on Education.

At the very least, based upon what I have seen at Western Michigan, I would strongly advise trustees not to employ the tactics of the for-profit business world in terminating a presidency.