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When you have an attorney that's negotiating on your behalf, you're going to be willing to ask for more. You're going to be willing to ask for that sabbatical, or you're going to be willing to ask for the retention bonus. Your attorney is not going to feel awkward about nagging the board. If they're dragging their feet, you report to the board. It's hard for you to really be always sending reminders saying, hey, where are you with this, your attorney? That becomes their job. Foreign. Welcome to the Successful Nonprofits podcast, friend. I'm Dolph Goldenberg, a consultant, coach and confidant for leaders at small and large organizations across the country, and I bring three decades of leadership and consulting experience building, growing, leading, and, yes, repairing organizations. Today, we're going to be having a conversation about negotiating your employment agreement and specifically some of the newer clauses that I'm starting to see in chief executive agreements. Now, if you've ever negotiated a contract as a chief executive, you know that it can feel like walking a tightrope, a thing thousand feet off the ground. And not only that, but you're doing it without a net. On one side of the tightrope is your commitment to the mission, and right next to that is the fact that you're usually negotiating with a board leader that you have a pretty strong relationship with. On the other side of that rope is your duty to protect the organization and manage its expenses. And while you're trying to balance both of those, you look down and below you, 100 or 200ft is a cement floor. And on that floor is your own financial well being as well as your professional trajectory. So it is no wonder that the contract negotiation process can be so difficult for those of us who are chief executives. And if it only gets harder, because so often boards will drag their feet in negotiating, drafting, or even approving that contract. Now, I've had a front row seat and a backstage pass to contract negotiations in a variety of roles over the last 20 years. As a chief executive myself, as a board chair, as a board treasurer, as a coach of other executive directors, and as an interim leader. Whether negotiating it myself or watching other people do it, I have seen this. And because I have seen so many executive director agreements, clients and former clients will often ask me to review a draft of their new employment contract. Of course, you know, I always give the usual disclaimer, hey, I'm not a lawyer, I cannot do a legal review of this, but I can take a look at it and tell you whether or not I see clauses that are pretty common in the other agreements. And since the pandemic, I have to tell you, I am seeing some very different chief executive agreements. In a lot of cases, they are adding clauses that are very beneficial for you as the chief executive and quite frankly, for the organization. So I want to share with you the six kind of cool clauses that I'm starting to see. The first is a cost of living adjustment that's tied to the consumer price index and is automatic regardless of your annual evaluation. Now, you know a cost of living adjustment is different from a raise. It's essentially designed to keep you steady with inflation, so that way inflation doesn't erode away your earning power. If you're a chief executive and you've not gotten a salary increase since 2023, I hate to say this to you, but your earning power has actually declined by 9%. So if you were earning $100,000 in 2023 and have not gotten any increase at all, well, this year you are really only making 91 cents on the dollar. The second clause that I'm starting to see is more specificity around performance bonuses and incentive pay. Until the last few years, so many chief executive contracts would be very vague and essentially say the executive director is eligible for an annual pay increase and an annual bonus. But it doesn't give a range. It does not give any criteria how it's going to be decided or what type of a timeline those decisions will be made. And I'm seeing way more detail in contracts now, specifically a range for both the bonus and the salary increase. I'm also seeing that there's a timeline that will be done and that the decision will be made by a specific point in time. This next clause, after I saw it for the first time, I've told every executive director who is negotiating their contract about it. And at this point, I know several chief executives that have gotten it in their contract. And that's an automatic incentive pay and bonus. If the board fails to conduct a performance review of the chief executive in a timely manner. Let's face it, we have all been in that position as an executive director where all the rest of our staff have gotten a raise. We're six months later waiting for our board to finish our evaluation and make a determination about what our raise is going to be. And maybe nine months after that, we finally get the evaluation and maybe get the raise. Well, that's not fair to us. We deserve a timely evaluation. But if we don't get that timely evaluation, we should not be penalized we should still get our bonus and our salary increase. So I'm starting to see executive director contracts include that as well. Along those lines, more and more contracts have retention bonuses in them, and that's essentially a bonus that incentivizes someone to stay. Often I'll see a retention bonus at the end of an executive director's first year and then again after three years or five years or seven years. And I'm a huge fan of retention bonuses. It is a good way for the organization to communicate with. We want you here and we want to give you the incentive to stay. And for a lot of us, those retention bonuses become very real incentives if we are considering another job. But we know that we're going to get a retention bonus in a year, and it's significant. It's 10 or 20% of our annual salary. You know what? We're much more likely to stick around so that we can get that retention bonus. Another way to incentivize a longer tenure is for us to negotiate a sabbatical inside our contracts. Once again, I normally see a sabbatical after five years, or maybe at the very outer limit, seven years. But after five or seven years of service for the chief executive to get a specific period of time off with pay, I always advocate that you ask for a sabbatical of three months with pay. The last clause that I'm starting to see in executive director agreements is essentially a non renewal severance payment. So if you get to the end of your agreement, you're three months away. Either you or the board have to give that three months notice. For the board, if they decide not to renew your contract, not to negotiate and sign a new contract with you, and they decide to part ways, you get that non renewal payment, that might be two months, three months, or even four months or more of pay. But that's going to do a couple of things for you. It's also going to be really good for your organization. The reason it's good for you, obviously, is it gives you a soft landing. But you only get that pay if you are fully cooperative in the transition and if you were there on your last day. So if you know that you're going to get three or four months, you are much more likely to stay through your last day and ensure it is a very smooth transition for the interim or whoever is coming in to run the organization. At this point, you might be wanting to do a little bit of a reality check on me. You might be saying, you know, Dolph, I'm not at a Huge organization. I'm not at a 10 or $20 million nonprofit. I run a half million dollar nonprofit. In what world am I actually going to get things like a sabbatical or retention bonuses? Well, friend, I'm here to tell you you don't have to be running a big organization to get some or even all of these clauses in your agreement. I have seen CEOs of half a million dollar organizations get three month sabbaticals and also get a retention bonus. What it's going to require is that you and your board get really good at planning. Making sure that you are planning years in advance so that your organization has the money for you to take a sabbatical and to bring in an acting chief executive to run the organization while you're gone. The planning to make sure the organization has the money to pay that retention bonus. This is 100% doable. You might not be able to have a retention bonus next year or sabbatical next year, but in three or five years, I bet you can. I'm going to pivot now so we can talk about legal counsel. Because whenever I have a conversation with a chief executive about negotiating an agreement, I always say the minute your board has agreed to negotiate with you, you need to go get legal counsel. And there are many reasons for it. You absolutely want your lawyer to be working directly with your board or even better, with the board's attorney. And the reason is it just keeps your relationship cordial and professional. It means that you're not having to play the bad guy with your board. I'll tell you two other secrets about hiring an attorney, though. When you have an attorney that's negotiating on your behalf, you're going to be willing to ask for more. You're going to be willing to ask for that sabbatical, or you're going to be willing to ask for the retention bonus. Additionally, your attorney is not going to feel awkward about nagging the board. If they're dragging their feet, you report to the board. It's hard for you be always sending reminders saying, hey, where are you with this? Your attorney? That becomes their job. And the last big benefit is that it increases the likelihood that your agreement is going to be enforceable. So without a doubt, once again, as soon as your board says, yeah, we're negotiating a contract with you, you want to make sure you've got legal counsel to represent you. In doing that, though, I also know how awkward the conversation can be with you and your board chair when you let that person know that you're going to have an attorney do the negotiation for you and essentially to have that conversation. If I was doing it, this is what I would do. I would say to my board chair, hey, you know, I really value my relationship with you and, and with the board, but I think it's so important that I have an attorney representing me that I'm actually going to spend money out of my own pocket to make that happen. And there are several reasons why. You know, first of all, I want my attention to stay 100% focused on leading this organization. So if I know that I have an attorney that's moving the contract forward, I don't have to worry about it anymore. Additionally, as board chair, it's important that you're able to focus on in your role as board chair. I would really encourage you and the board to engage an attorney as well. And that way it won't be us negotiating with each other. It will be our two attorneys that are just negotiating to make this happen. And part of what I also love about this is that it can ensure that our attorneys do the due diligence that's required, and we can avoid the horror stories that I have heard from some of my colleagues because they didn't hire an attorney and neither did their board. Now, if you say that to your board chair, that's a pretty disarming way for you to approach the conversation. Now that we've talked about the legal aspect and we've talked about the interpersonal part with your board chair, let's talk about the rest of your staff. I want you to negotiate the best deal for yourself, and then I want you to work to give those same benefits to your staff. To be clear, I am not suggesting, if you're in a right to work state, that you give all of your staff a contract, but I would suggest that you start to think about automatic cost of living adjustments that are tied to inflation, retention, bonuses, and sabbaticals. Because, honestly, if you deserve those things, your staff does as well. Friend, I wanted to have this conversation with you today about contracts because I am a huge proponent of executive director agreements. When you feel secure in your role as leader, and even more importantly, when you've secured your own financial future, you are better able to provide the attention and time that your leadership role requires. And that means that both you and your organization is going to thrive. And quite frankly, that's my professional mission. You know, at the end of every podcast, that's what I sign off with. But the conjunction, and for me is really critical. I want both you and your organization to really thrive. I have coached a number of chief executives during contract negotiations and this is exactly the kind of issue that executive coaching can help you think through. So if you're looking to take your leadership to the next level, reach out about coaching. Just to be frank though, your employment agreement is just one of the high stakes issues that you will navigate as a chief executive and that you'd want to bring to coaching. There are also things like board tensions, staffing decisions, financial trade offs, strategic choices, and of course, you know those moments when everybody in the organization, board and staff are looking to you for clarity. While you're still sorting it out yourself, and if that is the support you are looking for, please reach out to me about coaching. I'm@dolphuccessful nonprofits.com and that, my friend, that is our episode for this week. I hope that you have gained some insight to help you and your nonprofit thrive. And just a quick disclaimer. You know the lawyers make me do it, but frankly, in an episode when I'm talking about contracts, I'm probably going to do it anyway. I'm not an accountant nor an attorney, and neither I nor the consulting practice provide tax, legal or accounting advice. This podcast. It's for informational purposes only, which means you should not rely on it for accounting, legal or tax advice. If that's what you need, please find a licensed, qualified professional in your area and get the counsel you need.