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Guidelines to help a board with the manager selection process.

The electric distribution industry is constantly changing and boards of directors across the nation are facing an ever-increasing rate of turnover in top management. Hiring a qualified general manager to lead your organization is the number one responsibility of the board of directors.

We are at a crossroads in the rural electric industry. If we continue to effectively serve rural America, we as board members are going to have to manage change. Boards are already making changes in co-op financing, operational structure and even mission statements. Buy-outs and takeovers are common expressions and many boards will be called upon in this decade to consider merger in order to remain viable. How we as boards meet the challenge of change will largely determine the future of electric co-ops. The ability of any board to evaluate, perceive and implement change will be directly proportional to the ability, knowledge and leadership of their general manager. The historical co-op manager with twenty-five to thirty-five years in the same job is rapidly becoming a minority. Just as we see in the corporate world, rural electric management is becoming increasingly mobile. Regardless of the size of our co-op, you and I as board members owe a duty to our customers and the industry to employ the very best general managers to lead us through this time of change.

Co-ops across the nation have family-like bonds; however, each has its own personality. Due to factors such as location, size, growth rate, load distribution and competition, each organization is different. In order to find a manager best suited to the needs of the organization, the board must evaluate these factors along with the strengths, weaknesses, and needs of their co-op. Obviously, such a decision cannot be haphazardly made on a hit or miss basis. Rather, an informed decision requires total dedication, preparation, and hard work on the part of each board member. Based on our experience, the importance of professional assistance to facilitate the manager search process cannot be overemphasized.

Our co-op has always had a competent and progressive board comprised of community leaders. Unfortunately, we have had to learn how to select new general managers the hard way. In 1976, after twenty years with the same manager, our first selection of a successor was tremendously influenced by his opinion rather than an objective board decision. Three years later, the person we selected went with a consulting firm and the board was faced with making a decision without the influence of our ex-manager. We treated the vacancy as a routine position and only advertised locally and in our statewide publication. The results were disastrous, resulting in only five applications. Letters of recommendation were received without any background reviews. Two years later we were again in the market for a general manager. By this time our board had learned that although our co-op should attract good candidates, our board simply did not have the contacts or the time to do an adequate manager search. Our last two managers have been hired by the board assisted by the management search service of NRECA. The quality and quantity of applicants on both occasions has been phenomenal. Each finalist interviewed the first time has gone on to become outstanding distribution and statewide association managers.

While professing experience and not expertise, our board is glad to share some suggestions which might be helpful. Actions not to take are just as important as positive suggestions. Try to avoid:

* Being overly influenced by the retiring manager's efforts to influence the board to hire his/her choice as an heir apparent. The new manager must be the board's choice.

* Limiting the advertising for a general manager to the area newsprint media. Take full advantage of your statewide and national trade magazines which are read throughout the industry.

* Hiring the cheapest person available. The general manager's salary and benefit package must be comparable to similar co-ops in the region. The adage "you get what you pay for" is important to remember. Both times our board found excellent candidates in the mid to upper salary range.

* Hiring a new general manager without some independent and thorough review of the applicant's background.

* Entering into the manager search with a closed mind either for or against. Although there may be an heir apparent, if the board goes to the time and expense of a legitimate search, keep your options open. The co-op deserves the best and a good interview procedure with top candidates will be an awakening educational experience to the entire board.

* Being influenced by local or political pressures to hire a local person or board member. An interview might be okay; however, hire only the best.

On the positive side, a board must be patient and informed throughout a search. Do not get into a rush and make hasty decisions. If the first interviews are not satisfactory to your need, look at others. As you will see, our co-op even re-advertised. Our board has benefited from taking the following actions:

Require a management philosophy of your present manager to hire, educate, train and develop mid and upper level management who will get every chance to be future general managers.

Should a vacancy arrive, the board should:

* Individually, and then as a board, thoroughly evaluate the organization.

* The board should then have an open and thorough discussion of this evaluation. Make complete lists of the organization's strengths and weaknesses.

* Determine the needs of the co-op. This is an excellent time to discuss necessary organizational and industry trends. Information gained from prior management or wage studies can be helpful.

* Using the above knowledge, the board should discuss how and what type of leadership and management traits are needed by a new manager. This should vary depending on the strengths and weaknesses of past management as well as the overall condition of the co-op.

* Invite at least two companies with management services departments to prepare and make presentations to the board. The chosen group should be familiar with your co-op and maintain a respected position in the industry in order to attract and answer questions of different candidates.

* Once chosen, the search coordinator should meet with the board and become thoroughly familiar with the needs of the co-op and the traits needed by a manager to best manage the particular co-op. It is equally important at this meeting for the board to listen to what the search coordinator has to say. There should be complete trust and communication between the board and the consultant. The experience of the professionals is what you are paying for.

* Discuss and set a tentative timetable so time for interviews and meetings might be planned with some accuracy. This is important so everyone can arrange their general schedule for flexibility to be present at each stage of the process.

* Keep the employees informed from the beginning regarding generalities and timetable of the search. Awaiting a new general manager is a difficult time for employees. We also found it beneficial to stress to the employees the qualities the board was looking for in a new general manager. We were looking for fairness, competency, interest in the customers and honesty. This step is especially important where there might be employee unrest or a disregard for human resources by a previous manager.

* When applications and resumes are received, they must be thoroughly reviewed by each member of the board. They should be evaluated and ranked by the individual board member, always mindful of those previously determined strengths and weaknesses of the co-op, to wit financial, operational or human needs.

* Meet with the coordinator and openly discuss each applicant. Narrow the list to a manageable number and request background information on this group. This is when it is good to have a nationally known management search group. Also, contact other co-ops, statewide associations and REA. They can be helpful within certain limits.

* Meet again with the search coordinator and after reviewing the applications and background checks, select a number to be interviewed. Our board wrote down ten names each and invited the seven with the most votes.

* Send to each interviewee a complete package of information on the co-op, including operational and financial data. Send information on communities and schools within the distribution area. Each applicant and family members should be invited to visit the cooperative. Arrangements should be made for several employees to give tours of the co-op to the candidates and their families.

* Prior to the interviews, the board should discuss questions with the search coordinator. The co-op attorney should be present at this meeting and at all other stages of this employment search.

* Prior to interviews and offers, the board should agree that no one will be hired without a consensus of the board. The job of general manager is difficult enough, much less when one is hired with a six-to-four vote. Actually, the board should approach the entire search looking to an applicant that all can agree on.

* Our board has found that it is better to have interviews away from the corporate headquarters. We have used a state park and motel meeting room facilities. This allows a much less distractive setting for discussions.

* With a well-prepared board and capable applicants, the interviews should be much like seminars. Each board member should participate and our REA Field Representative has always been present and felt free to participate. At the conclusion of the interview, the applicant should clearly understand the needs of the organization as well as the expectations of the board. Accordingly, the board should listen and gain a clear understanding of the applicant. The interview process should be totally honest and difficult questions need to be asked and answered.

* Unless the board plans a second round of interviews, applicants should be requested to remain in town should further questions arise or the field reduced to fewer people. Questions might arise on the third interview that, in fairness, should be asked also of interviewees.

* Decisions regarding dates to report, salary, moving expenses, performance evaluations and possible contracts should be discussed by the board prior to interview. Adjustments can be made during or after the interviews.

* If a manager is selected after a comprehensive and complete search, he or she should have the total support of the board.

* In many cases, it might be necessary to hire an interim manager. When this is done, it should be clear from the beginning whether or not the interim manager will be an applicant.

* If the interim manager is an applicant, the board chairman and the search coordinator should be sure that all applicants are treated equally and that the interim manager is not privy to any advantageous information. Correspondence between the board and the search coordinator should not be through the interim manager's office. Lastly, the interim manager should not sit in on any board meeting while the hiring process is being discussed.

For those board members who have not been through the process of hiring a new manager, I am including entries from our board minutes from meetings pertaining to our most recent manager search (Appendix A). Reading these entries will reaffirm my earlier statement regarding patience of the board. The secretary to the board of directors searched and typed the entries and summarized, "a happy ending to a very long and tiring process." The benefit of that process is that our board knows that we have gone through a process that resulted in the employment of the very best general manager available at the time to lead Tri-County EMC and make it an even better co-op.


Tri-County EMC Minute Entries

January 7, 1991. Previous Manager mailed resignation letter to the Board, to be effective January 21, 1991.

January 11, 1991. A Special Board Meeting was called by the President, attended by all directors and the Rural Electrification Administration Representative for Tennessee. The purpose of the meeting was to accept the resignation of the GM and make plans for an interim manager during the search for a new GM. Three companies with Management Services Departments were to be contacted to meet with the Board at the regular February meeting to outline their management search programs. A routine audit of the GM's expense and cash accounts was scheduled for January 22, 1991.

January 14, 1991. Directors of their respective district offices met with employees to update them with the Board plans. Plans for a press release were made.

January 16, 1991. Special Meeting of the Directors and REA Field Representative to interview prospective interim managers who might be employed during the search for a permanent general manager. Interim Manager hired.

January 22, 1991. First day at work for interim general manager. A routine audit of the GM's expense and cash accounts was held. A special meeting of the Board of Directors via telephone conference was held for the purpose of assignment of signing cooperative checks.

February 8, 1991. Regular Board Meeting--Management Services persons made presentations regarding proposals for the Manager search. NRECA was selected by the Board with an advertisement to be published in the April RE Magazine.

April 12, 1991. Special Meeting of the Board of Directors and Pat Peyser, NRECA, update regarding the number of applications for the position of GM received at NRECA.

Questions of applicants:

1. Salary Range 2. Contract with the GM?--Term of Contract 3. Statement of Delegations to serve as the job description 4. Relocation Cost

Also, the decision that all of the Board would interview applicants.

June 19, 1991. Special Meeting of the Board of Directors and Pat Peyser, NRECA, for the purpose of reviewing all applications received by NRECA for GM. Seven candidates were chosen for interviews and an additional five were chosen in case neither of the seven were selected.

Pat Peyser was to contact all candidates to be interviewed and those that were not selected. She was to do an in-depth search on the candidates and check references.

July 24-25, 1991. Special Meeting of the Board of Directors, Pat Peyser and REA Representative to interview the seven applicants.

A secret ballot was taken and two applicants were chosen for an additional interview at a later date.

August 3, 1991. Special Meeting of the Board of Directors and Pat Peyser to interview the two applicants chosen on July 25, 1991. After the interviews a board discussion was conducted and a candidate was chosen to begin employment on September 16, 1991.

August 9, 1991. Regular Meeting of the Directors and REA Representative. The chosen candidate had called the REA Representative on this date and declined the Board's offer of employment due to illness of his mother. The Board was to contact Pat Peyser and schedule another meeting to review the applicants for the position of GM.

September 13, 1991. Special Meeting of the Directors, REA Representative and Pat Peyser. Discussion and passing of motion that travel expenses for the candidate's spouse be paid by the cooperative for one trip only. After reviewing applications, the Board selected ten candidates and directed Ms. Peyser to make inquiries regarding salary and interest in the position.

September 17, 1991. Special Meeting of the Directors reviewed additional information concerning the ten candidates tentatively selected for GM. Five candidates were chosen for interviews.

October 3, 1991. Regular Meeting of the Directors, Interim Manager, REA Representative and Pat Peyser and General Counsel. The Interim General Manager announced that he had obtained employment elsewhere and would be leaving the cooperative on October 7, 1991. Pat Peyser presented the Board a report concerning the five candidates plus an additional one to be interviewed on the next day. Discussion regarding the appointment of another Interim General Manager was discussed but no action taken.

October 4, 1991. Special Meeting to interview the six candidates; a candidate was chosen to assume duties no later than November 2, 1991. Due to the resignation of the Interim General Manager and the time lapse before the new Manager could assume his duties a New Interim General Manager was appointed from within.

October 25, 1991. Special Meeting. The new Manager had spent the day visiting employees at all eight offices and assured the Board that he would assume his duties no later than November 21, 1991.

November 1, 1991. Regular Meeting. The Board discussed and resolved the issue of salary for the Interim General Manager. Many projects were placed on hold until the Manager could assume his position.

April 3, 1992. Regular Meeting. The Chairman reported that the General Manager would be leaving the cooperative for family reasons and returning to work with his previous employer. The former Interim Manager was again assigned that duty to be effective April 23, 1992. A resolution was adopted to again use Management Search Services of NRECA to find a new General Manager for the Cooperative.

April 9, 1992. Special Meeting. The Board decided to advertise for the position of GM in the insert section of both the Tennessee and Kentucky statewide magazines and RE Magazine.

April 16, 1992. Special Meeting. The GM and Interim GM wanted to update the Board of ongoing issues before the departure of the GM.

May 8, 1992. Special Meeting. Pat Peyser presented the Board a report concerning her search for a new General Manager. Several applications had been received and many more were expected. The Board decided to post the position internally.

July 17, 1992. Special Meeting. Pat Peyser and the Board reviewed all applications she had received. Eight candidates were chosen for interviews.

July 24-25, 1992. Special Meeting. The Board interviewed the eight candidates. The present General Manager was chosen and accepted the position of General Manager to assume duties on August 26, 1992.

Summary. A happy ending to a very long and tiring story.

Tom P. Thompson, Jr. is a member of Tri-County EMC located in Lafayette, Tennessee. He has been a member of its board since 1974 and chairman since 1990. Tom also serves on the board of the Citizens Bank in Hartsville. He is the District Attorney General for the Fifteenth Judicial Circuit. He is a graduate of Centre College of Kentucky and Vanderbilt Law School. Tom also raises beef cattle and his wife and family live in Hartsville, Tennessee.
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Article Details
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Title Annotation:includes appendix
Author:Thompson, Tom P.
Publication:Management Quarterly
Date:Jun 22, 1993
Previous Article:That 'just right' debt-to-equity ratio.
Next Article:Staying off the 'troubled co-op list.' (rural electric cooperative)

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