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Anatomy of a Flawed Hire

Anatomy of a Flawed Hire
August 21, 2009

The National Association of Student Financial Aid Administrators was in a vulnerable state as it hired a new president late in 2007.

The group had been through the grinder of New York Attorney General Andrew M. Cuomo's inquiry into student loan malfeasance, partly because of NASFAA leaders' own missteps and partly because of the politician's opportunism. Questions about the association's own practices had led it to agree to a settlement in which it adopted a new code of conduct, a decision that divided the association's members.

Amid the heightened scrutiny, the association's president of 32 years, Dallas Martin, had decided to retire, and the credit crunch that was undermining the lender-based system of student loans was also threatening a significant stream of revenues that NASFAA took in from vendors at its annual conference, virtually ensuring that Martin's successor would take on an organization with financial challenges as well as a bruised public image.

It's easy to look back with 20/20 hindsight and see that NASFAA's decision to hire Philip R. Day Jr. as its president turned out to be disastrous. That's a comment not on his performance in the job -- about which NASFAA's staff and the financial aid directors who are its members have mixed views -- but on the fact that Day resigned last month after San Francisco's district attorney charged him with felony violations of state campaign laws linked to his previous job as chancellor of the City College of San Francisco.

Day's resignation, after barely 18 months on the job, was the last thing the organization needed -- another blow to its outward image and its internal functioning.

But it isn't only in hindsight that Day's hiring warrants tough questions. By the point in December 2007 when NASFAA's executive committee met with the two finalists put forward by the committee and outside firm that managed the search process, the San Francisco D.A. and the City College of San Francisco's trustees were already investigating allegations that subordinates to Day had broken state law in their fund raising practices. (Day himself had not yet been directly accused of wrongdoing, but a series of news articles in the San Francisco Chronicle throughout 2007 had documented some of the situations that wound up underpinning the charges against Day.)

Yet when they gathered in mid-December to meet and decide between Day and the other finalist for the presidency, members of NASFAA's executive committee say they were not told a thing about the investigations at City College of San Francisco, and NASFAA officials say they had been assured by Korn/Ferry, the firm that managed the search, that "there were no significant issues of concern.... The association therefore moved forward with its decision in good faith based upon the information received from the search firm," according to a statement issued by Joan Crissman, the group's interim president.

Charles Ingersoll, the Korn/Ferry consultant on the NASFAA search, says that he had told members of the search committee about the situation at City College but that he had assured them, as he himself had been assured by Day and the San Francisco college's trustees with whom he consulted, that it was "just politics."

"Faculty members and community members, when they decide they're unhappy with someone, can create a lot of noise" and criticism about a leader, Ingersoll says. "Unless you have facts that someone was involved, you have to take it for what it is worth at the time. The committee didn't have information at the time, nor did we find any information," to suggest potential wrongdoing by Day. "I still believe I gave the right advice knowing what I knew at the time, and I think the committee made the best decision it could at the time."

Most members of NASFAA's board declined to be interviewed for this article. But one has her regrets about what she knew, and didn't, at the time of the hire.

"If I had known, I would have made a different decision," says Pamela Fowler, director of financial aid at the University of Michigan and a member of NASFAA's executive committee at the time it hired Day. "He could have been the best candidate in the world, but given where we were, we just couldn't afford to go there. We had enough [negative] stuff to deal with."

Looking Backwards

Virtually every higher education association, every college and university, every organization at some point hires a leader, and understanding those that go wrong can be instructive.

It isn't as if NASFAA wasn't prepared to undertake a search for a new leader. The association's Board of Directors had spent much of 2006 soliciting information from its members about what it should seek in a new leader, and developed a thorough plan for transitioning to its next president in mid-2007 -- a recognition, NASFAA officials said at the time, that Martin, its longtime president, would not stick around forever.

Martin's departure was hastened, however, by the student loan investigation undertaken in the first half of 2007 by Cuomo and Congressional leaders -- and particularly by the NASFAA president's public clash with the New York politician. The disagreement, in which Martin accused Cuomo early in his inquiry of using inflammatory language without appearing to have found any serious wrongdoing, won Martin praise from some financial aid officers who felt that Cuomo had unfairly impugned their character. But as revelations continued to spill out, including some that showed financial aid directors owning stock or having taken money from lenders, Martin and NASFAA wound up apologizing to the attorney general and agreeing to limit corporate sponsorships and the organization's other ties to lenders.

Although neither Martin nor NASFAA were accused of any wrongdoing themselves, the student loan scandal left the financial aid profession and its chief association bruised and battered. So when NASFAA announced in July 2007 that Martin would retire, it is not surprising that the written job specification drafted by Korn/Ferry and the search committee included "highest levels of ethics and integrity" among the personal characteristics sought in the ideal candidate to replace him.

Fighting the Last War

When many organizations make major decisions, including choosing a new leader, there's a tendency for them to react strongly to what has come before, and go in an opposite direction.

By all accounts, as NASFAA searched for a successor to Martin, it sought, as one person familiar with the search put it, "the anti-Dallas." Martin was a financial aid expert, intimately familiar with technical details and able to analyze federal policies and explain them not only to NASFAA's members but to the broader higher education public. Where Martin, and by extension, NASFAA, was seen as less successful was as an advocate in Washington higher education policy circles; the association's influence on Capitol Hill had waned in his later years, a change made worse by the association's entanglement in the student loan controversy.

In replacing Martin, say many people in and around NASFAA, the organization sought someone who could "play with the big boys," as one put it (referring to Washington's president-led higher education associations), someone with political savvy who could have influence on Capitol Hill, and someone who could "shake things up" at an association that had been led by one person for 32 years and was arguably stuck in its ways. (What seemed not to be important was familiarity with financial aid -- apart from listing the name and describing the purpose of NASFAA, the job description did not mention the words "financial aid" at all.)

"We were looking for someone who could elevate NASFAA from being technicians to someone who could be at the table," says Fowler, the Michigan financial aid director.

As is the case in most executive searches at private entities, virtually all of the work occurred out of the public eye, so piecing together what happened -- what sorts of candidates applied, what criteria the search committee and search firm used to sort and select among them, etc. -- is difficult. Apart from a prepared statement, NASFAA administrators declined to talk about the search, and most members of its search and executive committees also chose not to be interviewed for this article.

Ingersoll, the Korn/Ferry consultant, filled in some of the gaps. He said that Day had applied for the position rather than having been nominated or approached by NASFAA (although Day had been on the consultant's list of potential candidates to contact); Day had been actively searching for a job during the previous year, having been among the finalists (but not chosen) to lead the North Carolina Community College System, Community College of Allegheny County, Community College of Rhode Island, and the California Community Colleges Chancellor's Office (on an interim basis).

And while Day had some ties to Korn/Ferry -- the chairman of the board of the City College of San Francisco's foundation while Day was president was Eunice Azzani, a Korn/Ferry managing director -- there was "no Korn/Ferry connection to getting him into the search," Ingersoll said. (Azzani did call Ingersoll after Day was already a finalist to praise him and suggest other references, Ingersoll said.)

Who Knew What, and When

As they weighed candidates for the presidency late in 2007, those involved in the NASFAA search process obviously could not have known that Phil Day would end up being charged with breaking state fund raising laws in mid-2009. But was there enough information available that could or should have scared them off?

On April 6, 2007, the San Francisco Chronicle reported that an assistant vice chancellor under Day at City College of San Francisco had allegedly steered a company's $10,000 rent payment to a political action committee that was promoting a bond measure for the college in 2005. The payment was one of at least four corporate donations to the bond campaign, the San Francisco newspaper reported, that came within days of their contributors having negotiated contracts with the community college, donations that appeared to violate state laws barring the spending of taxpayer funds on political campaigns and of misappropriation of public funds.

While the article did not allege that Day had been directly involved in wrongdoing, it did document his involvement in the awarding of some of the initial contracts, and quoted him as acknowledging that the business owners, some of whom were friends of his, had asked how they might help the bond campaign.

Day immediately agreed to return some of the donations, and within days of the first article, City College's trustees said they would investigate. In late June, the San Francisco Chronicle reported that the city's district attorney's office had begun its own broad inquiry into the college's practices during the 2005 bond campaign.

Some of the situations outlined in the newspaper's original article (in addition to others from a 2001 bond campaign that emerged during the D.A.'s investigation) ended up spawning the district attorney's formal charges against Day last month.

But "at that point all there was was an alleged allegation about one of his subordinates, but not about him," says Ingersoll, the Korn/Ferry consultant. As the shepherd of the NASFAA search, Ingersoll says he had read the San Francisco paper's articles -- "I Google like anybody else," he says -- and that he had, in an exercise of due diligence, asked Day and the trustees about the accusations.

"They all said, 'It's just politics,' " Ingersoll says. "Based on the information we had at the time, that was an answer that seemed to make sense." (Ingersoll says that the general impression of Day, gleaned from those Ingersoll spoke to, was a "walk on water type of attitude... They felt he had done a tremendous job.")

Ingersoll says that he did tell members of the NASFAA search committee about the fund raising allegations at City College, and about the responses from Day and the trustees. But he also told his NASFAA clients, Ingersoll says, that it is common for there to be lots of "noise" about strong, aggressive leaders, especially those who have been in their jobs a long time, as Day had.

"I told the committee that Day was a take-charge, can-do guy, and that he can ruffle feathers because he's about change," says Ingersoll. "They were talking about wanting someone who would bring about change. I wanted to make sure that, if they wanted somebody who's going to take the hill, they knew he could ruffle some feathers." The charges swirling around Day's administration at City College, Ingersoll suggested, looked like that sort of "noise."

To the extent that Ingersoll shared information about Day's potential troubles in San Francisco with the search committee, it does not appear to have been relayed to the members of the executive committee who ultimately chose between the CCSF chancellor and the other finalist for the job, Allison Jones, assistant vice chancellor for student academic support at the California State University System.

NASFAA's only statement on the Day allegations, provided by Joan Crissman, the association's interim president, said, in its entirety: "A background check is standard in any executive search and Korn/Ferry was tasked with conducting such a check on the finalists. When asked about background issues pertaining to both finalists, NASFAA was informed that there were no significant issues of concern related to any of the finalists. The association therefore moved forward with its decision in good faith based upon the information received from the search firm."

NASFAA hired Day in December 2007, and he set about trying to inject the association more fully into policy discussions and debates in Washington. But in October 2008, an internal review at CCSF concluded that Day himself appeared to have violated state laws; a grand jury ensued last spring, and then, in July, the formal charges against him. Day continues to say that he did nothing wrong.

Even as she and others note that the charges against Day have yet to be proven in court, Fowler, the Michigan financial aid director, says that she and her colleagues on NASFAA's board have spent a lot of time in recent months wondering whether they missed something. "I've gone over this again and again, thinking, 'I could not have missed this,' " she says.

Those from the search process who presented the candidates to the executive committee said nothing about the allegations in San Francisco, Fowler says. And she recalls asking Day during the executive committee's meeting with him in December 2007: "Is there anything we need to know that would help us make this decision?"

No, she remembers Day saying.

"I don't know what the search committee knew -- that was a very closed process," Fowler continues. "But we vested that entire authority [for exploring backgrounds] in [Korn/Ferry], the search committee.

"The process needs to be a lot more transparent next time," she adds. "Of course, hindsight is 20/20."

 

 

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