The Difference Between an Executive Director & a Chief Executive Officer

Executive director and chief executive officer (CEO) are leadership titles in organizations. Each is usually the highest-ranking position in the organization and the one responsible for making decisions to fulfill the mission and success of the organization. The term executive director is more frequently used in nonprofit entities, whereas CEO is used with for-profit entities and some large nonprofits.

Roles of an Executive Director

The executive director is appointed by the board of directors and works with the board to develop the strategic plan for the organization. As leaders, executive directors must create the culture of their organizations. They are the foundation of motivating employees and volunteers, oversee the entire budget and marketing efforts, and encourage a positive company culture.

Since most nonprofits work on limited budgets, an executive director must have a true passion for the mission that translates into getting operational needs met for less money. This is a unique stress almost always present in a nonprofit executive director's role. Executive directors grow organizations with great planning, limited financial resources and a large volunteer labor force.

Roles of a Chief Executive Officer

The chief executive officer is the highest-ranked employee of a for-profit company. This person is hired by the board of directors and reports to the board, while everyone else in the company reports to the CEO in one way or another. The board of directors reports to shareholders. The CEO must justify earnings or lack of earnings to shareholders via the board.

The CEO runs the day-to-day operations and has a team to oversee various departments. While the CEO should see the trees in the forest, his goal is to make sure the forest is healthy and growing. As such, he might not be fully aware of lower-level procedures and processes but understands the impact of those on sales, retention and service effectiveness.

Comparing an Executive Director and CEO

Every company is different, and thus the roles of an executive director and a CEO may vary based on the organization's need. Some nonprofits elevate an executive director to a CEO if the organization has grown in both revenues and paid staff. The role remains the same but the perceived clout of the CEO title versus executive director title aids in strategic alliances and fundraising opportunities.

CEO salaries range widely. A small corporation might pay a CEO a few thousand dollars per month while becoming established, while huge international corporations pay CEOs millions of dollars each year. Experience and a successful profit track record are the factors that warrant higher salaries.

Executive directors, on the other hand, usually earn less because of the philanthropic nature of their organizations. The average executive director salary is $113,002 annually.

References

• Glassdoor: Here's How Much More CEOs Earn Than Their Employees
• Investopedia: What Is the Difference Between a President and a CEO?
• Non-Profit Management: Nonprofit Chief Executives Should Have Title: President/CEO, Updated & Expanded
• BLS: Top Executives