Dr Joanna Martin, principal of Kirkley College, in Ponteland, Northumberland, stunned governors when she resigned during one of their meetings.
The college, which has been in merger talks with Newcastle College, planned to make four members of staff redundant to help meet a Pounds 100,000 budget shortfall. NATFHE, the lecturers' union, voted in favour of strike action.
The redundancies are now on ice and a new principal, Neil Davies, former chief executive of Airedale and Wharfedale College, in Leeds, has been appointed.
He said: "I have only been here for two days. I have been appointed to do the merger with Newcastle. I've done this kind of thing before, I am the Sir John Harvey-Jones of the FE world. The college has had difficulties but I cannot give you a figure to be quoted on, I am still finding my desk."
The Honourable Charles Beaumont, a local landowner and chair of governors, was unavailable for comment.