Leadership transition is gaining the attention of many concerned about the capacity and effectiveness of nonprofits because quality of leadership is widely recognized as a significant variable.
And, by all indications, an “era” of transition
is looming.
Today, of an estimated 1.6 million nonprofit organizations in the U.S., roughly 10-12 percent are managing a transition in executive leadership at any given time; in some communities this means a hundred organizations annually. The rate of transitions is expected to climb by 15 percent or more in the next five to seven years as the baby-boomer generation—many of whom founded organizations 20 and 30 years ago—reaches retirement age.1 Further, according to recent surveys, 15-35 percent of nonprofit executives plan to leave their current positions within two years and 61-78 percent are planning to leave within five years.2 From 1994 to 1997 the David and Lucile Packard Foundation found executive turnover in 45 percent of its grantees.
The incidence of executive transitions is on the rise; mounting empirical evidence suggests that a change in nonprofit organization leadership has a direct impact on capacity—particularly in smaller organizations, and in organizations with founders or long-term executive directors who leave. It is imperative that stakeholders in the nonprofit sector review what we know (and what we suspect) about transitions and transition services.
Fortunately, the theoretical groundwork preparing the sector for the dramatic and inevitable changes in the leadership has already been laid. Few other elements of capacity building seem to enjoy this degree of focused attention. The body of research on executive transition is unusually rich in results for different levels and types of interventions. The three major waves of research on transition initiatives over the past 20 years have provided important guidance to nonprofit boards and executives, as well as to funders and capacity builders, about promising practices in transition management. With growing appreciation for and deliberation on its complexities, the process is yielding greater successes.
Neighborhood Reinvestment pioneers transition services. Their experience suggests that a comprehensive, organization development perspective during transitions increases the likelihood of success.
Neighborhood Reinvestment (NR), a publicly supported national nonprofit working through a network of local nonprofit housing organizations to revitalize neighborhoods and expand affordable housing, launched the first wave of concentrated research on executive transitions. In 1991 the median tenure for executives was three years. The high rate of leadership turnover was severely limiting the effectiveness of local groups, affecting the entire network as well, and it prompted NR to explore the issue of leadership change.
NR initiated a research project to conduct a study of needs, collect relevant data, and develop a working hypothesis on the dynamics of leadership transition in their network. This five-year pilot study monitored 100 executive transitions (occurring at a rate of 15-30 each year) and developed in-depth case studies of 10 transitions.
The key findings from the 100 transitions were: (1) that the process begins when an executive announces his or her departure and continues through the first anniversary of the new executive; (2) that when the founder of an organization leaves, the impact is large and the transition is often complex; and (3) that most transitions are “non-routine”—involving an organizational crisis due to funding instability, leadership ineffectiveness, or other fundamental issues. Seventy-one percent of the sample were non-routine, 17 percent were routine, and 12 percent were start-up organizations.
A framework outlining three distinct phases of executive transition services was developed, refined, and evaluated through hands-on work with the 10 case-study organizations: (1) getting ready/preparation; (2) recruitment and hiring; and (3) post-hiring. Each phase built on the preceding and failure to attend to the key tasks at any point increased the odds against a successful outcome. In fact, the principal conclusion from NR’s early research was that technical assistance “providers working together can improve the odds for a successful transition that serves the community and mission of the organization.”
These findings were bolstered by data from NR’s annual scan of network members (approximately 200 organizations). Between 1991 and 1997, median executive tenure increased from 3.0 to 5.2 years. Organizational health (as measured by an internal NR rating system) increased from 67 percent in 1991 to 90 percent in 1997. Additionally, during this period, NR documented a significant increase in local reinvestment and new homeowners—two essential measures of impact for community development organizations.
While these more generalized surveys do not prove a direct correlation, they suggest that increases were due, in part, to the transition project, as well as other environmental factors, including NR’s emphasis on capacity building technical assistance in general.
CompassPoint adapts the NR model, advancing the understanding of transition as a moment for organizational reflection, adding the notion of interim executive leadership to the mix, while also documenting the relative impact of comprehensive transition services (found to be more effective) compared to less comprehensive services.
In the late 1990s, San Francisco became a focus for work on executive transitions. CompassPoint Nonprofit Services and the Management Center—two management support organizations (MSOs)—launched executive transition service programs in 1998.
A survey of 137 nonprofit executive directors conducted in April 1998 revealed that most respondents saw their positions as a “one-time-only” event. Examined in light of a corresponding phenomenon of high executive turnover, the implications of this revelation for constructing a pool of experienced executives is obvious.
CompassPoint built its transition program around two main services: organization development consulting and interim leadership support. Organizational development includes assessment, coaching the board through the transition process, executive search, and coaching the new executive director. Interim support services include assistance in hiring and supporting interim leadership.
The focus on interim services and on the role interim directors play in providing emotional space for organizational renewal is one of the largest differences between CompassPoint’s services and early transition services offered by Neighborhood Reinvestment. In his paper, “Into the Fire,” Michael Allison3 attributes this focus on interim leadership, and the understanding of transitions as an opportunity for organizational renewal, to the experience of the Presbyterian Church of Northern California. “The church treats leadership transition as a naturally occurring event in the life of a congregation (rather than an unanticipated crisis to be avoided)… A central feature (of their management of transitions) is the requirement that a congregation take a full year for reflection and renewal between pastors.”
CompassPoint evaluated its executive transition services at the end of its first and second years of operation. In the first year, the evaluation focused on descriptive information, evaluation of process, and satisfaction feedback. In the second year, 12 organizations that had used executive transition services the previous year participated in a survey exploring the effectiveness of transition services. Although this was a small sample, two findings were particularly striking:
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- All but one organization reported that they are either “healthier” or “much healthier” since the new executive director was hired. (“Health” was defined as growth in budget, strength of board and staff, and degrees of job satisfaction reported by new executives and board members.)
- Also, since the new executive was hired, 33 percent of the executives reported that their agencies are serving new populations; 44 percent reported that they are offering new programs; 33 percent stated that they are serving higher numbers of clients; eight out of nine executives reported staffing improvements; two-thirds or more of the executives and board members reported that the board is stronger.
In summarizing their findings, CompassPoint says, “Our internal records and follow-up… appear to indicate that the organization’s success is related to the comprehensiveness of services used. Of the eight organizations that used interim services only, four are struggling or have already lost the new executive director. On the other hand, of the 20 organizations that used organization development services—with or without interim services—only three are struggling or have replaced their new directors within a year.”
While the cost of more comprehensive services was found to be prohibitive for some, the evaluator recommended that CompassPoint consider modifying its services so that organization development was included regardless of other client choices.
Maryland Nonprofits’ Executive Transition Initiative and the Annie E. Casey Foundation undertake more in-depth research documenting the high cost of transition for nonprofit organizations, the opportunity for leadership among deputy directors, and the critical need to make diversity an explicit part of transition.
In Baltimore in the late 1990s, local foundations pooled resources and funded Maryland Association of Nonprofit Organizations (Maryland Nonprofits) to offer executive transition services erected on the knowledge base generated by the earlier NR and CompassPoint initiatives. By 2001 Maryland Nonprofits was offering transition assessment and planning services, interim executive placement, executive transition and comprehensive coaching, and new executive support services to 15 area organizations.
The Maryland Nonprofits’ first-year report documented the cost of service delivery, noting that transition assessment and planning services ranged from $350 to $2,600, with an average cost of $1,300. Similarly, the direct cost of interim services ranged from $12,000 to $60,000, depending primarily on the length of assignment. The cost of comprehensive coaching ranged from $7,000 to $14,600, averaging $10,500.
The pooled funds available through Maryland Nonprofits reduced transition services costs to member organizations by 60-70 percent. Further, the Maryland program attempted to provide organization development services to all clients by making some transition assessment and planning services available at no cost. According to Tom Adams, managing consultant for this program, “The elimination of the cost barrier for assessment and planning increases the odds that organizations will receive some assistance in planning their transition.”
As of November 2002, among the 15 organizations receiving assistance during the first year:
• The new executive remained with the organization in all cases where the transition services involved hiring the new executive.
- In two cases, the assessment process helped boards conclude that the organizations should close down.
- In 11 of the 15 cases the organizations are “healthier” or “much healthier” (in terms of funding and identifying organizational issues).
In 2001 Maryland Nonprofits also surveyed its membership about leadership. This survey provided some of the first data about deputy directors’ age, tenure, and racial characteristics and revealed in much greater detail the characteristics of executives who are planning to leave their current positions in the near future—within five years, versus those leaving in 5-10 years.
Executives planning to depart relatively soon after appointment tended be less experienced, with lower salaries, in smaller organizations, and more likely to note conflict with the board. In contrast, executives projecting their date of departure beyond five years tended to have more experience, longer tenure in their positions, and an interest in continuing to work in the sector in some capacity. This data suggests—and some experience confirms—that transitions occur more frequently and may be more difficult in smaller organizations than in larger organizations with more resources. It also suggests that movement of seasoned leadership out of the sector may actually take longer, thereby limiting opportunities to advance younger or more diverse leadership in the short term.
Twenty-six percent of Maryland Nonprofit members employ a deputy director (i.e., some level of senior administrative staff). This staff pool is slightly more diverse than that of current executive directors. Based on their qualifications and experience, senior management represents a group of potential leaders who are slightly younger than existing executives. However, in practice there was no direct career path from deputy to executive director. Two plausible explanations are that deputies lack opportunities to demonstrate the kind of visioning and strategic thinking that board members look for in executive leadership, and they are overshadowed by the legacy of the executive who helped train them.
Parallel research, also in 2000, involved the Baltimore-based Annie E. Casey Foundation. Driven, in part, by unexpected leadership transitions in several anchor grantee organizations, the Casey Foundation has sponsored the most comprehensive research on the topic to date. First among their findings is the importance of adapting services to the organizational context, as discovered in a series of consultative sessions:
- There is no predictable formula for managing transitions because each organization is different.
- Paying attention to all parts of the process, including other staff, and establishing oversight to manage the process are vitally important.
- Boards and staffs should begin thinking early on about the infrastructure their organizations should or could have in place.
- Unity on the message—explaining what is transpiring between the board and the departing executive, and clarifying the role of the departing executive in the transition—is essential.
- A transition consultant to educate the search committee about what is likely to happen in the process is helpful.
Another valuable insight was that diversity issues are integral to every element of the transition management dialogue. Like transition, diversity has many layers—race, ethnicity, gender, age, or disability—and there is still much to learn about its relationship to leadership transition.
This research also highlights the need to address both the supply and demand sides of the transition equation. On the demand side, transition is still not a comfortable topic and boards do not understand their role nor the potential for significant risk from poorly managed transitions. On the supply side, while transition management is a growing field, the numbers and geographic distribution of consultants are inadequate relative to the emerging need. There is also a need for professional development of providers to ensure service quality.
Finally, this research points to the distinct differences in transitions involving founders and long-term executive directors. Always complex and emotional, these transitions require specialized support and much still needs to be learned about how best to assist both the organization and the executive in transition.
There is still much to learn about nonprofit leadership transitions. As yet, there is no research comparing organizations receiving transition services with those that do not; nor has sufficient time elapsed for empirical follow-up with organizations surviving transition. Additional research is needed on how to increase diversity among job candidates and how to help organizations articulate their values about diversity. Moreover, most of what we know about this area of work is based on small samples, which limits our ability to generalize confidently.
What we do know is that with such high stakes, transition management should become a cornerstone of effective nonprofit practice and a critical component of local capacity builders’ offerings. This means funders have to invest. Nonprofit executives and boards must be afforded the resources and encouragement to explore the issues of transition—preferably early and often. Currently, it is clear that executives and boards even in networks educated on the issues are not preparing themselves adequately. In a recent survey of Neighborhood Reinvestment funded organizations, most executives said they didn’t have time to do succession planning.
Some of the ways funders and capacity builders can support transitions are:
- Increase available funding for transition management services.
- Spread the word that transitions are pivotal moments in which organizations can significantly build (or lose) capacity.
- Use the research, practice models, and tools that exist to develop local programs to strengthen the practice of transition management.
- Continue to document what works and what doesn’t, and under what conditions.
We must continue to deepen the way we think about this type of change, acknowledging that leadership transition is both a natural part of the organizational life cycle and a tremendous capacity building moment. Yes, leadership transition is difficult. But more important, it is an opportunity to celebrate the legacy of the men and women who work tirelessly to make our world a better place, and to attract important new leadership into the work so nonprofit organizations will be there and be strong when we need them most.
Endnotes
1. Dohm, A. July 2000. “Gauging the Labor Force Effects of Retiring Baby-Boomers,” Monthly Labor Review.
2. The Annie E. Casey Foundation surveyed 208 community-based grantees across the country and received responses from 129 (62 percent). In 2000 CompassPoint conducted a study of nonprofit executive directors in five regions of the country, looking closely at professional experience, compensation, tenure trends, and executive training and support. The five regions yielded 1,072 survey responses from executive directors of nonprofits of all types and sizes. The Maryland Association of Nonprofit Organizations surveyed their membership and received 159 responses from executives across the state.
3. Allison, M. Summer 2002. “Into the Fire.” Nonprofit Leadership and Management
Vol. 12, No. 4.
For additional information about citations for data and reference materials, please contact the authors, Denice Rothman Hinden (drhinden
@managance.com) or Paige Hull ([email protected]).
About the Authors
Denice Rothman Hinden, Ph.D., president, and Paige Hull, M.P.P., senior associate, of Management Performance Concepts, Inc., are part of the team for the Annie E. Casey Foundation and Maryland Association of Nonprofit Organizations executive transitions projects. 301-260-9503 (www.managance.com).
