Editors’ Note: This article has been adapted from a Center for Applied Research (CFAR) briefing, and was previously published on the Nonprofit Quarterly’s website on September 26, 2012.1
Many writings stress the importance of a board’s thinking about leadership succession as its most critical task.2 Yet, too often we frame succession as foreground without fully tending to the related background. Succession is often wickedly intertwined with the state of the board’s functioning and the enterprise’s strategy. Similarly, working on governance is often triggered by succession and linked to strategy in terms of new competencies that need to be on the board. It is rare that one of these three can be the sole focus without consideration of the other two areas, but their segmentation is clear in the three different professional groups that offer services in each of these areas:
- Strategy: Strategy consulting firms;
- Governance: Organizational development and process consultants; and
- Succession: Executive recruiters and search firms
There have been some recent incursions of each of these professional groups into the others’ business: big search firms are moving into onboarding and coaching, and strategy firms are beginning to address governance issues in the wake of new attention to boards.
The optimal sequence of the above three key processes would be excellent, up-to-date governance approving a strategy that informs the selection of a great leader who executes and leads strategic renewal—as the environment demands—under the board’s ongoing oversight. But organizations cannot count on taking up developmental issues in the optimal sequence, especially in today’s fast-changing environment. This article offers an overview of the challenges of sequencing these intertwined issues, and the imperative that they be thought of in a woven, recursive way across time rather than a simplistic, linear sequence.
Three Common Dilemmas in Leadership Succession
The three processes of strategy, succession, and governance are linked in ways that often create the following three dilemmas:
Misalignment between the board’s readiness and leadership succession. Often, a long-tenured leader leads to atrophy of the board’s vitality and increases its dependency, especially when the leader is successful. So, when that leader leaves (on his or her own, or upon being invited to step down), a key support to the board is missing as members think about strategic shifts and the implications for succession. Leaders are often in denial about when their effectiveness is losing its edge and when is the appropriate time to leave. Ken Olsen, the legendary founder of the Digital Equipment Corporation, said, “There’s only one measure of success and that is, five years after I’m gone, how is the company doing. I will accept no accolades until five years after I’m gone. I may avoid that by not going.”3 Yet boards grow dependent on the CEO and often find it difficult, with a long-tenured leader whose earlier work boards greatly value, to have the conversation about leaving.
Misalignment of the strategy with succession. In facing leadership succession tasks, a “good enough” strategy is essential for a board to define the scope of the leadership role and to make a high-quality selection of a talented organizational leader. Yet, if there are major strategic dilemmas, an outgoing leader—especially if the departure is based on performance or a conflicted working alliance with governance—is not in the best position to support the board in working through its vision. This dilemma may be heightened if the leadership search is caused by major differences in opinion about the strategic direction of the organization among board members; candidates may be reluctant to apply under such conditions, and the board may have difficulty reaching a choice and supporting the new leader. In one organization studied by CFAR (the Center for Applied Research), the successful applicant made it clear to the search committee that he would only accept the position under the condition that they support a new direction. Yet a key board member had told the current staff that “we put the ship in dry dock, lifted up her skirts, and pronounced her shipshape,” communicating to them his commitment to the current strategy. For several years, the new leader struggled with the splits in the board until a new chair brought in a third party to work through differences and align the board with the chosen leader.
Mismatch between the board’s capabilities and strategic development. A board’s membership and tenure, often a valuable source of institutional memory, can be ill suited to its role in oversight of significant strategic change that its CEO is driving. In professional associations, people often rise to governance as an honorific for long, distinguished service. Yet, when facing significant changes in the environment—such as new technologies, new delivery mechanisms, and different preferences in younger generations—the board may lack members with sufficient experience with these new phenomena—work that requires “generative” thinking.4 Strategy work involves thinking about the future threats and opportunities and the needed core competencies for the organization to succeed—what Peter Drucker has termed “the theory of the business:”5
- Assumptions about the environment of the organization;
- Assumptions about the specific mission of the organization; and
- Assumptions about the core competencies needed to accomplish
the organization’s mission
If the CEO is driving this work, he or she may find splits in the board that hurt the working alliance with the leader. Sometimes, this work is taken up in conjunction with succession. But often search consultants do not have the depth of experience to staff good high-level strategic thinking or, especially, to work through significant differences that may have triggered the succession.
The corporate-sector case of Home Depot illustrated the interdependence of strategy, governance, and succession. The flat performance of the stock suggested questions about the strategy. This, combined with the high compensation of the CEO, led to the loss of his dominant coalition on the board, and he stepped away. This triggered a second order change, with four members of the board stepping down. The incoming CEO (an insider) put in play a significant shift in strategy. Let’s look at some other cases that illustrate the intertwining of these three related processes and how different sequences play out.
Intertwining Strategy, Governance and Succession: Three Case Studies
When Strategy Leads.
The board chair and CEO of a professional society initiated a strategic planning process. Believing that the field was changing dramatically, they collaboratively created an ad hoc committee deliberately dominated by Young Turks and with only a few current board members. They crafted a strategy process as a Trojan horse for working on board changes by creating the visibility needed for these younger leaders to become board members. There were several important interactions with the board along the way, and a few key overlapping members prevented an unproductive split. Toward the end of the process, the CEO surprisingly announced his intention to resign for his own career reasons. At the final retreat, where the strategic committee engaged the board to get the plan adopted, the committee linked the strategy going forward to the key competences that guided the job description for a new leader. An executive search firm found a new executive director with the competencies to fit the strategy, and the board supported transition work with the new leader to ensure good working alliances with the board, staff, and members. After a year with the new leader, the chair of the strategic planning process—now on the board—was charged with leading a yearlong board development process.6 The process focused the new leader and the board on the issues in implementing the strategic plan. As board members became more actively engaged, they realized that they needed more protected time for strategy. They committed to a two-day summer retreat during which they began to reshape the strategy of the organization with the active support of the new leader and her reconstituted top team.
When Board Development Leads.
The leadership of a freestanding hospital during the peak of the managed care era realized that the organization needed to align with one of the big systems in the city for bargaining power with insurers. The CEO realized that the board was neither knowledgeable enough nor strong enough to navigate the issues—likely to be highly complex and possibly divisive—in choosing a system to join. He hired an expert with deep knowledge of the significant trends in healthcare to brief the board, and engaged CFAR in facilitating histories of future scenarios7 that challenged the board members to best fulfill their stewardship role by looking back from a decade hence at each of the two alternatives to explore. The board was able to come to a decision (by one vote) on which system to join. Leadership changes followed, in the wake of this decision, as the hospital became one of several in a system. A new strategy to take advantage of its system membership also followed.
Of the three issues discussed herein, board development is the least amenable to being addressed in isolation. An encapsulated “board development” frame often labors mightily to shuffle structures and process with little progress in actual results. Talented people have very limited time, and the most powerful way for the board to develop is via strategy conversations or leadership search work. One organization was able to make significant changes in governance (smaller size, true corporate board versus representation of member hospitals) because it looked deeply at future challenges and saw the need for the changes. At another institution, when a new leader was appointed, the board chair invited the new CEO to propose to the board nominating committee some people whom would bring strengths related to the directions that she and the board had agreed to in the succession.
When a Leadership Transition Leads.
An advocacy policy institute had hired a leader who left within a year when both he and the board realized the misfit. A second search, shaped by insights from the failed succession, yielded a new leader who was charged by the board with developing a new strategy. This individual came in, engaged the staff, and selected board members in crafting a new strategic direction that ended up consolidating some programs and adding new competencies in communications and development to the organization. In the wake of the new strategy, especially with regards to development, the board took on new challenges. In hindsight, it seems that this effort would have been more powerful if the leader had built his team before undertaking the strategy work (perhaps six months to a year after taking over). We often see a new leader taking up strategy in compliance with the board’s request, rather than within the rhythms of his or her transition and understanding of where the organization is in its annual cycles (of budget, planning, work, and so on).
In each of the situations presented above—whether the entry point is board development, leadership succession, or strategy—there are inevitably developmental pressures on the other two areas. Thus, one might see a sequence that begins with a board undertaking a quick reconnaissance into the strategic landscape to get a sense of what is likely and what is ruled out. This can inform a leadership search, which is also a learning process, like taking a product (in this case, the posted job opportunity) to the market and seeing what the response is. One gets enormous insights from interviewing people and hearing their ideas and reactions to the presenting challenges.8 Once a new leader is hired, work has to cycle back, with the new leader diving deeper into the strategy. This process may take a year, and its outcomes may in turn shape both membership and process changes in governance.
Five Tips for Navigating These Interdependent Processes
Once one recognizes the intertwined nature of these issues, how should one go about navigating them? Below are some tips based on lessons learned:
Go as far as you need to inform the next step, but value incompleteness and retained flexibility. The concept of “minimum critical specs” has been used in emergent redesign of work processes.9 This concept states that one should only develop the minimum specifications necessary to take the next steps. In that way, an organization acts into its future—it values the retained flexibility at each stage to adapt to what it has learned and ways the environment may have changed. Thus, the strategy might be broadly directional, perhaps with a few options left open as the context for a chosen leader who can then join and take the next steps in fleshing out the strategic implications. Once those are underway—possibly linked to a change in board leadership—there might be implications for the board in terms of membership, committee structure, and working processes.
Never take up one of these tasks without using the occasion to reflect on the other two. For example, in working on a leadership succession, ask questions about the state of the board’s functioning and dynamics, and the connections between board turnover (especially the chair) and the leadership transition. If the work is board development, ask questions about issues related to strategy, such as splits on significant issues that may be sending mixed signals to the CEO. If the foreground issue is strategy, is the board too dependent on the CEO who fills the time with excessive PowerPoint briefings instead of enlivening conversations about the tough choices facing the organization and engaging the diverse perspectives of the members? Another case study—this one a warning—may be useful here: one innovative, newly appointed president was deeply driving an effective strategy process, yet failed to pay enough attention to keeping the board’s support. He changed a member of his team without realizing the depth of a long-working alliance of this individual with the board. As his strategy work was nearing completion, he was asked to step down over “strategic differences in the direction of the university.”
Actively manage the transitions from one phase to another. Boards that have been overly involved in a leadership search often pull back in relief too quickly once the candidate is named.10 Yet, a good search surfaces many more insights than may be used in the act of choosing. Furthermore, much of that learning needs to be shared constructively with the successful candidate. Upon completion of the search, creating a “lessons learned” or “after-action report” with the search firm, the governance leadership, and the successful candidate can be a major contribution to a successful transition. This provides a mechanism for setting expectations, flagging early concerns, discussing key stakeholders and their values, and surfacing key strategic choices. All of these can help the new working alliance of governance and leader get off to an effective start.
One transition issue is the relationship of the outgoing leader to the new leader. This relationship is often under-managed. Sometimes the former leader goes on the board or is retained in some consulting transition capacity. This can be developmental or can serve as a hedge if the new appointment stumbles, but it can often inhibit the new leader from fully taking up the role.11 It is more useful to ensure a rich exchange of information from the former to the new leader as background, not as covert influence. By not having the board leadership change at the same time as the CEO, the chair can be a link across the discontinuity in executive leadership and can host some of these conversations linking past, present, and future.
Respect the time needed for different phases. Too often, a board charges a new leader with “doing a strategic plan,” or the new leader too quickly decides to use a strategy process as his or her entry process. This may be necessary if the organization is in crisis; however, the new leader often just needs to listen, learn, and build his or her working alliances before jumping into strategy.12 We have seen several situations where a strategy process undertaken by a leader immediately upon taking over was hampered by too much influence from some holdover staff, and not informed by a few key hires that came on too late in the strategy process to both influence and be influenced by it. Furthermore, a new strategic direction might benefit from some key changes in board membership first.
Respect that people may be in different places in all of these processes. During the intertwining of these three related strands, different stakeholders are likely to be in different places on these issues. Some board members who are new may be arguing against a coalition of the “old guard” and a long-tenured executive for new strategic conversations. The new leader may bring a much sharper sense of new realities and may have to develop data to break through board complacency while also worrying about long-tenured staff’s relationships with board members. Searches often create tensions stemming from who was involved in the search and who was not, and these tensions surface—especially if the newly chosen leader begins to experience difficulties. By being alert to the intertwining of the three areas of governance, succession, and strategy, one can better trace what often surfaces as interpersonal conflicts back to the important substantive stakes that the organization faces and to different players’ bases of experience. Stakeholders never say they are “resistors to change” but, rather, see themselves as champions of core values that the Young Turks might put in peril. In fact, these two groups represent different ends of an important polarity between change and tradition that needs to be engaged.13
The Recursive Linking Challenge
The interdependencies of board development, leadership succession, and strategy suggest that we should think of each as strands in a tapestry that have to be taken up in related ways—with one often being figure, and the other two background and context, respectively—and then the “good enough” work in one area becomes part of the context for the focus on another strand. This often repeats in a deepening spiral.
For example, an arts organization board had a daylong retreat with the artists, the top staff, and a board delegation to work on their relationships in anticipation of a search for a new president. The board development and relationship work was done via discussion of the strategy and the implications for hiring a new president. When the recruiting firm began the search, there was an explicit exchange of insights from the board retreat to jump-start the recruiting.14
Likewise, a university president— even though chosen from within the institution—spent the first year getting on top of the organization and its challenges, then took on governance changes on the occasion of a new board chair. With revitalized board processes, the president then took up a creative mode of strategy that linked it to fundraising and board and faculty development via intensive, wellstaffed working sessions on critical issues that had been identified by the board. This created excitement and learning among both board and faculty.15
Lastly, consider the experience of William G. Bowen. A year into his presidency of the Mellon Foundation, he learned that the board chair, with whom he had a strong working alliance, was retiring. Bowen anticipated difficulties in his collaboration with the individual expected to succeed as chair. He took a risk and discussed the issue with a few trustees, and with their support he reached outside of the current board to recruit a new chair. He notes, “It would have been easy for me to simply let nature take its course in the selection of a chairman following the retirement of Baker [the former chair]—and it would have been a huge mistake.”16 This is the action of a leader who knows the value of linking succession, strategy, and governance in the service of an organization’s performance.
The world comes at us in complicated ways that challenge us to make this same link rather than segmenting these issues into separate (perhaps horizontal) silos.
Thomas Gilmore is one of the founding Principals of CFAR, a consulting firm that spun out of the Wharton School. He is a Senior Fellow in the Health Care Management Department and in the Leonard Davis Institute of Health Economics. His book, Making a Leadership Change, explores both the search and joining aspects of transitions.
- Briefing Notes: Dilemmas of Aligning Leadership Succession, Strategy, and Governance (Philadelphia: Center for Applied Research [CFAR], 2009), www.cfar.com/Documents/succ_strat _gov.pdf.
- Ram Charan, Boards at Work: How Corporate Boards Create Competitive Advantage (San Francisco: Jossey-Bass, 1998); Thomas N. Gilmore, Making a Leadership Change: How Organizations and Leaders Can Handle Leadership Transitions Successfully (San Francisco: Jossey-Bass, 1988; repr. Bloomington, IN: iUniverse, 2003).
- Glenn Rifkin, “Making a Difference; Mr. Olsen Hangs On . . .,” The New York Times, November 10, 1991, www .nytimes .com /1991 /11 /10 /business /making -a -difference -mr -olsen -hangs -on .html.
- Richard P. Chait, William P. Ryan, and Barbara E. Taylor, Governance as Leadership: Reframing the Work of Nonprofit Boards (Hoboken, NJ: Wiley & Sons, 2004), 79–100.
- Peter F. Drucker, “The Theory of the Business,” Harvard Business Review (September–October 1994): 99–100, hbr .org /1994 /09 /the -theory -of -the -business /ar /1.
- Briefing Notes: Lessons Learned from a Board Development Intervention (Philadelphia: Center for Applied Research [CFAR], 2001), 1–6, www .cfar .com /Documents /Less _brd .pdf.
- Gilmore and Gregory Shea, “Organizational Learning and the Leadership Skill of Time Travel,” Journal of Management Development 16, no. 4 (1997): 302–11, www.emeraldinsight.com/journals.htm?issn=0262-1711&volume=16&issue=4&articleid=880272&show=abstract.
- Joseph A. Califano Jr., Governing America: An Insider’s Report from the White House and the Cabinet (New York: Simon & Schuster, 1981), 183.
- P. G. Herbst, “Designing with Minimal Critical Specifications,’’ chap. 2 in Socio-Technical Design: Strategies in Multi-Disciplinary Research (London: Tavistock Publications, 1974), revised and reprinted in The Social Engagement of Social Science, Volume II: The Socio-Technical Systems Perspective, ed. Eric Trist and Hugh Murray (Philadelphia: University of Pennsylvania Press, 1993), moderntimesworkplace.com /archives/ericsess/sessvol2/17HERDES.pdf.
- Gilmore, Finding and Retaining Your Next Chief Executive: Making the Transition Work, Nonprofit Governance Series 16 (Washington, DC: National Center for Nonprofit Boards, 1993), 8–9.
- Richard F. Vancil, Passing the Baton: Managing the Process of CEO Succession (Boston: Harvard Business School Press, 1987), 101–4.
- Gilmore, Making a Leadership Change, 128–145; John J. Gabarro, “When a New Manager Takes Charge,” Harvard Business Review 63, no. 3 (May–June 1985): 110–23, hbr.org /1985/05/when-a-new-manager-takes-charge/ar/1.
- Barry Johnson, Polarity Management: Identifying and Managing Unsolvable Problems (Amherst, MA: HRD Press, 1992), 53–78.
- Gilmore, “Headhunting: Psychodynamic of Potential Spaces Created in the Executive Search Process,” Socio-Analysis 9 (December 2007): 63–78, search .informit .com .au /documentSummary ;dn =947430096313199 ;res =IELBUS.
- Susan Frost and Larry Hirschhorn, interview in Rob Kelly, “Matching Donor Interests with Problem-Centered Academic Programs,” Academic Leader 21, no. 9 (September 2005): 1, 8.
- William G. Bowen, The Board Book: An Insider’s Guide for Directors and Trustees (New York: W.W. Norton & Company, 2008), 66.