This article comes from the Nonprofit Quarterly‘s spring 2017 edition, which addresses ways of thinking differently about a variety of issues affecting the sector.
Twenty-five years ago, when an executive director left a nonprofit, it too often meant a decline in performance—or even going out of business. Today, through supportive investments by national and regional foundations and the development of a practice focused on executive transition, most nonprofits move through times of executive transition without trauma or tragedy. The evolution of this practice and the development of nonprofit succession and sustainability planning are topics covered in a recently published essay (see The Evolution of Executive Transition and Allied Practices, 2017).1 This article offers board leaders and executives a hands-on look at that essay’s key points, and focuses on the experience of one organization, and what’s different today from twenty-five years ago about the choices boards and executives have when they are faced with imminent or future executive transitions.
While it is tempting to deny it, every leader will transition someday. The approaches listed below offer leaders expanded choices that do the following:
- Transform the fear of executive transition into a proactive, empowering opportunity to increase focus on mission results and the leadership team needed to achieve the desired results.
- Reduce the disruption and risks of executive transition.
- Support organizations where needed in major repositioning or turnaround.
- Make more coherent the emotionally charged transitions of founders and long-tenured executives.
- Expand the culture and practices of leader development, inclusion, and diversity.
- Open the possibility of new approaches to sharing power and leadership.
- Consider more fully the possibility of a new partnership or merger before deciding to hire another executive.
- Address shifts in funding and the political environment, and rethink the connection between mission, strategy, and how the work of the organization is supported.
- Prepare for unplanned and planned transitions through a deeper approach to succession planning.
The case study that follows is intended to provide readers with an example of the power and potential of executive transition and its allied practice. It offers an example of how an organization faced and addressed big shifts in funding, board nervousness about viability and succession, and a potential internal succession where the board was divided in its enthusiasm for it.2
Six years ago, Community Builders Southeast faced a turning point.3 Their aging executive director had let the board know he would retire in three years. On paper, the organization was doing well programmatically and breaking even financially in the midst of the recession. Yet the board chair and other executive committee members felt that the organization was drifting and that they needed a more strategic thinker. Three more years with an operationally effective executive scared them. These board members envisioned less government money, resulting in major changes in programs, and they doubted that the current executive could lead them through such a major change.
Tensions grew. The board chair was a successful business executive and an action-oriented, fix-it guy. The board treasurer longed for leadership like that of the executive who had left ten years earlier. The governance chair, who led a different kind of nonprofit, was getting impatient with the executive of this one.
What’s different: Many boards in this situation would either do nothing or overreact and terminate the executive rather than wait three years. This organization chose instead to step back and consider its options before deciding.
Deciding on Focus
The board was divided about what to do next. Some wanted to do nothing and wait until the executive was ready to leave, and then do a search. The board chair and a few executive committee members felt strongly that to do nothing was to abdicate and accept a status quo that looked okay but was more risky than it appeared. From their corporate experience, succession planning looked like the next action, so they started researching how to do nonprofit succession planning. A review of articles on the topic led them to a firm that offered succession planning for nonprofits.
The approach offered included a replacement review of all management positions, including a review of job descriptions and key functions and roles (sometimes called “unpacking the job”), along with an emergency backup plan for the executive director, chief operating officer, and four other senior managers. The board members would also develop a succession policy and get clear on their preference for internal promotion or an external search for the new executive when the executive transition occurred.
The board chair and executive committee were successful in convincing the board to make this investment. The fact that the board was divided in its opinion about the likelihood of internal succession as well as in its level of confidence in the current executive helped make it clear that outside guidance was needed.
The other complicating factor was the timing of strategic planning and how the organization did that strategic planning. The board chair had enlisted a private sector consultant to help with the strategic plan. This process had been repeated several times, had resulted in a complex set of measurable outcomes, and was understood by long-time board members (but not newer board members or staff).
The board’s concern about reduced government support and decline in services to the community resulted in agreement to include a sustainability review to accompany the succession planning. Once the complexity of the strategic plan was made visible, willingness was heightened for an organizational sustainability review that focused on board and executive leadership, a strategy/business model, resources (financial and human), and organizational culture.
The possibility of a sudden, unexpected transition can be scary to managers and staff, and can result in rumors and unnecessary anxiety.
What’s different: The board proactively decided to use the three years’ informal notice to get ready for transition rather than waiting. The executive director overcame his fear that this process might result in the board deciding to pressure him to leave sooner. The board decided to focus on succession planning in order to be thoughtful about leader continuity and the possibility of internal succession. The succession planning was done with a focus on organizational sustainability—a more recent option particularly relevant to organizations with long-tenured or founder executives, or facing major changes in funding and environment. The board and the executive and management teams embarked on this broader planning process, which looked at strategy more broadly in the context of culture, resources, and leadership. They thereby reexamined their assumptions about organizational sustainability and how they updated their strategic plan. This decision allowed them much-needed time to go deep on these questions and not rush a decision.
Once there was agreement on the broad scope of the work with the consultant, the first focus was learning more about the management team and board. The possibility of a sudden, unexpected transition can be scary to managers and staff, and can result in rumors and unnecessary anxiety. By working with the management team and the executive director together toward understanding how succession planning would be done—and clarifying the roles of the management team and board in the process—some of the anxiety and distractions are reduced. For the management team, first actions included finalizing the questions for an organizational self-assessment to be completed by all staff, and agreeing to complete a worksheet to unpack their jobs.
The board formed a succession and sustainability committee and guided plans for a board self-assessment. The findings from these two surveys were compared to understand board and staff perceptions and alignment/disagreements. These data informed the later discussion on organizational sustainability and the connection between where the organization was at the time and what was needed going forward.
The unpacking of the management team jobs—key functions and roles, key relationships, and possible backup in an emergency—helped all to better understand the current roles of the CEO, COO, and management team, as well as how they were progressing. The COO quickly let it be known that she was interested in a CEO position at Community Builders or at another organization at some point in the future. The unpacking showed where the CEO (who had been promoted from COO nine years earlier) was still the detail person for the organization. The COO was in many ways more of a strategic thinker and visionary. This insight became helpful as the board began to consider the question of internal succession. Some of the board’s anxiety about the pending transition was reduced by learning more about the very talented management team the CEO had put in place.
Succession planning resulted in a written, board-approved emergency backup plan and succession policy for the CEO, and written emergency backup plans and worksheets with leader-development and cross-training plans for all the managers.
What’s different: Too often, succession planning is avoided entirely because it can seem uncomfortable for the executive and board. Or, it is done in a check-the-box superficial way by taking a template and filling in some details. Once the fear of succession planning is overcome, it is a very empowering process for both the board and managers. The process makes real everyone’s passion for mission by focusing on ensuring that they are preparing the leaders that the organization needs. In this situation, the succession-planning process improved trust and communication between the board and managers, and affirmed the progress in developing internal talent.
Connecting Succession and Organizational Sustainability
Community Builders faced more than the challenge of transitioning its executive and planning for succession. Changes in federal and state funding for its work raised real threats to its long-term viability. Community leaders on the board could see that their neighborhoods and people served by the organization were at risk if the reductions in public support were not addressed. This concern made it hard to evaluate the internal candidate fairly, because she was associated with the old ways of supporting the organization.
The board and staff survey had asked questions about the four domains of sustainability: leadership, strategy/business model, resources, and culture. The survey data showed that some programs worked better than others both in terms of results and paying for themselves. The sustainability review engaged the management team and board in a process that included:
- Detailed discussion of the survey results and the questions the data raised about the organization;
- A line-of-business (programs) review to better understand the programs, their impact, their funding now and in the future, and their potential for growth (the board decided to ask the COO and her potential internal successor to work with the CEO in organizing and leading this review); and
- A board and management team retreat to discuss sustainability, succession, and the connection to the strategic plan.
Unexpectedly, this process resulted in a shift among the board leaders to unanimous support for the possibility of the COO’s becoming the next CEO. This happened largely because of the deeper appreciation the board gained from knowing the managers better and seeing (via the line-of-business review) the strengths of the COO and the key leadership role she already played.
What’s different: Community Builders looked at its need for a new executive through the broader lens of adapting its mission to a rapidly changing environment. One of the risks of executive transitions is the board’s beginning to think about who the next executive might be before there is clarity about the organization’s direction and priorities as well as the competencies and attributes required. Doing so comes from anxiety, and this anxiety is normal. We have a vacancy: Who do we know who could fill the position? This approach, however, misses the opportunity for growth and refocusing of organizational impact. Integrating the sustainability review with succession planning allowed the board to gain a much better understanding of the organization, its future, and the leadership team already in place. This resulted in a much more informed decision about whether or not to do an external search and how to shape the succession policy and eventual transition.4
The Executive Transition
From the planning described above, the board decided to offer the executive position to the COO on an incremental basis. Eighteen months before the CEO intended to retire, the COO was promoted to president. This promotion included increased involvement and work with the board, and overall responsibility for implementing the strategic plan and reporting organizational results. Based on six-month and one-year performance reviews of the president by the board, the COO was promoted to CEO six months before her predecessor retired. The former CEO became a senior policy advisor (and was also available as requested to the new CEO), and carried out discrete duties as assigned by the COO. (This arrangement is somewhat unique, and it worked because of a long, positive, and trusting relationship between the CEO and COO; typically, this type of overlap is not recommended.)
The board managed the communications about this process throughout to ensure both confidentiality and transparency as appropriate. The new CEO retained an executive coach during the process, and continued those services after she became CEO. The board established an onboarding committee to work closely with the two executives during the overlapping six months, and with the new CEO during her first year. Two years later, the organization has adjusted to the budget changes, expanded the role of a chief development officer, increased private fundraising, and successfully continued to achieve and expand mission results.
During this process, the board chair commented, “When we began planning for our CEO’s retirement, I was really concerned. I knew we needed to change and wasn’t sure how. This process supported the board and management team in exploring questions we had not been able to address, and making decisions that positioned Community Builders for long-term success.”
What’s different: The board navigated a complex situation and achieved both a good ending with its retiring executive and a great beginning with a new CEO who met their present and future needs.
- Tom Adams, The Evolution of Executive Transition and Allied Practices: A Call for Service Integration (Oakland, CA: CompassPoint Nonprofit Services, March 2017).
- For additional examples, see Tom Adams, The Nonprofit Leadership Transition and Development Guide: Proven Paths for Leaders and Organizations (San Francisco: Jossey-Bass, 2010); Tim Wolfred, Managing Executive Transitions: A Guide for Nonprofits (St. Paul: Fieldstone Alliance, 2009); and other articles found here.
- This case is based on a real situation, with the organization name and industry changed.
- The 2008–09 recession intensified for the sector the question of organizational sustainability. Most organizations faced funding challenges and the need to operate with fewer resources. Jeanne Bell, Jan Masaoka, and Steve Zimmerman advanced attention to sustainability in 2010 with the book Nonprofit Sustainability: Making Strategic Decisions for Financial Viability, which helped leaders to look at mission impact and financial viability together. This initial focus was followed by a second book, in 2014, The Sustainability Mindset: Using the Matrix Map to Make Strategic Decisions, by Steve Zimmerman and Jeanne Bell. The Foraker Group, the management support organization for Alaska nonprofits, and TransitionGuides (now part of Raffa, P.C.) also developed approaches that broadened the discussion of sustainability beyond mission and finances to include leadership, strategy, and culture.