Succession Planning for Nonprofit Leaders

December 2010

SUCCESSION PLANNING FOR NONPROFIT LEADERS

by Eileen Morgan Johnson

With the increased attention on governance in recent years, succession planning - planning for the replacement of the chief staff person - is something that every organization should consider. Anecdotal evidence shows that the average term of office for an executive director is only three years. This article looks at six different scenarios that organizations might face and how succession planning can help avoid or solve a problem.

1. Founder's Syndrome

Problem: Founder's Syndrome refers to a founder of an organization who likely has stayed too long in a leadership position at the organization. The founder may be the executive director or the president and chair of the board who also serves as the organization's chief executive officer (CEO).

The founder often had the original vision for the organization and nurtured the organization for years, frequently at great personal sacrifice. The organization's success is due in large part to the founder's vision and hard work. The founder started as a volunteer and is now the senior leader of the organization, often a position the founder has held uncontested for many years.

As the organization has grown, new people have joined the board or assumed positions of staff leadership. These new people bring new ideas. The organization may be going in directions that the founder is not comfortable with or does not support. Board members are hesitant to raise the issue of succession planning because of the founder's deep commitment to the organization.

Solution: Hold a board retreat focused on evaluating the current state of the organization, its strategic plan and the qualifications that the CEO will need to lead the organization into the next decade. A facilitator with experience in nonprofit management who is not aligned with either the founder or the rest of the board can be invaluable in leading a discussion of the previously taboo subject of the founder's retirement. The organization should celebrate the accomplishments of the past and the effort that it took to bring the organization to where it is today and then move on to future scanning and what is necessary to achieve the organization's strategic goals.

If every senior leader in the organization is tasked with identifying and mentoring their potential replacement, it will be difficult for the CEO to refuse to do that, too. Some uncomfortable moments may occur, and patience may be needed as the founder slowly realizes that it is time to move on, but the organization will be stronger and more viable in the future if it does not depend on one person's energy and vision.

2. The Steady Ship

Problem: Our next organization was founded as part of the new society movement of the 1960s. All of the current staff leadership has been with the organization for more than 30 years. They started as young idealists in their 20s, and now their retirement years are on them. This team has been through good times and bad together. They've seen their organization grow, faced membership and funding challenges, reinvented the organization more than once and enjoyed steady prosperity in the 21st century.

Along the way they have hired bright, talented people who never stayed for more than a few years after it became clear that there was no place to move up in the organization. The chief financial officer has announced her plans to retire next year, and now everyone is wondering about their own retirement plans and who will run the organization after they leave.

Solution: It is not too late for this organization's leaders to plan for their own succession. They should discuss their retirement plans with their current staff. Some staff may be waiting for the chance to move up and would welcome more responsibilities now to help prepare them for future leadership roles.

Every senior staff member should be charged with identifying and cultivating a replacement, even if only on an interim basis. If certain skill sets or experience is missing among that staff, now is the time to identify what is needed and to develop and implement a plan to mentor and train staff or recruit new staff with the needed qualifications.

Attention also should be given to reviewing what it will take to keep the next level of management in place until it is time for them to move up into leadership positions. Retention bonuses, additional responsibility, higher profiles with the board, investment in professional or managerial training--all of these might go a long way to helping staff feel valued and invested in the organization and make them want to stick around.

3. New CEO on Board

Problem: The CEO has been in place for only a year, and things are going well. Membership and donations are up, and the organization has attracted the attention of a major foundation that is willing to fund a strategic initiative that will roll out during the next five years. As part of the grant application, the foundation has asked the organization to describe its succession plan. The foundation is well aware that with a five-year project and nonprofit CEOs changing jobs more frequently than in the past, the current CEO may very well not be there for the full course of this new strategic initiative. They want assurances that there is some plan in place to carry on the work that they are funding. The development director is puzzled as to how to answer this, since it seems like the new CEO just got there.

Solution: Even when a new CEO is on board, the organization should be planning for her successor. Whether it is a single person who is designated to act on behalf of the CEO when she is on vacation, someone who is the second in command on a daily basis or a committee of two or three senior leaders within the organization, someone must be getting groomed to step up to the CEO level if needed.

If the CEO does, in fact, stay there for the next five years, the organization will be blessed with two (or more) senior staffers who are invested in the organization and deeply involved in its programs and strategic planning. Should an unfortunate accident occur and the CEO be unavailable, the organization would be able to continue with at least some continuity in focus and direction.

4. New CEO Looking to Leave

Problem:The board has found an ideal candidate for the CEO position that has been vacant for many months. The organization is in transition. It has tried a new branding initiative, a new membership program, a new fundraising program and a new strategic focus, all without success. The candidate is interested in the challenge of a financial and programmatic turnaround, but he is not interested in sticking around to run the organization once those goals are accomplished. He sees his own retirement on the horizon and is looking forward to enjoying more travel and golf. He also has heard that the board doesn't agree where the organization should be headed, and he wants protection in case it decides to terminate his employment contract. He wants to negotiate his exit as part of his contract.

Solution: This CEO is offering the board the opportunity to frankly and openly discuss succession planning. In addition to negotiating the financial terms of his departure from the organization, his employment contract should establish as part of his duties the obligation to identify a successor within the organization (or outside of the organization, if a suitable candidate cannot be identified in-house) and to work with the heir apparent as he returns the organization to solid financial and programmatic success. By laying the groundwork for the organization and mentoring his successor, he will be positioning the organization for even greater success than a mere turnaround operation could achieve.

5. The Board Member as CEO

Problem: For a small organization without a succession plan, it is not unusual for a board member to temporarily serve as the CEO while the search is on for a permanent replacement. Sometimes the acting CEO likes the job so well that she does not want to leave. She argues with her fellow board members that she is the ideal caretaker, and that they do not need to rush into things. After all, she has been on the board for 12 years; she has served on every committee and chaired most of them; and she has been involved in the most successful fundraising efforts of recent years.

The board acknowledges the truth of these statements, and they are a bit unwilling to argue with her about her fitness to serve as CEO. It is easier to allow her to remain in an acting CEO status than to tell her she is not the choice for a permanent CEO and then go about the business of recruiting a CEO. Some fear that she will quit, and then one of them will have to step up and be acting CEO, a position that none of them wants.

Solution: While the board should acknowledge with gratitude their fellow board member's service as acting CEO, they should not allow the situation to drag on. Her fellow board members may not be comfortable criticizing her actions as CEO, since she will very likely resume her place on the board once a permanent CEO is hired.

They should work with a headhunter who specializes in association recruitment and who can help the board as a whole identify the qualifications of the ideal candidate. A battle may loom with the acting CEO, but the organization can get through it with the help of a seasoned professional. Who knows? She may be the ideal candidate after all. Then again, as the board goes through a formal recruitment process, it may become clear to everyone that different skills or qualities are needed for the future. In any event, the board should thank her for her service during this time of transition.

6. The Revolving Door

Problem: The board cannot figure out why it has trouble keeping an executive director. The CEO never seems to last even three years, and the last one quit after only 18 months. Board members wonder if their staff salaries are competitive, if they are requiring too much travel, or if the job is just too much for one person to handle.

Solution: The board can engage the services of a consultant to perform exit interviews for their most recent executive directors. In the anonymity of an exit interview with an outsider, volunteer leaders may find the reason why their hired leaders are not staying long. Armed with that information, they can develop strategies to address and stop the revolving door.

They can also use this exercise to plan for the next executive director's successful tenure and include in that plan how they will identify and recruit that person's successor. Perhaps the organization is demanding too much of the executive director, and a strong second-in-command position is needed. Or maybe the salary is too low, and they will never stop the revolving door until they face up to the current market for executive directors in their area. By identifying and facing their problems, the board will be in a better position to help the next executive director succeed and implement a succession plan as part of the recruitment process.

# # #

Author: Eileen Morgan Johnson is an attorney at Whiteford, Taylor & Preston LLP in Washington, DC. She can be reached at 202-659-6780 or emjohnson@wtplaw.com.



	December 2010 SUCCESSION PLANNING FOR NONPROFIT LEADERS by Eileen Morgan Johnson Reprinted with permission from ASAE: The Center for Association Leadership. Copyright 2007 The Center for Association Leadership. With the increased attention on governance in recent years, succession planning - planning for the replacement of the chief staff person - is something that every organization should consider. Anecdotal evidence shows that the average term of office for an executive director is only three years. This article looks at six different scenarios that organizations might face and how succession planning can help avoid or solve a problem. 1. Founder's Syndrome Problem: Founder's Syndrome refers to a founder of an organization who likely has stayed too long in a leadership position at the organization. The founder may be the executive director or the president and chair of the board who also serves as the organization's chief executive officer (CEO). The founder often had the original vision for the organization and nurtured the organization for years, frequently at great personal sacrifice. The organization's success is due in large part to the founder's vision and hard work. The founder started as a volunteer and is now the senior leader of the organization, often a position the founder has held uncontested for many years. As the organization has grown, new people have joined the board or assumed positions of staff leadership. These new people bring new ideas. The organization may be going in directions that the founder is not comfortable with or does not support. Board members are hesitant to raise the issue of succession planning because of the founder's deep commitment to the organization. Solution: Hold a board retreat focused on evaluating the current state of the organization, its strategic plan and the qualifications that the CEO will need to lead the organization into the next decade. A facilitator with experience in nonprofit management who is not aligned with either the founder or the rest of the board can be invaluable in leading a discussion of the previously taboo subject of the founder's retirement. The organization should celebrate the accomplishments of the past and the effort that it took to bring the organization to where it is today and then move on to future scanning and what is necessary to achieve the organization's strategic goals. If every senior leader in the organization is tasked with identifying and mentoring their potential replacement, it will be difficult for the CEO to refuse to do that, too. Some uncomfortable moments may occur, and patience may be needed as the founder slowly realizes that it is time to move on, but the organization will be stronger and more viable in the future if it does not depend on one person's energy and vision. 2. The Steady Ship Problem: Our next organization was founded as part of the new society movement of the 1960s. All of the current staff leadership has been with the organization for more than 30 years. They started as young idealists in their 20s, and now their retirement years are on them. This team has been through good times and bad together. They've seen their organization grow, faced membership and funding challenges, reinvented the organization more than once and enjoyed steady prosperity in the 21st century. Along the way they have hired bright, talented people who never stayed for more than a few years after it became clear that there was no place to move up in the organization. The chief financial officer has announced her plans to retire next year, and now everyone is wondering about their own retirement plans and who will run the organization after they leave. Solution: It is not too late for this organization's leaders to plan for their own succession. They should discuss their retirement plans with their current staff. Some staff may be waiting for the chance to move up and would welcome more responsibilities now to help prepare them for future leadership roles. Every senior staff member should be charged with identifying and cultivating a replacement, even if only on an interim basis. If certain skill sets or experience is missing among that staff, now is the time to identify what is needed and to develop and implement a plan to mentor and train staff or recruit new staff with the needed qualifications. Attention also should be given to reviewing what it will take to keep the next level of management in place until it is time for them to move up into leadership positions. Retention bonuses, additional responsibility, higher profiles with the board, investment in professional or managerial training--all of these might go a long way to helping staff feel valued and invested in the organization and make them want to stick around. 3. New CEO on Board Problem: The CEO has been in place for only a year, and things are going well. Membership and donations are up, and the organization has attracted the attention of a major foundation that is willing to fund a strategic initiative that will roll out during the next five years. As part of the grant application, the foundation has asked the organization to describe its succession plan. The foundation is well aware that with a five-year project and nonprofit CEOs changing jobs more frequently than in the past, the current CEO may very well not be there for the full course of this new strategic initiative. They want assurances that there is some plan in place to carry on the work that they are funding. The development director is puzzled as to how to answer this, since it seems like the new CEO just got there. Solution: Even when a new CEO is on board, the organization should be planning for her successor. Whether it is a single person who is designated to act on behalf of the CEO when she is on vacation, someone who is the second in command on a daily basis or a committee of two or three senior leaders within the organization, someone must be getting groomed to step up to the CEO level if needed. If the CEO does, in fact, stay there for the next five years, the organization will be blessed with two (or more) senior staffers who are invested in the organization and deeply involved in its programs and strategic planning. Should an unfortunate accident occur and the CEO be unavailable, the organization would be able to continue with at least some continuity in focus and direction. 4. New CEO Looking to Leave Problem:The board has found an ideal candidate for the CEO position that has been vacant for many months. The organization is in transition. It has tried a new branding initiative, a new membership program, a new fundraising program and a new strategic focus, all without success. The candidate is interested in the challenge of a financial and programmatic turnaround, but he is not interested in sticking around to run the organization once those goals are accomplished. He sees his own retirement on the horizon and is looking forward to enjoying more travel and golf. He also has heard that the board doesn't agree where the organization should be headed, and he wants protection in case it decides to terminate his employment contract. He wants to negotiate his exit as part of his contract. Solution: This CEO is offering the board the opportunity to frankly and openly discuss succession planning. In addition to negotiating the financial terms of his departure from the organization, his employment contract should establish as part of his duties the obligation to identify a successor within the organization (or outside of the organization, if a suitable candidate cannot be identified in-house) and to work with the heir apparent as he returns the organization to solid financial and programmatic success. By laying the groundwork for the organization and mentoring his successor, he will be positioning the organization for even greater success than a mere turnaround operation could achieve. 5. The Board Member as CEO Problem: For a small organization without a succession plan, it is not unusual for a board member to temporarily serve as the CEO while the search is on for a permanent replacement. Sometimes the acting CEO likes the job so well that she does not want to leave. She argues with her fellow board members that she is the ideal caretaker, and that they do not need to rush into things. After all, she has been on the board for 12 years; she has served on every committee and chaired most of them; and she has been involved in the most successful fundraising efforts of recent years. The board acknowledges the truth of these statements, and they are a bit unwilling to argue with her about her fitness to serve as CEO. It is easier to allow her to remain in an acting CEO status than to tell her she is not the choice for a permanent CEO and then go about the business of recruiting a CEO. Some fear that she will quit, and then one of them will have to step up and be acting CEO, a position that none of them wants. Solution: While the board should acknowledge with gratitude their fellow board member's service as acting CEO, they should not allow the situation to drag on. Her fellow board members may not be comfortable criticizing her actions as CEO, since she will very likely resume her place on the board once a permanent CEO is hired. They should work with a headhunter who specializes in association recruitment and who can help the board as a whole identify the qualifications of the ideal candidate. A battle may loom with the acting CEO, but the organization can get through it with the help of a seasoned professional. Who knows? She may be the ideal candidate after all. Then again, as the board goes through a formal recruitment process, it may become clear to everyone that different skills or qualities are needed for the future. In any event, the board should thank her for her service during this time of transition. 6. The Revolving Door Problem: The board cannot figure out why it has trouble keeping an executive director. The CEO never seems to last even three years, and the last one quit after only 18 months. Board members wonder if their staff salaries are competitive, if they are requiring too much travel, or if the job is just too much for one person to handle. Solution: The board can engage the services of a consultant to perform exit interviews for their most recent executive directors. In the anonymity of an exit interview with an outsider, volunteer leaders may find the reason why their hired leaders are not staying long. Armed with that information, they can develop strategies to address and stop the revolving door. They can also use this exercise to plan for the next executive director's successful tenure and include in that plan how they will identify and recruit that person's successor. Perhaps the organization is demanding too much of the executive director, and a strong second-in-command position is needed. Or maybe the salary is too low, and they will never stop the revolving door until they face up to the current market for executive directors in their area. By identifying and facing their problems, the board will be in a better position to help the next executive director succeed and implement a succession plan as part of the recruitment process. # # # Author: Eileen Morgan Johnson is an attorney at Whiteford, Taylor & Preston LLP in Washington, DC. She can be reached at 202-659-6780 or emjohnson@wtplaw.com.