Kittleman Blog

Nonprofit CEO Transitions

Monday, January 30, 2017

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Boards Look for Answers

A significant milestone was reached last year that might have escaped your attention: the oldest Baby Boomer was obligated, by law, to begin taking the required minimum distribution from her 401k plan. She was the first of some 76 million Boomers who are now between the ages of 55 and 70 years old. Although the onslaught of Boomer retirees that was predicted 10 years ago that is just now materializing, due in large part to the Great Recession, the sheer number of Boomers who are leaving the workplace, or planning to “do something else”, is likely to cause a significant problem.

The unsettling effect of this upsurge is likely to be the cruelest in the nonprofit sector, with particular regard to the transition of top leadership. Unlike the corporate sector where succession planning and management development ladders identify the next leaders, nonprofits generally lack sufficient scale, budget and opportunities to integrate such strategies into their operations. Thus, when the chief executive officer departs, the nonprofit board is often thrown for a loop. A survey we conducted a few years ago indicated that 75% of the nonprofits we queried did not even have an “emergency plan” that would help guide the board in case of the chief executive’s sudden, unplanned departure. Under such circumstances, the risk of disrupting the organization’s critical relationships, funding sources and community credibility is greatly elevated, as you might imagine.

Transitions Are Inevitable
Obviously, nonprofit governing boards today are well advised to devote attention to the issue of executive leadership transition. Admittedly, this can be tricky. If the board has a CEO who is performing well and the organization is thriving, why would you even bring it up? Even delicately broaching a conversation with the CEO about his or her plans for the future might be extremely uncomfortable for both parties. But here is the reality. The question is not if your CEO leaves the organization, it is when. Whether it happens on the watch of the current board (“Tell me it’s not so, Joe”) or those who succeed you, having a clear plan for managing top leadership transition is simply good business practice.

Organizations that are led by a founder CEO present an even greater challenge. Over time, the identity of the founder and the identity of the organization become interlocked. In the minds of key stakeholders, funders and the community, they become one and the same. The chief executive generally earns a level of respect and influence in the organization through years of successful relationship building, both internally and externally. When the founder steps down, the board quite naturally might question whether the organization can survive without its leader or if they can even find a successor who is as qualified. The fact that most founders have personally recruited most of the Board only magnifies the concern.

What’s the Big Deal?
There is no question that a change in leadership at the top of any organization must be acknowledged, and accepted, as a big deal. The board and chief executive must work in close partnership knowing that leadership transition planning will require a great deal of focused attention, additional time and heightened commitment from both parties.

Using a tactical approach that both informs and prepares the board for the chief executive’s eventual departure, including the mandate of governance to appoint a successor, will ultimately increase the likelihood of a smooth leadership transition. It certainly will decrease the problems associated with a failed transition.

The selection and appointment of a chief executive officer is one if not the most important role of the board. In leadership transition planning, long before that selection occurs, the board will find value in stepping back and taking stock of the situation. This is particularly important in the case of a long-serving CEO since the board has for so long depended on the chief executive for direction (in some cases, for everything that goes on in the organization).

Due to the chief executive’s omnipresence, and as a result of the healthy separation of governance and management functions, it is not uncommon during transition discussions that the board finally understands what exactly it is that the CEO does. Unless you step back and take stock, you might misinterpret some nuances that you otherwise took for granted.

Finding a Roadmap
There are numerous examples of successful nonprofit leadership transitions, most involving the CEO’s planned retirement. In these scenarios, one thing seems to stand out: the board’s resolve to use the transition time to “re-claim” the mission of the organization. This means exercising its prerogative to articulate clearly the answers to the following seminal questions, and without prompting from the CEO: What is our true purpose? What are our key priorities? What impact are we trying to make? What will it take to sustain our organization? Arriving at the answers is an absolute prerequisite for entering into a discussion about a successor.

In 2005, we developed an approach to leadership transition planning based on years of CEO recruiting assignments we have conducted across the broad national spectrum of nonprofit organizations. The key concept behind the approach is the paradigm of Leadership Transition Alignment©. Simply stated, it brings together three common analytical tools used to characterize specific organizational needs and behaviors. The purpose of the workshop exercise is to provide the board with a starting point for the subsequent search and selection of a leader. The three tools include an Aspirational Assessment, CEO Job Analysis and Leadership Competency Profiling. The data gathered from these tools allow the board to align its distinctive vision with the criteria around which a new leader would be selected.

The Time is Now
As any board chair who has experienced it will attest, the day your CEO walks into your office and tells you he or she is going to retire or has accepted another position, will be memorable one, likely followed by a sense of foreboding. The severity of that angst will be in direct proportion to the board’s readiness to respond. If the board concedes, as it should, what the Boomer Generation is going to create for us in the years ahead, it will need to start its leadership transition planning now.

Rick King,
Chairman
Kittleman & Associates, LLC

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