Leadership Change and the Designated Successor

Posted on 26. Jan, 2018 by in Boards Behaving Better

In my 20 years as an organizational consultant and executive recruiter for both the nonprofit and for-profit sectors, I continually find that most board leadership does not have emergency or long-term transition plans in place for the chief executive. The sub rosa issue of a planned departure is avoided in order to not rock the boat with the current executive. A robust leadership continuity plan would, however, serve as a roadmap for an internal junior executive’s talent management prior to their leadership transition; unfortunately, very few organizations provide the executive coaching needed to enable the “designated” (but unprepared) successor – often the current CFO or COO – to succeed as CEO.

Nothing is more central to a dynamic organization than its capacity to cope with complexity, ambiguity, uncertainty, and change. In the modern era of rapid change, it is imperative for a nonprofit organization to be more future-oriented and more concerned with selecting the proper direction and most capable leader. Our nonprofit leaders have to be capable of dealing with revenue generation and sustainability issues that demand courage, decisiveness, and action. This makes the distinction between leadership and management quite critical in the search for a new chief executive, which has large implications for both an organization’s externally-focused succession planning, as well as their internally-focused successor planning.

Search committees often make hiring decisions based on candidates’ institutional knowledge, rather than their ability to tackle future challenges. Committees inherently focus on keeping the status quo and select the internal COO or CFO candidate, regardless of whether they have developed or demonstrated the ability to lead. CFO’s and COO’s are good managers, adept at overseeing resources and organizing the activities and operations of the organization, while CEO’s are leaders that challenge the process, inspire shared vision, enable others to act, model the path forward, and encourage commitment internally and externally. In my extensive consulting experience, I am continually dismayed that many organizations are over-managed and under-led, resulting in unmotivated employees without a clear or compelling vision. This implies a lack of robust talent management.

Subsequently, there are many public examples of the unprepared internal candidates succeeding the chief executive; the COO-turned-CEO or CFO-turned CEO often departs after a limited and frustrating tenure. The search committee must then engage once again in an extensive and expensive search process and adeptly manage declining stakeholder and community confidence.

Search committees must explicitly consider the profound distinction between management and leadership when selecting a chief executive. In the process of assessing talent for a leadership change, it is important to keep the expectations of management and leadership quite distinct – if the board wants the next chief executive to create new ideas, new approaches, and new methodologies. Good managers demonstrate success by being tactical, but great chief executives demonstrate success by being strategic leaders; the distinction is critical.

Effective leadership continuity and transition is about a focus on the needs and challenges facing the organization, rather than successor planning that prioritizes the comfort level of the board. To ensure organizational sustainability, chief executives have to demonstrate the skills to competently address problems and issues that demand courage, decisiveness, and action.  Taking the time to train potential internal successors to truly lead puts organizations many steps ahead of the game.


Retirement – Who Makes the Decision?

Posted on 26. Jan, 2018 by in Boards Behaving Better

Change in leadership often strikes fear at the very heart of an organization. It can throw the board, staff and leadership into turmoil. In fact, people go to great lengths to avoid disrupting the status quo. Sometimes, they even stay in dysfunctional relationships because it seems like a more palatable option. If we are overwhelmed by the fear of new leadership and we try to hold onto the way it’s always been, we expend a lot of energy resisting change.

Change in leadership is, indeed, a painful thought. But avoiding or postponing leadership change could put the organization in long-term jeopardy. What is most important is that the facts are faced and parameters put in place to ensure the organization will continue to thrive and stand on its own without the current leadership.

The organization’s vitality and sustainability are the key factors to be considered when thinking about leadership continuity. This issue of the organization’s best interests is often confused with the best interests of the founder/long-term leader. The organization is often held hostage to the retirement considerations of the chief executive, who may no longer be leading the organization into the future. Not surprisingly, we have seen a number of organizations that are holding on to leaders who have lost their passion and vibrancy, leading to the organization’s decline.

There is the example of The Philadelphia Foundation that lost its focus on mission and did not serve its constituents in a meaningful way. The community foundation did not grow its resources to lead innovative regional initiatives, nor provide substantial funding for their grantees’ organizational sustainability.  The Philadelphia Foundation is seen as a critical philanthropic resource for the large diverse Philadelphia region with significant challenges; as a major city, it ranks as the fifth largest city in the nation. Surprisingly, according to the Foundation Center, The Philadelphia Foundation is not listed among the top 25 Community Foundations in the nation, in terms of asset size or total giving. We learned that many of the top ranking community foundations serving smaller cities, like Pittsburgh, Boston and Hartford, have significant impact within their communities.

For more than a decade, the long-term President of The Philadelphia Foundation was not displaying robust leadership, but had requested a hiatus to consider possible retirement. Outside the foundation, everyone spoke of the board being “asleep at the helm”, out of touch with the foundation’s current lack of community responsiveness, compared with its greater significant potential.  When the leader’s limited functioning became too obvious to ignore, the board had to step in and create a hasty leadership change.

We have seen many boards reluctantly ask the long-term chief executive or founder if they have any retirement plans. When the board chair gets the unsurprising response that the chief executive has no immediate plans to retire – that is a discussion-stopper! But Boards should not acquiesce so quickly…

Frequently, long-term leaders who have not had authentic performance conversations with the board leadership believe that the organization is theirs to oversee – until they get tired of showing up. Boards are remiss in not having regular performance expectations and comprehensive performance reviews with long-term leaders. The performance review should focus on the health and sustainability of the organization, and have input from the major stakeholders. Conversations about retirement are challenging, but approaching leadership viability through consistent and vigorous 360 performance reviews will ensure that organizations are focused on growth and sustainability.

According to Bill George, author of True North, organizations derail when leaders are not able to lead others with deep curiosity, and keen judgment. So who makes the retirement decision?

Questions regarding retirement planning for the board:

  • Why is this the right time to transition to new leadership?
  • What will ensure the organization’s sustainability in the next 3-5 years?
  • A new chief executive will make changes to the operations and might move the organization in new directions; are you ready for this?
  • What will be the biggest challenges for a successful leadership transition?
  • Can the long-term leader envision letting go while still being embedded in the organization; what will be the most difficult aspects of stepping back?
  • In planning for the transition, what crucial responsibilities and relationships is the long-term leader prepared to share or hand off; what key relationships should s/he maintain?
  • How does the long-term leader want your organization’s stakeholders to describe their legacy?
  • How can the board best support the long-term leader through transition planning?

The Dream Board Chair

Posted on 26. Jan, 2018 by in Boards Behaving Better

Every nonprofit organization (as well as public agency) is looking for the perfect board chairperson who can excel at every aspect of leading the organization to the next level. It’s true that the board chair is a critical element to a successful organization. Selecting a board chair must be a careful and strategically well-planned process. You don’t select a board chair based on who raises their hand first and cries “pick me.”

Serving as the chair of a board is not a role for the undecided or inexperienced. To do the job right demands at times exceptional and supernatural qualities, endless energy and undivided attention and commitment. Accepting the responsibility of leading a nonprofit board, not just serving as a figurehead, assumes that the chair possesses the leadership competencies through demonstrated (professional or volunteer) experience to do an effective job and produce results, namely leading a team, running a business and handling the allocation of resources.

It has been our finding that the focus of nonprofit and business leaders, in their board roles, is frequently on keeping administrative costs and enterprising risks low, without consideration of what it takes to ensure program quality and impact. They often do not understand how the mission is realized or how its impact is assessed.  They would never consider running their own businesses without the necessary resources or talent just to keep overhead low.

Imagine if these leaders used their board roles to promote a greater investment in capacity building, succession planning and performance measurements, rather than minimizing risk and administrative costs.  Without adequate training on their role as a nonprofit board leader, they miss creating the alignment of the mission with an understanding of the talent and resources needed for success and sustainability. We propose that the stewards of mission-driven organizations should be adequately trained in the implications of their governance roles, before assuming the mantle of board chair.