When Replacing a Long-Standing Executive Director - Don't Forget About the Exit Plan!

When a board succession plans for a departing, long-time Executive Director - most of the attention is focused on the recruitment and onboarding of the new leader...and rightly so. With that said, a critical (and almost always overlooked) component is the exit-plan of the outgoing leader. Following are two essential tips for you to consider:

1. Capture Institutional Knowledge
When any leader exits an organization - untold amounts of institutional wisdom and knowledge leaves as well. And while fresh leadership is often a positive - it can usually be optimized when key institutional knowledge can be retained. This information can include processes, professional networks & relationships, expertise, etc. If the exit is framed by advanced notice (such as a retirement), a multi-week plan to capture this wisdom can be advisable.

2. Set Terms of Exiting Leader's Continuing Involvement - or Lack Thereof
While most organizations make a clean separation with limited-to-no ongoing involvement - it can be advisable for the board to set clear expectations in advance. We occasionally see a retired leader continuing to participate despite the fact that it is a significant distraction and impediment to the new leader's onboarding. Even if a formality, it is a best practice to lay out the mutual expectations for the retiring leader.

A Nonprofit Leadership Edge - Install a President's Advisory Council

The President's Advisory Council (PAC) is a highly effective but rarely utilized tool that can accelerate development and enhance impact of the nonprofit leader.

What is a PAC and how is it different from a Board?
A PAC is an informal circle of mentors, advisers and friends that provide coaching, counsel and guidance to the nonprofit Executive Director. There is a significant distinction between the Board and a PAC. Boards are formalized, meet together and delivery governance for the organization. PACs are information, often meet as individuals and deliver personal & professional guidance to the Executive Director.

Do PACs conflict or compete with the Board?
PACs are not part of the nonprofit's organizational structure and work in harmony with board governance by providing guidance and counsel.

I have a few mentors, does that mean I have a PAC?
It depends - like a board possesses the necessary skills that can optimize an organization; a PAC must be composed of individuals who possess the particular talents that must be continually fostered in that particular nonprofit leader. For example, is one of your mentors able to coach you from a finance & accounting perspective?

How can a PAC make an impact?
The ways a PAC can optimize a nonprofit leader's performance and too numerous to identify here. One critical benefit provided by a PAC is the opportunity for the nonprofit leader to sound-board ideas and concepts before taking them to individual board members, to committee or to the board itself.

What are the steps to organizing a PAC?
1. Identify the talents you need to lead your organization
2. Take inventory of the assets possessed by your peers, mentors, former managers, etc.
3. Tap into individuals that will both mitigate your weaknesses but, arguably more importantly, leverage your strengths. If you identify a gap, network your way to an individual who might help.
4. Invite each individual to be part of your President's Advisory Council. Explain why you are forming the PAC, who else is participating and what that individual's role will be.

CEO Search Committee Debate - Who's on the Roster?

When a nonprofit organization faces a leadership change, it will typically form a search committee charged with optimizing the recruitment and transition process. Committee formation, however, is rarely without incident and must occur around the central question - Who Should Be on the Search Committee?

BOARD PARTICIPATION
The committee must be anchored by a strong chairperson - ideally a well respected board leader who is prepared to facilitate a process filled with challenge and debate from all spectrums of the organization.

In addition to chairperson, the search committee should also include:

• Current Board Chair
• Current Board Vice-Chair or whomever is anticipated to succeed the Board Chair
• Member(s) of the executive committee

STAFF PARTICIPATION?
In almost all cases, we do not advise including staff on the search committee with the exception of a trusted, senior staff person who will not interfere with the board's efforts. We are often surprised at how often organizations will include staff on a search committee - at a minimum resulting in frustration and too often resulting in regret.

WHO ELSE?
In instances where an organization has a long-standing partnership relationship with a funder, inclusion of that funder on the search committee can optimize the search process in several ways. Perhaps most significantly, funder participation furthers the relationship and enables the committee to evaluate the candidates from the all-too-critical funders' perspective.

WHAT ABOUT THE OUTGOING CEO/EXECUTIVE DIRECTOR?
Generally, we advise against the inclusion of the outgoing executive with certain exceptions wherein it is beneficial to involve the outgoing leader. However, it is often advisable for the outgoing leader to participate in certain elements of the process such as assisting with the needs assessment and position profile development.

TAKEAWAY
It's difficult for a search to succeed if the search committee isn't properly formed. Be certain to include members that will optimize the committee's ability to evaluate candidates along with expanding the networking reach of the committee.

Can Entrepreneurs Fill the Corporate Giving Void?

Due to either exodus and/or consolidation - the corporate donor base in many markets can no longer support the the volume of corporate giving seen in year's past. The distribution of wealth in these markets often shifts to the entrepreneurial sector. Given this significant shift, how can non-profits successfully appeal to the growing entrepreneur class in order to advance their organizations?

OVERVIEW
Entrepreneurship is on the rise. If you're wondering if the trend will continue, consider that just a few short years ago most universities did not have a major in entrepreneurship let alone an individual course offering. Today, the top undergraduate and graduate programs are ranked and national enrollment is swelling - suggesting that the continued growth of the entrepreneurial sector is likely.

DISTINCTIVE CHALLENGES
Organizations must recognize the three most significant challenges associated with nurturing the entrepreneurial sector.

1. Corporate givers don't literally give away their money. When an entrepreneur donates, she is contributing dollars that could otherwise grow her income or be reinvested in her organization. And sometimes the money is completely tied up in the organization which can often be cash-starved.
2. Because entrepreneurs wear the multiple hats of growing a business, they often lack (or perceive they lack) the time to get involved with non-profits whether at the board or committee level.
3. As the non-profit sector knows all too well, with few exceptions it takes a significant multiple of entrepreneurial donors to equal what can be gifted by one corporate donor.

TAKEAWAYS
With the financial landscape shifting, nonprofits must work hard to engage entrepreneurs. This issue is too large a challenge to be fully addressed here. However, a launch point for non-profits is to more proactively interface with entrepreneurial organizations. For example, I am a member of several entrepreneurial groups and none of those groups has any associate memberships from the non-profit sector. Nonprofits should also target appropriate board representation from the entrepreneur community...remember entrepreneurs run in packs - one strong relationship can lead to many, many introductions.

As with most development initiatives, mission affinity will be the driver to entrepreneurial engagement.

Board Recruitment - Don't Forget Relocating Executives (& The Trailing Spouse)

Communities are regularly enriched when companies relocate/recruit executive leadership. These leaders have invariably served on nonprofit boards in their previous communities and will wish to establish new board relationships after arrival. In the majority of cases, these executives are accompanied by a trailing spouse who will also offer valued non-profit board talent and/or experience.

Boards should research the trustee's past board service to identify Mission Affinity. Certainly, an executive who has a history of serving museums and performing arts may not understand why they are being recruited by a children's services organization.

In the absence of an established relationship that can facilitate a relationship to the new executive - a phone call to the previously served non-profit's executive director and/or board chair can provide valuable insight into a prospective trustee's talents and passions. Further, if appropriate rapport is built during this call, this contact may even provide a highly effective introduction to the prospective board member.

Funders Often Surprise - The Misconception Around Transition Funds and Capacity Building

Nonprofits facing a leadership succession may be surprised at the supportive attitude many foundations take during such an event.

OVERVIEW
Under the umbrella of Capacity Building, a number of organizations may realize support from aligned foundations in the form of Transition Funds. Foundation leaders will often view an organization's success as a mission critical requirement worthy of support. As put by one foundation leader, "Transition planning is often seen by organizations as a luxury whereas foundations see it as smart." In contrast, many of these same non-profits that are facing the leadership succession will misguidedly think that foundation support would not necessarily be available. If you've had a different experience, recall the old axiom that when you've met one foundation, you've met one.

TYPES OF TRANSITION FUNDING
A number of transition funding scenarios exist, following a few of the more frequently seen examples:

1. Executive Search Firm Fee - foundations that are aligned with an organization's mission will occasionally, or even frequently, fund executive search fees.
2. Interim Executive Services - i.e., when an interim Executive Director involves a disparate salary expense as compared to the exiting leader
3. Transitional Concurrent Employment - when the nature of a succession is so critical that ideally the organization will employ the exiting leader simultaneously with the incoming leader for a number of months.

TAKEAWAY
Organizations should not miss the opportunity to consult with foundation partners during leadership successions to identify possible support opportunities.

For-Profit Leaders Thinking of a Nonprofit Career? Tips for an Enlightened Transition

Based on a number of factors, an increasing number of nonprofit boards are tapping executives from the for-profit sector. However, the transition is often challenging - certainly, both organizations and executives need to be wary of the prevalent pitfalls in order to optimize the likelihood of success.

CONTEXT
Why are more non-profits tapping for-profit leaders? Following are a number of the more customary reasons:

1. The rapid professionalization of the sector - more and more non-profits wish to operate in more business-like fashion. This trend is driven by influence from funders and by the board's increased interest in efficiencies and cost-containment - if, of course, these concepts can positively impact the organization's mission.
2. Mission Affinity - for profit leaders perceive the opportunity to do work that is more personally satisfying...often with a nonprofit wherein the mission addresses a personal experience personally experienced by that leader.
3. Narrowing Compensation Gap - while still significant - the gap between sector compensation has steadily, albeit incrementally, continued to decrease.

CHIEF TRANSITION CHALLENGES

A number of the distinct differences can prevent a successful sector transition - the most frequently cited are as follows:

1. Board Interaction - Most for-profit executives are surprised by the unique nature of non-profit decision-making including the intricacies of board relations. Accustomed to rapid decision making, many for-profit leaders are not able to adjust to the sector's nuances.
2. Culture Shock - Despite the sector's continued professionalization, many for-profit leaders will not successfully adapt to the legacy cultural components of a given organization that will likely frustrate an unsuspecting leader.
3. Unrealistic Satisfaction Expectations - While tremendous intrinsic rewards are experienced by those that lead nonprofit organizations; those rewards are interspersed among the daily (and hourly) challenges of running an organization that are not dissimilar to the daily challenges in the for-profit sector.

TAKEAWAY

Despite the challenges, a sector transition can be successful and rewarding for both the organization and the new leader. Certainly, a leader must be clear as to the motivations driving the shift. Further, mission affinity is critical - a leader may be successful leading one nonprofit but not necessarily another. Certainly, you can match one of the many success stories that include the Rock and Roll Hall of Fame and Museum's leader Terry Stewart who was formerly the President and COO of Marvel Comics.

Nonprofit Succession Planning - an Overview

BACKGROUND
First some statistics for your consideration

• 73% of current nonprofit leaders are baby boomers
• 50% of non-profits do not have a succession plans
• Approximately 2/3 of Executive Directors are planning to step down between 2007 and 2012 – yet, only 30% of those ED’s have shared their exit plans with Board leadership
• Less than 1/3 of all non-profits have a “deputy” director or Chief of Operations meaning that the possible internal successors have extremely silo-ed experience that creates succession gaps to the ED seat.
• In nonprofit, only 30-40% of Executive Director positions are filled internally (By comparison, for-profit sector is nearly 60% internal)
• When a long-tenured Executive Director leaves a post, a majority of those that follow fail within 18 to 24 months

OVERVIEW
Clearly, nonprofits need to adopt succession plans – however, they must be prepared for the dramatic cultural shift that will ensue. This cultural shift is both cursory and significant…cursory in the sense that the very act of introducing “succession planning” into the organization’s language will create impact. The more significant cultural shift is seen as the organizational environment moves toward professional development, evaluations, strategic human resources and more the more proactive setting of expectations. The resulting ripple effects with ensure that succession planning implementation will not likely follow in an orderly fashion.

SUCCESSION CAREER PATHS
Other than a deputy director, the seats that are most often considered for internal succession planning are Finance, Development, and Programs – each presenting skill gaps that create hurdles to a promotion to the Executive Director role. For Finance, Development and Programs leaders, search committees will be most concerned with the following potential skill gaps:

• Board interaction, board development and volunteer engagement. For example, many may not understand the intricate nuances of building board support of a given initiative/recommendation in advance of a board meeting
• Management and leadership of a much larger staff
• Strong capacity to deal with accounting, finance - primarily cash flow. The importance of this skill cannot be understated including an individual’s ability to work with auditors and leverage monthly financials

How can organizations and individuals address skill gaps such as those mentioned above? A number of recommendations are available including:

• Participate in the organization’s Board Resource and Finance committees
• Increase networking activity among community and business leaders to build contacts
• Join boards of other organizations and participate on their Board Resource and Finance committees
• Engage an appropriate number of mentors to address personal development

SUCCESSION BEST PRACTICES
When facing a reactive succession wherein an internal candidate has not been identified in advance, an organization should consider engaging an interim Executive Director. A number of advantages are associated with this practice including:

• An outside, objective leader who can make the difficult decisions that often face an organization in transition
• An interim leader will relieve the organization from moving too quickly to name a replacement – allowing for a comprehensive search that will optimize the outcome

Most markets have institutions that offer Interim Executive services including a network of available executives and complimentary consulting services - for example, the Center for Nonprofit Advancement in Washington, D.C. and Cleveland State's Interim Executive Director program in Northeast Ohio.

FOUNDATION SUPPORT
Foundations are more and more agreeable to providing organizations Transitional Dollars under the umbrella of capacity building.

OBSTACLES TO SUCCESSION PLANNING
Because the concept of succession is so relatively new in the nonprofit space, many challenges await its implementation. Chief among these is that the Executive Director must possess the confidence and vision to promote and support the concept. Many ED’s will view succession planning as a threat and as a result they will focus more on preservation. Succession planning, like any initiative, will fail without the wholesale support of the ED with in kind support from board leadership.

TAKEAWAY
Succession planning is critical to any non-profit organization. It is a concept that presents challenges but it is also one that is well worth the effort. Many best practices exist to implant a program and deal with the resulting cultural shift. The numbers are clear and they favor the organization that is well-prepared to transition its leadership.

Post-Graduate Education in the Non-Profit Sector

After attending a recent AFP Philanthropy Day event and participating in a discussion on post-graduate and continuing education in the non-profit sector; here is my sense of the group's consensus:

Overview
The non-profit sector is witnessing a rapid “professionalization of the field” including the emergence of post-graduate educational opportunities across North America. This movement seems to be driven by a number of factors including:

• Increasing complexity within non-profit organizational management
• The explosive growth in the sector
• Critical emphasis on coupling the passion and vision of the sector with the numerous business necessities – in other words, the bottom line is now as important as the top line
• Donor focus and scrutiny on bottom line results and sustainability
• Lack of formalized succession planning within non-profits often leaves internal successor unprepared for promotional opportunities
• A litany of educational offerings exists in most markets with more opportunities emerging on a continual basis.

Dr. Duane Dukes shared "Your heart got you into it (non-profit) but now your head has to handle it." Professionalization can optimize a leader's ability to face many of the familiar challenges facing non-profit leaders including:

• Financial sustainability of non-profits
• Leadership succession
• Board engagement and the changing dynamic of volunteerism
• Advancing scrutiny and transprency issues

The non-profit leader must proactively build management skills to address the increasing internal and external challenges. So what is a non-profit leader to do in order to advance in professionalism. From an educational perspective, following are the most frequently pursued post-graduate programs:

• MBA with a concentration in non-profit
• Masters in Management for Nonprofit Organizations (MNO) – typically 60 credit hours
• Certificate in Nonprofit Organizational Management (NOM) typically 15 credit hours

Additionally, a number of continuing educational opportunities exist through universities and non-profit organizations that focus on sector education (for both non-profit executives and board members); two examples are Cleveland’s Business Volunteers Unlimited or Washington D.C.’s Board Source.

Quick Reference Tool (QRT) for Considering Post-Graduate Opportunities

MBA with a Non-Profit Concentration
Less exposure to non-profit curriculum, heavy focus on accounting, finance along with comprehensive business curriculum...often appropriate for non-profit leaders with career ambitions that require advanced business and financial acumen.

Masters – MNO
Interdisciplinary approach to non-profit including fundamental focus on subjects including accounting, finance, human resources, legal and leadership with significant focus on non-profit management. Courses are often designed for the non-profit school by other departments - for example, a university's accounting department may create a course on Tax Law for Non-Profits for the non-profit program. MNO are sometimes earned concurrently with J.D.’s or other post-graduate degrees. In general, an MNO is often appropriate for non-profit leaders who do not possess another Masters degree.

Certificate – NOM
Interdisciplinary approach to non-profit and is an excellent complimentary credential...often appropriate for more tenured non-profit leaders who already possess another Masters degree.

Continuing Education
Subject matter focused, quality varies among delivery outlets...often appropriate for nearly all non-profit audiences, particularly Board Members.

TAKEAWAY
Amidst the rapid professionalization of the field, post-graduate and continuing education is playing an increasingly important role for non-profit leaders. The most appopriate educational track will most often depend upon a leader's other experience and credentials. However, it seems advisable that today's non-profit leader possess some sort of post-graduate Masters degree. In the absence of an MNO and tenured experience, an MBA or other post-graduate degree can be complimented by a certificate of NOM. Finally, all non-profit leaders should be exposed to some consistent continuing education regardless of credentials and experience.

The panelists involved with this discussion were:

>Jennifer Alexander, Ph.D. - Associate Professor & Co-Director, Cleveland State University, Center for Non-Profit Policy and Practice
>Duane Dukes, Ph.D. - Professor of Sociology & Director, John Carroll University’s Nonprofit Program
>Susan Lajoie Eagan, Ph. D. - Professor & Executive Director, Case Western Reserve University, Mandel Center for Nonprofit Organizations