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.

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.

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.

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.