O Leader, where art thou?

We have been talking about succession planning* in anticipation of mass leadership transitions for nearly a decade in the nonprofit sector. When the subject arises, rather than pushing the panic button we tend to shrug our collective shoulders. How concerned do we really need to be? Numbers from “Shaping the Future – Leadership in Ontario’s Nonprofit Labour Force” are telling:

Nonprofit sector leaders
68%
are between 45-64 years of age                                                                                  72% are women                                                                                                           73% have a bachelor of arts or more (30% have a professional degree, master’s or PhD)                                                                                                                              79% earn less than $100,000/year

Succession_leaderIn 2013, only 34% of organizations had a succession plan in place. That year, 55% of management hires came from within the nonprofit sector. Although 63% of organizations identify high performers, 44% of organizations reported losing high performers due to a lack of leadership opportunities. Perhaps more concerning, 27% of qualified internal candidates indicated they would NOT be interested in taking on the top job, a role that many associate with stress, overwork, burdensome administration, and under-compensation.

When the Chief Executive Officer (CEO) begins to think/talk about retirement, leadership transition planning should be underway. The information above could inform an organization’s approach to succession planning and leadership transition.

Nancy Axelrod urges boards to take a broad and integrated view of leadership succession planning. She notes that it, “Is not only about determining your organization’s next leader, it is a continuous process that assesses organizational needs, and creates a climate for an executive to succeed. An effective succession plan is linked to the organization’s strategic plan, mission and vision…”

What’s an organization/board to do?

At the system level, boards and leaders need to make leadership in the nonprofit sector more attractive to next generation leaders. This requires gaining a better understanding of what appeals to and motivates leaders from inside and outside the sector. Negative perceptions about various aspects of the role suggest the structure of organizational leadership might need rethinking, so that incoming leaders can succeed in demanding, multidimensional CEO roles.

At the organizational level, boards need to ensure that leadership skills and critical competencies are developed and nurtured throughout the organization. Strategic plans often highlight key skills and talents related to the implementation of strategic priorities. These competencies might be developed internally and/or recruited externally.

Three_optionsRThree options

Hiring the right CEO is one of the most critical governing responsibilities any board undertakes. Boards must think carefully about what stage of development their organization is at and what type of leader they’re looking for – an innovator, builder, maintainer, transformer and/or collaborator?

Faced with the prospect of replacing a CEO, the board invests significant time and effort considering and implementing one of three options: hiring from within, hiring from without, or using the transition as an opportunity to restructure the organization and acquire a new CEO through integration. Considerations associated with each option are outlined below.

Hire from within

Opting to promote someone from within the organization to replace a CEO might be informed by several criteria. Organizations that are values-driven, effective and have a clear sense of their future would more likely sustain their trajectory by promoting an internal candidate. Often these organizations have been deliberate in using succession planning as a way to cascade values throughout the organization and to evaluate and develop staff (e.g. through formal training, special projects, mentoring). Key positions and related competencies are identified along with staff who have or can develop requisite competencies.

Boards of larger organizations sometimes encourage their CEO to groom/mentor a successor. A challenge inherent in this approach is board turnover; when the time comes, different board members may decide not to appoint the internal successor. This shift in approach may cause resentment in the person who was groomed but passed over. Some of these individuals, who are expected to mentor the new CEO, subsequently leave the organization and the investment the organization made in their development is lost.

In contrast, smaller organizations that lack the resources and capacity to offer professional development and internal promotion opportunities may be forced to look externally. These organizations may be the beneficiaries of the investments larger organizations have made in internal leadership development.

Hire from without

Most boards opt to open up the recruitment process to external candidates for comparison; after all, what if the best candidate is actually out there? Organizations are often overwhelmed by the volume of applications – from qualified and unqualified applicants. Those agencies that can afford to, often hire an executive search firm to conduct a professional search.

When a strategic plan outlines the need for transformational change, hiring from without may be a compelling option. Outsiders bring fresh eyes, different perspectives and experiences and may find it easier to introduce major changes since they are less invested in an organization’s history. Boards need to ensure that in addition to bringing a vision and creative ideas, the new leader has experience in change management.

Restructure the organization

Pressures to reduce duplication, integrate and amalgamate are decreasing the number of organizations in the nonprofit sector. As smaller agencies increasingly struggle to meet growing expectations for accountability, some amalgamate with larger agencies while others engage in joint ventures to deliver programs collaboratively.

Leadership transition presents boards with an opportunity to reflect on sustainability, the organization’s place in the broader system, and whether the agency should consider some form of integration. Boards sometimes appoint an interim CEO, to afford them the time and space to explore whether integration might prove the best way forward.

Leadership_transitionLeadership Transition

No matter what option is chosen, the board needs to play a more active role throughout the leadership transition process from recruitment to the end of a probationary period. The board and organization would benefit from bringing clarity to the direction of, and approach to, a change in leadership. After the appointment of the new CEO (with or without integration), the board’s work must continue in earnest. Well before the new CEO is appointed, the following strategies can be implemented to facilitate a successful leadership transition:

  • Define a shared leadership approach between the board and CEO as the foundation for a productive long-term relationship
  • Clarify the decision-making role of the CEO and the delegation of power from the board to the CEO
  • Consider what an effective change management process would look like to ensure a smooth transition with minimal disruption to services, clients and staff
  • Create a healthy and nimble culture characterized by open and honest communication.

Being proactive in creating a succession plan and process for leadership transition reduces the panic when the CEO announces his/her imminent departure. Be prepared to answer “O leader, where art thou?”

Questions

What critical conversations and questions do boards need to engage in related to succession planning and leadership transition? The sample questions below are crafted for organizations that are just starting out, and those that are actively engaged in, succession planning.

Fiduciary (oversight) Strategic (insight) Generative (foresight)
What kind of succession plan is in place? Is turnover anticipated in the next 2-3 years?

Can we afford to hire a recruitment firm?

How competitive is our salary scale – can we attract the leader we need?

 

What competencies do we need to move the organization forward in alignment with our strategic plan? Or to introduce a new strategy?

Should we be looking internally to maintain our organizational culture and strategy, or externally to introduce change and challenge our assumptions?

How important is it that the individual is highly aligned with our organization’s values and vision?

How might we restructure the CEO position? Do we need someone full-time?

Does this represent an opportunity for organizational restructuring, divestment or integration? Is there a leader at another organization we admire?

How far can we reach to recruit the skills we need – e.g. recruiting out of province/country?

What other opportunities for renewal does this represent?

*Definition: “Succession planning is an ongoing and strategic process…to identify, and then meet, the future requirements of the organization by preparing candidates who will become equipped with the necessary competencies to excel in a job.

Where no current employee has the potential to succeed in the intended role, the organization will create contingency plans (e.g. a budget for executive search services) as part of its succession management strategy to hire qualified people who currently do not work for the organization.”  Succession Planning, Jack Shand, 2009.

Ruth Armstrong and Sandi Trillo, VISION Management Services

Recommended resources and references

“Companies Need Not Hire Outside CEOs to Stimulate Fundamental Change”. Jim Collins and Jerry I. Porras. 1994

“Daring to Lead 2011: A National Study of Nonprofit Executive Leadership”. CompassPoint Nonprofit Services and the Meyer Foundation. 2011

“Executive Transition Initiative”. Greater Milwaukee Foundation. 2006

Managing Leadership Transition for Nonprofits. Barry Dim, Susan Egmont, Laura Watkins. Pearson Education, Inc. 2011

“Nonprofit Executive Succession-Planning Toolkit”. Federal Reserve Bank of Kansas City. 2009

“Shaping the Future: Leadership in Ontario’s Nonprofit Labour Force”. The Mowat Centre and University of Toronto. September 2013

Succession Planning: Succeeding at Succession. Jack Shand, Canadian Society of Association Executives, 2009

Are you ready for the Leadership Shift?

Several Canadian studies have been released over the last the last decade predicting a wave of senior leadership retirements in the non-profit sector (see related resources at end). Peel Leadership Centre (PLC) asked us to analyze the data from their first survey of regional non-profit Executive Directors (ED) in the fall of 2013. The Peel Region numbers paint a clear picture of the change to come: more than 50% of EDs plan to leave their roles in the next 1-4 years. By comparison, the Ontario Nonprofit Network (ONN) found that 60% of leaders plan to leave their current role in the next 5 years (2013); and the HR Council of Canada reported that on a national level the number is 55% (2012). When it comes to change readiness, the numbers are even more disconcerting: only 27% of the Peel Region organizations surveyed reported having a succession plan in place.

This data is not new, but the time horizon for this huge leadership shift looms nearer. The 2008 economic downturn has led some leaders in the non-profit and for-profit sectors to delay retirement. Despite this reprieve, it appears few non-profit organizations and boards have engaged in productive conversations about the larger challenges and opportunities that this shift will bring.

Leadership TransitionThe loss of the collective wisdom of retirees over the next 5 years cannot be underestimated. Although some EDs who founded their organizations learned on the job, many long-standing EDs benefitted from professional development programs that were available. Today there are fewer opportunities for leadership development. One promising finding in the PLC survey was that many experienced leaders are mentoring their staff as well as newer EDs. In a recent meeting of supportive housing sector leaders, one newer ED commented how concerned she was about the impending retirement of mentors she has relied on since assuming her role.

The article “Exit Agreements for nonprofit CEOs” (see related resources below) highlights how one organization retained some of this knowledge and expertise by contracting with their former ED to stay involved as a part-time grant-writer after retirement. This arrangement was borne in part out of necessity – their dedicated ED was not financially able to retire after working many years on a low salary without a pension plan. Analysis of the PLC survey data found that many outgoing EDs predict their organizations will need to increase salaries and redesign their role to recruit a successor.

What then, are the opportunities for organizations in this transition? In parallel with the impending leadership transition, a variety of forces are driving change in the non-profit sector. In today’s lean economic times, the models under which many organizations have operated are no longer viable. Funders expect organizations to find efficiencies, deliver evidence-based services, demonstrate impact, engage externally with a range of stakeholders, and act as part of a larger system.

Questions for LeadersThese changes require thinking and acting differently on multiple levels – from how services are designed and delivered, to how charitable work is funded. Organizations need to be nimble and adaptable. This environment demands innovation and an ability to do and lead differently; to collaborate across sectors; and to share leadership internally and externally. A leadership transition is an opportunity to position the organization for this changing environment.

Many studies have pointed to the different values and expectations those from different generations bring to the workplace. Younger generations seek values alignment in their work, opportunities to make a difference, flexibility and greater work-life balance compared to their parents. Both the PLC and ONN survey findings revealed that these interests conflict with the way non-profit leadership roles are currently defined.

Ernst and Young’s (EY) 2013 survey of 1200 professionals in the US highlights some perceived generational strengths and weaknesses of leaders in the workplace. It will be of interest to those developing and recruiting future leaders:EY Generational Differences of Leaders

A Transition Toolbox                                                                                                         EDs and boards both have work to do to prepare and facilitate a smooth leadership transition – key tools include:

  • A succession plan – for the sudden or planned departure of your organization’s leader
  • An exit agreement – that enables your ED to retire at a time that is right for him/her and the organization
  • A development plan – for middle level managers to develop their leadership skills by giving them responsibility for some of the areas that EDs currently fulfill
  • A redesigned ED role – that recognizes and promotes shared leadership; the need for more external, system-level work; and the value of work-life balance

Related resources

  1. “Building leaderful organizations – Succession planning for nonprofits” Executive Transition Monograph Series, Volume 6, The Annie E. Casey Foundation, 2008. http://www.aecf.org/~/media/Pubs/Other/B/BuildingLeaderfulOrganizationsSuccessionPlann/Building%20Leaderful%20Organizations.pdf
  2. “Driving change: A national study of Canadian nonprofit executive leaders, The HR Council for the Nonprofit Sector, 2012. http://www.hrcouncil.ca/documents/driving_change.pdf
  3. “Exit Agreements for Nonprofit CEOs: A Guide for Boards and Executives”, by Tome Adams, Melanie Herman and Tim Wolfred, Nonprofit Quarterly, Fall/Winter 2013 http://nonprofitquarterly.org/governancevoice/23315-exit-agreements-for-nonprofit-ceos-a-guide-for-boards-and-executives.html
  4. “Next generation leaders: What they want and need from the workplace” by Terri Klass, Judy Lindenberger and Jean-Baptiste Marchais. Nonprofit Quarterly online July 19, 2011.  http://www.nonprofitquarterly.org/index.php?option=com_content&view=article&id=14156&catid=153&Itemid=336
  5.  “Shaping the Future: Leadership in Ontario’s Nonprofit Labour Force – Summary of Findings” Prepared by Elizabeth McIsaac, Stella Park, Lynne Toupin for The Ontario Nonprofit Network and the Mowat Centre, University of Toronto. http://mowatcentre.ca/pdfs/mowatResearch/88.pdf
  6.  “Who’s Leading Non-profits in Peel Region? A Snapshot of Executive Directors – 2013 ED Survey” prepared by Sandi Trillo and Ruth Armstrong for Peel Leadership Centre, September 2013.  http://www.peelleadershipcentre.org/wp-content/uploads/2013/09/PLC-ED-Survey-2013.pdf
  7. “Executive summary: Younger managers rise in the ranks” EY Survey, September 2013. http://www.multivu.com/assets/63068/documents/63068-Executive-Summary-Generations-Research-081913-SCORE-APPROVED-original.pdf

Sandi Trillo and Ruth Armstrong, VISION Management Services

Join me at the Tools 2012 Conference

Iler Campbell and Prentice Yates & Clark are once again sponsoring their one-day Tools conference for staff and board members from non-profits, charities, co-ops and community groups. The law and accounting firms are committed to providing participants (many of whom are client agencies) with an opportunity to learn from experts on a variety of topics and exchange information with each other.

Over the years, I have presented on different topics at the conference. The audience tends to be diverse, friendly and open to learning. It’s been a great way for individuals to refresh their thinking by getting exposed to practical information and training. Participants also enjoy the opportunity to connect with others from their own and other fields.

This year I am presenting a session on:

Shared and Separated Leadership between Board and ED: Navigating the boundary                                                                                                                     We continue to debate and describe the boundary between the board and the executive director in different ways: oversight vs. operational, direction vs. implementation, policy vs. practice. The general principles are easy to state but challenging to honour. The session will focus on practical strategies for establishing the right conditions, addressing the inevitable tensions and making the Board-ED relationship work.

At the Tools Conference this year there are 12 workshops (you choose four when you register) and an inspiring keynote speaker who will share stories and strategies for engaging youth. Cost of $180 per person includes breakfast, lunch and great networking at the end-of-day reception.

The one-day conference is being held at Oakham House on the Ryerson University campus in downtown Toronto on November 22, 2012. Check it out!

Hope to see you there – Ruth.

Questions for leaders:

  • What does it take to engage in shared leadership while respecting the separate duties and responsibilities of Board and ED?
  • How do we navigate a fuzzy boundary that shifts in different circumstances (e.g. new ED, mature organization, small agency)?