Succession Planning

Succession Planning is a way of thinking about the future of an organization through a human resources lens. What experience, skills, connections, and personal attributes are necessary to successfully lead the organization through its next chapter? Assuming a CEO or Executive Director is successful in their role, 7-12 years is a reasonable time for a leader to stay in their position. So, around year six, a planful board should begin anticipating the likelihood and perhaps the desirability of a change. For senior team members below the chief executive level, voluntary transitions can come at any time. Surprise departures are rarely welcome, but they will happen more smoothly and with less drama if the organization has a transition plan in place.

What does preparation entail? A board should plan for a CEO or ED transition by answering these questions: 1) How will a successor be chosen? 2) Who will run the organization if there is a gap in leadership? 3) What oversight should the board provide during a period of transition?

How should a successor be chosen? Among the board’s principal responsibilities is the hiring and evaluation of a CEO. During the Succession Planning process, the board should determine the following:

• When we need to replace our CEO/ED, will we use a search firm or conduct the search ourselves? If the board plans to use a search firm, identifying at least three highly recommended firms and vetting them in advance can reduce the time it takes to move ahead in the hiring process. If the board plans to do the search themselves, it’s helpful to lay out the process from beginning to end, with a timeline and clearly outlined interview stages.
• Who will be on the search committee?
• Are there qualified internal candidates for the CEO/ED role? And if so, what are the current gaps in their skills and experience and how can the organization support bridging them so that the person is ready to step into the top jobwhen the time comes?

Are internal candidates desirable? For any position at any level, retention is less expensive than acquisition. If an open position can be filled by an internal candidate who is well-prepared to step up, time, money, and some of the disruption that comes with transition can be spared.

Prepare future leaders. In a planful nonprofit, employees are intentionally prepared for their next leadership role. Their talent is formally recognized in the performance evaluation process; they are given opportunities to build the skills they need to take on new and greater responsibilities; and they are encouraged to take an enterprise view of the work they are responsible for, to develop the executive capacities that a step up typically demands. Future leaders receive professional development coaching, lead special projects, or serve in a short- or long-term interim position when their manager is away.

When an executive departs, someone has to be placed in charge to ensure continuity in current programs, handle routine business matters, maintain external relationships, partner with the board on issues of policy and overall organizational performance, provide a steady hand at an uncertain time, address the inevitable crisis, and keep the seat warm for an eventual successor. There are several possible approaches to appointing an “interim” to the role – sometimes called “acting.”

Can an insider serve in an interim role? When an insider is designated to serve in an interim capacity – say the COO, CDO, or CFO – there’s no learning curve around how the organization operates. Known to colleagues, board members, partners, funders, regulators, and peers, an insider can be a good choice – particularly when the individual does not want the job they’re temporarily filling.

Note to inside interims: It is hard to balance a “steady state” mandate (keep the organization moving forward without making changes that the next CEO may undo or do differently) with a desire to prove one’s mettle and signal to the board the kind of leader one might become. Acting executives who want the top job too often fail as candidates when they wait to do the job until they get the job and miss impressing a board that is closely watching. Given that it’s difficult to make bold moves when one is, essentially, the seat warmer, it might be better to engage as a candidate without serving as interim or acting.

What’s the value of an outside interim executive? It can be advantageous to hire an interim chief executive from outside – typically an independent consultant engaged to bridge the gap on a temporary basis without trying to be the future leader. An interim who is an outsider brings a fresh perspective to the role and often a wealth of operational experience in similar roles. They can offer a dispassionate and steady hand along with ready solutions to current challenges. They can serve as an objective observer and provide an unvarnished evaluation of current conditions to the board. They can also buffer staff from board overreach without fear of offending. When following a founder or an especially charismatic leader, an outside interim creates some healthy space between a predecessor and permanent successor.

What about a shared leadership structure? Boards sometimes favor designating a small group (usually select members of the senior management team) to serve together in the interim capacity. Boards usually make this choice when they don’t want to appear to favor a member of the senior leadership team or they lack confidence in any one individual. For shared leadership to work, there should be clarity around who has the authority to make which decisions. In addition, the board should work with the team to create a clearly articulated set of short-term goals that the group is charged with achieving. This approach helps galvanize the partnership, creates a sense of shared purpose, and makes effective use of the interim period.

Should a board member step in? A board member who has the time and the proclivity may serve in an interim or acting capacity, but there’s good reason for caution here. A board member in a staff role can blur the lines between governance and management inappropriately. The presence of a board member in the executive role can have a chilling effect on staff who may become guarded in their willingness to speak frankly or act on an issue that is inappropriate for board involvement or consideration. Especially when the board member is also a major donor, the relationship to staff can be a challenging one…for staff.

An open search for a new CEO or any professional in a leadership position (i.e., the “C-suite”) can and should be a healthy process for an organization. For a CEO search, it forces the board to think specifically about future direction; exposes the board to a variety of leaders, each of whom will bring their own vision and approach to the work; and provides an opportunity to assess the overall health and effectiveness of the organization and the current team. For a C-suite search, it gives the CEO a similar opportunity to step back, take stock, and reset.

Hire a firm? There are pros and cons to hiring a search firm. In the plus column, they:

• Have an organized, disciplined process for leading the search committee and identifying and vetting candidates.
• Spend considerable time identifying and recruiting highly qualified candidates who aren’t in an active job search and would not see or answer a job posting.
• Bring a network of candidates and connectors to candidates that will be leveraged on behalf of the particular role/organization.
• Have a perspective on the competitiveness of the talent market and knowledge about appropriate compensation levels and employment terms.
• Provide insight and advice on critical management or organizational issues that could or should be resolved in advance of the new hire joining the organization.

A good hire should meet the organization’s long-term objectives, not simply respond to the current staff configuration with its strengths, weaknesses, and many personalities. A good search firm is keenly attuned to both the organization’s long-term objectives, and its current staffing configuration.

The biggest impediment to hiring a search firm tends to be price. Most searches are billed as a percentage of annual compensation and many have minimum fees that are too high for a small organization to underwrite.

Do it yourself? The search for a chief executive by the board or for another C-suite professional by the chief executive is most effective when it mirrors the work of a search firm: The organization is assessed for current conditions and future direction; a detailed job description is finalized; a list of key qualifications is enumerated; a salary analysis is completed; a marketing plan is put in place and executed; a procedure for receiving, acknowledging, and reviewing applications is formally managed; an objective approach is used to evaluate candidates; a structured interview process is conducted on a tight timeline; a decision-making rubric is used to select a top candidate; an agreement or contract is effectively negotiated with an appropriate salary and benefits package, congruent with state law and internal precedent; candidates not selected are informed and thanked; and the finalist is introduced to all constituents with a combination of sensitivity and fanfare.

Aside from lacking specific experience and training in recruiting and vetting candidates, the biggest impediment to an organization or board running a search itself is time. It can be very difficult to drive forward a rigorous search and onboarding process on top of day-to-day work.

What’s the board’s role? In a CEO search, it is inappropriate for the entire board of any organization to participate in a search, whether handled in-house or with a search firm. Check the organization’s bylaws to see if it has anything to say about executive leadership transition. A small number of trustees or directors should be deputized to make a recommendation to the rest of the board. The group should be selected for diversity of perspectives, available time, ability to maintain confidentiality throughout the process, and their ability to perform well in a committee structure. In other words, a search committee should not be open to anyone who volunteers.

A note on Search Committee composition and leadership. Committee members should represent the different points of view on a board. If a board is interested in recruiting from a variety of demographic groups, it is helpful to have those groups represented on the Search Committee. A strong Search Committee chair is also critical – someone who knows how to run a good meeting, help a group reach consensus, handle the advice and candidate suggestions that come from those outside the committee, and confidently wrangle rogue members.

Board leadership succession deserves as thoughtful and deliberate an approach as executive leadership succession. The board’s responsibility, while circumscribed, is weighty – a board should govern, not manage. And the chair or board president’s role is central to an organization’s success in meeting its mission – not to mention simply staying in business during times of challenge. As with professional leadership, change is good, and a healthy board should encourage regular leadership transition in accordance with bylaws and organizational customs. If bylaws or customs indicate that the term of a board chair or president is finite, or the leader signals that they are ready to step down, a planful board should have in place a systematic and thoughtful process for selecting a successor and making a smooth transition.

Who picks? An active Governance & Nominating Committee should be thinking about board leadership succession with each new member they bring on. Candidates for the board should also be candidates, later, for roles as committee chairs and as officers so there is a continuous pipeline of rising talent. The Governance & Nominating Committee, the Executive Committee, or both should be thinking about board succession; one of the two should select the slate of candidates for officer roles with an eye to immediate and longer-term needs. And a good Governance & Nominating Committee is also focused on preparing members for future leadership roles through thoughtful committee assignments, committee chair roles, outside learning on board practices, and sometimes professional coaching.

What makes an ideal board chair? Available time may be the most important factor in selecting a board chair or president. Preparing for, leading, and following up on regularly scheduled board and relevant committee meetings; meeting with the CEO or Executive Director on a regular basis; participating in board recruitment and nurturing current board members; raising money; addressing policy issues; quarterbacking big decisions; and taking time to celebrate with board and staff…all demand time. For this reason, an ideal candidate may be a very recent retiree or someone who is senior enough in their career that they can devote themselves to the job’s demands. But available time alone isn’t enough to be an excellent board chair. Leadership experience, self-awareness, good judgement, excellent listening skills, and a positive regard for the CEO/ED are also important for success.

Can an outsider serve? The Governance & Nominating Committee should look for an internal candidate first but may recruit an outsider to serve as chair when no internal candidates exist. A search firm may be engaged for this purpose. But the learning curve for an outsider can be exceptionally steep. Coupled with the hard work needed to gain the trust and respect of other longer-serving board members, taking on such a role can be a daunting task.

Get the house in order. Board transitions go best when the board itself is well organized, well structured, and well run: a strong committee structure is in place; the performance of the board overall and of individual members are both regularly considered; term limits create a regular pattern of movement; and future leaders are trained up through executive committee or other committee leadership positions. Consider undertaking a facilitated Board Assessment and make needed changes to improve board governance so that board transition is a positive experience of organizational evolution.