Sasser Sefton Tipton & Davis

Sasser, Sefton, Tipton & Davis, P.C.
Montgomery, Alabama

PLANNING IS KEY TO HAVING A SUCCESSFUL TRANSITION

As the millions of baby boomers begin to retire, few sectors will be harder hit than the non-profit sector. Recent surveys predict that eighty-five percent of all non-profit executive directors will be replaced within the next seven years. Sixty-one to seventy-eight percent will leave within five years, and fifteen to thirty-five percent are expected to depart within the next two years. Further compounding this problem is the fact that many non-profit executive directors either founded the organization or have been in charge for extended periods of time.

This pending mass exodus of experience, knowledge, and leadership has spurred many to analyze the issue of non-profit executive transitions. While there is no lack of advice regarding executive transitions, this article will attempt to synthesize many of the ideas of leading experts in the industry and present those ideas in an easy to digest format for the board of directors as well as the incoming and outgoing executive directors. One general point of agreement among the experts is that planning is the key for a successful executive transition.

Part One of this article will examine not only the risks of failing to prepare properly for the coming turnover but also outline some of the benefits and opportunities from bringing in new leadership and re-examining the vision and mission of the non-profit. Part Two will present an overview of the board’s step-by-step process for bringing in new leadership and potentially shifting the direction of the organization. Three will examine the roles of the outgoing and new executive directors and provide some advice for making the transition as smooth as possible.  Although executive transitions can be costly, they are also inevitable; therefore, the only way to mitigate tomorrow's costs is to start planning today.

PART ONE: OVERVIEW OF THE EXECUTIVE TRANSITION PROCESS

The amount of risk a non-profit faces as a result of the departure of a chief executive is directly related to the size of the organization. Whereas a larger, more stable organization may be able to absorb the costs of a mistake during the hiring of a new executive, smaller non-profits, where the executive director often assumes multiple roles and has a direct effect on day-to-day operations, cannot afford a single mis-step. Even a simple error can have a disastrous effect on the non-profit’s bottom line or even prove fatal to the organization. Regardless of the size of the non-profit, it is the duty of the board to minimize the costs of transition.

To reduce the non-profit’s risks during transition, the board must fully understand the sources of these costs. During an executive transition a non-profit incurs two types of costs, direct and indirect. Direct costs are those associated with finding and hiring the new executive. While direct costs can often range in the tens of thousands of dollars, they are controllable and to a certain degree predictable. Indirect costs, however, are those associated with the consequences of a leadership change, such as a loss of key staff or donors. These indirect costs can be far more damaging to a non-profit and, if not managed correctly, can cause an organization to falter or fold.

All non-profit organizations should recognize that, although the costs of an executive transaction can be high, the benefits of a properly planned transition can far exceed both the direct and the indirect costs. Instead of focusing exclusively on minimizing the costs of the transition, a non-profit board can use the opportunity to re-evaluate the vision, mission, and goals of the organization. Only after reassessing the direction in which the non-profit is heading can the board make a sound decision as to who should lead the organization. An executive transition provides a perfect opportunity for the board to take a second look at the direction the non-profit is heading and decide whether to continue on the same course as previously envisioned.

Because the benefits can more than outweigh the costs associated with an executive transition, boards should approach the task of selecting new executives as the chance to create stronger and more viable organizations. Part Two will describe the steps necessary to minimize risks while maximizing benefits to the organization.

PART TWO: THE ROLE OF THE BOARD OF DIRECTORS

Changes in executive leadership present opportunities for unique risks as well as for unique benefits to non-profit organizations. The organization’s board has an important role to play in the executive transition process. That role may be thought of as a series of five steps. These steps include promoting open and productive communication, filling the gap left by the executive’s departure, reassessing the organization’s strategic direction, recruiting a new long-term leader, and bringing the new executive onboard.

Keeping the Lines of Communication Open

The easiest way to create mistrust and discontent within an organization is to fail to provide timely and accurate information to the stakeholders. This principle is particularly true during the stressful events surrounding the resignation, retirement, or termination of an executive director. It is, therefore, important that the board provide objective and accurate information on a regular basis. Rumors may circulate during the transition process, and therefore, it is the board’s responsibility to be the primary source of trustworthy and timely information. Although the board should not meet every rumor with a response, regular communication with stakeholders regarding the status of the transition will help to calm fears and dispel rumors. Of course, different approaches will be appropriate for different interested groups, which include the board itself, the other internal stakeholders, and the external stakeholders.

Filling the Gap

Once the board has established a plan of action for communicating the departure to the stakeholders, the next step is to form a transition committee which will oversee the entire process. While the committee members ideally should have direct management experience, they must be available for the next four to eight weeks to implement the search for the new executive. The committee must also have clearly established goals, objectives, and rules with regard to confidentiality and decision-making authority.

The first issue for the transition committee is the day-to-day operation of the non-profit during the search process. Sometimes the committee can negotiate with the outgoing director to remain on the job during the search; however, other times the committee will be forced to appoint an interim director. The board should not only clearly document the role of the interim director but also establish up front that the interim director will not receive special consideration in the selection of the permanent executive director. Merely appointing an interim director may not be sufficient to fill the gap caused by the departure of a hands-on executive, though. The transition team should also consider whether some of the outgoing executive director’s day-to-day responsibilities should be spread among other senior managers to lighten the load on the new interim director.

Regardless of whether an interim director is appointed or other managers are given additional duties, the transition team can take a number of specific steps to make sure that the organization runs effectively and efficiently during the transition process. The outgoing executive will need to document key dates, prepare a list of major donors and other outside stakeholders, complete any performance reviews and important pending personnel actions, and prepare management status reports. The transition committee should complete an office review with the outgoing executive and should clarify the chain of command during the transition period. Once the management and staff understand their roles and responsibilities during the transition period, the board’s transition committee can turn its attention to finding a new director.

Reassessing the Organization’s Strategic Direction

The transition committee should view the transition as an opportunity to reassess the direction of the organization. The strategic reassessment is not just a valuable by-product of the search for a new executive director; it is a necessary step in defining the role of the new executive director. The most common mistake boards make when defining the new executive’s role is to look at the old executive’s job description. However, unless the job description was frequently updated, it may not bear much resemblance to the actual role of the outgoing executive director or to the needs of the non-profit. Instead of defining the new executive director by the outgoing executive director, the board must instead assess what type of leader is needed to achieve the organization’s future goals.

Beyond the selection of the organization’s new executive director, the transition committee’s reassessment of the non-profit’s strategic direction may lead to other actions which could be taken together with the hiring of an executive director. The board should address the direction and focus of the organization before beginning its executive search. Otherwise, it could end up hiring a new executive director perfectly suited to the old strategies but not equipped with the necessary skills to lead the non-profit into the future.

Recruiting a New Executive Director

Once the transition committee and board have a clear vision of the road ahead, they can then begin the work of drafting a comprehensive job description for the new executive director. The job description should consist of at least three parts: salary and benefits, minimum criteria, and roles and responsibilities. With a completed job description, the transition committee can then begin the process of actively recruiting a new executive director.

Aside from listing the description in local newspapers and other media, the transition committee should advertise the position with all internal and external stakeholders. By casting a wide net, the transition committee will help to ensure that candidates with a diverse set of skills and backgrounds apply for the position. This will also help the transition committee in evaluating individual candidates as the pool for comparisons will be larger.

All members of the executive search team must fully understand which criteria they may use to screen candidates. Because of the myriad of state and federal anti-discrimination laws, a non-profit should always have an experienced lawyer review the criteria for initial screening of candidates. Following the initial screening, candidate interviews may begin. To ensure fairness, interviewers should ask the same questions of all candidates. Again, an experienced lawyer should be consulted in developing interview questions. The interviewers should use standardized questionnaires to be completed directly after each interview. The transition committee should then be in a position to recommend candidates for further screening and interviewing by the entire board of directors.

Once the board has selected one of the candidates, a formal offer should be extended as soon as possible. The board may wish to announce the offer in person but should follow up with an offer letter outlining the compensation, benefits, other key terms, and proposed starting date. This will help avoid any misunderstandings concerning the terms of employment. Assuming that the candidate accepts the offer, the next step is to bring the new executive director onboard.

Bringing the New Leader Onboard

The board has a duty to ensure a smooth transfer of authority from the outgoing or interim executive director to the new executive director. The most important task the board has in the first few weeks is to make certain that the new executive is properly introduced to the organization’s work and culture. The transition committee should help the new executive in developing a plan to quickly and efficiently bring the executive up to speed. This plan should be designed to introduce the new executive to all aspects of the organization’s operations.

However, the transition committee should not forget about the outgoing executive director. Depending on the circumstances, the organization may wish to allow the outgoing executive the opportunity to make a “grand exit” that can provide a sense of closure and mark a clear change in command. Finally, after the outgoing director has left and the new director has been brought onboard, the transition committee should evaluate the transition.

PART THREE: SOME LESSONS FOR EXECUTIVE DIRECTORS

The executive transition process provides opportunities for lessons not just for the board of directors and the organization as a whole but also for the executives involved. Both outgoing and incoming executives can learn.  This Part Three discusses those lessons.

The departure of an executive director can cause considerable stress. Regardless of the relationship with the board or staff, a senior executive’s loyalty should remain with the organization and the success of its mission. Therefore, even if the departure is not on good terms, the outgoing executive can still have a substantial impact on the non-profit’s ability to carry out its mission by exiting gracefully. The outgoing executive has a responsibilityto strengthen the organization before leaving and should focus on completing those short term goals which can be accomplished before departure and on creating a comprehensive turnover manual for the incoming executive director.

The incoming executive director has three important tasks. First, the new executive must fully understand where the organization stands at the time of the transition. Second, the incoming executive must reach out to the stakeholders and begin the process of creating those interpersonal relationships which allow any executive to get things done. Third, the executive must begin to plan for the future by implementing strategies to achieve the organization’s short-term and long-range goals. Although a new executive director’s first few months can easily overwhelm even a seasoned manager, by focusing on these tasks, the incoming executive director can cap off a successful transition process.

Copyright © 2011 by Sasser, Sefton, Tipton & Davis, P.C. All rights reserved. You may reproduce materials available on this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement.