Children's Voice May/June 2009

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Succession Planing

How to transition between CEOs

By Howard Shiffman

Illustration and photo manipulation by Tim Murren

Shortly after I notified my board of directors that I was planning to leave my position as CEO of Griffith Centers for Children, a CWLA member in Lakewood, Colorado, after 32 years, I realized I had neglected to adequately prepare myself or the governing body for my departure. Though I openly acknowledged to my deputy director that it was my intention to have her serve as my successor, I never broached this topic with my board. We ultimately crafted a plan after I announced my retirement, but it was not without flaws and some regrets. Some of those mistakes resulted from my lack of knowledge about how to do succession planning successfully. It is important that CEOs think about who will lead their organization next, and take advantage of the resources available to create a successful plan.

Succession planning for executives has been given more attention lately, as the baby boomer generation has started retiring from leadership roles. This is happening in all sectors, including for-profit and government organizations. For example, in a 2007 Harvard Business Review article, "Solve the Succession Crisis by Growing Inside-Outside Leaders," Joseph L. Bower reported that 60% of the 1,380 human resources directors of United States companies said their firms had no CEO succession plans in place. According to Kittleman & Associates, a nonprofit executive search firm, a national leadership study confirmed that baby boomers account for nearly 73% of the chief executives of nonprofit organizations and that 55% are over age 50. This generation is going to leave the sector in two waves: the first by 2010 and the second by 2020. A little over half of the baby boomers (57%) in executive director positions are planning on leaving by 2010. Nearly 85% plan to leave during the next seven years.

Studies reveal that most organizations do not have succession plans in place for routine departures or for emergency situations. Yet the research further suggests that one in ten nonprofits experience a leadership transition each year. Many articles reference the serious risks for a nonprofit organization when succession planning has not occurred. A faulty hiring can result in high costs and extended periods of poor performance, and even failure of an organization. The dollars associated with recruitment, interviewing, and relocating an executive can be quite expensive and will rise depending on the use of a professional executive search firm and the expertise of the organization's search committee.

Some succession plans must be specific to the executive leaving, particularly in the case of nonprofit founders or executives who have served for more than 20 years. Succession planning for these individuals requires special understanding when it comes to their transitions and their replacements. Founders often fear that their replacement might not stay true to the mission. "The fears we have in leaving it to someone else are: Will the new person keep the same value systems in place? Keep the standard and quality high? Will they deviate from the mission and keep the agency financially sound?" says Steven Ramirez, the founder of CWLA member Shiloh House in Littleton, Colorado. "It's hard to give the agency over to someone else after you started from nothing, and built it up to where it is now." A 2008 study titled "Ready to Lead?" reveals that founder transitions are particularly hazardous for nonprofit organizations. This study and the body of literature on this subject reveals that the founder or long-term executive, her board of directors, and the community-including financial supporters, foundations, and agency personnel-can all be affected adversely if the transition is not completed with thoughtfulness and with an understanding of the dynamics associated with this type of transition.

Hiring outside interim leadership is often an answer to a complex transition, whether planned or unplanned. But the literature reveals that not many human services organizations take advantage of this technique. Hiring an outside experienced executive for a period of six to nine months-one that will not apply for the position but rather helps an organization to continue doing business while they search for the right candidate-has definite advantages. Some faith-based organizations have adopted this practice, since their departing or departed leaders are so much a part of the institution that the membership often cannot accept an immediate replacement. This transition time dramatically increases the new leader's chance of success. And for organizations replacing an executive director due to negative factors, or less than desirable performance, hiring an experienced interim director can help an organization rectify poor systems, help define the mission with the board, give new confidence to donors, and provide a mentor to the newly hired executive director.

Challenges to Finding a Successor

Finding excellent candidates out of the pool of available and qualified individuals is extremely challenging in today's environment. Key findings in the "Ready to Lead?" study indicate that many nonprofit managers aspire to be a CEO and that 40% said they are ready now or would be in the next five years. However, the study also identified many barriers, such as the long hours and compromised personal lives associated with executive leadership, as well as nonprofit salaries. Almost 70% of the respondents in this study felt underpaid in their current positions, and 64% were hesitant to commit to a career in the nonprofit sector. Other findings included the lack of mentorship from incumbent executives; only 4% of the respondents were openly being prepared to become their organization's executive director.

Selecting and training an internal candidate does not always result in that person seeking the position. Sometimes the apparent, well-trained staff member decides she does not want the top executive position. This happened to Shnease Webb, who had been the associate executive director at Lena Pope Home, a CWLA member agency in Fort Worth, Texas, since 1987. When Lena Pope's CEO, Ted Blevins, decided to retire, he and several board members encouraged Webb to seek the position, but Webb chose to not pursue the job. "I have worked for an agency I dearly love and have a personal passion for the mission," says Webb. "It was not the right time of life for me. I also highly suspected our board would want new blood, new eyes, or a new perspective."

Research suggests that qualified internal candidates get attached to their present position, which often brings them in close contact with the population the organization serves. Moving away from operations and spending a great deal of time raising funds and maintaining board relationships does not always look attractive to internal staff who are happy with their positions.

From Theory to Practice

The role of the board of directors is undisputedly clear: They are responsible for succession planning and implementation of this process. What clouds the situation is that the present CEO also has a responsibility to ensure that the organization he has been authorized to lead has a well-crafted plan that can be implemented in the event of his unplanned departure or planned transition. With this in mind, the first step in any succession plan is to develop a policy to guide the organization in these matters.

The policy must be developed in conjunction with the governing body and ultimately approved by them. Bill Holicky, Executive Director of The House of the Good Shepherd in Utica, New York, shared his policy with fellow member agencies at CWLA's 2008 national conference. The document states: "The purpose of the Plan for Interim Leadership is to ensure that appropriate and effective management of The House of the Good Shepherd continues in the event of the unanticipated loss or incapacitation of the current Executive Director." It goes on to outline how the board should proceed, step by step. It names an internal group of staff members to assume the leadership role, defines when the board should move to a permanent search, and discusses how the board and staff should proceed to assure continuation of the mission.

Bob Cooper, CEO of CWLA member the Tennyson Center for Children and Families in Denver, Colorado, re-crafted Holicky's document for his own organization. "Although this has not been Tennyson's standard to date, from a best practice standpoint, the CEO should annually submit to the executive committee a succession plan for the CEO position," says Cooper, whose succession plan is divided into two sections. "The section entitled 'Selecting a New Leader' addresses issues related to a planned succession, the process in which, for example, my retirement from service to Tennyson is announced. The second section, entitled 'The Plan for Interim Leadership,' allows Tennyson to move forward with as normal an operation as possible in the event of my incapacitation, death, or unplanned departure."

Creating a policy for succession planning may be proceeded by professional consultation. "The decision was made to enter into a time of planning to include consultation of leading professionals in education, juvenile justice, mental health, and strategic planning," says Blevins. "The decision was also made to bring consultation for the board on succession planning. Jeff Bormaster with CWLA provided that leadership with a timetable emphasizing a series of necessary steps."

The Search Process

Most succession plans will instruct that a search committee be created under certain circumstances. Usually the membership of the search committee is comprised of the most experienced board members. The importance of this committee's work cannot be overemphasized, as the fate of the organization is often determined by how well they do their job. Many executives will agree that the leadership group and the executive committee are synonymous, and they should comprise the search committee. This was the case in my succession, although we added an additional member to the committee who represented our supporting foundation.

If the succession plan does not mandate looking within the organization first for talent or contracting with an executive search firm, one of the first discussions among the search committee members will cover how much money to spend, settling on a timeline, and the level of experience the organization needs. In a planned transition, the departing executive director can assist the search committee by providing a detailed job description and other materials that will assist the committee in better understanding the type of person they should hire.

One large mistake made by search committees, especially when the executive has an unplanned transition, is to not focus on what kind of leader the organization needs. Search committees often hire for the immediate needs of the organization and neglect to think about the future needs of the agency. Consulting the strategic plan'which can serve as a blueprint of what skills are needed by the new executive' is often overlooked. Because members of the board search committee are often businesspeople, they sometimes assume they know how to hire a qualified professional and can recruit, interview, hire, and negotiate a contract. But literature warns that having little experience in the human services field hampers their understanding. This can be remedied by enhancing the committee with a retired executive well versed in leading a similar nonprofit, hiring a qualified consultant, or contracting with a search firm that specializes in this area.

Hiring a professional search firm is often used by organizations that can afford to do so. Blevins reports that the cost of the search at Lena Pope Home, from start to finish, approached $200,000. Using a professional search firm usually starts at $50,000 and increases depending on the services required. "The search process from the start to the new executive director being in place was nine months. One hundred and fifty-five candidates were screened, it was narrowed to fifteen, then five, and finally resulted in the three top candidates," says Blevins. In Lena Pope Home's case, internal candidates were processed the same as external candidates. Grooming an internal leader to compete for the position is often a way that organizations avoid the use and cost of search firms.

Training Internal Candidates

Developing leadership from within an organization makes great sense but is rarely done. Training a capable deputy director or chief operating officer not only saves the organization the expense of hiring a search firm and the complications of searching for an external candidate, but also can ensure a smooth transition for staff, business partners, donors, and the board of directors. Training can include coursework on leadership, regular participation at board meetings, exposure to fund development, advocacy involvement, and experience leading the organization when the outgoing CEO is away on vacation.

It is important to let the board of directors know a staff member is being trained, so when the time comes for a planned or unplanned transition, he or she will be the recognizable candidate. It is essential to recognize that an experienced COO or deputy, in many cases, does not want to just be handed the position. Going through a formal process is necessary for the internal candidate, no matter how many years they have served the agency. "I wanted, and I believe all internal candidates for the executive director position need, a more rigorous process than an external candidate," says Beth Miller, my successor as the new CEO of Griffith Centers for Children. "The internal candidates cannot have their credibility compromised by a selection process that is not of the highest caliber."

Supporting a Smooth Transition

In many cases, once a new executive director is hired and a contract has been negotiated, the search committee, board of directors, and facility management fail to create a well-crafted transition for the exiting executive director and the incoming newly hired executive. The responsibility of the agency in hiring a new executive is not complete until the transition of both individuals are adequately planned and implemented. The creation of a support committee with the responsibility of this transition is a technique worth exploring. "The Lena Pope Home successfully implemented this strategy. Their role is to introduce the new executive director to the community, and help establish significant relationships with our contractual partners as well as significant donors, foundations, elected officials, and corporations in the community," says Blevins. "The support process doesn't end here. The committee will be active the first year of the new executive director's employment."

In a planned transition the exiting executive director, especially if he or she was at their job for many years or was a founder, will experience strong emotions about leaving. This is unavoidable and is recognized as a normal part of the transition process. "What I have found in the transition was a change of mindset. So many thoughts flood in my mind at all times...thoughts of my mistakes, victories, the passing of old friends out of my life, and the coming of the new," says Blevins. "And the obvious process of new leadership evaluating the past work and changing what we have known and trusted. There are just a lot of feelings."

My recommendation to all executive directors-those who are seasoned and those recently hired-is to take some time to learn more about succession planning. Approach your board of directors about working with you to create a strategy in the event of your planned or unplanned exit. This will make you a better leader, and it will undoubtedly strengthen your organization.

Howard Shiffman is the former CEO and current Director of Business Development at Griffith Centers for Children, a CWLA member in Lakewood, Colorado.

Ted Blevins, former CEO of CWLA member Lena Pope Home in Fort Worth, Texas, contributed to this article.

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