Case Studies

Retirement – who makes the decision?

Contributed by Priscilla Rosenwald

Change in leadership often strikes fear at the very heart of an organization. It can throw the board, staff and leadership into turmoil. In fact, people go to great lengths to avoid disrupting the status quo. Sometimes, they even stay in dysfunctional relationships because it seems like a more palatable option. If we are overwhelmed by the fear of new leadership and we try to hold onto the way it’s always been, we expend a lot of energy resisting change.

Change in leadership is, indeed, a painful thought. But avoiding or postponing leadership change could put the organization in long-term jeopardy. What is most important is that the facts are faced and parameters put in place to ensure the organization will continue to thrive and stand on its own without the current leadership.

The organization’s vitality and sustainability are the key factors to be considered when thinking about leadership continuity. This issue of the organization’s best interests is often confused with the best interests of the founder/long-term leader. The organization is often held hostage to the retirement considerations of the chief executive, who may no longer be leading the organization into the future. Not surprisingly, we have seen a number of organizations that are holding on to leaders who have lost their passion and vibrancy, leading to the organization’s decline.

There is an example of a major community foundation that lost its focus on mission and did not serve its constituents in a meaningful way. The community foundation did not grow its resources to lead innovative regional initiatives, nor provide substantial funding for their grantees’ organizational sustainability. Community foundations are established to be grant making public charities that are dedicated to improving the lives of people in a defined local geographic area. They can bring together the financial resources of individuals, families, and businesses to support effective nonprofits in their communities. Community foundations can play a key role in identifying and solving community problems in fields that include the arts and education, health and human services, the environment, and disaster relief.

This community foundation was seen as a critical philanthropic resource for a large diverse region with significant challenges; the major city it served is ranked as the fifth largest city in the nation. Notably, according to the Foundation Center, this community foundation was not listed among the top 25 Community Foundations in the nation, in terms of asset size or total giving. We learned that many of the top ranking community foundations serving smaller cities, like Pittsburgh, Boston and Hartford, and have significant impact within their communities.

For more than a decade, the long-term President of the community foundation was not displaying robust leadership but had requested a hiatus to consider possible retirement. Outside the foundation, everyone spoke of the board being “asleep at the helm”, out of touch with the foundation’s current lack of community responsiveness, and its greater significant potential. When the leader’s limited functioning became too obvious to ignore, the board had to step in and create a hasty leadership change.

We have seen many boards reluctantly ask the long-term chief executive or founder if they have any retirement plans. When the board chair gets the unsurprising response that the chief executive has no immediate plans to retire – that is a discussion-stopper! But Boards should not acquiesce so quickly…

Frequently, long-term leaders who have not had authentic performance conversations with the board leadership believe that the organization is theirs to oversee – until they get tired of showing up. Boards are remiss in not having regular performance expectations and comprehensive performance reviews with long-term leaders. The performance review should focus on the health and sustainability of the organization, and have input from the major stakeholders. Conversations about retirement are challenging, but approaching leadership viability through consistent and vigorous 360 performance reviews will ensure that organizations are focused on growth and sustainability.

According to Bill George, author of True North, organizations derail when leaders are not able to lead others with deep curiosity, and keen judgment.

Questions regarding retirement planning for the board:

  • Why is this the right time to transition leadership to new leadership?
  • What will ensure the organization’s sustainability in the next 3-5 years?
  • A new chief executive will make changes to the operations and might move the organization in new directions; are you ready for this?
  • What will be the biggest challenges for a successful leadership transition?
  • Can the long-term leader envision letting go while still being embedded in the organization; what will be the most difficult aspects of stepping back?
  • In planning for the transition, what crucial responsibilities and relationships is the long-term leader prepared to share or hand off; what key relationships should s/he maintain?
  • How does the long-term leader want your organization’s stakeholders to describe their legacy?
  • How can the board best support the long-term leader through transition planning?

So who makes the retirement decision?


The Founder Who’s Celebrity Eclipsed Her Organization

Contributed by Lesley Mallow Wendell

The founder of a social service organization focused on aiding homeless women and children grew and expanded it into a multi-service agency over her 30-year tenure. During that time, she became an iconic figure in the region, and focused much of her energy externally, increasing the organization’s and her own visibility.

The external focus exacted a price. While the organization expanded into many different components, the internal infrastructure to manage the complex contracts, compliance and funding did not. Suddenly, deficits developed in some of the program areas, her ability to serve as an internal leader was minimal and the organization talented members of the senior team began to leave. The founder made a decision to retire and the board, which largely had followed her direction, paid scant attention to creating either a succession or transition plan.

The incoming board chair headed the search committee to find a new chief executive and pushed for the organization to retain a large, nationally focused search firm to conduct a broad search. Because the outgoing founder had such a high profile, the board determined that the incoming chief executive needed to be a visible leader in the community, and the search focused on finding someone well-known rather than someone who had good leadership skills and the ability to manage a complex organization.

The new executive was visible community leader, but had led a small organization that focused on only one aspect of service delivery. She lacked both the leadership skills and breadth of financial and operational acumen to oversee a large, complex, multi-faceted organization. On top of this, the board chair had little interest in or commitment to creating a robust transition process to integrate the new leader. He largely exited from active involvement with the organization and allowed her to chart her own path without much board interaction. This created an environment where the CEO thought she could lead the organization without engaging the board in decision-making around strategy, and was reluctant to share some of the long-standing problems in finance and operations that were becoming acute. By the time the board realized the extent of the problems, the relationship with the CEO had deteriorated considerably, senior staff were leaving, and the organization was struggling to pay its vendors.

The CEO made the decision to separate from the organization, and the board was forced to delve into turnaround mode, with a steep climb to solvency. Fortunately, they stabilized the organization by borrowing funds from their reserves, and appointed a talented interim leader who has the right skill set and leadership competencies to gain the trust and support from both senior staff and those at all organizational levels., not to mention external stakeholders.

What the board has realized is that they were so focused on finding someone who had the same high profile of the outgoing founder that they neglected to fully grasp what type of leader the organization needed at that moment in time. Had they completed an effective organizational assessment to inform the profile of the new leader they needed, versus the one they wanted, they might have avoided a costly mistake. The initial search carried a high fee compared to the organization’s budget, the loss of talented senior team members had a financial impact, and their relationship with constituents and vendors was challenged. Once the new leader was in place, the board abdicated its responsibility to work closely with her through the transition period to communicate expectations, learn about her vision for the organization and make sure it was aligned with the overall goals and objectives and compliance requirements.

The organization is now on steady footing, but it will continue to require vigilance and operational excellence for the foreseeable future.

How could the board have managed the transition successfully?

Conduct an organizational assessment to gain greater understanding of the key qualities and competencies a new leader must possess to be successful. Talk to senior staff, and if they are not comfortable sharing their perspective with the board, consider hiring an outside consultant to do this or insist that the search consultant carry out a robust process before the search begins.

If the goal is a new leader who is visible, consider candidates with the right skills and competencies to lead the organization, and then create a plan to foster the CEO’s visibility.

Work closely and collaboratively with the new CEO. Don’t simply assume that he or she can go off without input and lead the organization. A transition team made up of Board Members and other interested stakeholders can serve as a good “kitchen cabinet” for the new CEO. Set the expectation that an engaged, collaborative relationship is the goal and identify what that looks like and how it can occur.

Ongoing feedback during the first 90 days is useful and important. Conducting a robust annual performance appraisal is also integral to the transition process.