3 Lessons for Non-profit CEO search

DRi Consulting

03/28/17

It’s no secret that executive turnover is a challenge. Non-profit CEOs must do it all—finance, fundraising, public relations, and programs—so a CEO search changes every element of an organization’s operations. Finding the right new candidate is critical. And the challenges are as steep as the stakes. A 2011 study found that 67% of non-profit executives were planning to leave their positions in the next 5 years[i], and recent research by Amanda Stewart has found that most non-profit executives fill the CEO role only once in their careers–which makes it harder to figure out who’s qualified to step into those departing CEO shoes.[ii]

Three approaches are suggested by recent research: (1) Be cautious about interims; (2) Have a succession plan that includes search; and (3) Trust the person you hire.

(1) Be cautious about interims

Interim executives may seem like a tempting way to preserve continuity during a CEO search. But research shows that this “bridge” between your outgoing and incoming CEO can actually be a platform from which other employees jump. While a CEO change triggered staff turnover at 62% of the non-profits Stewart sampled, non-profits that used interim executive actually had higher staff turnover than those that avoided this approach.[iii]

Interim CEOs create uncertainty and double the number of transitions you have to weather. Sometimes an interim leader can’t be avoided, and in coming pieces we’ll explore research that suggests how you can make it most effective in those situations. But the best approach is to have a succession plan that avoids it.

(2) So have a succession plan—and consider making search part of it

Studies have found that organizations with succession plans weather CEO searches with more resilience, but in Stewart’s research, such plans existed at just 5 of 40 sampled non-profits.[iv]

A succession plan doesn’t mean you know who your next CEO is going to be. One of DRi’s recent clients, Greater Public, had a plan to find its CEO’s successor. Whether an executive search firm is part of a search depends on how broad your network is and how effectively you can mobilize it. In Stewart’s study, only 30% of non-profits used an executive search firm—but many of the other 70% selected from a limited pool of candidates they already knew, even when those people were not the most qualified.[v] And small non-profits were a big part of that 70%.

We aren’t surprised by this finding: we know that small non-profits face a difficult decision when deciding whether to invest resources in a CEO search–or save some money up front at the risk of spending more to fix potential damage later. But the risk is a big one: a full 25% of the outgoing executives in Stewart’s research had short tenures because a non-profit had not been able to identify a suitable candidate.[vi] So while it may be difficult to overcome fiscal restraints, consider whether your network is broad enough to allow you to find the right person the first time, or whether paying for search would be lower than the costs of getting a search wrong and doing it over again.

(3)  Trust the person you hire

Finding the right person is important, but it doesn’t end executive turnover risks. Executive transitions depend on quickly building the right kind of communication and engagement with a Board.[vii] Early in a new CEO’s tenure, extensive Board involvement may be necessary to instill confidence and help ease early transition concerns.[viii] But research finds that continued Board “domineering” and not letting the new CEO act on their own can raise tensions and harm an organization’s operations.[ix]

If you trusted someone enough to hire him or her as your new CEO, you must let them lead with their own vision and purpose. And if you’re hiring a firm to lead your CEO search, you need to ask how they’re going to foster this kind of communication and with it a seamless transition, too.

Notes

[i] (Stewart, 43, 2016)

[ii] (Stewart, 45, 2016)

[iii] (Stewart, 52, 2016)

[iv] (Stewart, 50, 2016)

[v] (Stewart, 50, 2016)

[vi] (Stewart, 53, 2016)

[vii] (Stewart, 52, 2016)

[viii] (Cornforth and Macmillan, 961, 2016)

[ix] (Cornforth and Macmillan, 961, 2016)

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