With the number of long-serving foundation and nonprofit executives who have announced their retirement growing by the week, the need for effective succession planning has become more obvious than ever. The National Executive Service Corps (NESC) works primarily with nonprofits in the New York metropolitan area to help organizations address operational challenges, including leadership transitions and succession planning.
Recently, Philanthropy News Digest spoke with Marvin Berenblum, chairman and CEO of NESC, about the reasons behind the recent exodus of nonprofit executives, what it means for the sector, and what an organization can do to ensure that its next leadership transition is a smooth one.
Philanthropy News Digest: The number of high-profile leaders in the nonprofit sector who have recently retired or announced their retirement seems to be growing. While executive transitions are a fact of life, is something else going on here?
Marvin Berenblum: Yes. Nonprofit executives are experiencing ever-greater stress, caused in part by a shift in foundation support away from unrestricted to restricted grants. That shift, in turn, has put pressure on the balance sheets of nonprofits. The situation is further exacerbated by the growing emphasis being placed on metrics and outcomes measurement. Indeed, a lot of veteran executive directors, many of whom have spent their whole career in the nonprofit sector, are not always comfortable with either the mechanics or the need for metrics and outcome measurement. Adding to the challenge is the simple fact that a great deal of nonprofit activity is difficult to quantify. Put that all together, and you have a situation in which a growing number of nonprofit EDs are feeling stressed and burned out.
PND: Given those realities, should nonprofit organizations facing a leadership transition be looking to hire a different type of leader from what they might have in the past?
MB: I think you will see a lot of organizations finding it difficult to survive as a consequence of the challenges I just mentioned. And it all comes down to the demands on leadership and how they are different today from what they were, say, ten years ago. The major difference is that today nonprofits, more than ever, are expected to operate in a businesslike fashion. They have to be able to justify to funders the activities they are involved in and demonstrate that they are meeting their objectives, are financially fit, and are organizationally up to snuff. A decade ago, there was less emphasis on that kind of accountability. Today, in contrast, the vast majority of funders insist on it.
Looking ahead, the turnover among executive directors in the nonprofit sector is projected to be rather dramatic. According to a recent survey of two hundred executive directors in the greater New York metropolitan area sponsored by the Annie E. Casey Foundation, we can expect to see a 70 percent turnover rate over the next five years. The same study also indicated that something like 75 percent of the organizations that responded to the survey did not have a succession plan in place. Those findings would seem to suggest the nonprofit community has a semi-crisis on its hands.
PND: What can nonprofits do to improve their succession planning?
MB: What is needed is much greater anticipation, on the part of board members and staff, of the likelihood of changes in leadership. In particular, more attention should be paid to the timeframe in which leadership changes are likely to happen. By that, I mean taking stock of and grooming potential leaders within the organization, rather than discovering after it is too late that viable internal candidates were never given a chance to step up. Nonprofits need to do much more to develop the leadership potential of their own employees, helping them gain experience within the organization as well as exposure to outside programs and ensuring that individuals on the leadership track are given progressively larger management responsibilities over time.
The other thing we have found to be very helpful for succession planning and the effective transition from an established leader to his or her successor is a review of the organization's culture. That means reviewing with key staff members what kinds of leadership and/or organizational styles are currently in place and then giving consideration to the kinds of adjustments that might be required under a new leader.
PND: Was the selection of Luis Ubiñas, the former director of McKinsey & Company's San Francisco office, as president of the Ford Foundation a sign of things to come? Do you expect to see more corporate executives jumping into leadership positions in the charitable sector without first having served on the operations side of a nonprofit or foundation?
MB: Yes. In Mr. Ubiñas you have a person who has substantial experience and knowledge of the business world on the one hand and significant immersion in the nonprofit world, pursued as an avocation, on the other. I don't know him personally, but he sounds like a person who is really well prepared and positioned to take over the top spot at Ford. Interestingly, he succeeds someone, Susan Berresford, who basically spent her entire career there. So you have a situation in which a person that knows the foundation world extremely well and has been responsible, directly and indirectly, for many, many positive developments around the globe, is succeeded by a person who has much more of a business background and the skills to adapt the foundation to the rapidly changing realities of the twenty-first century.
PND: How applicable is operational experience within the for-profit world to operating in the nonprofit or philanthropic sector?
MB: There are a lot of best practices in the corporate world that have direct application to the nonprofit world. But they usually need to be adjusted. You need to take into account the fact that in the nonprofit world the bottom line is not profit-driven, it's all about mission. That's one adjustment. Another is dealing with volunteers and understanding the kind of directive that volunteers will take and the kind of leadership that inspires them. In many respects, it's very different from the kind of direction and inspiration that people in the for-profit world respond to. So that's another adjustment.
Ultimately, however, the experience and oversight of a board may be the most important factor in the success of a nonprofit organization - so much so that I would say that wherever you have a strong board, you invariably will find a strong nonprofit. And wherever you have a weak board, you almost invariably are dealing with a nonprofit in difficulty. The organization may not know it, but it's only a matter of time before it becomes apparent.
— Matt Sinclair