Managing Turnover at the Top

Charities seek to transform the loss of a leader into an opportunity

In the past eight years, Tim Wolfred has served as chief executive of an AIDS-education charity,

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a center for abused children, a health-care-policy think tank, and 13 other non-profit organizations.

His constant job switching is a sign not of poor performance or a short attention span but of the way non-profit leadership is changing. As a growing number of organizations face turnover at the top, more and more of them are seeking professional help from people like Mr. Wolfred.

He not only steps in to serve as interim director for charities that have lost a top executive, but he also tries to show non-profit groups how they can transform the loss of a valued chief executive from a short-term crisis into a long-term opportunity to strengthen a charity’s operations and reassess its mission. Many times that means asking hard questions about what went so wrong that an executive director called it quits, and making major organizational changes instead of simply racing out to hire somebody to fill the top slot.

Demand for help in dealing with the departure of chief executives has grown so much that Mr. Wolfred, who used to work by himself, last year set up Executive Transitions, a new unit of San Francisco’s Support Center for Nonprofit Management, a training and counseling organization.

Many other non-profit groups are also starting to offer services to help charities manage executive transitions, while numerous charities are undertaking their own efforts to rethink the task. A handful of national non-profit organizations — such as United Way of America and Girl Scouts of the U.S.A. — have started their own internal search and transition services to help affiliates cope with leadership changes, while several statewide and local groups are developing programs with the same aims as the San Francisco Support Center.

Non-profit experts say they expect even more focus on such leadership transitions in the next few years because all the indicators suggest that chief-executive turnover is indeed becoming a constant of non-profit life. No comprehensive studies have been done on the subject, but it is clear that increasingly tempting and lucrative offers from the business world and the increasing demands being placed on charity chief executives are causing many leadership departures.

Charity board members and officials say the damage that can be done by frequent changes in leadership — or when an institution mishandles an executive transition — can be severe.

“The cost of that kind of turnover is extraordinary,” says Tom Adams, a former non-profit executive who now advises charities that are going through transitions.

“The executive’s job is largely a relationship job,” he says. “When a person’s not there long enough to establish relationships, both with the community they’re serving and with major stakeholders and funders, then you’re always starting over. You get no synergy within the organization, just a lot of inefficiency.”

Charity officials’ efforts to find more-effective ways to carry out transitions are being bolstered with money and attention from foundations. The David and Lucile Packard Foundation two years ago started providing money to grantees that needed help in dealing with executive transitions.

Packard says it was prompted to take action after a survey it conducted found that 45 per cent of its grantees had experienced a change in leadership in the previous three years.

“That made us think that it was an issue of importance to a large and potentially growing percentage of our grantee organizations,” says Barbara Kibbe, Packard’s program officer for organizational effectiveness and a leader of Grantmakers for Effective Organization, a group of more than 130 foundations that was formed last year to focus on issues like executive transition.

Ms. Kibbe says she hopes more foundations will make grants aimed at “transforming the attitude that it’s a crisis to a feeling that it’s an opportunity to re-examine your organization, and to avoid making a hasty hiring decision.”

The W.K. Kellogg Foundation is another leader in the effort to focus attention on transitions.

The foundation poured nearly $950,000 from 1994 through 1997 into an effort to help neighborhood-renewal groups recruit and keep highly qualified executives. The grant followed a study by the Neighborhood Reinvestment Corporation, a network of 184 community-development groups, that found that the average tenure for chief executives at its affiliates was only four years, and that the median tenure was just three years — meaning that half stayed longer and half left within three years.

The goal was to improve the organizations in long-lasting ways so that they could attract leaders of high quality, and also so that chief executives wouldn’t burn out so fast. An additional $96,500 grant from Kellogg last year allowed the organization to publish several handbooks, including its latest one, called “Managing Executive Transitions.”

Mr. Adams, who has been heavily involved in the Kellogg effort, says he is encouraged by the growing attention to the topic — especially with regard to those organizations that cannot afford to hire an executive-search company to deal with the search and transition process.

“There are thousands of small and moderate-size non-profits that we rely on for critical services, and there really has been no system to support them through transition,” says Mr. Adams, who directed the Kellogg-financed study of leadership transitions for the Neighborhood Reinvestment Corporation before starting his consulting company.

The California Abortion and Reproductive Rights Action League is one organization that realized it needed help in finding a better way to handle executive transitions.

Sandy Minella, president of the board of directors for the organization’s lobbying arm, says that in the past, when top executives left, the organization moved quickly to “put an ad in the paper, get in candidates, interview them, and see what happens.”

After the group’s lobbying arm lost two executive directors within two years, she says, it realized that things needed to change. It turned to the San Francisco Support Center’s Executive Transitions service. A colleague of Mr. Wolfred’s conducted a thorough assessment of the organization, interviewing board members, current and former staff members (including the departed executive directors), and major donors. She also scrutinized the group’s finances, as well as its mission statement, procedures manual, and articles of incorporation.

One big problem that the consultant from Executive Transitions helped the organization identify, Ms. Minella says, is that the league — actually an umbrella organization for a charity, a political organization, and a fund-raising political-action committee — lacked unity because the charity and the political arm operated under different executives, although they shared some staff members.

Another problem was that the organization was focusing most of its attention and resources on developing its education programs, and doing little to raise money for its political arm.

After reflecting on those issues, the league decided that having two chief executives was part of the reason for the problems. It decided to consolidate the positions and hire a new person for the post, although the charity and political arm continue to maintain separate boards.

It also shifted its resources so that the charity and the political arm were getting equal attention.

They were difficult decisions for the organization, and many staff and board members initially opposed melding the leadership of the charity with that of the political arm, says Kerry Enright, the consultant.

“But eventually we got 100 per cent unanimity, and because of that we were able to attract very good talent from the East Coast to lead the organization,” she says.

Mr. Wolfred’s service, in business only a year, has already helped nearly four dozen groups navigate leadership changes. Its fees are based on a sliding scale and run from $7,500 to $10,000, depending on a group’s budget. That is considerably less than what professional search companies charge — typically one-third of the annual salary of the executive whom they’re recruiting, although some companies offer discounts to non-profit clients.

Although the Support Center in San Francisco has the most comprehensive search and transition service among non-profit management organizations, others are starting to follow suit.

The Maryland Association of Nonprofit Organizations recently began offering a coaching service that helps boards and search committees evaluate their leadership needs, recruit candidates, and make the transition to a new leader. In Atlanta, the Nonprofit Resource Center plans to offer a similar service.

Among the handful of national charities with local chapters or affiliates that now have their own internal search and transition service is the Girl Scouts of the U.S.A., which added the service in 1993, following a search for a new national executive director.

The service was set up for free by the consulting company that helped the organization find its national leader. It was designed to give local Girl Scout councils “more expertise in looking for a new executive director,” and to help provide a pool of candidates that was more diverse in everything from racial background to business experience. It sends out interim directors to groups that have lost a leader and helps the affiliates figure out their own strengths and weaknesses so they can make needed changes before a new leader is appointed.

For charities that have received professional help in making executive transitions, the benefits have often been long-lasting.

Neighborhoods Incorporated, in Battle Creek, Mich., was one of the organizations that participated in the early phases of the Kellogg program to help community-development groups.

In 1991, the group was barely able to survive financially and was rehabilitating no more than two or three homes a year. It had no explicit mission and lacked a strong leader.

With help from the Neighborhood Reinvestment Corporation, the charity developed a mission and new goals, conducted a thorough reassessment, and made numerous major changes in its programs and board. The executive director, who was given the option of accepting a less-senior position at the organization, chose to resign.

The board then conducted a national search, bringing in a new leader who had experience in making organizations more effective.

“He built a very stable organization, and the community had a huge amount of confidence in him,” says Marta Howell, who took over in 1996 when the new executive resigned.

Before Ms. Howell was selected, the Neighborhood Reinvestment Corporation again stepped in, providing the charity with $15,000 to conduct a study to figure out what skills it needed in a new leader. Ms. Howell says the organization’s assessment of its needs was a key ingredient in her ability to succeed once she was appointed.

Now Ms. Howell is stepping down to move to Pennsylvania, where her husband has taken a job.

Although the transition process is barely under way, Ms. Howell says the charity is building on the lessons it learned from its previous transitions. The board plans to use the search for a new chief executive to promote a discussion among civic leaders about non-profit leadership in Battle Creek, where several large non-profit organizations have recently lost their top personnel.

“There’s a feeling that the new executive director needs not only to lead the organization, but needs to lead the community as well,” she says.

In many cases, it doesn’t take an outsider to persuade a charity to take plenty of time in making the transition between chief executives. Some executive directors announce their decision to leave well ahead of the time they plan to depart, to give their organization ample time to decide how it wants to proceed.

Terry M. McGovern, founder of the HIV Law Project, in New York, which provides legal services to poor people who have the virus that causes AIDS, gave her group a full year’s notice after she decided to move on.

“In a lot of funders’ minds, the project is associated with me,” says Ms. McGovern, who founded the charity a decade ago and leaves this month. “I thought it was extremely important for the survival of the project to have a very long process.”

She says she consciously hoped to avoid the problems she saw at other groups that lost their founders. “Usually the director burns out to a crisp and leaves the organization in chaos,” she says.

The extra deliberation time granted to the organization led to a major restructuring, which Ms. McGovern believes will help strengthen it. Although she had served as both the group’s chief executive and its chief litigator, the board decided to split her job into two. Although the charity will now incur greater salary and benefit costs, Ms. McGovern says she persuaded the board that she had been doing too many different things.

Tom McKenna, who has led Big Brothers Big Sisters of America for more than 13 years, said he also felt it was important to give plenty of notice when he decided to leave.

He announced his departure in August, but will not actually leave until the middle of this month.

Mr. McKenna says that twice before when he left leadership posts, he stayed away on purpose from the search for a replacement, in part because his mind was on his new job and in part because he felt it was inappropriate to interfere. But he has since changed his mind, and has been actively involved in the search for his successor at Big Brothers Big Sisters.

“The selection of the C.E.O. may be the most important decision that a board makes,” Mr. McKenna says. “The C.E.O. must be involved in that process if possible because he is the person who knows what it takes to do the job.”

Mr. McKenna says he worked with the executive-search company that Big Brothers Big Sisters hired, as well as the search committee established by the board, to make sure they knew “how the job really works.”

He also met the job candidates, though he was not involved in interviewing, and spent time discussing the job with eight finalists, relaying his impressions to the board. Ultimately, the board chose Judith Vrendenburgh, senior vice-president at the March of Dimes Birth Defects Foundation.

“It made it a lot easier to be able to say, ‘I’m staying until you get the right person,’” Mr. McKenna says. “That is key: the assurance that everybody can take their time and make sure they’re doing it right.”