Guest: Jan Masaoka, executive director of the Center for Nonprofit Management
Host: Sean Bailey, Philanthropy-Journal

Philanthropy Journal, Sean Bailey:

Philanthropy Journal Online is glad to have as our guest this month Jan Masaoka, executive director of the Support Center for Nonprofit Management, based in San Francisco

For more than 23 years, the Support Center has provided consulting and management expertise to nonprofits in the U.S. and overseas.

One issue Jan thinks nonprofits need to address is "executive transition." It's a term I think is more widely discussed in the for-profit sector. Most major corporations, as a matter of routine, have specific plans in place to groom people within their organizations to take over leadership when the top position becomes vacant.

But the sudden departure of the executive in the nonprofit sector is not an issue, Jan says, that most nonprofits are prepared to handle.

PJ: Jan, thanks for being a guest on Nonprofit Web Talks.

Jan Masaoka of the Support Center for Nonprofit Management: Thanks, Sean, for inviting me. It's very exciting to be involved with Philanthropy Journal Online -- what you're doing is at the forefront of nonprofit technology utilization.

PJ: Why is executive transition an issue you believe nonprofits should spend time thinking about?

Jan: We in the nonprofit sector believe so deeply in the importance of teams, sometimes we overlook the crucial role played by the executive director. By the way, let's use "ED" or "exec" for short, okay? And when this crucial person departs, the organization is poised either to make a leap towards a new level of effectiveness, or to make a poor hire and possibly cause years of damage to the agency.

Why should we think about it? Because we need to be prepared for such crucial moments in our organizations' histories. We prepare (or try to prepare!) for board leadership transitions, relocations, changes in funding streams and new accounting guidelines. Executive transition represents a very powerful moment in an organization's life, yet many agencies don't start thinking about it until the moment is on us.

PJ: What is it about the nonprofit sector that has created a situation where there is typically a short tenure average for the executive directors and other managers of nonprofits?

Jan: The David & Lucile Packard Foundation here in California recently surveyed its grantees and discovered that the average tenure of executive directors was just over three years (and we suppose that Packard grantees might be somewhat more stable, more established than average). We don't have complete research yet, but we know that two of the most frequent reasons given by resigning executive directors are related to compensation and board-ED relations. I'd like to hear from EDs reading this Web Talk: if you were to leave your position, what would be your key reasons?

PJ: Finding a suitable pool of applicants to fill executive nonprofit positions seems to be an issue many nonprofits struggle with. Why is the nonprofit executive pool not very strong?

Jan: Actually, I think the executive pool IS strong: look at how many terrific execs are out there! I do see some big difficulties: first, in the nonprofit sector we expect and demand not just strong EDs but EXTRAORDINARY individuals with strong vision, amazing communication skills, management prowess, miraculous fundraising ability, and the patience of saints ... and on top of that, we want racial/ethnic diversity, we don't want to pay very much and we hardly give them any positive feedback.

Other difficulties are caused by mismatches between executives and boards, or between executives and organizational cultures. And we don't provide the kinds of supports to execs that can help them compensate for their own weak areas.

I think we in the nonprofit sector can do something about this. We can develop training programs and career path counseling for people who are now nonprofit middle managers: the next generation of executive directors. We can help boards make better choices, and help them do better at supporting and guiding their EDs. We can find mentors and advisers for EDs suffering from isolation or looking to improve their skills and contacts. We can pay them more! As we at the Support Center for Nonprofit Management finalize our Executive Transitions program, we're looking at all these ways of helping EDs and their organizations.

PJ: You've said that many nonprofit executives report "feeling misled about the organization during the hiring process." I find that astounding. What is a typical scenario where such a situation occurs?

Jan: We've been holding "New Executive Director Luncheons" in our workshop series and we've found that many new execs feel taken by surprise by the job and organization. A very common complaint is that the depth of financial problems or the level of staff conflict was not communicated to the prospective ED ... often because the board itself wasn't fully aware.

Also, during the hiring process board members are often much more involved and active than "usual" and often make promises about their future commitment and involvement that they can't keep. Boards are often so relieved that they've finally hired an ED that they want to take a vacation ... and the new ED ends up feeling deserted. (It happens the other way, too: some boards have become so intimately involved in the agency's operations that they can't step back when they finally hire an ED.)

PJ: You've said that the literature suggests that such transitions are orderly but that in reality many departures are sudden. The onus to fill the position falls upon the board which you say often feels "at a loss" when put in the position to replace an executive director.

Jan: I wrote a book about boards -- Action Handbook for Boards -- and I made the same mistake every other author makes. We talk about ED hiring processes as if the ED has resigned for routine reasons such as retirement or a decision to move on. But when the national Neighborhood Reinvestment Corporation looked at executive transitions among its member agencies (mostly housing and community development agencies), they found that 60% of the transitions were "non-routine," that is, involving the board firing the previous exec, sudden departure due to illness or death, abrupt resignation in the face of sudden negative revelations, etc. In other words, more than half of the transitions were unanticipated, unplanned, unexpected. More reason for advance planning!

PJ: How do boards react to sudden departures?

Jan: Often the situations leading to sudden departures create feelings of anger and betrayal (and sometimes despair) among both staff and board. In a focus group we recently held with professional interim executive directors, one interim executive told about coming in after a beloved, founding exec of more than 15 years tenure was fired after it was discovered she had been embezzling for years. Too often boards find themselves facing not only an executive vacancy but an agency in financial crisis. It's hard for them to know whether to "hire first or plan first." No wonder some boards make a weak hire because they feel rushed into hiring.

PJ: Often, sudden executive transition puts an organization in a crisis mode. Rather than viewing it as a crisis, what are the typical kinds of opportunities that a transition presents to an organization?

Jan: Thanks, Sean, for reminding me of the positive side of things. My own background is nonprofit finance, and I'm something of a pessimist (I can never figure out whether those of us in nonprofit finance went into finance because we're pessimists, or whether we became pessimists from being in nonprofit finance).

Executive transition is an exceptionally powerful moment in an organization's life for change: for the kind of transformative change that is usually more difficult and more protracted if you keep the same executive director throughout. When for-profit companies decide to change strategies or to grow in a new direction, the first thing they do is think about what new CEO they can hire who can help them make that change. Look around you at the organizations you've seen make great leaps into new areas of service, innovative programming and client involvement, and dramatic changes in scope or in who they serve. Weren't most of those changes made possible by a new exec who both reflects and initiates transformative change?

PJ: You say that executive director changes are often accompanied by board changes. Why is that? Do you see that, generally, as a good thing?

Jan: Executive transition often interrupts the natural turnover of a board. When an exec leaves, some board members usually decide to stay on a little longer than they might have in order to see the transition through. Some board members may have been principally involved because of a connection to the departing exec. Other board members may leave because they don't like the new hire. As a board member myself, I've probably been in all three of the above situations. In any case, for the new exec this change in board composition can be seen as an opportunity to build a new board that is better suited to the new challenges. But it can also leave just two or three people on the board with all the knowledge and clout ... which can spell trouble for the new exec or for incoming board members.

PJ: Can you give us an overview of the key items you think nonprofits should address to strengthen their ability to provide for an orderly executive transition?

Jan: This question reminds me of Hank Rosso's line about the five keys to successful fundraising: planning, planning, planning, planning, and asking. Maybe we can adapt this to the five keys for successful executive transition: compensation planning, transition planning, professional development planning, board planning, and getting lucky by asking the right person.

PJ: What are the key elements of an executive transition plan?

Jan: First, boards should realize the importance of their hiring decision and make sure they have enough time to do it right. Hiring an experienced interim executive director may be one way to "hold down the fort," make some changes, and give the board time to plan and think about what kind of person they really want and need. The Presbyterian Church offers an interesting model: most congregations seeking new pastors engage in a lengthy enough planning and assessment process that they hire an interim pastor. These interim pastors undergo special training and have access to support and networks to help them do their unique job well. Today there are individuals who see themselves as "professional interims"; in fact, one of our board members, Tim Wolfred, is on his 13th interim executive director assignment (that must be some kind of record, Tim).

Second, the board should seize the opportunity for changing the organization, and decide how to make strategic use of the vacancy. Maybe this is just the right chance to bring in someone with more of a personal connection to the agency's cause or issue rather than the competent manager we had before. Or maybe this is the time to bring in someone with big organization experience rather than relying on staff who have no experience with the size the organization has suddenly become. This may be the opportunity to choose an exec who more closely reflects or is connected to the client population, or to choose an exec with specialized experience, such as in earned income or in political action.

Finally, the board should consult others about what kind of person to hire, and involve others in seeking the right candidates. Staff, funders, clients, sister agency leadership and other constituents may have valuable insights into the right kind of ED for the agency, and can often help recruit and identify strong candidates. Some agencies have had good experiences with search consultants and board consultants who help them work through these decisions as well as help find good applicants.

PJ: Do you think most nonprofits should be able to find and develop successors to the executive within the staff or is that unrealistic?

Jan: I do think we neglect succession planning. In a Fortune 500 company, one of the key board-CEO ongoing discussions is about succession: who is being prepared for succession? What is the succession plan, not just for the CEO but for other key managers? But in the nonprofit sector, succession planning almost seems unethical. If an executive director plans for his or her successor, the board may feel that its authority is being usurped. And if the board initiates discussions about succession, the executive director might start wondering whether this means the board is really talking about hiring the ED.

Many nonprofits are simply too small to expect that internal successors will always be available. And many times, by hiring externally, the board can look at a wider range of candidates with fresh perspectives.

PJ: It seems like there are two areas that need to be strengthened in this field: the board and the executives.

Jan: I would add: prospective executives. Younger nonprofit folks, especially people of color, could make good use of a training program that helps them develop the skills and choose the right career steps that will help them become strong executive directors.

Thanks, Jan.

Part Two