Transition Management Consulting, Inc.

Succession SOS

by Robert T. Van Hook, CAE, and Jackie Eder-Van Hook | Mar 01, 2008
If your CEO suddenly disappeared, could your association calmly navigate a turbulent transition? Having a plan in place makes all the difference.

For some organizations, top-level executive changes come often. For others it happens only once every 20 to 30 years. Either way, it’s inevitable—every association will experience a turnover at the top at some point in its lifecycle. It’s just a fact of life.

If you’re lucky, your executive’s departure is planned far in advance—like a retirement, for instance—and your board and staff have plenty of time to prepare a comfortable transition. But we all know that life isn’t always that kind. As professional interim execu­tives, we see many situations in which boards of directors are unex­pectedly faced with a need to act to replace their chief staff executive. Consider these scenarios:

The CEO moves on. Sally has served for five years as executive director of a 4,000-member trade association. An up and comer in asso­ciation management, Sally has done a bang-up job of increasing the membership and adding value to the association’s services. The board likes her, has given her good reviews, and has raised her compensation consistently. Although Sally likes her current job, she is recruited to run a new organization. She gives her required 90-day notice to the presi­dent of the board of directors. The board is shocked, and now the clock is ticking.

The CEO fizzles out. Ed is CEO of a professional society with a stable $3 million budget. He has led the organiza­tion for nearly 20 years. The board of directors and the membership revere Ed for the work he has done in the past, but in the past few years the organization has seemed flat and has not done much to develop new programs and services. During this time, the board leadership begins to think it is time for an execu­tive leadership change. With much anxiety and some regret, they begin the political work necessary to gain a con­sensus to not renew his contract at the end of the year. In a highly emotional executive session three months before the contract ends, the board makes the decision and hurriedly comes up with an exit package. When the board informs Ed of its decision, he is angry and hurt. The membership, which sees Ed as a revered leader, is shocked. The staff is angry and disheartened by the board’s decision, and several staff mem­bers threaten to quit. How does the board deal with a lame-duck executive, a demoralized staff, and a perplexed membership?

The CEO gets the boot. The board of directors concludes that the potentially illegal, inappropriate, and coercive behaviors of its executive are no longer tolerable and unanimously agrees to terminate the executive immediately. He is terminated and walked from the building. The executive feels backed into a corner, grossly mistreated, and begins a legal campaign against the organization and its leaders.

Planning for events like these is a critical responsibility for boards of directors and the executives who run them. Without a plan, an executive departure for any reason can be a very uncertain, difficult, painful, or even dangerous time. To put it simply, it’s hard to think or act strategically when the house is on fire. Unfortunately, many organizations do just this, relying on the political strength and a de novo strategic conversation of the board or the executive committee at the most inopportune time.

Planning for one’s own unplanned departure can be uncomfortable, but it is important that association executives address this subject as part of a larger strategy of “leaving well.” CEOs who are willing to think about exit contingency planning can ensure that their depar­tures will not unduly affect their orga­nizations and that their legacies at their associations will remain intact.

Isn’t a “Bus Book” Enough?

Often, when people think of succession planning for an unplanned departure, they only consider absolute emergency situations, such as when an executive is “hit by a bus,” or when some other physical emergency makes it impos­sible for the executive to continue in his or her role. Of course, there are elements of the “bus book” that are important to capture and have accessible, such as the names of banks, contact information for accountants, lawyers, and so on. In real­ity, however, this information is typical­ly easy to acquire and isn’t emotionally taxing to locate. While planning for this type of emergency is necessary, it is not sufficient to address the range of poten­tial needs that might occur.

Rather, an executive succession contingency plan is a critical strate­gic document that should be consid­ered a part of good governance for any organization, and it should plan for the immediate aftermath of an executive’s departure, regardless of whether it is expected or unexpected. It is especially important for micro-, small-, or medium-sized organizations. In these associations, the chief staff executive is central to a wide range of functions—often without any or many additional high-level executive staff—and frequently the knowledge he or she possesses about the organization isn’t widely distributed to others.

Preparation for a Crucial Process

Succession contingency planning resembles estate planning or planning for a future funeral—nobody enjoys it and it is frequently pushed to the bottom of the to-do list. But, with the average tenure of nonprofit execu­tives spiraling downward, the question “What do we do if the exec leaves?” is becoming more “What do we do when the exec leaves?” A well-constructed succession contingency plan can guide the board through the difficult days of consideration, framing, decision mak­ing, action, and announcement of the executive’s departure.

When an executive leaves an orga­nization abruptly—whether due to dis­ability, termination, or resignation—it leaves a hole in the fabric of the organi­zation that needs mending. A swift but thorough executive search process will still leave a vacancy ranging from four to six months or perhaps even longer. Knowing this, the board’s first impulse will be to immediately begin the search for a replacement, but it is important to assess the needs of the organization before beginning the search process. And, it is important to understand that the competition for highly quali­fied candidates is considerable, so an executive search must be conducted strategically.

The key challenge is to align leader­ship succession with organizational strategy, and this is why a succession contingency plan is so important. If such a plan is in place, the board can be comfortable knowing that the orga­nization has continuous coverage in the interim while it carefully assesses where the organization is, where it wants to go, and what kind of leader it needs before the search process begins. Taking the time necessary to look inward before looking outward can help ensure that the hire at the end of the succession is a good fit for the orga­nization both in terms of cultural fit, emotional intelligence, and appropriate skill set.

The assessment doesn’t need to unnecessarily delay the process, but it can pay big dividends for the organiza­tion over the long term. While some kind of assessment is often done as an initial part of any retained executive search, conducting a more thorough and thoughtful examination at this point can appropriately inform the search process. The magnitude of dif­ference is akin to taking a used car that you are considering buying to your neighborhood gas station and having them take a look under the hood versus taking the car to a mechanic who spe­cializes in assessing all of the car’s sys­tems. Like the old adage says, you can pay for it now or pay more for it later—the choice is yours.

A Succession Plan Checklist

Some forward-thinking associations have begun planning for emergency executive departures by creating a compendium of all the things some­one may need in the event of such an occurrence. This type of information is also useful for a new executive enter­ing an organization either as an inter­im or permanent executive. It includes contact information, policies and pro­cedures, budgets, financial statements and audits, board minutes, bylaws, staff rosters and resumes, contracts, etcetera in an easily accessible format and location.

While a comprehensive bus book can be an excellent supplement to a succession contingency plan, it is not a substitute for one. At a minimum, a full-fledged executive succession con­tingency plan should contain

  • A statement of purpose and a policy expressing the rationale for the plan and the board’s commitment to orderly executive transitions for both short-term absences and long-term absences or departures;
  • An outline of succession procedures, including timelines for when vari­ous steps should be taken;
  • A copy of the most current job description for the executive position;
  • A calendar of events and anticipated activities for the upcoming 12 to 18 months, including, for example, per­formance and salary reviews, staff hiring plans, and lease negotiations;
  • A communication plan that includes who should be notified of
  • an executive departure and when, including both internal and external stakeholders (e.g., staff, leadership, membership, legal and financial advisors, media, and affiliated orga­nizations), as well as a template press release or letter in which the specifics of the departure can be quickly added;
  • A key contacts list (be sure to keep it regularly updated);
  • A listing of financial institutions that should be notified and instruc­tions for changing check-signing authority. Don’t wait to find out there is only one valid signer on the account or that the employee ben­efits plan requires a notarized signa­ture of the executive who just left;
  • A description of the process for selecting interim management, including the pros and cons of using internal and external interim man­agement, who makes the selection, and the process for selection. The board should consider the essential functions of the executive that will need to be filled during the transi­tion period. The choice of using an internal or external interim execu­tive should be based on the strategic needs of the organization (see side­bar). Include contact information for potential interim executive man­agement companies, if that may be a consideration;
  • A description of the executive search process and a charter for a search committee, should one be needed. The plan should include the pros and cons of using doing the search in house or engaging an executive search consultant. This section should include a list of search firms that work with associa­tions and specifically with organiza­tions of your size, type, and market;
  • A financial plan. The cost of an exec­utive transition can be considerable. Expenses may include severance pay, outplacement, executive search consultants, and external interim executives. The organization may want to consider establishing a transition fund as a board-restricted account for an eventual executive departure.

Once the plan is in place, the board and staff should review and update it annually to ensure that the informa­tion is still correct and appropriate. Put it on the annual calendar of board activities to help ensure it is updated. In addition, the board should review and renew the plan any time a new chief staff executive is employed—perhaps as a part of the assessment of the executive search process.

Whatever type of succession plan you use, the process of planning is as important as the plan itself. Having an open dialogue on the topic will raise the awareness of the organiza­tion’s leaders to the issue of succes­sion and its importance alongside strategic planning, financial manage­ment, and budgeting. Succession plan­ning should not be rushed. It is much better to have discussions about exec­utive succession in the cool reason of a planning session than in the heat of an executive crisis.

Robert T. Van Hook, CAE, is principal, and Jackie Eder-Van Hook, PhD, is cofounder and president of Transition Management Consulting. You can reach the authors at 202-244-3163. Contact us.