Internal CEO Succession:

Karen SchulerMarch 10, 2015

ABOUT KAREN SCHULER

Former Executive Vice President of TransitionGuides

Leads the Nonprofit Search and Transition practice at Raffa

Focuses on bringing the strongest elements of planningFocuses on bringing the strongest elements of planning, leadership transition, and effective business modeling to the nonprofit sector.

Helps organizations integrate Succession and Sustainability Planning to build mission capacity and thrive through leadership transitions and executive searches.

Karen SchulerSearch & Transition Executive

Raffa P CRaffa, P.C.

(202) 995-7244

kschuler@raffa.com

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ABOUT RAFFA, P.C.,

Focuses on making the world a better place

Contributes to client’s abilities to achieve their missions and deliver their promises to the world.

Keeps organizations compliant, effective, and efficient with practical back office support and deeper strategies that create sustainabilitystrategies that create sustainability

Provides expertise in consulting, accounting, nonprofit search, and technology services that help

RAFFA, P.C.

1899 L Street, NW,

Suite 900 p , gy padvance client’s organizational missions.Washington, DC 20036

(202) 995-7245

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AGENDA

Opening and Welcome

Agenda & Overview

S i Pl i F kSuccession Planning Framework

Internal Succession Considerations

Key Decisions to Support Internal Succession

Three Approaches

Discussion and Questions

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LEARNING OBJECTIVES

•Explore why organizations need to pay attention to p y g p yCEO succession planning before an executive transition occurs

• Identify the challenges of internal succession

•Review the key decisions that support effective internal succession models

•Explore the risks and rewards associated with three approaches to internal succession

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SUCCESSIONSUCCESSION PLANNING FRAMEWORK

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FRAMEWORK & ASSUMPTIONS

GOALS:

• Support the long-term sustainability of the organization

• Increase mission impact

ASSUMPTIONS:

• CEO transition is inevitableCEO transition is inevitable

• Planning increases potential for long-term success

• Internal succession works with careful planning

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WHAT IS INTERNAL SUCCESSION?

The disciplined means of nurturing, developing, and retaining talent as a platform for an executive’s inevitable transition

It creates a culture that maximizes the internal institutional talent, appropriately “grooms” top potential/performers, and empowers them for top leadership positions

INTERNALINTERNAL SUCCESSION CONSIDERATIONS

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INTERNAL SUCCESSION CONSIDERATIONS

Examples of Possible Scenarios

• The Executive Surprise

• The Board Punt

• Interim to Placement

• The Executive-Board Collaborative Plan

Th C i• The Compromise

• Unexpected Considerations

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INTERNAL SUCCESSION CONSIDERATIONS

The Executive Surprise

Occurs When?

CEO grooms internal manager to be the successor HIGH RISK g g

without informing Board

Implications

RISK

• Messy for the board

• Poor ending for organization

• Unfavorable ending for departing executive

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INTERNAL SUCCESSION CONSIDERATIONS

The Board Punt

Occurs When?

Board relinquishes its duty of executive selection by HIGH q y yselecting a staff or board member with insufficient attention to expectations, skills, and attributes of new executive

HIGH RISK

Implications

• High risk for failure

• Potentially an inappropriate “fit” for the position

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INTERNAL SUCCESSION CONSIDERATIONS

Interim Placement

Occurs When?

A short-term executive is selected as the new executive.HIGHImplications

• Boards can try out an internal candidate as an interim

HIGH RISK

• Boards can try out an internal candidate as an interim executive to determine if it’s a good fit

• Internal interim with no intention to apply may seek the position or be asked to apply based on trying the roleposition or be asked to apply based on trying the role

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INTERNAL SUCCESSION CONSIDERATIONS

The Executive-Board Collaborative Plan

Occurs When?

Executive and Board use ongoing succession planning MODERATE g g p gand leader development to reach a consensus on an internal successor

MODERATE RISK

Implications

• Awkward for the potential candidate(s)

• Requires a thoughtful processRequires a thoughtful process

• High odds of success when done well

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INTERNAL SUCCESSION CONSIDERATIONS

The Compromise

Occurs When?

Either the internal successor is recommended by the Best Practice y

executive or applies and the board is divided about appointing internal candidate without an external search to compare with other candidates

Practice

Implications

• Board becomes more confident in candidate

• New executive is more empowered

• “Partial Search” for limited candidate comparison is hard to do well

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UNEXPECTED CONSIDERATIONS

What happens if….

• More than one internal candidate

• No internal candidate – executive hires a new senior manager with intent s/he will be successor

• Designated internal successor leaves the organization before the transition occursg

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POTENTIAL CHALLENGES

INTERNAL SUCCESSION LEADERSHIP TRANSITION PROBLEMS:

WHO CHOOSES

Handpicked

PAIN AVOIDANCE

Easy Shortcut

INSUFFICIENTRIGOR

Less Critical

MISDIRECTED CRITERIA

• Familiarity vs• Handpicked

• Successor-Appointed

• Easy, Shortcut

• “Solution” To Full Search

• Less Critical Evaluation

• Overreliance

• Familiarity vs. Experience

• Limited to no Exploration of

• Board-staff divide

• Less Board investment in new executive

• Hiring on “hope”

Exploration of Role

• Too big of a stretch for successor

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POSSIBLE ADVANTAGES

• Institutional knowledge and organizational understandingInstitutional knowledge and organizational understanding

• Increases employee morale

• Inspires others employees to leadership roles

• Salary stability vs. matching external salaries

• Decreased learning curve and training required

• Less prone to “rock the boat”

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KEY DECISIONS TO SUPPORT INTERNALSUPPORT INTERNAL SUCCESSION

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KEY DECISIONS

Decision Factors to Consider:

• Culture of Leadership Development

• Board Preparednessp

• Board-Staff Alignment

• Executive’s Responsibilityecut e s espo s b ty

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KEY DECISIONS

Leadership Development Culture

• Does the existing culture support leader development?

• Does the organization have a clear assessment of its bench strength?

B d P dBoard Preparedness

• Is the Board ready to own the decision (selection of next executive)?

• Is the Board ready to define the position and the leadership needs that y p psupport the organization moving forward?

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KEY DECISIONS

Board-Staff Alignment

• Are the Board and staff aligned on Strategic Direction Near-term Priorities Issues to monitor/address during the transition

Executive’s Responsibility

• Groom potential internal successor

• Avoid selecting internal successor prematurely or without a process

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APPROACHES TO INTERNALINTERNAL SUCCESSION

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INTERNAL SUCCESSION PLANNING

Step 1: Fully engage your stakeholders

Step 2: Establish criteriaSteps

for Step 3: Assess your internal candidates

Step 4: Measure internal candidates against criteria (short-term and long-term)

for Successful Planning

(short-term and long-term)

Step 5: On-board the successor

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INTERNAL SUCCESSION: NO SEARCH

Requires: B d l it & li t t t i di ti i iti• Board clarity & alignment on strategic direction, priorities, competencies

• Robust vetting of internal candidate• Strong, deliberate transition plan (hand-off, relationship building

with board, role of departing executive, communications)with board, role of departing executive, communications)

Risks: • Organization defaults on the plan; unsuccessful transitiong p ;• Internal successor not a good fit; organization limps along• Internal successor not selected and leaves the organization

Rewards: • Reduced learning curve for new executive• Leader development culture reinforced• Successful transition that “sticks”

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INTERNAL SUCCESSION: LIMITED SEARCH

Requires: • Board clarity & alignment on strategic direction priorities competencies• Board clarity & alignment on strategic direction, priorities, competencies• Capacity to attract known qualified candidates• True openness to external hire• Agreed upon process for candidate vetting & selection• Strong transition plan tailored to the selectionStrong transition plan tailored to the selection

Risks: • External candidates perceive process favors internal • Board division between internal and external candidates• Internal candidate feels disrespected if communications not handled well• Process/selection polarizes staff and board

Rewards: • Reduced learning curve for new executive• Internal candidate more empowered• Board more certain of decision• Successful transition that “sticks”

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INTERNAL SUCCESSION: FULL SEARCH

Requires: • Board clarity & alignment on strategic direction, priorities,

competencies• Capacity to implement outreach & build strong candidate pool• Clarity regarding process & how internal candidates will be

managed (& communications)

Risks: • Internal candidate not selected & leaves the organizationInternal candidate not selected & leaves the organization• Board not fully invested in process/open to external candidates

Rewards: • Validation of new executive’s selection• Successful transition that “sticks”

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PROCESS OVERVIEW

Executive Search and Transition

Prepare Search Onboard

Launch the Search

Recruit

Screen

Organize & Tailor the Process

Gather Information

Onboard

Relate

Evaluate

Select

Hire

Engage the Board

Develop Profile & Search Plan

Evaluate

Support

Board-executive alignment on priorities, roles and performance measures.

An exceptional executive selected – who fits the current and future leadership

needs of the organization.

Board clarity and alignment about the four factors critical to the search and

transition.

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OUTCOME: Increased capacity to deliver organization’s mission under new leadership.

DISCUSSION &DISCUSSION & QUESTIONS

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INTERNAL SUCCESSION PLANNING

1. Who owns the CEO Succession?

2. Is there agreement between you and the Board around internal succession?Questions

to3. What’s involved in grooming a successor?

4. Who’s a good candidate and how do you know?

to Consider

5. Are internal candidates better than external candidates?

6. What criteria should be used to select a CEO?

7. How transparent is the succession process?

8. When should planning begin, and what time horizon should it be considered?should it be considered?

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THE NEXT STEPS WORKSHOP

Nonprofit CEOsA Ne t Steps Planning Workshop

Sustainability succession and transition planningA

Two-Day

A Next Steps Planning Workshop

Sustainability, succession, and transition planning for founders and long-tenured executives

Dates & Locations

Two DayIntensiveHands-onWorkshop

• May 11-12, 2015 – Hartford, CT• July 27-28, 2015 – Baltimore, MD

More information: Melody Thomasmthomas@raffa.com(202) 955-7242( )

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Thank you!y

Karen SchulerKaren SchulerSearch & Transition Executive

kschuler@raffa.com202 955 7244202.955.7244