Executive Transitions Monograph Series Volume 1

Capturing the Power ofLeadership Change

Using Executive Transition Managementto Strengthen Organizational Capacity

About CompassPoint’sExecutive TransitionsExecutive Transitions is part of theExecutive Leadership Services unit ofCompassPoint Nonprofit Services, anorganization that has served the training and consulting needs of B ayArea nonprofits for more than 25 years.The consultants of Executive Transitionsare a carefully recruited team of experienced nonprofit executives.They have received special training inexecutive transition management (ETM)and executive search. Many also serveon boards of directors for area nonprof-its. Tim Wolfred serves as director of theprogram,which has provided supportto more than 160 nonprofit agencies in transition since 1998.

About TransitionGuidesTransitionGuides is a leader in the development and delivery of e xecutivetransition management (ETM) servicesaround the country. It is a collaborationof experienced consulting firms withextensive track records in working withnonprofit organizations and leadershiptransitions. The TransitionGuides teamoffers a full range of ETM services tononprofits in the Mid-Atlantic regionand nationally and has collectively provided executive transition assistanceto over 200 nonprofit organizations.Tom Adams is the president and seniormanaging partner of TransitionGuides.

The Executive Transitions Monograph Series“Capturing the Power of LeadershipChange” is the first volume of a newmonograph series on executivetransitions and executive transition

management, funded by the Annie E.Casey Foundation and the Evelyn andWalter Haas, Jr. Fund. The series is a joint effort of TransitionGuides andCompassPoint Nonprofit Services.

The Annie E. Casey FoundationThe Annie E. Casey Foundation is a private charitable organization dedicated to helping build betterfutures for disadvantaged children in the United States. The primarymission of the Foundation is to fosterpublic policies, human service reforms,and community supports that moreeffectively meet the needs of today’svulnerable children and families.In pursuit of this goal, the Foundationmakes grants that help states, cities,and neighborhoods fashion moreinnovative, cost-effective responsesto these needs.

For more information,visit theFoundation’s Web site at www.aecf.org.

The Evelyn and Walter Haas, Jr.FundThe Haas, Jr. Fund is a family foundationdedicated to celebrating and buildingcommunity. It seeks to create vibrant,safe neighborhoods that support thehealthy development of young peopleand the well-being of their families. TheFund also seeks to strengthen thebonds of mutual respect among peoplefrom all walks of life to pursue commoninterests and contribute to the largercommunity. Through its grantmakingfocused primarily in the San FranciscoBay Area,the Haas, Jr. Fund aspires toserve as a positive, unifying force forsocial change.

For more information,visit theFo u n d at i o n’s Web site at www. h a a s j r. o rg.

© 2004, The Annie E. Casey Foundation,Baltimore, Maryland

Table of Contents

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Executive Summary

Executive Transitions in Context

Prepare, Pivot, and Thrive

A Model for Executive TransitionManagement Services

Looking Back, Going Forward

Seeking Partners: A Call to Action

Effective leadership is a common andcritical element of successful organiza-tions. Not surprisingly, the period ofexecutive leadership transition—thedeparture of a current and the hiring ofa new executive director or chief staffofficer—is fraught with risk. Board lead-ers, in particular, fear transition becauseof the uncertainty it brings, the increasein their responsibility, and the chal-lenges of hiring an appropriate succes-sor. Poorly managed, these transitionstoo often occasion a crisis, leading todecreased organizational efficacy andeven failure. Even well-establishedorganizations can falter during and aftera leadership change.

Though they happen infrequently toindividual organizations, leadership tran-sitions are increasingly common in thenonprofit sector. A 2000 study of 130community-based grantees of the AnnieE. Casey Foundation found that 85% ofexecutives were likely to leave theirpositions before 2007. Similar surveyssuggest that this is representative of alarger generational shift in the sector’sleadership in the coming decade.

Link the negative outcomes associatedwith poor transitions and their increas-ing frequency, and one discovers a sig-nificant threat to the nonprofit sector’sperformance, a threat with serious andpotentially disruptive implications forthe delivery and quality of services forvulnerable populations, including disad-vantaged children and families.

Investigating and improving leadership transitionsIn 2000, the Casey Foundation launchedan effort to better understand executiveleadership transitions in nonprofit

organizations and explore theFoundation’s role in helping its granteesmove successfully through these diffi-cult periods. The Foundation supportedan 18-month research process thatincluded a literature review, a nationaland three-city scan of available transi-tion services, a grantee survey, 11 con-sultative sessions with nonprofit leadersand capacity building practitioners, casestudies of founder executive leadershiptransitions, and hands-on practice withtwo management support organiza-tions. The paper that follows representsthe synthesis of much of what we havelearned through this exploration.

Casey’s initial investment has generatedgrowing interest among groups of non-profit executives, their boards, and fun-ders. Workshops designed for founderexecutives considering a transition havebeen oversold. In foundation-supportedprograms in California and Maryland,demand for executive transition man-agement (ETM) services and placementof interim executives doubled after eacheffort’s first year and has continued togrow since then.

Seven funders have joined with Casey tolaunch an ETM initiative in Maryland.The New England Regional AreaGrantmakers and several New Englandfoundations have begun a fo rmal ETMplanning proce s s. E x p l o rato ry programdevelopment conversations are alsounderway with funders in Washington, DC, New York City, and theTwin Cities, among others. Each timethis work around transitions has movedforward, we have experienced growingdemand and promising results.

Executive Summary4

Transitions: Prepare, pivot,and thriveThe Casey Foundation’s research andexperience to date suggests that execu-tive transitions need not result in badorganizational outcomes. On the con-trary, we have found that transitions arepowerful—and under-realized—oppor-tunities to strengthen nonprofits.Proactively managed, leadership transi-tions provide a “pivotal moment.” Facedwith a (sometimes disconcerting) pausein business as usual, organizations canre-examine current practices, position-ing, even mission, direction, and vision.Boards, with expert support from ETMproviders, can assess the situation, workthrough the hiring process, and imple-ment strategies that enable an organiza-tion not only to survive a transition,butto thrive through it.

A developing model, hopeful resultsAn ETM model, first developed in the1990’s and now refined, has alreadybeen found to reduce the risks of transi-tions and strengthen organizationalhealth and effectiveness. A 1997 study,for example, retrospectively analyzed afive-year capacity building and execu-tive transition initiative conducted bythe Neighborhood ReinvestmentCorporation, a national nonprofit serv-ing more than 200 housing and commu-nity development organizations acrossthe U.S. This research found that theseorganizations had significant increasesin executive tenure (from 4.3 to 5.7years),“healthy” rankings (from 67% to89%) and direct investment in commu-nities served (from $146.7 million to$418.9 million). More recent assess-ments of the ETM services of Compass-Point Nonprofit Services, a nonprofittraining, consulting, and research organization withoffices in San Franciscoand Silicon Valley, and the Maryland

Association of Nonprofits, a regionalassociation of grantmakers, point tosimilarly positive impacts and high levels of satisfaction with ETM serviceprovision.

ETM offers exciting potential as an entrypoint to a broad range of capacity build-ing efforts. In addition to the outcomesdescribed above, transition services haveled to new Board leadership, sharpenedstrategic direction, improved financialmanagement, led to new funding, andpromoted thoughtful approaches toorganizational restructuring and merg-ers. The potential of this interventionhas encouraged the Casey Foundationto continue to track and learn abouthow ETM services sustain and enhanceorganizational effectiveness and aboutspecific opportunities for capacity build-ing during transition.

The following paper provides back-ground on the challenges and opportu-nities associated with executive transi-tions and describes the model of ETMthat has been in development duringthe last decade. Finally, it lays out aseries of opportunities for funders andother partners to provide support forthis developing service modality. Weinvite you to join us in this importantwork.

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While not everyday occurrences, execu-tive leadership transitions in nonprofitorganizations are quite common.Surveys by NeighborhoodReinvestment, CompassPoint, andMaryland Nonprofits and an examina-tion of 990 data on transitions inBaltimore and San Antonio indicate that10% or more of nonprofits experience aleadership transition annually. If oneconsiders the approximately 220,000nonprofit organizations in the UnitedStates with budgets greater than$100,000, this means there may be asmany as 22,000 leadership transitionsevery year—considerable turnover withimportant implications for the sector asa whole.

Change is comingRecent research suggests that the inci-dence of nonprofit leadership transi-tions will likely increase during the nextdecade. As noted in the ExecutiveSummary, a 2000 survey completed by130 executive directors of Casey’s com-munity-based grantees reported thatmore than four out of five executiveswill likely leave their position by 2007.Three other surveys found that between62% and 78% of responding executivesof nonprofit organizations said they planto leave their current positions withinfive years. And they may not be headingfor other executive director jobs.A CompassPoint study of 137 Bay Areaexecutive directors—of whom two-thirds were in their first executive direc-tor role—indicated that only 20%wished to take on another such job inthe future. This reflects the acknowl-edged difficulty of the position. It alsosuggests a major hiring challenge in theyears and decades ahead.

National demographic trends are par tof this story. As baby boomers—whomake up nearly half the current overallworkforce—retire, leadership change inall sectors will intensify. This may beparticularly problematic in the nonprofitsector, where, because of the relativelysmall size of so many nonprofits, thereare fewer middle managers, and conse-quently less access to needed manage-rial and other experience than in gov-ernment or corporations. A smallerworkforce and fewer managersgroomed for nonprofit service will likelymake the passing of the leadershipmantle even more difficult.

With these generational challenges,however, there may be some important,under-realized opportunities. A newgeneration of leaders will bring freshenergy and ideas to the sector. If proac-tively addressed, this change also offersan opportunity to increase the represen-tation of leaders of color and those withdemonstrated cultural competence, criti-cal to serving our nation’s increasinglydiverse communities.

Change is hardDuring the last decade, field research bythe Neighborhood ReinvestmentCorporation has highlighted the seriousrisks of failed or unsuccessful transitions .This work has found that most transi-tions (as many as 70%) are “non-routine”and occur due to an organizational crisisor the departure of a founder or vision-ary leader. This research has also demon-strated that poorly managed executivetransitions incur high costs to organiza-tions and communities. Too frequently,there is repeat executive turnover andextended periods of under-perform-ance. In extreme circumstances, organi-

Executive Transitions in Context

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zations go out of business, leaving awake of broken commitments andfinancial entanglements.

While all executive transitions are chal-lenging, research in this area has identi-fied several distinctive types of transi-tions with different levels of risk andopportunity. Transitions involving thedeparture of the founder (or long-termexecutive with many similarities to afounder) are the most perilous, as keyinternal and external constituencies(employees, funders, etc.) tend to identi-fy the organization with its first leader.This is particularly important in theCasey network, where founders lead oneout of every three community-basedgrantees. “Startup” transitions that occuras organizations formalize their opera-tions, and “turnaround” transitions inresponse to crises, are stressful in differ-ent ways with their own distinct organi-zational challenges, as well as opportu-nities for growth.

Practice has shown that size is also acritical variable in leadership transitions.Smaller and community-based organiza-tions often have little or no manage-ment depth or infrastructure and ar eextremely vulnerable during a leader-ship change. When the executive leaves,much of the institutional memory andmany relationships may be lost. Largerorganizations, particularly those withlong-term relations with an executive ora founder, face a different, yet similarlychallenging set of issues. For theseorganizations, their identity and key fun-der relations are often linked to thedeparting executive.

Change is costlyIn the private sector, succession plan-ning is designed to avoid lapses or

major interruptions in leadership. This isnot generally the case in the nonprofitworld. The experience of executivesearch and transition consultants consis-tently indicates that nonprofit organiza-tions struggle on average for four–eightmonths to select a new executive. Forfounder and turnaround transitions, therisks and potential length of transitionincrease, as does the likelihood of a follow-on transition in a year or t wo ifthe first transition effort is not well managed.

The costs of a failed leadership transi-tion—or one that results in a poor orstrained fit between an executive andtheir board—occur on multiple levels.There are the direct costs of transition,which can range from $1,500 to $40,000,including advertising, executive search,relocation, and other expenses.Cumulative organizational costs canrange from additional staff and Boar dturnover to missed opportunities forprogram growth to the loss of hundredsof thousands of dollars of client servicesdue to program shrinkage or closure.In the worst cases, a critically neededorganization goes out of business. Thecommunity loses an essential serviceinstitution, and in some cases, a broad-scale systems reform or communitychange effort may be derailed.

Help is hard to findUntil quite recently, executive searchfirms were the sole service providers forleadership transitions. These firms pro-vide a focus on finding the next execu-tive, typically with limited focus onbroader organizational capacity build-ing. Search firm fees are also prohibi-tively expensive for all but the largestnonprofit organizations, and especiallythose with operating budgets under $1

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ETM in actionAn ETM consultant initiallyworked with an agency servinghomeless San Francisco familiesto consider its strategic directionwhen its executive directorresigned. This process enabledthe agency to understand thatsince affordable housing forhomeless families was not readilyavailable in San Francisco, itsservices needed to be mobile (i.e.,able to follow clients into outly-ing counties). With this newstrategic direction adopted, theboard, again with the ETM con-sultant’s help, sought and hired anew entrepreneurial executive toaccomplish the new vision andreplace the departed director, asocial worker who had success-fully improved program quality.

million. Thus for 82% or more of non-profits, these kinds of services are notaccessible.

During the last decade, a small numberof national and local organizations havepioneered a more comprehensive andcost-effective approach to ETM. TheNeighborhood ReinvestmentCorporation, CompassPoint NonprofitServices, and the Maryland Associationof Nonprofits, with support from a num-ber of national and local foundations,have developed and tested a compre-hensive menu of ETM services (Seepage 11, “A Model for ExecutiveTransition Management Services” ).

Still, these ETM providers are relativelyfew and far between, without the capac-ity to meet the needs of the nonprofitsector as a whole. The Casey Foundationcommissioned a national scan to under -stand the availability of various types ofETM and search services for nonprofitorganizations.This study reviewed Websites of executive transition and execu-tive search providers as well as founda-tion giving for capacity building andleadership development. In addition tothe providers noted above, this researchfound only 21 management supportorganizations that provide one or moretransition-related service, and 36 searchand organizational development firmsthat do search work (which, as notedabove, is focused generally on the newhire and not on the whole transitionprocess). Access to services varied wide-ly, depending on where an organizationis located, its size, and funding base.

Even in the few areas with establishedservices, there is a pressing need tobroaden access. Again, given the grow-ing incidence of executive transitions in

the nonprofit sector and the often-debil-itating effects of organizational turnover,attention to broadening the supply andenhancing the capacity building ser-vices of ETM providers is not only war-ranted, but critically needed.

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ETM in actionBetween 1997 and 2001, aneighborhood services center inBaltimore had three executivedirectors as it struggled to makethe transition from a volunteer-driven group to a professionallystaffed organization. The non-profit sought ETM assistance afterthe third executive left after justsix months. The initial transitionalassessment identified the need toclarify board, executive, and staffroles and communications andbroaden consensus on the strate-gic direction before a new execu-tive could be recruited. After dis-cussion, the board agreed to hirean interim executive director, whoreaffirmed the organization’sstrong volunteer base and fund-ing support while clarifying boardand staff roles and establishingbuy-in to a new strategic direc-tion. The interim provided a posi-tive role model of executive lead-ership for the board, helping it getclearer on the competenciesrequired in the executive directorit was hiring.

One year later, the board, afterhiring a permanent executivedirector, has completed its initialsix-month evaluation. Both theboard and the new director notesatisfaction with their progress todate and report that the ETM sup-port and interim executive haveprovided a strong and stableoperating platform that will ser vethe organization well as it growsin the future.

The significant implicit and explicit costsof leadership transitions to organiza-tions and the nonprofit sec tor demandattention, but not despair. The CaseyFoundation’s research and experience todate suggests that transitions are under-realized opportunities to strengthennonprofit organizations. Properly andproactively managed, leadership transi-tions provide a “pivotal moment” fororganizations. Transitions require organ-izations to pause and perhaps regroup.In this neutral space, boards, with expertsupport from ETM providers whereneeded, can assess their organizationfrom a new perspective. They can thenwork through the hiring process, andimplement strategies, even new direc-tions, that enable their organization notonly to endure a transition, but emergestronger and more dynamic from it.

Of course, the degree of positive organi-zational change derived through a well-managed transition varies widely. For anorganization mired in a financial crisiscaused by a departing executive, simplesurvival may be a major feat. For agroup losing its founder or a long-termexecutive, sustaining its current effec-tiveness is an important accomplish-ment. For some organizations, however,leadership transition is transformational.It serves as a moment when new possi-bilities can not only be imagined, butrealized.

Prepare, Pivot, and Thrive 9

Promising resultsWhile the field of executive leadershiptransition services is relatively new, ini-tial studies of these services point toimpressive effects. Between 1992 and1997, the Neighborhood ReinvestmentCorporation provided transition andcapacity building services to its memberorganizations across the country. Anannual survey of this network of non-profits (noted in the ExecutiveSummary) reported significant increasesin executive tenure and organizationalgoal accomplishment over a five-yearperiod, improvements in executivetenure (from 4.3 to 5.7 years), organiza-tions ranked “healthy”(from 67% to89%), and direct investment in commu-nities served (from $146.7 million to$418.9 million).

In 1998 and 1999, CompassPointNonprofit Services began an ETM pro-gram and provided services to 28 localnonprofit organizations. An independ-ent follow-up evaluation in 2000 of thefirst organizations participating in thisprogram found increased organizationalhealth one year after the new executivewas hired in 11 of 12 organizations.

Even more recently, the MarylandAssociation of Nonprofits, after provid-ing ETM services to 15 organizations in2001, reported overwhelmingly high satisfaction, according to client surveys.Respondents have attested to both thechallenges of transition and theincreased organizational capacitygenerated through the ETM process.

Finally, in case study work with a smallsample of its community-based granteeorganizations, the Casey Foundation hasdiscovered both positive results andhigh satisfaction. Terry Keating, a banker

and Chair of Kaleidoscope, a foster careinnovator in Chicago that received ETMsupport, was so enthusiastic about theconsulting that he offered to host work-shops for other board leaders in Chicagoand around the country to “help wakethem up to the impending stress andthe opportunity leadership transitionbrings.”

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ETM in actionA national health promotionagency based in California washemorrhaging with debt, just twoyears after it had doubled itsbudget from $2.7 million to $5.4million. The increase had seemedappropriate following a surge indonations. However, this budgetlevel could not be sustained.Management refused to cut pro-grams, believing new monieswould be found. As a financial crisis loomed, the executive direc-tor left the agency. With supportfrom an ETM consultant, theboard hired an interim executive,who instituted staff and programcuts. The interim also communi-cated clearly with staff, donors,and funding agencies to enlisttheir help in sharpening theagency’s mission and setting realistic objectives. The consult-ant then worked with the boardand recruited a permanent execu-tive director well-equipped toimplement new strategies in linewith the revised mission and amore modest financial outlook.Five years later, the agencycontinues to thrive with a $2.5million budget.

A number of practitioners—includingNeighborhood Reinvestment,CompassPoint, Maryland Nonprofits andother transition consultants—havedeveloped a unique approach to reduc-ing the risks and maximizing the poten-tial of the transition period. This ETMmodel combines traditional executivesearch and organizational developmentservices in a way that can be tailored tothe transition and broader developmen-tal needs of any agency. In particular,however, these services are designed forcommunity-based organizations rang-ing from start-ups with no budgets tothose with annual operating outlays upto $5 million—groups that are oftenpriced out of traditional search services .This innovative ETM approach consistsof a flexible set of practices and servicesthat are widely adaptable, but that takeplace in three broad steps or phases.

• Getting readyUnlike traditional search processes, ETMhelps organizations prepare for leader-ship succession, months, even yearsbefore the actual transition takes place.Central to this preparation is to identifythe executive director’s key leadershipfunctions (e.g., fundraising, governmentrelations, etc.) and to make sure they ar ebacked up by staff or board members.Cross-training top managers in thesefunctions may even be required.Administrative systems, particularlyfinancial planning and oversight, areoften reinforced so that they will survivethe departure of the e xecutive director.In addition to addressing the prospec-tive timing of the executive’s departure,ETM asks whether significant organiza-tional changes—including mergers,partnerships, or even closure—arewarranted.

When the executive is ready or in theprocess of leaving, there is a transitionplanning consultation, which includes aquick review of the circumstancesaround which the executive is depart-ing, the important presenting issues facing the organization, and what if anyinterim management is needed. Theconsultation results in a general plan for managing the transition. This planensures there is an appropriate good-bye and ending for the departing execu-tive. It also enables board and staff toreflect on the direction of the organiza-tion, the required attributes and compe-tencies of the next executive director,and any organizational strengtheningrequired before the next executive ishired. One of the critical benefits of theconsultation and the resulting plan isthat it enables the board to resist therush to hire and to consider broaderorganizational opportunities that maybe embraced.

Once the executive announces he or shehas a departure date, an organizationenters a leadership “neutral zone,” wherethe current leader is letting go, and theagency is awaiting the new leader. Thisis an unusually powerful and opportunetime in an organization’s life cycle forcapacity building—taking stock, open-ing up to new strategic directions, andmaking changes based on cur rent andprospective challenges and opportuni-ties. With ETM support, board and staffwill often reflect on the direction of theorganization and any capacity buildingneeded before the next executive direc-tor is hired. An interim executive experi-enced in capacity building may bebrought in to lead these efforts , as well.

As the “Getting Ready” phase is complet-ed, the organization has a clearer picture

A Model for Executive Transition Management Services

of the transition issues that need to bemanaged, a set of strategies for address-ing these issues, and an understandingof the requirements, including compen-sation for, and initial priorities of, thenew or permanent executive director.

• Recruitment and selectionFinding the right new leader in align-ment with the agency’s vision for itsfuture is critical. Unlike traditionalsearch processes, this stage employs anorganizational development orientationdesigned not only to find and hire thenew executive, but also to maximize anonprofit’s ability to provide servicesand fulfill its mission.

ETM activities in this phase generallyinclude a proactive outreach process toestablish a diverse and qualified finalistpool. In particular, this involves recruit-ment, candidate screening, interviewpreparation and interviewing, referencechecks, and the preparation of anemployment offer. It may also includeinterim executive referral/placement ortransition coaching to board leadership.Depending on the organization’s needs,capacity, and resources, these servicescan be offered individually or as part ofa comprehensive package. Anddepending on the circumstances of thenew hire, this phase may also involve avariety of concrete steps designed tobegin making needed infrastructureimprovements or to reposition theorganization and its programs.

• Post hireThis focuses on the successful launch ofthe new executive and ongoing capacitybuilding. The executive and board enterinto a formal “social contract,” whichclearly spells out priorities, roles, andprocedures and serves as a powerful

tool in getting the new executive off onthe right foot. In Maryland, new execu-tives have also begun to participate inpeer networking meetings where theyreceive collegial support and feedbackfrom other leaders outside their ownorganizations.

At this point, a variety of capacity build -ing activities, from strategic review tovisioning, may be introduced or contin-ued from earlier phases. These serve tosupport the new executive’s control andstrengthen his or her ability to guideand grow the organization.

A menu of ETM servicesThe formal ETM model is built on thethree-step process above, and can bedelivered in what is called aComprehensive Transition and SearchService, which helps organizationsthrough the entire transition process.This includes:

• An initial consultation and assessmentwith required competencies and priori-ties for the next executive;

• A capacity building plan;• Compensation review;• Candidate screening and selection

assistance;and • Post-hire plan.

However, to be most useful to the field,ETM providers offer a variety of discreteservices in order to ensure nonprofitscan receive support they need at a pricethat fits their budget. These servicesgenerally begin with a TransitionPlanning Consultation, which helps anorganization identify key issues influenc-ing a looming or expec ted transition,any capacity building opportunities, andan outline and timetable for managingthe transition. Following this initial

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work, ETM consultants can then provideadditional services tailored to an organi -zation’s needs. These can include any ofthe following:

Leadership succession planning andcoachingHere, an ETM consultant conducts an ini-tial private consultation with a boardleader or executive considering leavingand then provides targeted coachingthat considers timing and process issuesand seeks the best result for the execu-tive and his or her organization.Experience indicates succession plan-ning may be approached for purposesof emergency planning in the event ofan illness or unexpected absence, aspart of a strategic planning process, or inrelation to a time-defined departure(e.g., an executive that is planning toretire in two years).

Transition management coachingLess extensive than the ComprehensiveTransition and Search Service, thesecoaching services support the board incarrying out the key transition manage-ment steps including an organizationalassessment, development of the job pro-file and competencies, compensationreview, and/or board-executive socialcontracting and evaluation planning.

Interim executive referral/placementDepending on internal capacity and theissues an organization faces, a trained,experienced interim director may be agood choice.This service helps anorganization review and select amongcandidates it already knows. An ETMconsultant may refer and place an expe-rienced interim from an outside pool ofcandidates, as well.

Executive coaching and peer supportThis service offers guidance to a depart-ing and/or newly arriving executive. TheETM consultant serves both as a sound-ing board and as a seasoned guide.(ETM coaches generally have directpersonal and professional experiencewith the executive director role.) Wherepossible, the consultant also strives toconnect executives with peers facingsimilar situations.

Capacity building assessment andplanningThe transition period can be a powerfulentry point for a whole range of capacitybuilding services from strategic plan-ning to financial review to fund develop-ment. An ETM consultant can serve tohelp diagnose an organization’s needs,identify strengths to build on,and findmanagement support providers whocan provide needed services.

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ETM in actionA local community developmentorganization in the Southwesthad seen four executive directorscome and go in five years. Thegroup’s primary funders—localgovernment and a few banks—had lost confidence in the organi-zation’s ability to improve theneighborhoods it was serving.Rather than seek another new“permanent” director, an interimexecutive was hired who focusedexclusively on producing results inthe community, reorganizing theboard, and re-engaging funders.Once the organization was stabi-lized with increased board capaci-ty, the interim executive served asan ETM consultant and assistedthe board in planning for and hir-ing a new executive. This execu-tive has now served for ten yearsand increased the organization’simpact and production. Forexample, while the organizationhelped five to thirty familiesannually find affordable housingbetween 1986 and 1992, it assist-ed 200 families in 2001. Its annu-al budget has grown from$115,000 in 1991 to $1.6 millionin 2002.

In 1994, the philanthropic communitybegan major investments in ETM ser-vices. The W.K. Kellogg Foundationadded its support to a five-year ETMresearch project of the NeighborhoodReinvestment Corporation (NRC),designed to increase executive directorretention and bolster the leadership ofNRC’s member organizations. Part of thissuccessful strategy included providingETM consultation to boards during thehiring process and providing training tonewly hired directors. Since that time,further investments by the David andLucille Packard Foundation, IrvineFoundation, the Evelyn and Walter Haas,Jr. Fund, and others have allowed thedevelopment and testing of a promisingrange of ETM services, most notably inthe Bay Area. This support has enabledtwo local management support organi-zations there—CompassPoint NonprofitServices and The Management Center—to serve more than 200 nonprofits since1997.

Building our knowledge baseIn 2000, the Casey Foundation launchedan effort to better understand the fre-quency and issues of executive leader-ship transitions in nonprofit organiza-tions and explore the Foundation’s rolein assisting grantees to move success-fully through the organizational challenges of leadership tra n s i t i o n s.The Fo u n d at i o n commissioned an 18-month research process that included a literature review, a national and three-city scan of available transition services,a grantee survey, 11 consultativesessions with nonprofit leaders andcapacity building practitioners, and case studies of founder executiveleadership transitions.

In Baltimore, the Baltimore CommunityFoundation, the Annie E. CaseyFoundation, and six other local founda-tions—Goldseker Foundation, StrausFoundation, Blaustein Foundation,Francis and Marian Knott Foundation,France-Merrick Foundation,and WilliamBaker Memorial Fund—have pooledresources to support a replication of theNeighborhood Reinvestment/CompassPoint service model throughthe Maryland Association of Nonprofits .In 2001,15 nonprofit organizationsreceived assistance. In 2002, demand forexecutive transition services inBaltimore doubled, so the MarylandAssociation of Nonprofits has adapted avariety of lower-cost variations on theCompassPoint approach to expand thenumber of organizations served.

From the work to date, three approachesto making ETM services affordable tosmall and mid-size nonprofits haveemerged. They include:

1) Planning grants to a reputable man-agement support organization or associ -ation to adapt ETM services and identifyand train ETM providers. Here, nonprofitorganizations needing financial supportto pay for ETM services seek it from acurrent funder (San Francisco/Bay Areaapproach);

2) Both planning grants and grants toreduce the cost of ETM services to spe-cific organizations are made into a pooladministered by the management sup-port organization or association(Baltimore/Maryland approach); or

3) A funder commits to support all or aportion of the cost of ETM services for

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ETM in actionAn entrepreneurial founder hadcreated a thriving museum inBaltimore during a ten-year pe-riod. When the founder receivedan offer to direct a larger museumin another city, he decided it wastime for a new challenge.Somewhat stunned, the boardquickly moved from an advisoryto a more hands-on role. A boardmember with experience provid-ing interim management in cor-porate settings became the inter-im executive and served for twoyears. During this period, theboard worked with an ETM con-sultant to complete a strategicreview, identify and address sev-eral infrastructure and fundingneeds, and agree on priorities forthe new executive. As a result ofthis work, the museum selectedone of three very qualified mu-seum executives who applied forthe permanent position.

selected grantees through a dedicatedstream of funding either specifically forthis purpose (Casey Foundation) or formanagement assistance generally(Eugene and Agnes E. MeyerFoundation).

Additional regions and communities areactively working to make ETM servicesavailable. The New England RegionalArea Grantmakers and several NewEngland foundations are exploring theprovision of ETM services through aplanning process. Conversations withfunders are also underway about pro-gram development in Washington, DC,New York City, and the Twin Cities,among others. On the service providerside, more than 40 management sup-port organization managers and con-sultants attended a day-long workshopin 2003 on how to start an ETM programor practice at the Alliance for NonprofitManagement conference (This sessionresulted in the offering of a three-dayETM consultant training attended by 20consultants and a waiting list of severalothers.).

Given the growing interest and positiveresults from its exploration of transitionsand ETM, the Casey Foundation is now:

• Developing a service delivery mecha -nism to make ETM services available toselected, key grantees;

• Documenting its learnings on the tran-sitions of founders and long-term execu-tives and how the coming, sector-widegenerational change will affect therecruitment and development of newleaders;

• Sharing its lessons with other funderswith an eye to identifying collaborativestrategies to expand the supply of need-ed ETM services; and

• Investing in evaluating this strategyand its potential to increase organiza-tional effectiveness.

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Like any developing field of practice, thepioneering work of ETM requires bothencouragement and testing. The earlyresearch and development investmentshave been made. The results in terms ofvalued assistance to organizations andincreased organizational capacity andeffectiveness are promising. To fullyunderstand the potential of ETM andrelated capacity building, the CaseyFoundation invites other funders, boardleaders and executives, researchers,management support organizations,leadership development programs, andothers to join us in this important workby:

• Raising awareness about the powerand potential of ETM;

• Reducing cost and other barriers toETM provision;

• Building the capacity and availability oflocal or regional service providers ofthese services;

• Supporting the dissemination of bestpractices and other learnings fromresearch about ETM and leadership succession;

• Articulating a set of measurable resultsto provide a foundation for ongoingresearch on the impact of ETM; and

• Exploring how to best prepare thenon-profit sector for the challenges ofthe imminent generational shift in leadership.

The Casey Foundation looks forward toidentifying new partners and advocatesfor this effort, and for expanding thepower and potential of ETM as a recog-nized and widely used managementsupport modality.

The opportunity for significant advancesin this developing field is real both forthe organizations facing a transition andfor the sector as a whole. Experience todate suggests that organizations choos-ing to use ETM services and fully explorethe capacity building opportunitiesassociated with a leadership transitioncan make major advances. Similarly,there are significant opportunities forthe sector to prepare and “pivot,” as itfaces the challenges associated with amajor generational change. While thesector grapples with identifying its nextcohort of leaders, ETM can be an entr ypoint for increased attention to leader-ship succession planning, leadershippreparation,and other capacity buildingapproaches. Over time, we are hopefulthat this work will lay the groundworkfor sector-wide growth and positivechange.

Seeking Partners: A Call to Action16

ETM in actionA health services organization onthe West Coast was threatenedwith lawsuits and possible closureafter it diverted significant fundsfrom a government grant for thedevelopment of residential hous-ing, a new component unrelatedto the grant (and to the agenc y’smission). With help from an ETMconsultant, the executive directorand the deputy executive directorwere able to resign without fur-ther destabilizing the organiza-tion. The board hired an interimexecutive director, and together,they took on the task of divestingthe agency of its new housingprograms and re-committing toits core outpatient services andprograms. The interim focused onrebuilding staff morale andreconstituting a devastated man-agement team. The ETM consult-ant worked with both board andstaff to develop its future vision,which included becoming moredemographically diverse to servea broader range of minority com-munities. Just eight months afterthe organization had been on thebrink of failure, a talented, cultur-ally competent administrator wassuccessfully recruited to lead therenewed agency.

One of the first to obser ve that leadership transitions were pivotal times for nonprofit agencies was Tom Gilmore. See: Gilmore, T.1988. Increased Leadership Turnover:Problem or Opportunity. In Making a Leadership Change: How Organizations and Leaders Can Handle Leadership Transition Successfully. San Francisco: Jossey-Bass.

Others making similar points include:Altman, B. 1995. Trends in ExecutiveTransition: A Conversation with John Isaacson. Human Resource Management 34, No. 1.

Greene, G. May 3, 2001. Getting the Basics Right. The Chronicle of Philanthropy.

Farquhar, K. 1995. Special Issue on Leadership Transitions, Human Resource Management 34, No. 1.

Hesselbein, F. Fall 1997. The Challenge of Leadership Transition. Leader to Leader No. 6.

National Center for Nonprofit Boards. May1997. Crisis or Opportunity. Board Member 6, No. 5.

Allison, M. Summer 2002. Into the Fire: Boards and Executive Transitions. Nonprofit Management and Leadership 12, No. 4.

Maryland Association of NonprofitOrganizations. 2001. Executive TransitionCustomer Satisfaction Survey Results.Unpublished paper.

This may not include faith-affiliated nonprofits,which are not required to file a 990 reportwith the IRS. Sources: IRS ReturnTransaction File, 1990-1999; Stevenson, D.,Pollak, T.,Lampkin,L.,et al., State Nonprofit Almanac 1997; Nonprofit Almanac 1996- 1997 as updated by Independent Sector,1998.

Annie E. Casey Foundation. 2001. CommunityBased Organizations and ExecutiveLeadership: A Survey of Annie E. CaseyFoundation Grantees.

Wo l f re d,T. with Al l i s o n ,M . and Ma s a o ka ,J .1 9 9 9 .Leadership Lost. San Francisco:CompassPoint.

The impact of generational change on nonprofit organizations is only just beginning to be discussed. One of the first published discussions of the probable impact is:Joslyn, H. Oct.10, 2002. Employers, GrantMakers, and Policy Makers Need to FaceShrinking Nonprofit Labor Pool. Chronicle of Philanthropy. In addition, there is an unpub lished paper looking at gener ational change in the nonprofit sector sponsored by the Annie E. Casey Foundation in 2002.

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Endnotes 17

Burkhardt, J. and Adams, T. 2000. Improving Executive Tenure and Organizational Effectiveness: The Potential of ExecutiveTransition Capacity Building Services.Unpublished paper.

Smith, S. and Goldstein, M. 2001. Theory and Practice of Transition Management.Unpublished paper.

Executive transitions have been categorized byseveral authors including the following:Burkhardt, J. and Adams, T. 2000. Improving Executive Tenure and Organizational Effectiveness: The Potential of ExecutiveTransition Capacity Building Services.Unpublished paper.

Redington, E. and Vickers, D. 2001. Following the Leader: A Guide for Planning Founding Director Transition. Leadership Report No 1.Columbus: The Academy for Leadership and Governance.

Smith, S. and Goldstein, M. 2001. Theories and Practice of Transition Management.Unpublished paper.

Weitzman, M. Jalandoni, N. Lampkin, L., and Pollak, T. 2002. The New Nonprofit Almanac and Desk Reference. New York: Jossey Bass.73% of nonprofits reported under $500,000 in expenses, 43% have expenses under $100,000, and only 18% reported expenses over $1 million.

National Center for Nonprofit Boards. May1997. Crisis or Opportunity. Board Member 6, No. 5.

Prepare, Pivot, and Thrive

About the AuthorTom Adams is the president and seniormanaging partner of TransitionGuides, acollaboration of consulting firms special-izing in Executive TransitionManagement, and the project consultantfor the Annie E. Casey Foundation’sExecutive Transition Management andCapacity Building Initiative. Tom hasmore than 30 years experience servingnonprofit organizations as an executivedirector, senior manager of a nationalorganization, and as a consultant. Hiseleven years of research and practice inthe area of nonprofit executive transi-tions includes five years as direc tor ofthe Neighborhood ReinvestmentCorporation's Community DevelopmentLeadership Project and six years as a pri-vate consultant to nonprofit boards andfoundations.

AcknowledgmentsWe would like to thank the nonprofitorganizations’ leaders and executiveswho have participated in our workthrough their use of ETM services. Theircontributions to the development of thiscapacity building approach—along withthose of the participating consultants,interim executives, and foundationstaff—have strengthened, shaped, andrefined the ETM model.

We would also like to especially rec og-nize Tim Wolfred at CompassPoint, aswell as Don Tebbe, Denise Rothman-Hinden and Melody Thomas-Scott ofTransitionGuides, for their ongoing commitment to this field and for theirsupport in the development of this document.

CreditsJohn Beilenson of StrategicCommunications & Planning providededitorial support.

Jonathan Wajskol of Wajskol Inc.provided graphic design services.

TransitionGuides301 / 439 6635www.transitionguides.com

evelyn & walter HAAS, JR. fundThe Annie E. Casey Foundation