Leadership Transition: Navigating Succession, Interim Leadership and Risk

Last year, Imagine Canada reported findings from its HR Check Up survey and of the hundreds of Canadian charities and nonprofits that responded, they reported that 74% of organizations don’t have a written succession plan.

This means that there are a huge number of Boards and leaders that are unnecessarily exposing their organizations to significant risk.

Every Board knows that it’s not realistic, or even desirable, for a CEO to stay forever. And every leader will acknowledge that they don’t plan to work forever. Yet both groups can struggle to pragmatically address this reality with a written plan.

Thinking about succession planning can create angst for a Board that doesn’t want to consider their CEO moving on or retiring. And when they’re dealing with immediate real issues, this type of hypothetical future preparation can feel less important.

Succession is also a sensitive topic for CEO’s. The high levels of commitment and accountability can be a double edged sword when it comes to putting themselves first. Succession planning can also force leaders to think about what comes after their working life (in the case of a retirement), which can be scary in a role where one’s personal identity may be deeply entwined with professional identity. For Boards, succession can be a difficult and delicate topic to raise because they don’t want to seem to be pushing a leader out the door, either towards retirement or if the incumbent doesn’t have the right skills or knowledge to lead ambitious strategic change for the organization.

Succession planning as risk mitigation

However, if the conversation is reframed, at minimum we can think about succession planning as risk mitigation.

By, at the very least, having an emergency succession plan in place, it ensures that the organization can continue operating smoothly if a CEO is suddenly unavailable due to illness or departure, or for any other reason. An emergency succession plan will ensure that the Board and staff leadership are clear on what needs to be done, who is responsible, and how and where to access key information.

Think of it as a ‘break glass in case of emergency’ safeguard.

Although this might feel like a heavy lift at first, once an emergency succession plan is in place, it’s reasonably easy for staff and Board to review and update it on a regular basis. This is something that can be written into the Board and CEO workplan, and added to the risk register.

“Having a properly documented succession plan ensured that we felt prepared for when our Executive Director resigned”, noted Judith Moses, Chair of the Board of Directors with Anishnawbe Health Foundation in Toronto. “KCI supported us in developing our succession plan. It gave us a clear roadmap, and we had the information we needed to efficiently and quickly move forward, which in turn reduced risk for the organization.”

Succession planning as a strategic opportunity

However, succession planning isn’t just for emergencies. It’s also an important strategic opportunity for leadership transition, and one that can be important a time of transformative change.

As Executive Search consultants, we often see Boards jump straight into CEO recruitment without taking time to pause and consider strategic opportunities. Usually this is because the clock is ticking on departure of the CEO, and they worry about continuity of business.

But by taking time to pause and align the transition with the strategic plan, organizations can instead capitalize on leadership changes.

We encourage Boards to think about what opportunities and challenges they see for the future, and what skills, experience, and behaviours a new CEO will require to help make this envisioned future a reality. But these are not easy questions to answer, and sometimes Boards benefit from external perspectives and guidance.

Different but Similar: Succession planning for Boards

The concepts of succession planning can and should be applied to Board leadership roles, both for executive roles and for committee chair positions.

Boards can use succession planning as an opportunity to look to the future to ensure that they have the right skills, knowledge and professional and lived experience on the Board to insulate the organization against risks and maximize the organization’s ability to reach its full potential. This means intentionally recruiting, training, coaching, and preparing volunteers to take on critical Board leadership roles.

Proactive boards integrate succession planning into their regular agenda. By conducting board-wide skills assessments, consulting experts to align competencies with future business risks, and analyzing directors’ contributions and expertise, these boards have systems to develop board knowledge and skills, and to help underperforming directors improve.

They also have clear rules and limits for board tenure, and know when directors will be cycling off the Board and various committees. This allows them to identify potential replacements years in advance, and help them to prepare for future leadership roles.

This proactive strategy is not merely about filling positions; it’s about cultivating a pipeline of volunteer talent that aligns with the organization’s values, objectives, and opportunities. Smart organizations embed leadership development (both staff and volunteer) into core organizational systems, so the organization anticipates and is ready for inevitable change.

Benefits of an Interim CEO

At some point every organization will go through a leadership transition. At that point, it can be valuable for a Board to think about what comes next, and whether it makes sense to move straight into hiring the new leader.

In an emergency situation, or when there will be a gap between CEOs, an Interim CEO ensures that the organization is running smoothly on the day-to-day, and that staff are well supported. Interim CEO’s also provide time and space to undertake the CEO Search without being rushed.

Even when a Board has a long runway, such as in the case of planned retirement, Boards can benefit from fresh perspectives. Bringing in an experienced CEO to serve for 4-6 months allows the opportunity for an experienced professional to take stock, assess, analyze, and report back to the Board about what’s working well, what’s not, and what’s needed.

This in turn can help the Board to better understand what competencies, experience, and behaviours are needed in the next CEO, which improves the likelihood of the Board hiring the ‘right’ next CEO.

As well, having the ‘breathing room’ to pause, reflect, and strategize will allow the Board to consider whether there are strategic opportunities that should be considered.

“Not all charities are intended to live on forever in their current form, and there are times when the better option is to consider merging or winding down,” explained Ellie Rusonik, Senior Vice President & Lead, KCI Search + Talent. “In these circumstances, an external Interim CEO can provide seasoned leadership to guide the organization through a thoughtful transition toward its next chapter.”

Further, an Interim CEO can be tasked with undertaking any significant or difficult changes that need to be made. This allows to the new permanent CEO to ‘start fresh’ without the baggage of tough changes, and it creates space and time for staff to digest the changes. This is especially helpful if staff are resistant to change, or the departing CEO was well liked and respected, and where change seems disloyal.

Boards need to consider what would most benefit their particular organization, situation, and timing. We also encourage careful thought about immediate short-term benefits vs. mid-term and longer-term benefits.

Basically, there are three options: promote an internal staff leader temporarily, shift a Board member into the role, or appoint an external leader temporarily. (And yes, we have seen hybrid combos work as well.) Below we’ll outline the pros and cons of these different options.

Internal Staff Leader as Interim CEO

Some organizations temporarily promote an internal leader as Interim CEO, and there are many benefits to this, mostly short-term in duration. In terms of drawbacks, there are also several, and most are mid-term challenges.

Pros:

• Less of a learning curve: Internal candidates know the missions and operations of the organization.
• Depending on team size, they also usually know all of the staff in the organization, and hopefully are trusted and respected by all.
• Depending on their role, they may have strong relationships with the Board, with donors, and/or with external partners.
• On the surface, appears to be a less cost option because not adding a CEO salary (though usually you would provide a stipend for the duration of the Interim CEO period.)
• Provides a senior leader with the opportunity to get some CEO experience.
• Board members and possibly staff may feel more comfortable and confident with this choice as it represents the least amount of change to the status quo.

Cons:

• Most often organizations don’t backfill the Internal Interim CEO’s original leadership role, meaning that they are doing two jobs at the same time. This can lead to burnout. While ‘stepping up’ might be sustainable for a couple of weeks, a proper CEO search takes several months, plus CEO candidates are often contractually required to give 2-3 months’ notice of resignation. This means your Interim CEO is likely to be in the position for at least 6 months.
• Change management can be more challenging for an Internal Staff Interim CEO because they tend to be less objective and also less willing to push through internal resistance due to previous relationships.
• As well, there can be lingering effects on peer relationships if they have to deal with big changes or major staff issues during the Interim period.
• If the Internal Interim CEO hasn’t been a CEO previously, this can be a challenging learning environment to be learning Board-relationship navigation, with potentially less efficiency and effectiveness as a result.
  • This can also result in more time and help needed from Board members, particularly the Chair but often also the Treasurer or other committee chairs, to coach, manage, and monitor someone new to the CEO chair.
• It can also be challenging if there are internal politics or dynamics with other senior leaders, particularly if more than one person is interested in the Interim or permanent CEO role.
• Many external candidates will not compete for a role if an internal Interim CEO is applying for the role, as there can be a perception of a predetermined outcome.
• And if the internal Interim CEO doesn’t get the permanent job, sometimes this can lead to retention challenges.

Board member as Interim CEO

What about having a Board member step into the Interim CEO role? There are a few benefits, mostly shorter term, but also some potential concerns and unintended consequences in both short and mid-term.

Pros:

• Some of the short-term benefits are the same as a staff Interim CEO though due to their governance role they are less likely to have detailed operational knowledge.
• Depending on how involved senior staff are with the Board, and vice versa, they may have strong relationships and trust with the staff team.
• This solution does not pull staff away from their ‘day jobs’, so may be less likely to lead to burnout.
• May be willing to do the work for free.

Cons:

• When someone whose role was oversight, insight and foresight is suddenly focused on operational management issues, it can be tricky for senior staff who are used to working with this person as a Board volunteer.
  • One major unintended consequence is that most top CEO candidates tend to be quite concerned when they see a Board member serving as Interim CEO because it signals that the Board may tend to get over involved operationally.
• If the Board member lacks NFP organizational leadership experience, they could inadvertently cause some problems if they don’t understand legislation, regulations, and best practices for the work that is performed by the organization. This may be less risky in a larger organization where senior staff maintain operational leadership roles.
• Ideally, in terms of good governance and managing conflict of interest, this situation can be fraught because a Board member serving in an Interim CEO role is technically reporting to the body on which they serve as a Board Director. So they need to step off the Board, ideally permanently.
  • Which means you lose a great Board member! (Because it’s usually the best Board members who take on these types of roles.)
  • But even if they step off the Board, they are then ‘reporting to’ their former peers, who can hesitate to raise concerns with performance because of the previous relationship.
• And if the Board member only steps aside temporarily, when they come back on the Board it can be challenging for the new CEO because the staff reported to the Board member as Interim CEO. In these situations, Board members sometimes also struggle to stay out of operations, particularly if they don’t agree with how the new CEO is doing something.

External Candidate as Interim CEO

There can be many benefits to hiring an external candidate as an Interim CEO, particularly when you hire one with previous relevant CEO experience. These benefits are mostly mid- and longer-term, whereas there is clearly a shorter-term learning curve. And experienced Interim CEO’s will be a more expensive option typically, though this can be mitigated by decreasing the Interim CEO role to 60-80% FTE.

Pros:  Most pros are mid- and longer-term benefits

• Ideally they bring previous CEO experience in a similar or relevant organization.
• Able to objectively assess and report on operational and team strengths, gaps, and opportunities, proposing and beginning to address potential solutions.
• Potentially more able to lead major changes without worrying about longer-term internal relationship impact.
  • In this way, they can ‘clear the deck’ for your new permanent CEO so they can move forward without being burdened by ‘wearing’ the tough decisions and changes.
• Allows internal candidates to be considered without having to worry about politics and search candidate impact of appointing an internal team member as the Interim CEO.
• Positive signal to strong CEO candidates that the Board values professional expertise and experience.

Cons:

• There is a bigger learning curve to learn the mission and operations of the organization.
• Relationships with staff and Board need to be developed and navigated quickly, but the reality is that trust takes time to build.
• Usually doesn’t make sense for external partners or donors to engage deeply with someone who will leave in 6 months, though ideally senior staff can continue to hold these relationships.
• In terms of immediate expenses, can be a more expensive option.

How to find an Interim CEO?

You can also work through your Board and Staff leadership networks, ideally finding someone who is a professional Interim Executive or a recently retired executive, or perhaps a past Board member if they have suitable operational and leadership expertise.

Some Executive Search firms also offer these services. For instance, KCI Search + Talent has an Interim Practice to help our clients find and retain part- or full-time experienced Interim CEO’s and Interim Executives at the C-suite/VP level.

“Hiring a permanent ED takes time and needs to be a thoughtful process. To support this, KCI suggested that AHF hire an Interim ED. Our Board was skeptical at first of the value an Interim ED would bring,” explained Stephen Scott, past-Chair of the Board at Anishnawbe Health Foundation in Toronto. “But after KCI introduced us to several Interim EDs with their extensive experience across similar roles, we opened up to the idea.”

Scott went on to add that “upon interviewing our preferred Interim ED candidate, the Board instantly recognized the sophisticated and professional toolkit that this Interim ED would provide, giving our Board the confidence to hire her.  This Interim ED was exceptional, quickly picking up the day-to-day activities of the organization, addressing the needs of the staff, and incorporating best practices into our small organization.”

As well, Scott noted that “our Interim ED also helped us prepare for and onboard our new permanent Executive Director, allowing her to hit the ground running.”

If you’re a Board member or CEO, we hope we’ve made the case for putting succession planning on the Board agenda and keeping an up-to-date succession plan in place. But succession planning is about more than preparing for an unexpected departure. It is an opportunity to think deliberately about the organization’s future and the leadership it will need to get there. Taking the time and space to consider those needs and options, perhaps with the support of an experienced Interim CEO, can provide valuable perspective before moving into a CEO search. The best CEO search may begin not with a search, but with taking the time to understand what the organization will need next.

Involving the Retiring CEO in Transition Planning

Transitions due to retirement can, on the surface, appear easier to manage than those resulting from the sudden departure or dismissal a CEO. But the longer a chief executive has been in place, or the more significant their impact, the harder it can be for a new leader to succeed them.

One of the most challenging aspects of this can be the (very human) tendency of leaders unconsciously want to control what happens after they leave. This comes from a place of caring deeply about the organization’s success and future, and it makes sense given the energy and effort they’ve invested.

By engaging the chief executive in discussions about their legacy, by proactively identifying potential areas for growth and change, and by co-creating a transition plan together, it can help pave the way for a smoother transition. And of course, CEO’s also have to learn to ‘let go’, and recognize that it is the Board that is accountable for the future direction of the organization, and for selecting the new CEO.

Case study: Two Wheel View, Calgary, Alberta

Contributed by Les Kende and Heather Beck, Board members at Two Wheel View

Two Wheel View is an organization that has served the youth of Calgary for 25 years, and had a longstanding executive director, who grew in her career over 15 years with us.  When she resigned, several of the board members became deeply involved in the transition, taking on more substantive and somewhat more operational roles. With this, we discovered that our internal systems were defined and best suited to the outgoing ED’s leadership style. We recognized that an incoming ED would be subject to comparison to the past ED, and this was an opportunity to redefine the role, responsibilities, and expectations of a new ED.

As a board, we reviewed what the organization needed now, and what it would need to elevate our impact in the years to come. What we needed now was to stabilize the organization, review internal systems and professionally manage the substantial organizational change resulting from this long-tenured (and loved!) outgoing ED.

As we navigate our way into a new leadership style with the incoming Interim ED, we (the board) are focused on setting up the organization’s internal systems to support our mission-driven staff. Having an Interim ED has helped the board focus on what’s possible in a timeline that’s associated with a defined tenure. The work the organization is doing now is in a container, and the gap from the past leadership style is clear.

Amongst the unexpected benefits of engaging an Interim ED was that their experience is supportive of improving our board practices. Part of what came apparent through the whole process was that we, as a board, needed to formulate a near to medium term strategic plan to inform the decision of what we were looking for in our Interim ED and the plan that individual would be expected to execute. As expected, a benefit of an experienced Interim ED has been to structure work plans for the organization. We had expected that the Interim ED would focus on the staff side of implementation. We had not expected so much insight and support in formulating the workplans for the board, its committees, and subcommittees. The Interim ED is taking a systems approach to the strategic plan implementation that is truly informing the actions of the board.

Two Wheel View’s board would recommend having an Interim ED after a long tenure of an outgoing ED, or other significant organizational upheaval. An Interim ED allows for the focused implementation of change, a specific timeline to work within as the board reevaluates what significant changes are needed to support the mission moving forward. As new strategies come into place, an Interim ED gives the organization the stewardship required without the board moving into operations, keeping the areas of responsibility of staff, ED, and board intact. As we navigate towards a permanent ED, having clarity on accountabilities of these three functions will help us achieve our mission of using the bicycle to create belonging, connections and expand horizons in the youth of Calgary.