Succession Planning Chiesman Center for Democracy Presented by Sandra McNeely, VP, CAE Abbey Group, Ltd. March 8, 2011

Session Objectives Define and understand the significance of succession planning and its value to the organization Provide a process for succession planning ©2011, Abbey Group, Ltd.

What is Succession Planning? What are the goals of succession planning? Who should participate in succession planning? When is a “succession plan” complete? Big Brothers Big Sisters of the Black Hills ©2011, Abbey Group, Ltd.

Succession Planning Succession Planning is a systematic process of planning for the development and placement of people in senior management positions. By identifying leadership talent early and cultivating it through training, mentoring, and job rotation, the organization can establish, maintain and nurture a pipeline of leadership talent – the goal of succession planning. Jodi Lehner, The World Bank Group ©2011, Abbey Group, Ltd.

Succession Planning A plan A policy of internal promotion Training Mentoring A variation in on the job experience A conscious effort to nurture those in the organization ©2011, Abbey Group, Ltd.

Succession Planning Succession planning is a key responsibility of incumbent leadership. Max Dupree, author of “Leadership Is an Art” ©2011, Abbey Group, Ltd.

Succession Planning Responsibility to plan, mentor, and nurture falls to those that will be replaced Executive leadership (employees) Who else? Board of Directors ©2011, Abbey Group, Ltd.

Good Governance: Role of the Nonprofit Board Guidance Oversight Monitoring Behavior Management Systems, Inc. ©2011, Abbey Group, Ltd.

Guidance Determine vision, mission and strategic direction for the organization Establish strategic goals and a process to evaluate progress Advise and guide the fund development process through strategic planning ©2011, Abbey Group, Ltd.

Oversight Oversee the organization including setting the organization’s policies. Assure the integrity and accountability of the organization from a legal and financial standpoint in conjunction with the mission, bylaws and articles of incorporation. Oversee the efficient and cost-effective operation by annually auditing and annually approving the budget, and assessing financial performance in relation to the budget regularly. ©2011, Abbey Group, Ltd.

Monitoring Monitor performance towards achievement of the goals and compliance with policy: Board performance Committee performance Management performance ©2011, Abbey Group, Ltd.

Board/Staff Relationship Hire, monitor and evaluate performance of the chief staff executive Conduct a formal evaluation each year Set guidelines and policies to set limitations for management The chief staff executive manages the staff ©2011, Abbey Group, Ltd.

Managing the Chief Executive Review and update the position description Develop a performance appraisal process Set measurable performance goals and monitor Provide guidance and training Define authority and limitations Implement a succession plan ©2011, Abbey Group, Ltd.

Reasons Key Staff Succession Planning Does Not Happen: Fear the successor may outshine you Perceived poor candidate pool Lack of a long-term vision and the importance for planning for future staffing Incapability – not a skill of incumbent Time – too busy running the organization Wessleman ©2011, Abbey Group, Ltd.

Elements of the Succession Plan Vision Mission Policies Care Net Pregnancy Resource Center ©2011, Abbey Group, Ltd.

Vision of Your Organization Vision: Future State Examples: Club for Boys: Help all boys meet their needs today so they can fulfill their potential tomorrow SANI-T [Society for the Advancement of Native Interests-Today] : To create a region offering fantastic opportunities, pervasive justice, and meaningful lives for all people. ©2011, Abbey Group, Ltd.

Vision Qualities of a Good Vision Statement Presents where we want to go. Easy to read and understand. Captures the desired spirit of an organization. Dynamically incomplete so people can fill in the pieces. Compact - can be used to guide decision-making. Gets people’s attention. Describes a preferred and meaningful future state. Can be felt/experienced/gives people goose bumps when they hear it. Gives people a better understanding of how their individual purpose could be realized in the group. Provides a motivating force, even in hard times. Is perceived as achievable and at the same time is challenging and compelling, stretching us beyond what is comfortable. ~From Organizational Vision, Values and Mission by Cynthia D. Scott ©2011, Abbey Group, Ltd.

Mission Statement An effective mission statement addresses the following points: A broad description of what your organization is and what it does With whom/for whom do we do it What is our distinctive competence (How do we do it differently, better, more effectively than the competition)? Why we do it, what is the result? An effective mission statement is generally 2 – 3 sentences. ©2011, Abbey Group, Ltd.

Mission CASA (Court Appointed Special Advocate) of the Northern Hills: Program seeks to promote and protect the best interests of abused and neglected children involved in court proceedings through the advocacy efforts of trained volunteers. Sturgis Center for the Arts/My Sister’s Closet: to provide an environment of learning and appreciation of the arts. Volunteers of America, Dakotas: a nonprofit, spiritually based organization that reaches out to empower people of all ages to become healthier, self-sufficient, productive members of their communities. Youth and Family Services: our mission is to support children and their families in being capable, caring and contributing members of the community. ©2011, Abbey Group, Ltd.

Values Values: beliefs as to what is important and what is not, what is right and what is wrong, what makes for a good life, success, etc. CASA of the Northern Hills ©2011, Abbey Group, Ltd.

Values Exercise Basic Rules for Developing Organizational Values*: Your organization’s values should directly support your strategic priorities They should be described as behaviors They should be simple and specific They should be arrived at through a process of enrollment List values: Worksheet #1 *Reinventing Strategy: Willie Pietersen ©2011, Abbey Group, Ltd.

Strategic Planning Steps Determine who to include on the planning team Gather market data Clarify your strategic position Set measurable goals Put the guiding principles of your planning, including relevant market data, measurable goals, and strategic position, into a written policy to be used as a guide as you plan. ©2011, Abbey Group, Ltd.

Implementing the Plan: Tools for the Process Identify resources required to attain goals Create a review process (that works at regular intervals) that analyzes both successes and challenges throughout implementation Develop a performance reward system tied to success Communicate successes and challenges throughout leadership team at regular intervals ©2011, Abbey Group, Ltd.

Succession Planning – Components of the Strategic Plan Goal Statement: Implement a Succession Plan for Key Managers Determine composition of key management succession planning team Worksheet #2 Action Items Who Timeline   ©2011, Abbey Group, Ltd.

Communicating the Plan Identify key stakeholders who must know about transition Determine best method of communication with each group of stakeholders Develop the message(s) Determine timing of delivery Finalize and Implement the plan ©2011, Abbey Group, Ltd.

Evaluation and troubleshooting Working with your Succession Plan after implementation has begun Evaluation and troubleshooting

A Succession Readiness Checklist A strategic plan is in place with goals and objectives in the near term (up to 3 years), including objectives for leadership development. The board evaluates the executive director annually on general performance and achievement of strategic goals. Wolfred, Tom (2008). Compass Point Nonprofit Services. Building Leaderful Organizations. Baltimore: The Annie E. Casey Foundation. ©2011, Abbey Group, Ltd.

A Succession Readiness Checklist The board, based on its annual self-evaluations, is satisfactorily performing its major governance jobs–financial oversight, executive support and oversight, policy development, and strategic planning. The executive’s direct reports, based on annual evaluations, are judged as solidly skilled for their positions. Wolfred, Tom (2008). Compass Point Nonprofit Services. Building Leaderful Organizations. Baltimore: The Annie E. Casey Foundation. ©2011, Abbey Group, Ltd.

A Succession Readiness Checklist The top management cohort, as a high performing team: Has a solid team culture in place in which members support one another and can reach decisions as a group efficiently and harmoniously. Shares leadership of the organization with the executive in having significant input to all major agency decisions. Can lead the organization in the absence of the executive Has authority to make and carry out decisions within their respective areas of responsibility. Wolfred, Tom (2008). Compass Point Nonprofit Services. Building Leaderful Organizations. Baltimore: The Annie E. Casey Foundation. ©2011, Abbey Group, Ltd.

A Succession Readiness Checklist Financial systems meet industry standards. Financial reports are up to date and provide the data needed by the board and senior managers responsible for the agency’s financial strength and viability. Operational manuals exist for key administrative systems and are easily accessible and up to date. Top program staff have documented their key activities in writing and have identified another staff person who can carry their duties in an emergency. Wolfred, Tom (2008). Compass Point Nonprofit Services. Building Leaderful Organizations. Baltimore: The Annie E. Casey Foundation. ©2011, Abbey Group, Ltd.

A Succession Readiness Checklist Operational manuals exist for key administrative systems and are easily accessible and up to date. Top program staff have documented their key activities in writing and have identified another staff person who can carry their duties in an emergency. Wolfred, Tom (2008). Compass Point Nonprofit Services. Building Leaderful Organizations. Baltimore: The Annie E. Casey Foundation. ©2011, Abbey Group, Ltd.

Moving forward with your succession plan Application

Successor Selection Identify Skills Identify Responsibilities Know which positions are Key Positions and require a plan Determine how skills and responsibilities will be measured Write a policy that reflects what has been identified and communicate it to the organization Consider appointing an interim guide that is already an associate of the organization in case of an emergency ©2011, Abbey Group, Ltd.

Successor Selection and Mentoring The future direction and stated goals provide a framework for identifying the skill sets required of future leadership. Identify key staff positions to include in the succession planning process. Review general skill sets and competencies required for successors. Identify skill sets and competencies required for successors in light of key long term business goals and capture on appropriate form. Worksheet #3 ©2011, Abbey Group, Ltd.

Define the Role of Key Managers Identify current roles of key managers Identify future roles of key managers as a result of the succession plan and business plan elements Worksheet #4 Wellspring ©2011, Abbey Group, Ltd.

Key Staff Positions and Required Skills Key Staff Position Title Skills (today) Skills (Future) ©2011, Abbey Group, Ltd.

Personal Succession Plan Answer the following questions based on the assumption that you may leave the association before the end of the year: My critical job responsibilities include: Staff members who know/need to know how to do the major components of my job include: (Who, What) Stakeholders who would need to know about the transition include: (Who, What They Need to Know, Best Method of Communication) Current employees who could be potential candidates for my position include: (Who, Key Skills They Possess, Key Skills to Develop) Identify other positions in the national/state association of interest to you for future employment purposes: (Position, Key Skills You Possess, Key Skills to Develop) List any development/training opportunities that would help you prepare for a different position in the association: Provide suggestions for the succession planning process in your association: Worksheet #5 ©2011, Abbey Group, Ltd.

Successor Performance Development Plan Set measurable goals Set timelines Assign mentor ©2011, Abbey Group, Ltd.

Mentoring Develop performance goals Goals should reflect the mission and vision of the organization, even though they are for an individual Example: Write Individual Development Plans (IDPs) The process of clarifying the development gap between what possible successors can already do and what they need to be able to do in order to qualify for advancement Besides training and education, also use on-the-job work assignments to close developmental gaps and meet succession needs. A hybrid of a learning contract, performance contract, and career planning form. IDPs are best paired with an internal promotion policy, instituted organization-wide. Rothwell, William J. (2001, 4th Ed.) Effective Succession Planning. New York: American Management Association. ©2011, Abbey Group, Ltd.

Successor Performance Plan Goal 1 Action Items   Goal 2 Goal 3 Goal 4 Worksheet #6 ©2011, Abbey Group, Ltd.

Communicating the Succession Plan Formalize the succession plan and succession communication plan Design the succession transition (timeline and action steps) from the current leadership to the next Prepare the succession communication plan ©2011, Abbey Group, Ltd.

Communicating the Succession Plan Identify the stakeholders who must know about the transition Determine best method to communicate with each group of stakeholders Develop the message(s) Determine timing of delivery Worksheet #7 ©2011, Abbey Group, Ltd.

Some Common Pitfalls (and how to avoid them) Examples of how to troubleshoot implementation of succession planning Some Common Pitfalls (and how to avoid them)

Trouble shooting: Manager-determined Successors The gambler’s fallacy: The belief that if deviations from expected behavior are observed in repeated random independent trials of some random process, then future deviations in the opposite direction are more likely.(1) (Betting on heads when tails came up the last 20 tosses, when the probability of heads is still ½) Managers may be replaced after repeatedly making the same error and creating mounting losses for the organization. This could call into question logic by which successors were selected. If succession occurs due to lack of performance, succession plan should be re-examined for familiar pitfalls.(2) (1) Lehrer, Jonah (2009). How We Decide. New York: Houghton Mifflin Harcourt. P.66 (2) Rothwell, William J. (2001, 4th Ed.) Effective Succession Planning. New York: American Management Association. ©2011, Abbey Group, Ltd.

Solutions What to do when leadership’s strategic logic breaks down, and the succession plan will come into play because of it? An important step in succession planning: Identify, in advance (and during planning): Which positions are Key Positions Work requirements or competencies for key positions Identify measurement for how individual performance should be appraised Put policies in writing! These steps will allow for the re-evaluation of the succession plan in the event of management failure Rothwell, William J. (2001, 4th Ed.) Effective Succession Planning. New York: American Management Association. ©2011, Abbey Group, Ltd.

Falling Through the Cracks: What Is the Board’s Role? Board roles differ in strategic leader development, emergency succession planning, and departure-defined succession planning. (These are all different kinds of succession planning) The board should provide feedback on succession plan and policy drafts Plan is presented to board for review and adoption Develop (written) board procedures to manage an executive transition in the event of a permanent absence Wolfred, Tom (2008). Compass Point Nonprofit Services. Building Leaderful Organizations. Baltimore: The Annie E. Casey Foundation. ©2011, Abbey Group, Ltd.

Falling Through the Cracks: What Is the Board’s Role? The board needs its own succession plan, as does the executive team. Does the board have term limits? Board committee to draft board’s own succession plan, which the board will ratify. Policies on the board parting at the same time as an Executive Director? Board as a solid bridge between directors. The board is the ultimate guardian of the agency’s mission and operations, and employer of the executive director. Wolfred, Tom (2008). Compass Point Nonprofit Services. Building Leaderful Organizations. Baltimore: The Annie E. Casey Foundation. ©2011, Abbey Group, Ltd.

Replacing the Irreplaceable: The Original Executive Director Organizations may have additional challenges when they are planning the succession of their first and only executive director. Possible preemptive measures: Appoint a veteran affiliate of the organization to take over for a stated period of time between current executive director and the next, and to head up the selection of the replacement. Communicate succession plans well in advance to avoid shock among staff, supporters, and clients, and to allow time for further communication about the succession between these groups. ©2011, Abbey Group, Ltd.

Replacing the Irreplaceable: The Original Executive Director Possible preemptive measures: Have current Executive Director work with a third party to clearly define the organization’s agenda for its next permanent ED. Continue relationship between board and ED in developing written policies that support transition. Wolfred, Tom (2008). Compass Point Nonprofit Services. Building Leaderful Organizations. Baltimore: The Annie E. Casey Foundation. ©2011, Abbey Group, Ltd.

Replacing the Irreplaceable Generally, there are no term limits for executive leadership: how do they know when it’s time to leave? Career coaching is a part of executive development: is this position still what you are looking for? Planning for next stages, like retirement. Is this still the right person for the position? Board’s annual performance review Performance reviews can be delicate, another reason why a relationship based on candor and respect is important between the board and the executive. Board can support itself with clearly written policies that are consistently executed. Wolfred, Tom (2008). Compass Point Nonprofit Services. Building Leaderful Organizations. Baltimore: The Annie E. Casey Foundation. ©2011, Abbey Group, Ltd.

For-Profit v. Non-Profit Succession Planning CEO/Executive director “raiding”– less likely in non-profit than for-profit. Succession planning has been emphasized less among all non-profits, even ones that operate in the same sector as for-profits, such as health care providers. Tenure expectations differ (for-profit CEOs expected to move on or be replaced more frequently) Board concerns prioritized differently Biggs, Errol L. “CEO Succession Planning: an emerging challenge for boards of directors.” Academy Management Executive, 2004, Vol. 18 No. 1, p 105 ©2011, Abbey Group, Ltd.

Profit v. Non-Profit Succession Planning National Association of Corporate Directors survey of boards, and what their top concerns were. Public Companies Non-Profit Healthcare Corporate Performance (28%) CEO Succession (25%) Strategic Planning (15%) Corporate Governance (10%) Board – CEO relations (6%) Financial Survival (27%) Strategic planning (25%) Conflict of interest among board members (17%) Quality-of-care oversight (15%) Board evaluation and education (10%) ©2011, Abbey Group, Ltd.

Do non-profits need a succession plan less than for-profits? Since the vision of an organization in either sector is different, as is the vision of its employees, what can be borrowed from the private sector and what cannot? Preparedness Financial stability Volunteers of America, Dakotas ©2011, Abbey Group, Ltd.

Implementation in your organization Steps for any organization to take, from the beginning: What is your immediate reaction to the possibility of key management succession planning in your organization? List potential positive outcomes List potential negative outcomes ©2011, Abbey Group, Ltd.

Value of Succession Planning List some of the potential positive outcomes of key management succession in our association: List some of the potential challenges/issues to address when implementing key management succession planning in our association: List some suggested approaches for addressing the challenges/issues potentially associated with key management succession planning: Worksheet #8 ©2011, Abbey Group, Ltd.

Implementation Different types of succession plans: Strategic Leader Development Emergency Succession Plan Departure-Defined Succession Plan Determine which positions in the organization require a succession plan Write clear job descriptions, including competencies and responsibilities, of those positions Identify natural successors, and evaluate where gaps occur in their experience or skills Create Mentoring System that uses formal elements and informal elements Seek out on-the-job experiences for possible successors ©2011, Abbey Group, Ltd.

Implementation Identify and reinforce rules for board behavior and succession Succession of board members Timing board changes and executive changes Reinforce board evaluations of itself and executive (respect and candor) If appropriate, identify a third party to act as an automatic interim director in the case of an emergency transition in leadership ©2011, Abbey Group, Ltd.

Next Steps: List 3 specific steps you will need to take to begin implementing a succession plan List 2 potential obstacles you may face List 2 solutions/approaches to overcome potential obstacles The Journey Museum ©2011, Abbey Group, Ltd.