Preparing for Successful Executive Transitions LeadingAge New Jersey May 29 th, 2015 CLAconnect.com
Objectives: Preparing for the change of leadership Understand the impact of Executive transitions on an organization and the role of the Board in preparing for them. Learn the steps to develop goals, strategic directions and expectations to prepare for successful leadership transitions Explore the elements of succession planning, internal candidate development and the option of Executive Search 2
What we need to understand. Preparing for a new CEO it s a big change Consider the role of Governance with new leadership Should we look inside or out? Strategic Plan before or after CEO selection? Understand the risks and challenges How to Plan for Success 3
Defining the Terms Succession Planning Process that ensures future leadership needs are met Includes identification and development of leadership skills in those with future leadership potential Executive Transition Process when incumbent departs and successor is hired and integrated Executive Search Process of identifying, recruiting and hiring a candidate to fill an executive position Source: Friends Services for the Aging Ensuring Successful Executive Transitions in Quaker Senior Living Organizations 4
Are We Ready To Begin the Process Mission, Vision and Values Become the Guiding Principles A Strategic Plan a clear direction, goals, objectives, action plans, measures of success An Executive Succession Plan An Emergency Succession Plan A Healthy Organization A Current Position Description An Effective Management Team An Engaged Board Source: Friends Services for the Aging Ensuring Successful Executive Transitions in Quaker Senior Living Organizations 5
The Basics of Governance The Board has the overall responsibility for directing the activity and insuring the success of the organization and its facilities. The Board has both legal and fiduciary responsibility for the corporation. The Board must represent the residents who are served by the organization, the employees who provide their care and the individuals and organizations who finance and regulate the programs. The Board is both limited and directed by the Articles of Incorporation, bylaws and applicable regulations. The Board works closely together, under the direction of the Chair, to represent the mission and interests of the organization. Members serve on committees, task forces and are on occasion asked to represent the organization in their respective churches, community activities, fraternal and social affiliations. Board members will work with staff and on occasion residents, always representing and supporting the organization. Board members should be aware of any potential conflict of interest between their personal or professional position and their responsibility as a Director. declare the potential conflict to the Board Chair and abstain from voting on any matter where a potential conflict exists. 6
10 Key Responsibilities of Governance Determining the organization s mission and purpose, and periodically reviewing and revising the mission statement as appropriate. Selecting, supporting and evaluating the CEO. Ensuring effective organizational planning. Ensuring adequate resources within the organization. Managing the resources effectively. Determining and monitoring the organization s programs, services and policies. Promoting the organization within the local communities and throughout the service area; enhancing the organization s public image. Receiving and acting upon recommendations from Committees. Assisting in fund raising on behalf of the organization through solicitation and personal contributions. Assessing the performance of the Board. 7
10 Key Responsibilities of the Chair Understand the organization Know the chair s responsibilities and authority Set goals and expectations for the board Create a safe environment for decision making Build a working culture Mange the board structure Cultivate future leadership Mange meetings well Communicate with the board through an effective information system Maintain a productive relationship with the chief executive 8
Principles for Good Governance and Ethical Practice Principle # 13 The board should hire, oversee, and annually evaluate the performance of the chief executive officer of the organization, and should conduct such an evaluation prior to any change in that officer s compensation 9
Is Succession Planning your Option? 10
Succession Management and Planning The purpose of Succession Planning is to create and maintain a solid foundation of high performing leadership. The elements of Succession Planning include: Building a leadership team with depth, rather than simply developing capable individuals. Aligning the development and succession of leadership with the organization s strategic imperatives. Centrally managing the identification and development of talent for succession through supporting levels of management, from first line supervisor through the CEO. Rigorously assessing annually the leadership performance of all executives, managers and supervisors against key competencies essential for the attainment of the organization s vision. Once identified, the Board will create the development plan. The plan, valid until the next assessment cycle, should include challenging assignments, rotation among programs and services, formal training, mentoring and coaching.
Expected Outcomes of Succession Planning The result will be a productive leadership culture: one that provides opportunities for professional growth, development, and challenging assignments in which an individual can demonstrate high levels of performance and ability and can make productive contributions to the organizational goals. Creating an organizational system to select and develop certain employees to fill key leadership positions is critical to the future success of all continuing care programs. With the many and varied concerns created by the economy, for many, leadership succession has been superseded by other management priorities. Having a succession management plan and supporting process is becoming increasingly important.
Fit, Readiness and Development Done correctly, succession management is a straightforward, action oriented process that enables management to assess the capability and talent of team members and determine three things: Organizational fit, given the future direction and challenges of the organization. Readiness for advancement. Development needs to ensure a viable pipeline of leadership talent.
Much more than a replacement process Succession management is an opportunity to build overall leadership capability, typically targeting senior management positions and roles critical to the long term strategic and economic health of the organization.
Assess Fit The first step in assessing the fit of internal (and external candidates) is to identify the targeted positions and delineate the requirements for each position. Consider the following: Key Accountabilities and Responsibilities. focus on the specific outcomes (accountabilities) as well as the primary tasks and activities (responsibilities) the position is expected to achieve relative to the company's mission and strategy. Accountabilities and responsibilities are identified carefully, considering the future business direction of the ministry. (Senior Leadership, CCRC or program). Competencies. The skills, knowledge, abilities and other attributes are deemed critical to fulfilling the position's accountabilities. Consider competencies that differentiate superior performance for the organization, including: providing resident value, strategic contributions, CCRC, Health Care and Senior Living acumen, function/technical expertise and interpersonal effectiveness. Critical Experience Sets. Identify experiences that best prepare an individual to fulfill the position in question. Consider experiences and previous roles that are required (must haves) and those that are preferred because they provide a strong platform. Also consider the length of experience and required or desired education.
Determine Readiness Using the position requirements (resident in the Job Description) as a foundation, assess the organization's internal candidates and provide them with feedback and coaching about their strengths and development needs. Consider a behaviorally based method that gathers feedback from multiple stakeholders. This rigorous approach to identifying the most capable candidates will result in a more rounded view of candidates' assets and potential.
Create a Succession Plan for the Position Based on a planned retirement date of (?) Create a timeline that would work backwards from the departure date to the search process: Orientation, introductions and transition occurs during the month of (month) The new CEO is on board (Date) The selection decision is made and accepted on or about (Date) Second Interviews (Date) Initial interviews in (Date) Candidate finalists (Date) Finalist Profiles submitted for Committee Review: (Date) (#3moths), candidate sourcing, interviewing and reference checking occurs. Ads are placed and Position Specification is approved (Date) Position Specification is submitted for Search Committee review (Date) Search Committee meets, kick off process, staff, leadership (and Board) interviews completed; input received; (Date) Search Firm selected; (Date) Search firms are interviewed, screened; (Date) Proposals (RFP) for Search firm selection are sent; Search Committee is named; (Date) Note: The time line can be compressed, but this sample gives plenty of time for delays, weather issues, schedule challenges etc.
Things to remember Each search process is different and should respond to the identified needs of the organization. This time line is presented as a sample for consideration and to provide an understanding of the steps and possible timing. To get the most reliable and valid information, consider: Historical performance data, focusing on the candidate's demonstrated results (e.g., financial, operational, research), historical progress against areas of development, and alignment with the organization's mission, values and culture. Behaviorally based candidate interviews, including 360 degree interviews designed to pinpoint key strengths, potential "derailers" (personality, knowledge, skills, and communication and management style), effectiveness of team relationships, improvement needs, "coachability" and motivation to change and sustain change.
Things to remember continued Regular talent reviews enable senior management to focus on individual employees by: Evaluating their strengths and ongoing improvement opportunities Identifying strengths and weaknesses for critical roles within functions and for the organization as a whole. Determining actions required to address key talent gaps. These might include the need for internal development investment and plans to source potential external candidates. Following the talent review meetings, work with individuals to implement and monitor progress on development plans.
Ensure Continued Development Succession management is an ongoing process. The process enables senior management to answer the following key questions: Are there immediate, viable replacements for key positions? What are the key talent gaps for each key position? Are there significant retention risks for incumbents in key positions? Who are the high potential employees to fill key positions? Do we have clear developmental pathways? What are the performance issues in these key positions?
Conclusions It is important for organizations to have a formal succession plan in place. In order to assure: smooth top level transitions, ensure the organization s long term viability. to identify, assess and develop the next generation of senior leaders, avoid being blindsided, and perhaps damaged, by whatever lies ahead. to provide for the future talent needs for the organization through the development of a comprehensive succession management and leadership advancement initiative for the organization. succession management should become a discipline that is an on going component of the organizational culture. Conduct a comprehensive review of the current management structure, at the Senior Leadership level Strengths assess the Board and staff perception of strengths, pose the question: What are the critical success factors for the organization going forward?
Strategic Planning The Right Time Plan Now or Wait? CLAconnect.com
SECTION 1: The past is not prologue
In the past, abundant markets, complacent competition and serial challenges hid the effects of bad strategy or no strategy at all
We now stand on the threshold of a new age the age of revolution. In our minds we know that the new age has already arrived: in our bellies we re not sure we like it. For we know it is going to be an age of upheaval, of tumult, of fortunes made and unmade at head snapping speed. For change has changed. No longer is it additive. No longer does it move in a straight line. In the 21 st century change is discontinuous, abrupt and seditious Gary Hamel 2000 25
Most strategic plans are a spitshine of the status quo 26
Senior living organizations tend not to die quickly they die slowly, over time 27
Three Mega Trends Have Converged Health Care Reform Government Debt Generational Change 29
31
33
Sunday October 28, 2012 34
The Web site Zillow, which tracks property values, still attaches some value to lots that have been inundated by the Gulf of Mexico, but local residents say these lots are not so easy to sell. 35
Nonprofit Market Share Assisted Living Nonprofit market share dropped by 35% from 1990 to 2000 Over 20 years, the nonprofit field lost nearly half of its market share 28% 26% 24% 22% 20% 18% 16% 14% 12% 10% Nonprofit Market Share 1985 1990 2000 2005
The biggest challenge will come from outside, not from within 38
Companies like Humana, UnitedHealthcare and Aetna are acquiring start ups that focus on helping people to live independently. Some 138 private equity deals over the past 10 years focused on acquisitions of companies serving the over 50 market and a subset of venture capital firms are now concentrating on opportunities in this sector as well. The Longevity Economy s Impact on Industry, Oxford Economics, The Longevity Economy
I d love to see a copy of your strategic plan. Candidate We don t have one. Thought our new CEO would help develop it Board Chair
The Case For and Against Current CEO knows the organization well and can help lead the development of a new plan But... has complacency crept into the culture? Is the long standing CEO on top of the magnitude of changes Developing a plan before the recruitment or succession process enables a more effective identification of qualification criteria Creating the plan now enables candidates to evaluate whether the organization has perspective and appears to be on the right track But... waiting enables the organization to build the plan on the strengths of the new leadership team But... developing the plan after the new leadership is in place creates a fresh start
42
How
Vision Driven Approach An understanding of the organization s core purpose Substantive discussion of what the organization should look like Vision & Portrait of the Future Vision: Portrait of the Future: Painting a picture Strengths Current Situation Weaknesses Objective assessment of how we re doing In the context of the environmental trends and challenges
Core purpose Core purpose reason for being Idealistic motivations for doing the organization s work Examples: 3M: To solve unsolved problems innovatively Merck: To preserve and improve human life Walmart: To give ordinary folks the chance to buy the same things as rich people Walt Disney: To make people happy Mary Kay Cosmetics: To give unlimited opportunity to women 45
Examples Collectively, we are able to do for others who are less fortunate in a much more significant way than we could through our individual Christian calling and service. Fast growth Affordable Housing Organization To release the power and joy in aging Large CCRC To ensure a vibrant life through extraordinary service, exceptional care and an unprecedented emphasis on wellness Single site CCRC 46
What is our core purpose the answer to the question why? What s the risk of the status quo? If we dream, what should we look like 15 years into the future? How will we get there? How can we hold ourselves accountable for making it happen? How are doing, how do we stack up, how do we know?
Managing the Executive Transition 48
Executive Transition Management Represents a crucial turning point for the organization Requires Board management of the process to insure good outcomes Leading a transition requires a larger view Transitions involve not just risk, but rewards too Transitions have a profound human dimension They are not just process Moves the focus from search/selection/hiring to onboarding Offers the Board an opportunity for introspection and if needed realignment 49
Legacy Issues defined Those leftover projects that did not get done The way we used to do it Role challenges or conflicts Informal reporting relationships A less active or more active Board of the past Anything that might affect the new executive's performance 50
Three Phases of Executive Transition Management Prepare The Board ensures the organization is ready to hire a new Executive Pivot Search, hiring process and selection Prepares the organization to work effectively with new leader Addresses legacy issues that might impact the executive s performance Thrive Designs and implements an effective orientation and launch for the new executive 51
Rules of Thumb for a Successful Transition Don t rush the process Strive for a good beginning so you can have a good ending Engage the staff and residents reap the rewards Begin with the end in mind Come to terms with history A successful search does not = a successful transition Step up and support the new executive 52
Type of Change You face Type 5 Hard to Follow Facing the departure of a Founder A highly entrepreneurial executive A long tenured leader Departure represents a major organizational change in Culture Performance expectations Relationships and structure Each being a reflection of the departing leaders thinking and personality 53
Transition Checklist: Organize stabilize understand plan execute To ensure the transition is well thought out Develop/Implement Communication Plan Consider how the board itself may need to change in order to work effectively with new Executive Appoint Transition Committee: oversee process Define appropriate role for departing Executive Appoint/hire Interim Executive Identify/address legacy issues To prepare for the new CEO 54
55 Thrive Phase Includes: A proactive announcement Share the process and criteria Plans to start off on the right foot Don t assume the work is done Clarification of priorities What is to be done in the first year Clarification of roles and responsibilities A good time to review the Board s duties Clarification of the Board s expectations Plans for monitoring and evaluating performance How will success and outcomes be measured?
Launching and Keeping the New Executive What can we do to help our new Executive start off on the right foot? What can we do to structure the Board Executive relationship in a positive way? What are the priorities for the Executive in the first year? 56
Initial Steps Announce the new Appointment Chance to tout the new executive s credentials Can signal the Boards new vision or direction Create a solid Orientation Involve key staff Separate operations from governance Start building new relationships early Create intentional opportunities for exchange Set review points to look back at progress 57
58 The Taking Charge Process Entry first three to six months Introduction, orientation, early stage learning Critical relationships established; assessment Immersion next three to six months Begins to manage; more informed; planning Reshaping generally another three six months Begins to implement plans; continues learning Consolidation Follow through on initial planning work Refinement Final phase of taking charge; no longer new
How does the Board help? Identify the Executive s needs; provide support Where can the Board create connections, introductions and relationships Create a Leadership Agenda A collaborative plan for the first year Define how to monitor performance A year is too long to wait Create a safe passage Offer feedback opportunities 3, 6, 9, 12 months Then 18 and 24 months 59
60 Conclusions It is not over with the hire A high percentage of Execs fail when following a legacy leader Monitor staff support of new Exec (or opposition) Make the success of the new Exec the full responsibility of the Board Rethink the role of the board; realign your thinking as may be appropriate Plan to succeed May be the most important Board function for the next twenty years
Resources Job Descriptions Board, Board Chair Statement of Commitment Covenant Agreement Standards of Practice adopted from CARF CCAC Principles of Good Governance and Ethical Practice Chief Executive Transitions How to hire and support the new Non Profit CEO* Structures and Practices of Nonprofit Boards* Legal Responsibilities of Nonprofit Boards* Ten Basic Responsibilities of Nonprofit Boards* *Published by BoardSource 61
Robert H. Morrow Principal robert.morrow@claconnect.com Scott Townsley Principal Scott.townsley@CLAconnect.com CLAconnect.com twitter.com/ CLAconnect facebook.com/ cliftonlarsonallen linkedin.com/company/ cliftonlarsonallen 62