October 17, 2018

Succession Guide for Founders and their Boards

Succession Guide for Founders and their Boards

Founders play a unique role in the beginning and the development of an organization. They have the privilege to be part of every important decision from the day they start until they leave the position. With this unique role comes an amazing amount of institutional knowledge and loads of long-developed relationships. Successful founders make extraordinary contributions to their organization and mission. For these reasons, planning for the succession of a founder (and for long-tenured and transformational executives who mirror many of the traits of founders) requires special care by all involved.

There are many stories of the negative consequences for organizations, founders and relationships where this care is not present. Here are some specific actions that help founders, their boards, and managers better prepare for founder succession:

1) Start early through organization -focused succession and sustainability planning
It is natural for the attention of all to be focused on the founder. The big question, spoken or unspoken, which permeates the organization is: “How long will the founder stay?” Some stay for decades, others for a handful of years. Regardless, an important first step is to shift the focus of discussion from the founder to leadership succession and organizational sustainability. Regardless of size, it is the board and staff that make mission results happen. Attention to leader development and back-up for leaders and staff makes attention to succession part of the culture rather than a way to deal with the founder leaving. Similarly, early attention – 2-4 years before founder transition – to organizational sustainability and what contributes to or impedes it shifts the organization’s focus to mission continuity. This then benefits those served by the organization over time.

2) Get help
Founder succession is complex and risky. Everyone involved will benefit from a sounding board and mentor to help navigate the succession and transition work. The founder is in a unique and often lonely position. There is great benefit in seeking an executive coach long before any planned transition to support steps the founder can take to prepare personally for transition. Without the personal readiness, the emotions of transition may overwhelm the founder and become a barrier to a successful transition. Similarly, the board and management team/staff have a lot at stake and often don’t know how to get started with succession and sustainability planning. Pro bono volunteer help or consultants who are experienced with founder succession and transition provide the board and staff with much needed support in planning.

3) Be thoughtful about the possibility of internal succession
Lots of factors help determine whether internal succession is a possibility for founder succession. The first step starts many years before transition as the founder and board make decisions of who leads and how the organization invests in leader development. Organizations that proactively encourage leader development and learning through taking on stretch assignments are better prepared for founder succession. Formal succession planning 2-4 years before transition provides an opportunity an opportunity to include how internal candidates will participate in the process in the written succession policy. In most cases, the founder is not “grooming” one successor, rather encouraging the development of leaders in the organization – some of whom may be candidates. Boards are at risk of either ignoring internal candidates because they are too well known or selecting an internal candidate too quickly and with an insufficient process. Whether internal candidates are compared to external candidates through an external search or not, there are steps that boards can take to thoroughly vet internal candidates and make a careful and respectful decision. Considering an internal successor to a founder is difficult to do without experienced outside facilitation because of the history of relationships and the challenge of ensuring attention to all factors.

4) Advance diversity and inclusion
Founder and all leadership transitions are great opportunities for organizations to review and make progress on advancing practices and policies that support diversity and inclusion. This begins with a discussion about what the organization values, how the organization is connected to its community, and how diversity adds value in decision-making and innovation. The question then is not so much what will be the race or ethnicity of the successor to our founder. Rather, the question is where are we as an organization in developing consensus among board and staff about our beliefs and values, and how does this influence our behaviors as leaders.

5) Pay attention to compensation early and often
One of the tragedies of some founder transitions is the frequency with which the executive realizes too late that they have been under compensated. This is doubly painful for long-tenured executives who are retiring or transitioning to part-time work. While the board may be dismayed when they realize they need to pay a higher salary and the new executive expects more in retirement benefit, imagine the pain of the departing executive who feels unfairly treated. In some cases where the resources and the will support it, historical underpayments to retirement or salary can be addressed in an exit agreement. (See Nonprofit Quarterly article) A more proactive practice is for the executive and board to review salary and benefits of the executive and staff annually to ensure fairness and competitiveness within the available resources.

There are consultants and practices that specialize in founder succession and transition. Much is at stake so it makes sense to seek support in planning ahead and navigating founder succession and transition.

Related Industry

Nonprofit & Social Sector