Making Founder Successions Work

(Illustration by Jessica Fortner) 

Every year, thousands of nonprofit boards face the daunting task of hiring a successor to replace the seemingly irreplaceable: the long-serving, beloved founder. The transition is fraught with anxiety and attracts standard advice about how to cope. “Make a clean break” goes the warning. “Founders and successors are managerial oil and water. They just don’t mix.”

In the world of corporate startups, four out of five founders are forced out by their boards.¹ And search-firm executives cite how rarely CEO successors call on former bosses.² Although some social sector research supports keeping founders involved, clean breaks tend to be the rule.³ Yet, is a clean break really the best way to ensure a successful founder succession?

Our research at The Bridgespan Group has found that the answer is often no. To a surprising extent, transitions that extend the role of a nonprofit founder yield the best results. In fact, nearly half of all founders who step down continue to bring their knowledge, relationships, and passion to bear for the organizations they started.

We conducted an in-depth, quantitative study of nonprofit founder transitions drawing on GuideStar’s IRS Form 990 database. A random sample of 2,000 organizations yielded 106 cases of founders transitioning. In addition, we joined with BoardSource and GuideStar to survey board members and nonprofit leaders, which resulted in 538 responses and 202 organizations that had experienced a founder transition. To get firsthand accounts of how founder transitions actually unfolded, we interviewed 49 individuals at 31 organizations about their experiences, including trios of founders, successors, and board chairs at organizations whose experience felt particularly instructive.

The results offered three valuable lessons. First, far more nonprofit boards work out a continuing role for founders (45 percent) than pursue an amicable clean break (31 percent). Moreover, among organizations where founders stayed, most reported that founders made positive contributions, and 75 percent thought the benefits of a continuing founder role justified the complexity. Nearly half of the organizations where the founder did not stay said the transition would have gone better had the founder played a role.

Second, transitions that paired a founder in a continuing role with a successor from inside the organization proved to be the most successful of all transition models we examined, based on revenue growth through the transition, retention of the successor, and self-reported performance. (See “When the Founder Stays On” below.) Examples from organizations large and small show the power of this model. What’s more, the same lesson holds true for non-founder long-term CEOs when they step aside: When they play an extended role post-transition, their organizations do better. (See “When the Long-Term CEO Stays On” below.)

Third, transition work is not easy; it requires preparation. The board needs to help the founder to define an appropriate role in support of the successor and the mission. It also must shepherd the process, anticipating bumps and developing processes to mitigate them. We identified several functions where founders were able to contribute after their tenure, feel satisfied, and deliver value to the organization. These included fundraising, ambassadorial visits, advocacy, and mentoring the successor.

 

Our research indicates that an extended founder role, when done right, can be the best path to maintain funder, board, and staff loyalty, while allowing the new leader to benefit from the founder’s capabilities and knowledge. Everyone wins, including the organizations and, most important, their beneficiaries.

The ‘Clean Break’ Myth

With so much at stake, we set out to better understand the types of transitions, their frequency, and the factors influencing success or failure.

Our research identified four types of founder transitions. We found that three out of four involve an amicable decision for the founder to either walk away or stay and work with the successor in an extended, but different, role. (See “Four Types of Founder Transitions” below.) Involuntary (founder is forced out or fired) accounted for 24 percent; amicable clean breaks (founder retires fully or moves to another opportunity), 31 percent; amicable transitions with significant founder roles (founder stays on in staff or board role), 23 percent; and amicable transitions with light founder roles (founder stays on in a consultant, advisor, or interim role), 22 percent.

Transitions where the board ousts a founder are least likely to succeed. However, our interviews revealed that the board often waited until the situation was critical to step in. One founder was “so crispy fried that she was barely functional,” recalls the successor. Inaction led to significant staff discord and souring relations with the board. Awkwardness, even painfulness, is inevitable in such departures. But early intervention has benefits all around. The board can preempt organizational atrophy, pave the way for a successor’s strong start, and provide the founder a graceful exit. (See “Seven Signs That the Founder Has Stayed Too Long” below.)

The clean break appeals to successors who prefer to start with clear authority. This fresh-start approach also provides boards with the broadest pool of candidates. For founders, the clean break can be attractive for personal reasons: Older leaders may be ready for full retirement, younger leaders may feel burned out and ready for change, and others may simply have an entrepreneurial urge to do something different.

For every two amicable clean breaks, there are three transitions where founders extend their roles. Sometimes founders want to stay for the wrong reasons: They don’t know what to do next, they haven’t planned for their retirement, their identity is with the organization, or they don’t think the organization can survive without them.⁴ Even when founders want to stay for the right reasons, the journey can be complex. Boards rightly worry about the real and perceived confusion around roles and responsibilities that an extended stay may create. Hence, the care and caution that needs to accompany any such undertaking.

From our extensive interviews, we distilled four conditions to guide an organization that is considering an extended founder role: First, the founder has the capability and desire to stay engaged. Second, the board perceives clear value from the founder staying involved. Third, the founder is willing to play a different role and genuinely wants the successor to succeed. And fourth, the successor is willing to work with the founder. All require both founder and successor to sublimate ego.

Consider the founder of Communities In Schools (CIS), Bill Milliken, a visionary who pioneered the coordinated delivery of community services in schools in order to catch and support students in danger of dropping out. After almost 25 years, the organization’s severe growing pains convinced the board and Milliken that CIS needed a “settler” to follow their “pioneer.” Because Milliken remained committed to the mission and to fundraising for it, the board persuaded him (with some outside counseling and a couple of false starts) to move up to a board role and stay involved in fundraising and advocacy.

This cleared the way for his executive vice president of field operations, Dan Cardinali, to take the reins, restructure the organization, and refresh its strategy. It worked, Milliken says, because “Dan could keep his ego [in check] and help me keep [mine] from getting out of place.” He added that their talents complemented each other: With Milliken anchoring the heart and soul of the movement, Cardinali became the data-driven mind that created a winning strategy in a crowded youth-development market. “By partnering with Bill and leveraging his moral authority to validate the organizational change strategy, we had an amazing opportunity to drive change,” says Cardinali, who is now president of Independent Sector.

 

Indeed, a board will want to assess the founder’s and successor’s ability to work together. With internal successors, the relationship is typically well established. At Family Promise, launched in 1988 to provide shelter, meals, and assistance to help homeless and low-income families back to independent living, founder Karen Olson worked with Claas Ehlers, the director of affiliate services, for 12 years before urging the board to appoint him as her successor in 2014. With external successors, the board needs to make clear during the search process that the founder intends to stay on in a specific capacity, contingent upon the rapport that the founder and successor establish during the vetting process. Whatever the founder’s role, final approval needs to rest with the successor.

Engineering a Successful Transition

Our data clearly show the potential value of extending a founder’s stay. But what exactly did organizations do to make such a relationship work? We turned to our survey and interviews for answers.

Many interviewees mentioned a cluster of traditional practices on managing leadership transitions. These guidelines included the following: Start early because successful transitions often take several years to plan, invest in developing internal successors, establish frequent interaction between the successor and board chair, and encourage active participation by the board throughout the process.⁵

In addition, we surfaced five recommendations that more directly address the practical aspects of managing an ongoing role for a founder. While our data show that transitions with an internal successor and a role for the founder tend to be the most successful, the practices apply to any organization that seeks to extend the founder’s stay.

First, limit the founder’s new role to specific areas of high interest and capability. Founders have a choice among a number of extended roles. Some are well-focused assignments with timetables and clear deliverables, such as starting a new program. Others tap the founder’s capabilities, such as fundraising or serving as an ambassador to affiliates. (See “Founder’s Post-Transition Role” below.) But whatever the role, it’s important for the founder, the board, and the successor to set clear expectations.

At the Toronto-based NGO Right To Play, founder Johann Koss and incoming successor Kevin Frey took this advice to heart. Over 15 years, Koss, a four-time Norwegian Olympic gold medalist in speed skating, built Right To Play into a $54 million global organization that trains teachers and coaches in a child-centered, play-based approach to learning. Today, it operates in 18 countries and reaches 1.9 million children around the world. To sustain such a far-flung organization, Koss traveled up to 300 days a year, an exhausting schedule that took its toll. He wanted to step back from day-to-day operations but stay involved. Board Chair Rob MacLellan decided to consult a corporate transition expert. “You’re doomed to failure because you’re not making a hard transition between founder and CEO,” the expert said.

Koss and Frey moved forward anyway but took the precaution of working with third-party advisors to write up an agreement. Dubbed the “Magna Carta,” it stipulated who did what during a two-year transition that began in August 2015. The agreement gave Frey authority to manage the staff, while Koss maintained relationships with funders and influential partners and played a role in strategic planning. These tasks were well suited to Koss’s new position as a board member. Frey also made it clear that he valued Koss’s continued commitment and was eager to work with him. “I can’t do this by myself,” he told Koss. In the end, the expert’s dire warnings motivated Koss, Frey, MacLellan, and the rest of the board to rally around a common goal: making the transition work.

Founders who transition to board positions are most successful when focused on core board functions, such as fundraising and setting organizational strategy. In our research, the value of founders in program-related roles, or in mentoring their successor, proves significantly lower when they serve as board members. Wendy Kopp, founder of Teach For America (TFA), relates a cautionary tale. When she left to head up the international organization Teach For All, she also took on the role of TFA’s board chair. Ostensibly, this would allow her to mentor her internal co-successors and evolve the board from an unwieldy 38 members to a more strategic governing body. But the structure proved wrong.

“I shouldn’t have been the board chair, because I couldn’t do what needed to be done,” Kopp says. “They needed a chair who could assert themselves … but when I asserted myself, I ran the risk of being perceived as the overbearing founder who was overshadowing the CEO.” The position also made Kopp effectively her successors’ boss and made it more challenging for her to play the role she felt was most valuable: mentoring the incoming leaders.

Second, engage in regular coaching to help navigate the operational and emotional aspects of transition. The journey from founder to a redefined supporting role can be fraught with tricky decisions and separation anxiety. Research has shown that a coach can increase the chances for transition success.⁶

At Right To Play, the board hired a coach to meet with the founder and successor both separately and together over a six-month transition period. The coach focused on how to help smooth the transition process without taking sides, thus avoiding a two-against-one situation. Having a coach on call proved worthwhile. For example, founder Koss started taking time off after successor Frey arrived, “which is what we all wanted him to do,” says MacLellan. “But then he’d come back to the office, and some of the old habits would surface. People would come to see him, and he would jump back into his old role. So we had to get back into doing some more coaching and some more communication.” For their parts, both Koss and Frey say that meeting with their coach before the transition allowed them to raise and resolve potential areas of conflict in theory and avoid traps in practice.

 

Coaching also played a key role in the transition at Citizen Schools, a large youth-development nonprofit that provides adolescents with opportunities to work side-by-side with experts to explore new fields, learn new skills, and build a foundation for their future. When the CEO, an external hire who succeeded founder Eric Schwarz, resigned after a rocky 19 months at the helm, he offered to stay for six months to help his own successor, insider Emily McCann, learn the ropes. The board hired a coach to smooth the handoff. “She led the two of us through this transition in a way that allowed us to feel like our relationship was on solid ground, and that we were able to put any frustrations or pain or anxiety aside for the sake of the organization,” says McCann, who moved up from her six-year role as president of the organization.

In the two weeks leading up to the transition, McCann and her predecessor met several times with the coach. “It was like therapy,” McCann recalls. “Yes, it was intense, but it was really important because when you have a lot of unresolved feelings about an organization or about a person, and you’re about to lead a transition, those feelings can show up in unexpected ways if you don’t have a handle on it.” The coach turned an awkward situation into a productive one.

Third, anticipate conflict and agree to a process to mitigate it. Leadership transitions are inherently complex, all the more so when a nonprofit’s founder stays on. As part of transition planning, boards need to work with the founder, successor, and, ideally, their coach to establish a conflict resolution process.

After Frey accepted the CEO position at Right To Play, just such an approach to conflict resolution was defined with the board and Koss (facilitated by their coach). If founder Koss and Frey disagreed, the process escalated decision making to the board chair. If still no resolution ensued, it would go to the board’s HR committee and, in a deadlock, to the full board. While Koss and Frey periodically disagreed, “we never had an issue go to the board,” Koss says. “Everything came back to our own decision making and communication.”

At the Oasis Institute, which promotes healthy aging through life-long learning, active lifestyles, and volunteer engagement, founder Marylen Mann made clear to successor Marcia Kerz that she wanted Kerz to handle the business side of the organization as she moved to a new role as chair of the board. “She was very open and very honest about that from the beginning,” says Kerz, who joined the foundation in 2000 as chief operating officer. Two years later, Kerz transitioned to president, a post she held until May 2017.

Initially, Kerz and Mann had no agreed-upon process to mitigate conflict, leading to confusion. “Marylen is creative, full of wonderful ideas, always wanting to start something new, to take the organization further,” Kerz says. “The biggest challenge we always had was balancing her ideas with the impact on the organization.” To manage this tension, Mann and Kerz agreed to a simple rule: Mann would run all ideas through Kerz before taking them to staff members. “That’s how she had always done it,” Kerz says. “It was really just understanding and being clear on what each of us was responsible to do.”

Fourth, transition board, funder, and staff loyalty in logical order. Founders often develop intense loyalty among staff and board members, many of whom may be personal friends. And funders are likely to identify more closely with the founder than with the organization. It is therefore critical to shepherd these loyalties to new leadership. With an extended transition, organizations have the benefit of sequencing such transitions over time, often with staff and board management transitioning immediately, and funder relationships transitioning as the founder introduces the successor around and builds her credibility.

Such was the case for Executive Director Rick Wartzman and his associate, Senior Managing Director Zach First. The pair worked closely for nearly a decade to launch and establish the Drucker Institute, an organization that builds on Peter Drucker’s management wisdom and applies it to contemporary issues. Eight years in, Wartzman declared in 2015 his intention to step down as founding executive director and considered First his natural successor.

Wartzman and First lost no time working out a detailed transition plan that they presented to board Chair Curt Pullen for quick approval. But Pullen hit the brakes. “In my experience, you never land a big change on a board at a meeting and ask for an approval,” Pullen explains. “We needed to figure out how to introduce the board to the concept, talk about why this might be the right time, and talk with the board about what a transition set of actions and activities looks like so that we ensure this is successful.”

They agreed on a plan that called for First to transition to executive director in February 2016 and take charge of most of the external-facing work that Wartzman had done, as well as manage and coach the staff. But it eased first into fundraising. Wartzman continued to interact with donors, but he included First in the conversations to transition those relationships. Wartzman also negotiated an arrangement to continue as a paid advisor to complete two major projects in which he was deeply invested: the revamped Drucker Prize and the Drucker Index, which aims to assess through publicly available data how effectively a company is managed. The index project led to the creation of the Center for a Functioning Society, a new arm of the Drucker Institute, and after a year Wartzman transitioned from paid advisor to director of the new center. The entire transition plan unfolded without dustups, albeit with some suspense regarding Wartzman’s next calling. “There really haven’t been any conflicts,” Wartzman says.

Fifth, create initial separation to allow the successor to settle in, particularly if the founder’s new role is substantial or long-term. A successor needs time to establish herself as the new leader, a period that may include staff restructuring or changes in strategy. While the successor may consult with the founder, it’s important for the founder to maintain a low profile during the early months of transition to avoid confusion about who is in charge.

In transitioning from Drucker Institute executive director to senior advisor, Wartzman essentially flipped roles with his successor. “We spent a lot of time thinking through how we wanted to handle the transition,” says First. For optics, First moved into Wartzman’s office space. “Rick came into the office probably once every six to eight weeks when he needed to get together with a couple of team members working on the new programs,” says First. “Other than that, he worked remotely. That was something that was really important, we both felt, for just helping the team adjust to me as the new executive director.”

Stepping back from day-to-day operations didn’t come as easily for Right To Play founder Koss, but some of the same tactics used by Wartzman and First helped. On the first day of the transition, Koss moved out of his office and successor Frey moved in. Koss also stopped attending executive team meetings and simply read the minutes to stay up-to-date. But when the Right To Play headquarters moved, the value of creating distance between founder and successor became palpable. Koss and Frey initially had side-by-side offices in the new building. “It was really tough for the staff,” Frey says.

 

The confusion over their roles led the board chair to counsel Koss to spend less time in the office. He also agreed to relinquish his office space, which was converted into a founder’s lounge. With Frey unambiguously at the helm, affiliates and funders turned to him with the tough strategic questions, and Frey has used his first two years to rethink organizational strategy. Meanwhile, Koss became the leader of social and environmental impact at an investment firm in the fall of 2017, two years after stepping down as CEO, further focusing and bounding the hours and ways he supports Right To Play.

Planning Ahead

Concern about managing founder transitions emerged more than a decade ago when several studies predicted a wave of retirements among nonprofit leaders, up to half of whom were founders or longterm executives.⁷ An Annie E. Casey Foundation 2005 report, Founder Transitions: Creating Good Endings and New Beginnings, warned, “People and communities rely on the services and programs provided by founder-led organizations. If these organizations falter or fail following a founder’s departure, many of our communities’ most vulnerable citizens—children, recent immigrants, the frail, and the poor—will suffer.”⁸

That warning rings no less true today. Many nonprofits still struggle to manage founder transitions, as evidenced by the high percentage of involuntary changes in leadership revealed by our research. The time to start planning for a leadership change is long before it happens. Every nonprofit led by a founder (or long-term executive) can take at least four steps to put scaffolding in place for a successful transition, whenever it occurs.

 

Step 1: Invest in internal talent development. The benefits justify the expenditure. Not only does the executive team get stronger, but the chances increase that the next executive director can rise from the ranks, rather than from an outside hire, and ease succession planning. The data are abundantly clear that internal successors are far less likely to fail in the first three years.

At BELL, the $20 million education nonprofit known for its effectiveness in preventing summer learning loss among low-income youth, founder Earl Phalen groomed Tiffany Cooper Gueye as a possible internal successor for several years via stretch assignments, promotion to COO of field operations, and exposure to board and funders.

“It was very clear that whatever responsibility was put in front of [Gueye] she fulfilled quite well,” says Laurene Sperling, BELL’s board chair. To help Gueye succeed as the new leader, Sperling mentored her. “You’re going to be completely supported through this,” Sperling recalls telling Gueye, adding that the best way to work with the board was with no surprises and frequent check-ins. Eight years later, Gueye’s own successor, who took charge in June 2017, also came from inside the organization with years of preparation for the job. (For the full story of the BELL transition, see “Groom to Grow: Developing Next Generation Leadership Inside Your Nonprofit.”)

Unfortunately, BELL’s success is not the norm. Strikingly, only 30 percent of key leadership roles in the nonprofit sector were filled by internal promotion in a recent Bridgespan survey—about half the rate of for-profits.⁹ Our new research also highlighted another reason to look inward for talent: The most successful leadership transitions paired an internal successor with an extended role for the founder.

Sometimes the right internal candidate needs a nudge to fill a founder’s big shoes. When Schwarz stepped down as CEO of Citizen Schools in 2014, McCann, then president, was his inside candidate for successor, with 10 years’ experience across programs and functions. But McCann wasn’t sure she was ready to balance caring for her young family with leading the organization, especially given Schwarz’s constant travel in the role. It took a short-lived stint by an outsider to convince her that her cultural fit, combined with her skills and experience, had prepared her. “I realized I could lead on my own terms and in a way best suited to the needs of the organization at its current stage of growth,” McCann says.

Step 2: Make succession planning a point of regular discussion. A number of circumstances afford a suitable venue: the executive director’s annual performance review; during a strategic planning process; at tenure milestones, such as a leader’s 10th or 20th anniversary or her 60th birthday; or contingency planning to address a prolonged health crisis or sudden departure. Our data show that the probability of a founder transition peaks at two points: at the 10-year mark and after 25 years. Boards should be particularly proactive about succession planning leading up to these milestones.

But the best board practice, based on Bridgespan’s more than 35 engagements helping organizations to build their bench of future leaders, makes CEO-succession planning an annual topic of discussion. Making succession a routine topic for the entire executive team renders the probing less personal, while focusing the board’s attention on the organization’s ongoing leadership needs.

At the Drucker Institute, founding executive director Wartzman told First, “I’ve done this for seven years. I could probably do it for seven more years. But somewhere around the 10-year mark, I feel it starts to do a disservice to the organization to have the same leader in place for any longer than that.”

 

Step 3: Shore up weaknesses in board oversight. Our research revealed common weaknesses among boards of founder-led organizations: lack of founder performance reviews, weak oversight of programs and finances, and insufficient independence from the founder. Organizations with the most successful transitions addressed these weaknesses before the leadership change. At one education nonprofit, for example, board meetings gave the founder a platform “to hold court and talk to the board about how great the organization was,” says one insider. This complicated the transition, because the board was unaware of operational issues that the founder’s successor had to address. Nor was it accustomed to playing the supportive role needed by the new leader.

In contrast, at Family Promise, the founder, successor, and board chair all recognized the need to strengthen board oversight to enable a strong transition. This involved bringing on new board members as well as changing the passive culture of the board to one that actively discussed key issues. This helped pave the way for a successful transition from the founder, Karen Olson, to the successor, Claas Ehlers, with Olson staying engaged as an ambassador to affiliates.

Step 4: Set aside a transition fund to address contingencies. Transitions can generate unbudgeted expenses, such as the cost of hiring a coach, paying a search firm, offering severance, or covering added compensation during a period of overlap between the outgoing founder and the successor. The Drucker Institute, for example, tapped its reserves to keep founder Wartzman on the payroll as a senior advisor for more than a year after he stepped down as executive director. “The organization bought Rick [Wartzman] and me a year to find our footing in our new roles,” says First, his successor. “All of this was possible only because we had healthy cash reserves.”

These four steps can help any nonprofit and its board to plan for a successful leadership transition. While they require significant effort over an extended period of time, they lay the foundation for stronger organizations better able to serve their beneficiaries.

Read more stories by Jari Tuomala, Donald Yeh & Katie Smith Milway.