University of Wisconsin-Milwaukee
RESEARCH AND OPINION
Volume 18, Number 1
April 2005

Leadership Change in Nonprofit Milwaukee : Making Transitions Work

This issue of Research and Opinion offers results of a Fall 2004 survey of nonprofit executive directors in Milwaukee , Waukesha , Washington and Ozaukee counties along with commentary addressing implications for nonprofit boards and funders. The survey was conducted in order to gather information about the potential scope and impact of executive leadership transitions and to inform the further development of strategies to address the pending general shift in leaders. As part of the first national study of leadership transition in the nonprofit sector, the Milwaukee survey was one of 24

conducted nationwide. The local study was sponsored by the Greater Milwaukee Foundation, the Donors Forum of Wisconsin and the Helen Bader Institute for Nonprofit Management at the University of Wisconsin–Milwaukee in partnership with the Annie E. Casey Foundation.


Nonprofit Executive Leadership and Transitions Survey 2004: Milwaukee 1
Paige Hull Teegarden, Managance Consulting

Nonprofits in the four-county Milwaukee area are likely to face an increase in the number of executive transitions over the next several years. Based on this survey, 66% of nonprofit organizations are likely to experience an executive transition within the next five years in comparison with 56% over the past 10 years. Responding organizations with smaller operating budgets—under $500,000—are more likely to lose their executive directors over the next five years than are large organizations with budgets over $2 million. Further, 43% of community development and neighborhood revitalization nonprofits are likely to lose their executives in the next two years.

Effective leadership is a critical element of successful organizations. Not surprisingly then, the period of executive leadership transition—the departure of a current, and the hiring of a new executive director or chief staff officer—is fraught with risk. Further, research has shown that an “era of transition” is looming as baby-boomers are nearing retirement age.

Since 2000 the Annie E. Casey Foundation has supported pioneering research to understand the potential scope of executive leadership transitions in the nonprofit sector, and to identify and develop promising practices for assisting nonprofits in successfully managing these transitions. It is also exploring the Foundation's role in assisting grantees to move successfully through the organizational challenges of leadership transition.

The Foundation's work builds on a growing corpus of knowledge about executive transitions in nonprofits developed by the Neighborhood Reinvestment Corporation, CompassPoint Nonprofit Services and Maryland Association of Nonprofit Organizations. Conducted during the last decade, this research highlights the risks of failed or unsuccessful transitions, noting that poorly managed executive transitions incur high costs to organizations and communities. For example, too frequently there is repeat executive turnover and extended periods of under-performance. In extreme circumstances organizations go out of business, leaving a wake of broken commitments and financial entanglements.

Executive directors from Milwaukee , Waukesha , Washington and Ozaukee counties were contacted for this study. (This four-county area is referred to as the Milwaukee area throughout the report.) This survey is part of the first national study of leadership transition in the nonprofit sector. The aim of this study is to better understand how leadership transitions will impact organizations in the nonprofit sector, and inform the further development of strategies to address the pending generational shift in leaders. The results from this survey will be combined with results from all the other participating organizations and geographies to form a national report on the State of Executive Leadership and Transitions in the U.S.

Key Summary Findings 2

The following is a summary of the key findings from this survey.

Organization Size. A majority of respondents are small organizations, with 46% having fewer than five full-time equivalent staff people and 50% having operating budgets less than one-half million dollars. Only 11% of the organizations have budgets of more than $5 million.

Executive Director Stability and Potential Transitions. A majority of responding nonprofits in the Milwaukee area have had relatively stable leadership over the past 10 years, with 77% having had only one or two executives.

Nonprofits are likely to face an upward trend in the number of transitions. Fifty-six percent of respondents have had an executive transition in the past ten years, whereas 66^ expect a transition in the next five years. Further, 55% of the current executives are over 50 years old, and labor force participation rates decline at 62 years old. This implies a growing number of transitions as these executives begin to retire. Twenty-six percent of responding organizations are likely to experience a change in leadership in the next two years.

The likelihood of transition in the next five years also appears to vary with the type of nonprofit. Responding organizations in community development, human services and arts, culture and recreation appear more likely to have a transition in the next five years than other types of nonprofits. Seventy-nine percent of community development nonprofits are likely to face a transition in the next five years; 66% of human service organizations are likely to face a transition and 68% of arts, culture and recreation organizations. In comparison, about 50% of education and health organizations are likely to face a transition in the next five years. Further, 43% of community development nonprofits are likely to face a transition in the next two years.

Describing the Current Executives. The average executive of a responding nonprofit is a white woman in her 50s who has about five years of experience as an executive and at least a Bachelors degree. The pool of executive directors is heavily weighted toward those over 40 years old, with 86% over this age and a significant number, 55%, over 50 years old. Twenty-two percent of responding executives in the Milwaukee area have been in their current positions for more than ten years, and 26% helped to found their organizations. Long-term and founder transitions can raise more challenging issues during their departure than other transitions.

Eighty-four percent of responding executives are white; 11% are African American; and 1.4% are Hispanic/Latino. In comparison, 46% of the organizations serve primarily white communities; 23% serve predominately African American communities; and 23% serve mixed communities. All of the African American executives served African American communities (100%).

Career Paths of Executives. In terms of their careers, a majority of responding executives in the Milwaukee area are in their position for the first time (60%). Many have experience at some point in their careers in for profit companies, and 69% have over 10 years experience in the nonprofit sector.

When they are ready to leave their current positions, 20% percent plan to take another executive job, and 39% plan to retire or semi-retire.

Depth of Management Capacity of Organizations. Many responding nonprofits in the Milwaukee area have some middle management, which may serve as a training ground for executives. One-third of the organizations have a deputy director, and a majority have program directors.

Salaries are modest. A significant number of responding executives in the Milwaukee area earn less than $70,000 (65%). About half of the organizations offer retirement and healthcare benefits.

Organization Experience with Transition and Succession Plans. Very few responding organizations used external assistance when they hired their current executive. The most commonly used resource was hiring a consultant, used by 11% of organizations. Another 7% used an executive search firm to get help for the transition.

About 12% of responding organizations have succession plans. Thirty-five percent of those who do not have a succession plan gave as a reason that they hadn't thought of it.

Most organizations appear to approach change in the executive director from a search and hire framework as opposed to a more comprehensive transition management approach.

In terms of the types of support or assistance that respondents would like to see during an executive transition, the top three choices are: 1) assistance with board coaching and leadership assistance (40%), 2) organization capacity assessment to identify things that may need to be addressed in transition (39%), and 3) long-term succession planning (38%). Eighteen percent chose no assistance.

Feedback on Expertise and Learning Sources. The most important types of preparation for becoming an executive director according to respondents are: 1) on-the-job management experience (72% say it is very important), 2) learning from mentor/coach (57% say it is very important), 3) learning from peers (48% say it is very important), and 4) on the job program experience (56% say it is very important).

In terms of the preferred source of information/learning, 43% of the respondents indicate internet resources would be useful. Print materials and conferences/training are the second most popular sources, both selected by 37% of the respondents. Online discussion is the least preferred source, with only 4% of the respondents answering yes.

Notes
1 There were 360 unique respondents who indicated they are based in the Milwaukee four-county area ( Milwaukee , Waukesha , Washington and Ozaukee counties). This is out of 1080 that were invited to participate, meaning there was a 33% response rate to the survey. According to April 2004 data available from the National Center for Charitable Statistics, there are 2,176 charitable organizations in the Milwaukee four-county area required to file a completed Form 990 with the Internal Revenue Service.

The nonprofit executive leadership surveys were conducted primarily through a web-based survey instrument. However, paper surveys were available upon request. Some respondents did request hard copies and completed these paper surveys.

2 The full survey with details, including graphs, is available on the Nonprofit Portal at http://www.nonprofitmilwaukee.org/transitions.


A Wakeup Call for Boards
John Palmer Smith, Ph.D., Executive Director, Helen Bader Institute for Nonprofit Management

In the monograph Ten Basic Responsibilities of Nonprofit Boards, author Richard Ingram identifies the first three duties as follows:

1. Determine the organization's mission and purpose
2. Select the chief executive
3. Support the chief executive and assess his or her performance

Recent research—and the work of nonprofit organizational capacity building practitioners—suggests that these and other board responsibilities be reexamined to take into account the impact of executive leadership transitions. That's probably good advice, even though most nonprofit board members serve as volunteers with limited time available to devote to board affairs.

The Milwaukee survey raises two basic questions for Milwaukee area nonprofit board members: What are the likely effects of current trends in nonprofit executive leadership transitions on the work of nonprofit boards? And what should nonprofit boards do to prepare and respond to these trends?

The survey strongly suggests that the rate of transitions of nonprofit executive directors is likely to accelerate significantly over the next several years. But few nonprofit organizations are prepared for these executive leadership transitions. Only 12% of nonprofit organizations responding to the survey have succession plans in place.

The survey also suggests that in the past, most responding nonprofit organizations (62%) had formed a board committee to manage the search process. Much smaller percentages had also examined the organization's strategic direction (23%), or interviewed the organization's external stakeholders (13%), as part of their transitions in executive leadership.

What nonprofit boards can do
Nonprofit board members can react to executive leadership transitions as they occur, hoping to get through them with as little pain and as few negative consequences as possible, but why not prepare for these events and take advantage of the opportunities they present to strengthen the organization?

Not convinced it's necessary? Given the widely acknowledged importance of executive leadership to successful—or unsuccessful— outcomes of nonprofit organizations, the consequences of not preparing for and using executive transitions to think more broadly about the future of the organization, and then selecting a new executive leader to match that future, may be significant and negative.

Don't know how to go about it? There is now a model for managing executive transitions that provides the necessary “know how” for nonprofit members to carry out this more comprehensive approach. This Executive Transition Model has been developed by a number of leading nonprofit practitioners over the past several years and is outlined in the monograph, “Capturing the Power of Leadership Change: Using Executive Transition Management to Strengthen Organizational Capacity.”(http://www.transitionguides.com/resources/docs/cappower.pdf)

Don't have time or expertise? There is a small, but growing, number of consultants and other practitioners skilled in the use of this Executive Transition Model that are available to work with nonprofit board members in implementing the model if they are unable to do so on their own.

Nonprofit boards of directors may have to spend more time and effort responding to executive transitions in the near future than they have in the past, and few of them have made any preparations for doing so. However, it is now feasible, as well as advisable, for nonprofit board members to both prepare for and implement nonprofit executive leadership transitions that increase the likelihood that the nonprofit organization will be strengthened in the process.


A Funder's Perspective
Deborah Fugenschuh, President and CEO, Donors Forum of Wisconsin

There is nothing more important than effective leadership to shape, grow and sustain an organization. There is also no time more risky and uncertain than when a leader leaves without a succession plan. In fact, when nonprofit board members are interviewed about what they most dislike about their volunteer work, they most frequently cite fund raising and hiring an executive director. Often overlooked by both the executive and the board in the midst of a leadership transition is the unique opportunity to revitalize and re-engage the organization's donors.

Donors, like board members and executives, are often leery of leadership transitions. This is especially true in Wisconsin where the conventional philanthropic practice is to fund the chef and not the restaurant. So when a transition, planned or unplanned, is taking place, the donors need to be an integral part of the transition process. As hard as it is, when change is planned thoughtfully it can breathe new life into an organization, re-energize staff and volunteers, and renew and build commitments with donors.

The leadership transition research recently conducted in greater Milwaukee shows that the nonprofit sector is facing major changes among its executives in the next ten years. Boards, donors and executive staff of nonprofits must come together to ensure that service is not disrupted, missions remain intact and organizational effectiveness is not compromised during this critical time of leadership change.

One of the most critical pieces of the transition puzzle is the continued stream of revenue needed from the community to stabilize the core operations while change is occurring. For this reason alone, donors must play a pivotal role in succession planning. The planning phase is the perfect opportunity to build donor confidence in the organization, decrease board isolation, and transform the organization.

Over time, as the Wisconsin nonprofit sector grapples with leadership transition, it is the hope of the Donors Forum of Wisconsin that this initial research and groundwork will lead to new models of partnership and engagement between donors, nonprofit boards and the next wave of new executives equally committed to sector-wide growth and positive change.

What can funders do?
Funders can support transition services and new executive coaching and leadership development activities for grantee organizations. This provides for more effective transitions in the short term and more successful organizations in the long term.

Funders' relationships with the organizations they support should actually be their tightest and strongest during a period of executive transition. Transitions, when appropriately supported and managed, provide powerful opportunities for nonprofit organizations to grow new leadership and make important strategic decisions about their future. Transitions give funders the opportunity to invest in a thoughtful and high quality process that strengthens the organizations they care about at a time in the organization's life cycle when it can have an enormous impact.

Publicly expressed funder support can have vital symbolic value, communicating confidence in an organization experiencing a transition to other funders and stakeholders.


Suggested Resources
by Mindy Lubar Price, Project Manager for Executive Transitions, Donors Forum of Wisconsin

Publications
“Capturing the Power of Leadership Change: Using Executive Transition Management to Strengthen Organizational Capacity.” Volume 1, Executive Transitions Monograph Series. 2004. Annie E. Casey Foundation, Baltimore , MD. http://www.transitionguides.com/resources/docs/cappower.pdf

Howe, F. 2003. The Nonprofit Leadership Team: Building the Board-Executive Director Partnership. Jossey-Bass.

Pidgeon, W.P. 2004. The Not-For-Profit CEO: How to Attain and Retain the Corner Office. John Wiley & Sons.

Sessa, V.I. and Taylor, J.J. 2000. Executive Selection: Strategies for Success. Jossey-Bass.

Weisman, Carol and Richard I. Goldbaum. Losing Your Executive Director Without Losing Your Way: The Nonprofit's Guide to Executive Turnover. Jossey-Bass.

Web Sites

Compass Point Nonprofit Services (www.compasspoint.com) provides access to research and articles on executive transitions, as well as templates for emergency succession plans and interim executive director job descriptions.

TransitionGuides (www.transitionguides.com) offers “transition tips” for departing executives, boards and arriving executives, along with a quarterly on-line newsletter offering step-by-step guidance on nonprofit executive transitions.


Acknowledgements

The board and members of the Donors Forum of Wisconsin, an association of Wisconsin grantmakers, have long been committed to help support the nonprofits in their communities. The Donors Forum of Wisconsin was recently selected by the Annie E. Casey Foundation to build a program in Milwaukee to address the emerging needs of nonprofits faced with leadership transitions. For more information, email Mindy Lubar Price at transitions@dfwonline.org.
http://www.dfwonline.org

The mission of the Helen Bader Institute for Nonprofit Management at the University of Wisconsin–Milwaukee is to improve the leadership and effectiveness of nonprofit organizations through education, research and service. The Institute offers graduate level courses leading to a Certificate in Nonprofit Management. For more information contact Lisa Peterson at lcp@uwm.edu or (414)229-3176. For further information on the leadership transitions survey, contact Barbara Duffy at bduffy@uwm.edu.
http://www.hbi.uwm.edu

The mission of the The Greater Milwaukee Foundation is to build a legacy of community philanthropy by connecting donor interests with community needs. This includes increasing resources for nonprofit management in the greater Milwaukee area to build the capacity of nonprofit organizations.
http://www.greatermilwaukeefoundation.org

The Annie E. Casey Foundation is a private charitable organization dedicated to helping build better futures for disadvantaged children in the United States . The primary mission of the Foundation is to foster public policies, human service reforms, and community supports that more effectively meet the needs of today's vulnerable children and families. In pursuit of this goal, the Foundation makes grants that help states, cities and neighborhoods fashion more innovative, cost-effective responsive responses to these needs.
http://www.aecf.org


RESEARCH AND OPINION
Series Editor: Barbara J. Duffy

RESEARCH AND OPINION is a publication of the Center for Urban Initiatives and Research (CUIR) located in the Graduate School at the University of Wisconsin–Milwaukee . Published quarterly, RESEARCH AND OPINION features timely research and commentary on urban policy issues in the greater Milwaukee community. For over 25 years, CUIR has been providing research services and technical assistance to public and nonprofit organizations to help them make informed policy choices. The scope of our work ranges from specifically-targeted services to comprehensive community initiatives. CUIR promotes strategic partnerships—across disciplines and sectors—integrating a dynamic network of expertise to address urban issues.

Opinions expressed in RESEARCH AND OPINION represent those of the author(s) alone, and their publication does not constitute an endorsement by the Center for Urban Initiatives and Research, the Graduate School , or the University of Wisconsin-Milwaukee .

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Visit the Nonprofit Portal of Greater Milwaukee, the “online grapevine for Milwaukee-area nonprofits,” for nonprofit management news, events and on-line resources. New to the Portal in 2005: Jobs that Serve sponsored by the Nonprofit Center of Milwaukee, and the Consultants Directory.
http://www.nonprofitmilwaukee.org

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