Succession planning is a hot topic right now. There is growing competition for executive talent – and a growing number of retirements with the aging of the “baby boomer” cohort. Which is why our session, Succession Planning: The Key To Long-Term Leadership Success, at The 2015 OPEN MINDS Executive Leadership Retreat had such robust discussion. The session featured case studies of how three different organizations managed their succession planning process – case studies that I summarized in my piece, The Art & Science Of Replacing Key Executives.
This discussion of succession planning drew a number of comments from our readers. But one perspective, from J. Kevin Fee, president of Angler West Consultants, made me think a bit. Mr. Fee’s basic premise – many non-profit organizations should be thinking about “merger” as their succession planning strategy. Mr. Fee wrote:
The topic…has become one of special interest to me. I pass along the following contrarian view from a recent article I wrote: “…Traditional approaches to succession planning should be revamped in light of the compelling need to build the scale and capital capacity of non-profit consolidators. Specifically, the familiar routines of filling Chief Executive… slots vacated by retiring baby-boomers with internal candidates or engaging search consultants would be better addressed by executing timely business combinations with organizations with compatible missions and elevating the target company chief executive to the parent CEO role. The impact of such transactions will be to combine the balance sheets and income statements of the formerly separate non-profit entities under common control, while increasing the capacity for sustainable growth of the combined entities…”
This is tough advice and a controversial premise. Should the succession plan of non-profit health and human service organizations be a plan to be acquired? And how does a board of directors make that decision?
I think that boards need to make this decision in light of two criteria. First, can the organization afford to recruit the CEO (or other c-level execs) they need? Often times, the current executive team members have been with the organization for a period of time – and are not making “market” rates. So a review of competitive compensation is a first issue. For more on that, see:
- Median Salary For Non-Profit CEOs $120,000+
- 7 Key Findings from GuideStar’s 2015 Nonprofit Compensation Report
- The Executive Compensation Question – A Look At Health & Human Service Salaries
- 2015 Nonprofit Human Services Compensation Report
- How Much Are You Worth? How Do You Negotiate That?
The second, and more important issue, is whether or not the organization is sustainable with its current service lines and at its current size in the long-term. This is important because attracting top talent is only possible if they are convinced they are joining an organization with a future. In addition, if the organization is not sustainable, recruiting a new CEO is going to put the board in conflict with the executive team if a decision to join a larger organization needs to be made.
For more on the sustainability issue, check out these resources from the OPEN MINDS Industry Library:
- What Is Sustainability Anyway?
- For Sustainability, Managers Matter
- Sustainability = The Ability To Endure
- From Disruption To Sustainability
- Endurance – The Key For Survival, Change, Sustainability
The question “should our organization’s succession plan be merger?” is a tough one to ask – but one that board members need to answer.
For more on this challenge, join me on February 11 in Clearwater Beach, Florida a The 2016 OPEN MINDS Performance Management Institute, where David C. Guth, Jr., Chief Executive Officer, Centerstone of America will deliver the keynote address, The Strategic Advantages & Challenges Of Mergers & Acquisitions. Under his leadership, Centerstone has grown from a local community mental health center to a multi-state provider of health care services over the past decade – and mergers have been a key part of that evolution. In his keynote address, Mr. Guth will discuss the challenges of making mergers and acquisitions work – selecting the right organizations, the M&A process, developing governance and management structures for a newly-merged organization, and the challenges of managing a bigger and more diverse organization.