Succession Planning

By March 19, 2012 News

The plans of the diligent lead to profit as surely as haste leads to poverty.  Proverbs 21:5 (NIV 1984)

We backup our computer memory onto external hard drives, we replace dead batteries in our fire alarms, we fill up our gas tanks before heading down a long stretch of deserted highway and we reference our planners before making plans.  The world is full of people obsessed with being prepared; there’s even a Meyers-Briggs Personality type (ISTJ) outlining the behaviors of the “Planner Inspector.”  So, why is it, with all of this planning going on in our daily lives, succession planning is so often forgotten?

Succession planning at the executive level is vital to the success of any healthcare organization, ministry or non-profit organization.  Selecting the most qualified candidate to fill a leadership position can take months in some cases.  Failure to have a succession plan in place can lead to crisis or ad hoc executive placement in the event of a sudden illness, termination or corporate restructuring.  And just as the old saying “a failure to plan is a plan to fail” warns, panicked decision-making may cause huge problems for the company, including loss of revenue, productivity and public trust.

Now more than ever there is a very real need to implement corporate succession plans.  In 2008 80 new CEOs were appointed at the 1,000 largest American companies (by revenue).  In 2009 two studies reported two-thirds of executive directors of nonprofits are expected to depart within five years and another predicted that 640,000 new nonprofit executives would be needed within the next 10 years.  Also in 2009, the turnover rate of hospital CEOs increased to 18 percent.  With the unstable economy coupled with the current and upcoming retirement of Baby Boomers from the workforce, it is clear succession planning has become more important than ever before.

Getting Started

Before drafting a succession plan, it is important to define who is responsible for its creation, maintenance and execution.  For healthcare or nonprofit organizations, the responsible party is most often the board of directors.  Ministries may rely on a committee of senior church leaders and occasionally seek input from the entire congregation.  Although including members in the process of succession planning may reflect some of the ministries’ core values of fellowship, this practice can often be detrimental to the overall goal.  While it is important to value the input of church members, it is also important for senior leaders to do just that – lead.

Once the committee or board has been assembled, the next step is to create a specific list of qualifications the successor must possess.  Essentially, this step involves writing a job description of the perfect candidate.  Planners should consider what skills the new leader should possess and what personality type will mesh best with current executives and other stakeholders (members of the congregation, employees, medical staff, etc.).

Planners should also evaluate the organization by examining its current state and where it’s headed in the future.  Will the organization be heavily integrating technology into its daily functions in the next five years?  Is there a need to garner more major national attention for fundraising efforts in the next year?  Has a plan already been set in motion to open campuses across the state in the next three years?  Consider what’s in store for the organization and what traits a leader must possess in order to achieve those goals.

It is wise to include the current leader in this phase, as they will be able to offer intimate insight regarding the skills and personality traits necessary to succeed in the position.  It is important to keep communication open and honest while working to create the ideal candidate profile in order to avoid tensions between the current leader and fellow succession planners.  A breakdown in communication may easily lead to tension among members if the current position-holder feels ousted or threatened.  Problems may also arise if committee members do not feel they may speak freely about said leader’s successes and failures.

Conducting the Search

According to a study published by Baruch College of New York, the chief executive is the single most critical factor underlying nonprofit effectiveness and a study done by Herman and Heimovics concluded, “chief executives occupy a place of psychological centrality” and “are assigned and accept responsibility for both successful and unsuccessful outcomes.”  Because of this, it is crucial that all options are explored before an executive position is filled.  This means looking for successors internally as well as externally and pursuing both avenues equally in order to ensure the best candidate is chosen.

Hiring internally is often viewed as the easier, safer route to succession.  Selecting an internal candidate allows organizations to train them for their future position based on company standards and expectations.  Internal successors may also have the opportunity to gain invaluable hands-on learning experience in the role of an apprentice, studying under the current leader.  In some instances, stakeholders of an organization are more receptive to internal succession and view external candidates as “outsiders.”

However, there are problems with internal succession. Typically an exaggerated importance is placed on seniority and company loyalty during an internal succession search.  This can be detrimental to the organization if a new-hire who fits the job description perfectly is overlooked for a promotion because a tenured employee is vying for the position.

It is the responsibility of those in leadership positions to select candidates who best meet the needs of the company.  This is not to say there is no possibility of hurt feelings or even resentment from employees who may feel slighted.  One way to avoid negative reactions is to clearly state position requirements to potential candidates.  It may be easier for an employee to accept not receiving a promotion if he or she is able to see the areas in which they are unqualified.

It is important to remember that promotions are earned, not owed.  Although it may be appealing to choose a loyal long-term employee in an effort to avoid in-office hostility or hurt feelings, selecting an under-qualified candidate will result in much greater problems for the company in the future.

External candidates must also be considered as part of a successful succession plan.  Exploring external options helps to ensure the best possible leader will be chosen.   External searches have the potential to breathe fresh life into an organization, as non-employees will bring thoughts, ideas and opinions about the organization from out outsiders’ point of view.  External candidates will perceive the organization differently than existing employees allowing them to address strengths and weaknesses possibly unseen by insider eyes.  They may also bring valuable skills and experiences to the table that compliment those lacked by existing leaders.

Hiring committees must resist hiring externally solely based on the thrill and excitement of something new.  There is no superhero candidate who will swoop in and solve all the organizations’ problems or appeal to everyone.  Consultant John Szold describes some of the negative effects an external candidate may have on an organization; “Outsiders…tend to paralyze an organization in the first 90 days of the job.  Employees become cautious and everyone’s feeling each other out.”  Conversely, there are some cases in which external candidates may be met with hostility or resentment from current employees and other stakeholders.  Some executives may find it in the organizations’ best interest to mentor an internal candidate and introduce him or her to the congregation or team while the existing leader is still in office in order to avoid a negative reaction as power is transferred.

It is the responsibility of existing leaders to consider these factors in order to select the right leader for the organization.

After the Search

Once the position has been filled, the succession plan should be evaluated and revised accordingly.  Were there any kinks in the original plan that can be smoothed out?  Were new research methods learned during the course of the search that should be implemented at the start next time?  Were there unnecessary steps taken in the search that can be skipped in the future?  Just because a succession plan has been put in place or even implemented, that does not mean it is set in stone.  Succession plans should be reviewed at least once a year and modified based on organizational changes as well as any modifications to the particular job functions or requirements.

Ed Fry is the president of FaithSearch Partners, the leading national retained executive search firm focused on identifying and recruiting leaders for churches, parachurch organizations as well as faith-based hospitals and healthcare systems.  Since 1990, Fry has successfully assisted faith-based organization boards and executive teams in securing mission-minded leaders.  He served as Vice President/Partner of Witt/Kieffer and launched the faith-based practice at Russell Reynolds Associates.  Ed holds an MBA from Dallas Baptist University and serves as board chair for a national faith-based wellness foundation.

For more information about succession planning or how FaithSearch Partners can assist you in an executive search for your next leader, contact Ed Fry at edfry@faithsearchpartners.com or visit www.faithsearchpartners.com.  For further reading, download our brochure, Leader Search Road Map: Five Steps to a Successful Search.

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