5 Years Later

February 1, 2006       Marla Nobles      

Four is the only number in the English language for which the number of letters in the word equals the number itself. It is the number of the horsemen of the apocalypse. Four years (or less) is also the average amount of time a chief executive stays at a nonprofit organization, a 2001 study concluded.

Five years later, the doors of the executive suite at nonprofits are still swiftly revolving.

An article in the February 2001 issue of The NonProfit Times found that at the end of 2001, a solitary member of the Leadership 18, an elite coalition of CEOs of national nonprofit organizations brought together by the United Way of America, remained from the 1994 roster. Peter Goldberg, chief executive officer of the Alliance for Children and Families in Milwaukee, Wisc., was the last man standing or, as he put it, the last man moving. “If I was just standing, I’d be gone,” said Goldberg.

And, of the 23 members on the expanded council back in 2001 — 22 of them having joined that year or in years to follow — five years later just 10, including the steadfast Goldberg, remain in the same position. 

But with nearly 85 percent of current nonprofit executives expected to transition out of their positions between 2000 and 2007, according to a 2001 study, high turnover is hardly restricted to the Leadership 18.

According to the Nonprofit Leadership and Transition Survey, 2004, there will be more transitions at the top of nonprofits during the next five years than there have been in the previous 10 years, forecasting what could be a damaging blow to the nonprofit sector. The study was completed by the Annie E. Casey Foundation, along with 11 of its national partners in the Neighborhood Transformation/Family Development National Campaign, and seven local partners, with 2,200 respondents from all 50 states.

The authors concluded that in the chief executive position at nonprofits, an “era” of transition is imminent.

With the events of the past decade, some unprecedented, this transition is also expected, said Goldberg. “(Five years ago), Monica Lewinsky was better known than Osama Bin Laden. I mean, who heard of Katrina? It was just a name. We were two weeks into the George (W.) Bush presidency. 9/11 was just another date. You look at what’s happened in the (past five years), there’s enormous change taking place in our society.”

Added Jan Masaoka, executive director at CompassPoint Nonprofit Services, a consulting and training organization in San Francisco, “I don’t think you can look at nonprofits without realizing that they are organizations operating in a time of the whole industry restructuring and losing large amounts of its income. So, in any of those situations, you expect to see higher turnover than in a period in which the industry is stable.”

As this transition period takes place, Masaoka noted, there are several issues that nonprofit organizations will be forced to consider. “That there’s turnover isn’t the question,” said Masaoka. “The question is, ‘Why are people turning over?’”

Baby boom?

Approximately 77 million baby boomers (those born from 1946-1963) make up more than half of the current work force, and represent more than seven in 10 nonprofit leaders in the United States, according to the 2004 Transition Survey. “There’s about to be a huge amount of turnover at the top (positions at) nonprofits, because many nonprofits have been run by baby boomers who are beginning to retire,” explained Diane Franklin, principal at the Jamaica Plain, Mass.-based Impact Collaborative, a consulting firm for nonprofit organizations. “In the next five years, there is expected to be a huge exodus of the baby boomers with replacement by younger people.”

While the oldest baby boomers turned 60 on Jan. 1, 2006, three times as many, or close to 40 million, are in their late 40s and early 50s, and another 23 million are approaching or in their 40s, according to the U.S. Census Bureau. These younger boomers will perform a massive exodus in two waves. Forming the first wave, 57 percent of baby boomers in the chief executive position said they plan to retire by 2010, while the second wave will be formed by the other 43 percent who are expected to retire around age 62. The survey added that if recent patterns hold, most of these transitions will have occurred by 2020.

But it seems the anticipated exodus by the baby boomers has yet to have any real impact on the sector. A 2002 CompassPoint study, Help Wanted: Turnover and Vacancy in Nonprofits, found that only 3 percent of CEOs surveyed marked “retired” as their reason for leaving.

Among the top executives no longer with the Leadership 18, retirement was the reason in the single case of Joanne Negstad, founder, president and CEO of the Baltimore, Md., headquartered Lutheran Services in America (LSA).  She retired from LSA in May, 2001, that same year relinquishing her seat on the Leadership 18.

Of planes and Palm Pilots

“I remember years ago having a conversation with (the late) David Liederman, who was then the head of the Child Welfare League (of America). David said he thought that about 10 years in this job was about all you could do,” said Rev. Alfred (Fred) C. Kammer, former head of Catholic Charities USA for nine years. “When I came in, my predecessor had stayed 10 years, his predecessor 20 and his predecessor actually 40 (years). But those were the days before airplanes, before charities were so big. I think it was simpler.”

Being a nonprofit executive is not an easy job, and it shouldn’t be, according to Goldberg. “The physical demands of travel, the time demands of constant electronic communication. In the old days, you’d go out to dinner and have a drink afterwards. Now, we’ll have a quick business dinner, then we’re all running back to our Blackberrys and our Palm Pilots and our emails. And that’s okay, but it is different.”

In a 1999 study by CompassPoint, Leadership Lost: A Study of Executive Director Tenure and Experience, high stress, long hours, anxiety about finances, fundraising and managing people were all cited as major stress factors for nonprofit chief executives. A follow-up study done in 2001, Daring to Lead: Nonprofit Executive Directors and Their Work Experience, received similar responses. Five years later, not much has changed.

Rev. Kammer left Catholic Charities and the Leadership 18 in 2001, largely due to the grueling nature of the position, he said.  After a 10-month sabbatical, he returned to the workforce in spring 2002 as provincial superior of the Jesuits in the South.  “I spent about 120 to 140 days of the year on the road,” said Kammer. “By the middle of my seventh year, my sense was that I had finished a strategic plan, I was finishing a major capital campaign and I was finishing a third, three-year term. I was very tired.” 

Fundraising, added Kammer, is also getting harder.

“The nonprofit sector as a whole has lost large amounts of money in the past 10 years,” said Masaoka, adding that competition for funding has increased due to the influx of new charities. The number of 501(c)(3) organizations has increased from roughly 865,000 in 2001 to number more than 1 million in 2005, according to the most recent count by the Internal Revenue Service (IRS). “That kind of environment makes people leave sooner, because their job has gotten 10 times harder.”

Expectations of CEOs, and not just by the board of governors, have changed in the past 10 or 15 years, added Goldberg. “CEOs are under a lot of pressure from a lot of directions. Within the board room, the pressures to satisfy members, funders, the public, are growing.”

Moreover, expectations of nonprofit organizations — not just its CEOs — have increased. “There’s a lot of pressure on governance at a time of profound change in our society, and much higher expectations for the performance of nonprofit organizations,” said Goldberg, who added, “and in a very public sense, national nonprofit human service membership organizations.” 

Troubled waters

“Certainly I think troubled organizations turn over more frequently,” said Masaoka. “Because the ability of an organization to change through changing its CEO is just much stronger than its ability to change dramatically while keeping the same CEO.”

The American Red Cross (ARC) has in the past decade gone through three permanent chief executives and four interim bosses, and is currently looking for a new president to replace the one it pushed out this past December.

Support system

When asked what additional support they could have used, CompassPoint’s 1999 study found that 23 percent of respondents (former or current chief executives) said more help with board development and 21 percent said more staff to lighten their load.  But because nonprofits have a social welfare mandate as opposed to a profit mandate, often a greater percentage of their resources are allocated to providing services than are allocated to building infrastructure or supporting management functions, according to the 2004 Transition Survey.

“One thing I worry about for CEOs is whether or not we have general, sufficient organizational capacities to manage all the expectations that we’re trying to fill,” said Goldberg, who has run the Alliance for Children and Families for more than a decade. Goldberg said that he fears that without sufficient support, the margin of error for an organization is reduced, rendering an organization and its leader more vulnerable to making a mistake.  “At some point, you stretch it beyond its capacity, and when you’re stretched thin for long periods of time, you increase your risk.”

According to CompassPoint’s 2002 study, 46 percent of nonprofit organizations responded to increased turnover by raising salaries across the board; another 46 percent increased resources for staff development; and 45 percent enhanced employee benefits. Some 26 percent, however, held on to substandard staff and 22 percent postponed or canceled programming.

With comparatively limited resources, smaller agencies were significantly less likely than larger ones to raise salaries or benefits, or to spend money on training for supervisors, the study found. 

Help wanted

Reacting to the findings by the Baruch College School of Public Affairs — that 45 percent of current executives of New York City nonprofits will retire in five years — the United Way of NYC in 2003 launched the Leadership Fellows programs to train the next generation of nonprofit leaders. The program, which began in January 2004 at Baruch in New York City, was also a reaction to the increased need for professional development within the sector, according to Lawrence Mandell, UW-NYC’s president and CEO.

The Center for Public Service at Seton Hall University in 1995 completed a study that found that more than 250 colleges and universities offered programs with courses in nonprofit management.  Of  those schools, 114 offered a graduate degree with a concentration (three or more courses) in the management of nonprofit organizations. According to Eugene R. Tempel, executive director of the Center on Philanthropy at Indiana University, there has been no formal tallying of schools since 1995.

Increasingly, nonprofits are taking advantage of these university education programs, influencing some colleges and universities to offer master’s degrees. One such program, the Mandel Center for Nonprofit Organizations at Case Western University in Cleveland, Ohio, offers both the master’s of nonprofit organization (MNO) degree and the certificate in nonprofit management (CNM).  The Mandel graduate program is consistently ranked by U.S. News & World Report among the top 10 nonprofit management programs in the nation.

“It’s only natural that the skill sets that a CEO has to have now are going to be different from what the skill set expectations were 15 years ago,” said Goldberg.  And while Goldberg maintains that vision and passion for the organizational mission are invaluable characteristics of a nonprofit CEO, “the ability (of a CEO) to generate the confidence to invest in this field is very important.”

When asked how a board should go about selecting its next CEO, “Fundraising has got to be a part of the decision,” said Goldberg.  “You look at all the data on the Giving USA stuff, right, and we lag other fields. The human services field is not doing well in fundraising. Are we all going to become like university presidents? That’s a good question.”

Certainly, in the smaller nonprofits, “the biggest thing that the board is looking for with executive directors is people who can raise money,” added Franklin.

The 23 members on the 2005 Leadership 18 roster represent some of the largest nonprofits in the nation, many of which have several levels of senior management already in place. Of nonprofits in general, only about one-third have a deputy director or someone they consider to be the second in charge, according to the 2004 Transition Survey. In other words, there is no readily available person to train future executives.

In-house development of people, said Impact Collaborative’s Franklin, is a rarity at most nonprofits. “That’s going to present its own set of challenges because a lot of the younger executive directors who are coming in have never really run anything. Many of them have gone to school (for nonprofit management), so they have the academic skills, but they don’t really have the practical skills or the contacts that have been built up from years of working in the field,” she added.

But as the incidence of chief executive turnover continues to rise throughout the sector, many nonprofit organizations are finding that effective management of the transition period, typically referred to as succession planning, can turn a potential crisis into a unique opportunity. 

According to the 2004 Transition Survey, the period of transition can provide an organization the opportunity to assess strategically its vision for the future, and to seek an executive who will move it toward that vision. It can also be an opportunity to diversify its leadership.

“I think there’s a problem with bad hires and sometimes with vacancies.  I don’t think there’s a problem with turnover,” said Masaoka. “Because the right person for one stage of an organization’s life is probably not the right one for the next stage.”

“When you get to be CEO, you look for a five-year turnaround,” said Gene Dyson, interim president at  the ARC in Washington, D.C., from 1996 to 1997.  “You want to come in, do what you want to do for five years and then get out.”

Conversely, repeated executive turnover denotes a poorly run organization, said Franklin, and can often lead to havoc.  “In any kind of organization, excessive turnover is bad,” she added.  NPT