CEOs Want Second Act; Top Jobs Opening Up

Some of the nation’s largest foundations have seen a new chief executive take over this year. Robert Gallucci will be the latest one to leave when his five-year term at the helm of the MacArthur Foundation expires at the end of this month. Since the start of the year, new CEOs have taken charge at the W.K. Kellogg Foundation and Bill & Melinda Gates Foundation while both the James Irvine Foundation, The Council for Advancement and Support of Education (CASE) and Pittsburgh Foundation seek new leaders.

A bevy of nonprofit CEOs announced their retirements in recent months, including Peggy Conlon at The Ad Council, Jane Gilbert at The ALS Association, Valerie Lies at Donors Forum and Sharon Camp of the Guttmacher Institute.

“Baby Boomers are getting to be 60, 65, and it’s time for them to move on to other things,” said Tom Flannery, a Boston, Mass.-based partner with Mercer consulting.

The inevitable conversation around when someone is going to retire and what they plan to do is very different from 20 years ago, when the plan was typically to head south and play golf. “What we hear more and more today is, they want to serve on a board, be an advisor, use the knowledge they’ve built up, but they don’t want the 9-5 grind. That’s a big change,” Flannery said.

“It’s opening up a lot of talent. Not a lot of them are running to publicly traded companies,” he said. The problem that exists is finding the right matchmaker between candidates and board members and organizations, he said. Some communities have organizations that focus on helping nonprofits find board members.

Turnover among nonprofit chief executives is occurring at a faster pace now than in previous years, according to statistics Challenger, Gray & Christmas. The Chicago-based search firm tracks staff and CEO turnover in the nonprofit and government sector (although it doesn’t break out nonprofit and government).

During the first quarter of 2014, 50 CEOs have stepped down compared with 36 during the same period in 2013. That’s a faster clip than last year when 178 posts turned over during all of 2013, which was nearly identical to the 179 the firm tracked in 2012. In previous years, the totals turnover was closer to 150 openings.

The demographics of CEOs and the aging of Baby Boomers is having an impact but David Edell, president and co-founder of DRG, a New York City-based executive search firm focused on nonprofits, said there’s more to it. “I would characterize it as a changing business model of nonprofits: the pressures that nonprofits are facing I think, many people are requiring different sets of skills, priorities, and background. So I think boards are pushing to make some change in those areas,” he said. “It varies field to field; in human services and healthcare, it’s all about managed care, in other areas it’s all about fundraising. There are a bunch of changes in the world that are dictating different kinds of skills.”

A new generation of board leaders has different expectations about how organizations should be run and the relationship between boards and CEOs, Edell said, which could be driving change as well.

“Retirement” doesn’t mean golfing for fishing anymore either. Dr. Larry Corey will step down this summer after three and a half years as president and director of the Fred Hutchinson Cancer Research Center in Seattle, Wash. He plans to focus his energies on research toward vaccines for HIV and herpes viruses.

After 30 years leading the Association for Healthcare Philanthropy (AHP), William C. McGinly next month will become the new president of Gobel Education, a health care philanthropic services firm. John Seffrin has led the Atlanta, Ga.-based American Cancer Society for two decades and announced plans to retire. Though there’s no timetable, he said he would continue to work to fight non-communicable diseases. The longest-serving president in CASE’s 40-year history, John Lippincott informed members earlier this year that he will retire in January 2015. Appointed in 2004, he is the organization’s ninth president. There’s no word yet on his next move.

It’s much more common these days for people to enter a second career, not just a second employer, Flannery said, but doing something very different.

Years ago, maybe a CEO would have stuck around longer, Edell said, but people who are staying in jobs for seven to 10 years don’t view it as their life’s work. People who are now in their late 50s say they have more things in life that they want to accomplish and they’re not “going to hang around for the next seven years,” Edell said.

“Fifteen or 20 years ago, executives would come to a job, building it, finding new challenges and stay forever and love it,” he said.

“There are a lot of CEOs who are saying, ‘I just don’t want to deal with the changes,’ and want to pack it in, retiring at 55 or 60 and not the magic 65 or 67,” Flannery said. “What’s good about that is they recognize they may not be the right person going forward and are willing to exit gracefully. That provides an opportunity for advancement for new people coming into the organization,” he said.

It’s a particular issue in healthcare where the Affordable Care Act (ACA) is putting significant stress on organizations and the regulatory environment is getting more stringent, Flannery said. “As a result, we’re seeing people who’ve just said it’s not worth it to stick around while other’s who’ve said this is the most exciting time ever.”

He told the story of one CEO in his 70s who was expected to retirement but thinks all the changes in healthcare are “just unbelievably terrific.” Flannery said he’s still seeing a lot of people in their 40s and 50s who are still on the achievement drive and if there are opportunities and the circumstances are right, they’ll take them. “People are changing jobs for new opportunities,” he said. For example, a 45-year-old who recognizes that they might not become the CEO at their organization may find there’s an opening, get recruited and move on elsewhere.
Lack of fit

When a CEO retires, it’s usually accompanied by laudatory announcements outlining accomplishments during their tenure. In some cases though, there’s far less talk about what was accomplished and merely some obligatory public thanks for their service. A short tenure can mean it was a weak marriage from the start.

The lack of fit between a CEO and an organization is a relatively small percentage of the turnover, Flannery said. He’s seen situations where within the first 30 days, it was evident the hire did not work out while in other cases it’s takes more than 18 months. Boards must be willing to give feedback and guidance to their CEO, to make sure there’s clarity around the expectations. “Where we see that clarity, we’re seeing fewer cases of failed executives. That means that the board has got to step up and provide that type of counseling,” Flannery said.

Of course, some boards and search committees talk about seeking a change, bringing new energy and dynamics, Edell said, but got out to hire and realize they weren’t quite as ready. “Sometimes it’s a bad fit, bad mutual expectations, just not matching up. They hired the person they said they wanted but weren’t really ready for what they wanted,” he said.

“In the context of this, there is a thrashing around of what kind of leadership do we want to help lead our nonprofit businesses these days, and will we find it in the nonprofit sector; do we find it someplace else, is it inspiring, can they manage the complexity of the new environment? No one in any sectors found the model that they have most confident in. Bad fits…have to do with trying to do those kinds of things and not exactly working out the way they thought they might,” Edell said.

Larger, asset-rich organizations are much more sophisticated in their recruitment process as smaller ones don’t have the assets to do it, Flannery said, while smaller, local organizations are looking at more local candidates so they don’t have major relocation costs and related issues. Those large organizations are changing how the individual is going through the final process, bringing them into town and letting them see what the environment is like. “Organizations have recognized that they’ve got to in many ways market themselves in a much more positive way,” Flannery said.