CEO Transitions in Family Foundations

Among the most important tasks that any board confronts is the choice of head staff person. If anything, this

decision has even greater significance in family foundations. Whether the position is vacant because of the retirement of a beloved CEO or the departure of a problematic one, CEO transitions in family foundations typically have three major stages: clarifying the foundation direction, identifying a suitable successor, and realigning the foundation’s strategies and/or programs as necessary.

Part I of this article features my own observations as a long-time advisor and observer of family foundation boards going through the delicate yet vitally important process of a CEO transition. Part II presents perspectives from two experienced and thoughtful family board members.

PART I: THOUGHTS FROM AN OUTSIDE OBSERVER

All CEOs bring certain strengths. They use their strengths to develop programs, structure and governance. Other things they don’t do as well get delegated or ignored. Hiring a new CEO offers the opportunity to rebalance the scales, to review and reaffirm what is important and to identify a leader with the strengths needed at this next point in the lives of the family and its foundation and philanthropy.

There is a tricky balance between what needs to be decided before the new CEO is hired and what needs to be decided after he or she is on board. The balance is often very much affected by the foundation’s current status. Here are a few examples from my experience in consulting with a broad range of family foundations:

• A much respected foundation has been dominated by second generation family members who will not retire for another 8-12 years. They need to find a new CEO, someone who can help them move towards new ways of working together. They don’t have a clear vision for what this means, and are unsure of how to merge the ways they have done grantmaking with the next generation’s preferences. My advice was that they need to include the third generation in the search process and look for someone who can help them work through this transition, rather than define in advance the direction of the foundation.
• A foundation “restarting” after the death of the donor. They needed to do considerable work with each other before they were able to outline the kind of foundation they wanted that would both respect their father’s legacy and acknowledge their diverse interests. After they did that work, they were able to hire a CEO who has helped them move ahead successfully.
• A foundation board that totally agreed on their mission, but had serious disagreements about the role of board and staff and the best way to carry out the mission. They worked through these issues, significantly changed their ideas about the role of the chief staff person and then were able to begin a search.

From these and other experiences, I draw the following recommendations.

1. Spend the time necessary to clarify direction before beginning a search.

A good first step in this is to do an organizational self examination using the National Center for Family Philanthropy’s Pursuit of Excellence assessment. This proven tool asks questions about all facets of the foundation: mission and direction, governance, family roles, grantmaking and program and finance, administration and accountability. I led the development of this assessment tool and believe it offers a great chance for board members to look at the whole of the foundation, not just the board’s role. Analyzing this information, often from the perspectives of board, other family members and staff helps to identify the areas that need attention and discussion.

Search professionals will say that the hardest searches are when the board doesn’t know the grantmaking direction they are trying to support or when there is serious intra-family or board disagreement. Split decisions on final candidates are often really about dissenting positions about the role or expectations of the CEO. In families the process also includes many points of view about legacy and how that legacy is or should be. Take time to explore these key orienting issues. Usually I suggest that it takes at least six months preliminary work before a search firm is hired or a search begins. That could be much longer for foundations, as in the example I gave earlier, that are essentially starting anew.

2. Spend time reviewing the larger picture of the role of the foundation.

Increasingly I have found that families have more differences of opinion about the role of the foundation than they do about what will be funded. These are exciting times. Many foundations are exploring possibilities for different activities beyond grantmaking. Grantmaking itself is becoming not just reactive or proactive but is using new ways of thinking about measuring effectiveness, including results based, issue based, or sophisticated logic models and paradigms.

The individual skills and talents that the current or recently departed CEO brought to the table usually influence how the foundation has chosen among these and other options. The questions the family needs to address as the executive transition approaches are: Which of those foundation roles should be continued? Which are most important? Do we need to consider alternative approaches? Answering these questions will help determine the kind of person who will provide appropriate leadership.

Of urgent importance is assessing the family’s role in the foundation’s activities for the future. Different generations have different amounts of time and interest in being involved in the foundation. What do you want to tell a potential CEO about the family’s role in the foundation? What do you expect of yourselves and what do you expect of her or him?

3. Outline major areas of grantmaking commitment or interest before the search begins but save more specific conversations about program direction for the new CEO.

Families need to know if they are generally comfortable with current program directions or if they need a new CEO who will begin an intensive review. Often what I see is that a family retains its commitment to the major areas of the foundation’s direction but its member’s wonder whether the current individual strategies or emphases within those should be continued.

Existing staff are often and appropriately passionate about the programs they are working in. That’s what helps to make them effective. They aren’t necessarily the best people to suggest new ideas or to develop new strategies. Or at least not on their own.

My point of view is that clarifying specific program direction is the task of the new CEO. He or she directs this process, using the staff and outside consultants as appropriate. This is often an intense period with the new CEO working with the board more directly than usually happens later when the in depth discussions often take place in program committees or with program officers. It’s a good time for the board, new CEO and staff to consciously learn about one another and to raise and resolve important issues of values, direction and operation.

4. Identify a search professional who has experience working with family foundations or family businesses.

One thing that is apparent to anyone who has observed more than a handful of foundation boards and staffs is that there are particular skills that are needed to be a CEO of a family foundation, beyond those that are required for an independent foundation. Search professionals who understand the family component are able to identify individuals who have the right set of skills and temperament to work well with families in general and a given family in particular. They are able to screen out those who may otherwise be good leaders but whose own style or needs prevents them from being effective with families.

The National Center’s CEO Initiative, currently underway, will identify and spotlight the particular skills needed to be an effective family foundation CEO. If you are a board member or current CEO interested in more information about this initiative, you can read more at the National Center’s website or contact National Center Vice President Susan Price at susan@ncfp.org.

PART II: THE FAMILY BOARD MEMBER PERSPECTIVE

Take your time, prepare, get help and make sure all voices are heard. These key recommendations come from family board members of two family foundations with recent experience with a CEO transition.

Julie Fisher Cummings, managing trustee of the Max M. and Marjorie S. Fisher Foundation, and Libby Andrus, board member of the Surdna Foundation, each suggest that family foundations embarking on this process should start by taking a step back to look at the values, guidelines and current funding areas of the foundation. In the case of the Fisher Foundation, “We didn’t have a values statement or concrete funding guidelines,” says Cummings. “Working with a consultant, we started with the values piece and then established different funding areas. This gave us a better idea of what we were looking for in a CEO. It highlighted the skills, talents, and help we were going to need as a board going forward.”

Andrus agrees: “Prior to the search the board came to consensus on specific criteria, shared values and expectations for the new CEO. We also decided on what his/her title would be.”

Cummings suggests that this is an important clarification: “Ask yourselves is this an ED that we want or a CEO? I think there is a really big difference. To me, a CEO is one who really sets strategy and is more engaged in leading the board, whereas an ED is one who helps the board find what their passions are and facilities that process. In our case, we really did want an ED, and that colored who we wanted to interview. It’s a big distinction, but a good search firm should help you determine that. “

Andrus and Cummings also recommend that boards clearly define early on in the process who will be leading the search, and postpone other important decisions before hiring the new executive. “A key decision by our board was to empower a committee to take the board’s charge, review candidates and come back to the board with one candidate for approval,” says Andrus. “We held off on making any important decisions including guideline and programs changes. All staffing changes were put on hold until the new CEO was in place.”

Adds Cummings, “It’s really important that you ask the board to determine who they want to be on the search committee, and which board members want to do this – it can take a lot of time and effort – it’s a big responsibility.”

Other suggestions for the interview and hiring process from Andrus and Cummings include:

• Allow everyone to be heard: make sure everyone has the chance to share their perspectives
• Get good comparables: while this is not always easy for family foundations, it’s important to compensate executive staff properly – “They’re going to be doing a lot of work!”
• Ask about their management philosophy: some candidates may have very different ideas than the current board about how many staff are required to achieve the mission of the foundation
• Find someone who respects the role and participation of family members: “I’ve heard this can be a problem in some family foundations and it’s unfortunate,” says Cummings. “Respect in this type of relationship must be mutual.”

Cummings also suggests a number of qualities to look for in a family foundation CEO. She advises that family foundation board seek candidates who have:

• … the ability to help you identify your collective passions and work towards consensus in your giving
• a high emotional IQ – skill at working with different personality types: “Try and find someone who is comfortable working with all personality types, and who can create and facilitate a space where everyone can be heard. Someone who is able to keep the family focused on the shared vision of the philanthropy rather than the personal issues that are sure to be present.”
• a great deal of patience with the process, the trustees and the grantees as well
• a collaborative approach to working with other organizations
• a love of learning: “You don’t want someone who thinks they know it all. They should think of the opportunity as a great adventure! Someone who enjoys the journey.”
• the ability to create an environment of mutual respect and trust

“The search itself can be a valuable learning experience for the board,” concludes Andrus. “Listen to the candidates’ questions and feedback and be open to the fact that you are interviewing very bright people and can learn from them. After completing the hiring process, build in time for learning for the new CEO, board and staff. Taking adequate time in the transition can result in a solid building of relationships and trust.”

Cummings agrees. “I believe that our highest good is being achieved through this foundation, and that it has allowed us to come together as a family over many generations and perpetuate the legacy created by our parents, the founders. “