Executive Transition Loses Something in the Execution

Philadelphia is waking up to the reality that no one is waiting to take the place of retiring boomers in the city's many small scale charities.  Interim directors can turn into executioners when they lack fundraising ability. 

A couple of articles in the Philadelphia Inquirer laid out the bleak future for huge numbers of charities, particularly in social services, who face the imminent retirement of long-term leadership of baby boomer age—but who have limited prospects for finding a replacement.

The main article (Retiring boomer worrying nonprofits by Jane M. Von Bergen) illustrates the problem with the story of the West Chester Area Senior Center (EIN 23-2149355 Form 990), whose director, Amy Holman Balian, is considering retirement after completing a capital campaign and moving into a new building, but who has no successor in sight. 

The Form 990 shows that the organization has a staff of just six and from the 2005 return we see that its operating budget in a year without a capital campaign is a third of a million a year.  The director salary was just raised to $55,000 a year. 

I would completely agree that it will be hard to find a qualified person willing to take on such a job at that salary.  As the article points out, today's young people come out of school with a load of debt and can't afford to take a job at that level.  That, plus the fact that the current generation:

• doesn't see a career path,
• doesn't like the technological backwardness of many charities, and
• wants a better balance between work and life than many charities provide. 

The article alludes to the problem in the demographics, but I see it even more sharply drawn:  to me, the reason there are so many smaller scale social service nonprofits (in the $100,000 to $10,000,000 range) was the glut of reasonably qualified talent in the boomer generation.  Demographics helped drive the creation of so many charities, and it will drive the next phase of mergers and closings. 

The companion article on interim executive directors illustrates the sad future facing many thousands of charities ('Gun for hire' aids nonprofits, also Jane M. Von Bergen).  New Creation Community Center (Centro Nueva Creación)(EIN 23-2800298 Form 990) offers after school programs and a summer camp in North Philly.  Its founder left after about a decade, just as the program moved to a new location in a renovated building. 

The program's lack of operating funding led to the quick departure of the next director, and then the board turned to an interim director, matched up with them by the Nonprofit Center, a program affiliated with La Salle University (EIN 23-1352654 Form 990).  Finding the organization in complete disarray (payroll taxes were unpaid, for instance), the interim radically downsized the program from fifteen full and part time staff to just one and a half paid staff member and three Vista volunteers. 

The Form 990s track some of these developments.  The 2004 form shows an organization with over $227,000 in contributions and $183,000 in government grants and a staff of six (not fifteen).  The 2005 Form is handwritten (signed by the interim director), with contributions at just $48,000, government grants at $143,000, and a staff of thirteen. 

Not exactly a success story, this illustrates the risks that small organizations face in these transitions.  Volunteer boards often lack the time and the skills to see the organization through in the absence of paid leadership.  Even a relatively quick solution like an interim director may not be quick enough to avoid administrative collapse (failure to pay payroll taxes) and a disastrous drop in contributions.  I get a sense, too, that an interim director with a business background coming from outside the community will have a tendency to focus on cost cutting rather than on emergency fund raising. 

The long term success of the interim director approach is still unproven, and this case study shows that it can result in a less than ideal outcome, especially if the interim lacks fundraising ability.  In reality, boards have a strategic choice when a long term executive decides to leave without a successor in sight.  All three options have to be considered, but the dynamics of volunteer boards rarely get past the first one:

• Transition to new leadership,
• Merge with another organization,
• Cease operations.

Comments

[Flakcatcher]

What I have noticed is that these small charities tend to become a cult of personality. The longtime ED has a hand-picked board and often fails to groom or train a successor. When the organization struggles after the ED leaves, it just goes to show what a great ED they were.