Academic journal article SAM Advanced Management Journal

Succession in Nonprofit Organizations: An Insider/outsider Perspective

Academic journal article SAM Advanced Management Journal

Succession in Nonprofit Organizations: An Insider/outsider Perspective

Article excerpt

Nonprofit organizations face many challenges. One is what Tierney (2006) calls their leadership deficit--who will replace the current executive directors scheduled to retire soon. Sinclair (2001) views executive turnover as a "revolving door." He found that during the years 1994-2001 only one of the 18 CEOs/executive directors of 18 high-profile nonprofit organizations such as the American Red Cross, Girl Scouts of America, Family Service America, National Urban League, and the United Way of America still led their organizations at the end of the period. In other words, the other 17 CEOs/executive directors had moved on. They had departed either on their own accord or at the request of their boards.

With such high turnover at the top of nonprofit organizations today, it is imperative that boards of directors seriously develop a succession plan to tackle one of the most crucial events in the life of an organization. Charan, Drotter, and Noel (2001) offer a working definition of succession: ... "perpetuating the enterprise by filling the pipeline with high-performing people to assure that every leadership level has an abundance of these performers to draw from both now and in the future." This paper focuses on succession of executive directors in nonprofit organizations. The particular aim is to determine whether insiders (current employees) or outsiders (individuals not connected to the organization) are the most likely candidates to replace departing executive directors of community-based nonprofit organizations. It examines and analyzes factors that played a role in the selection of successors as executive directors shape organizational strategy and direction, are responsible for increasing revenue streams, and often are held accountable for the success or failure of their organization.

We begin with a brief review of literature on organizational insiders and outsiders before presenting the methods of collecting data (questionnaire and interviews), the limitations of our study, and the organizational context of the association members participating in it. We profile the executives in this study and discuss their views about who will become their successors, and why. Implications for management and leadership are offered and recommendations for future research proposed.

Insiders/Outsiders as Successors

The succession of top executives is a major event for any organization. Two comprehensive literature reviews have been conducted on succession, covering some 50 years (Kesner and Sebora, 1994; Giambatista, Rowe, and Riaz, 2005). Recently, Karaevli (2007) and others have examined the impact of outsider appointments on firm performance, with mixed results (Bailey and Helfat, 2003; Bigley and Wiersema, 2002; Boyne, Ashworth and Powell, 2001; Davidson, Nemee, and Worrell, 2001; Davidson et al., 2002, 2004; Haveman and Khaire, 2004; Huson, Malatesta and Parrino, 2004; Zhang and Rajagopalan, 2004). For the most part, these reviews confine themselves to research about for-profit firms, although in recent years, succession issues in nonprofits has gained considerable interest (See Bonfils-Stanton Foundation, 2004; Bell, Moyers, and Wolfred, 2006; Santora and Sarros, 2001). A question that arises when considering succession in nonprofits is: "Should an organization select an insider or an outsider as its next executive?" The general response is "it depends": both insiders and outsiders can make a meaningful contribution to an organization in uniquely different ways and they bring different sets of skills and knowledge. For example, insiders have more intimate knowledge of the organization, and how it operates. On the other hand, conventional wisdom suggests that outsiders are viewed by boards as change agents. For instance, Karaevli (2007) states that outsider CEOs are seen as bringing "different leadership style, knowledge, skills, and perspective to a firm based on [their] previous experience in other firms and industries. …

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