Executive Leadership Research and Evaluation Methodologies
The Third Sector Company, Inc. uses three types of evaluation research to further understand the practice of professional interim executive management services for the nonprofit sector as well as gauge consumer buying patterns related to the purchasing of interim executive management services by representatives of the nonprofit sector.
The research methodologies used by The Third Sector Company, Inc. are:
WRITTEN CLIENT EVALUATIONS which are solicited at the close of an interim engagement for the positions of chief executive officer, chief development officer, and chief financial officer;
WRITTEN PRACTITIONER EVALUATIONS secured from the interim professional representing Third Sector Company, Inc. to the client organization; and
FOCUSED CLIENT INTERVIEWS with the decision-maker representing the client organization.
Third Sector Company, Inc. has been providing interim executive services for nonprofit organizations in the United States and Canada since 2002 and our executive summary findings represent the cumulative responses by clients and interims that participated in all three methodologies over a cumulative period of time. Third Sector Company has provided services to over 300 nonprofit organizations and our conclusions reflect 67 experiences from National City, California to Vancouver, British Columbia, a geographic expanse of 1,200 miles along the Pacific West Coast.
Nonprofit Consumer Buying Behaviors
Nonprofit organizations that do business with Third Sector Company, Inc. represent a median size of $2 to $4 million annual operating budget and contact the company, most times, during periods of planned termination of the predecessor, although unbeknownst to the predecessor currently holding the position. The average length of engagement for a Third Sector Company interim executive is 8.1 months within a range of 3 weeks to 2 years.
The buyer decision-making process averages four weeks from the point of inquiry to the actual placement of a Third Sector Company interim professional. The client organization, more often than not, requests two to three candidates prior to making a final selection.
Interim Executive Management Research Summary
The Third Sector Company, Inc.
Over the past ten years of practice, the optimal pricing arrangement has been the result of a percentage of pre-allocated amounts to the operating budget with a series of support services in addition to the placement of an interim executive. Simply providing a human resource has not been a sufficient “bang for the buck” in commanding a premium price for interim executive management services provided by a professional services firm over a private practitioner.
The ultimate purchaser is usually not associated with the nonprofit itself, but has a consulting or voluntary position of influence within the structure of the nonprofit. Print advertising and visibility in the business press and active participation and communications strategies in professional trade association channels have proven the most effective for initiating calls of inquiry for potential purchase from Third Sector Company.
Nearly 80% of Third Sector Company clients indicate an intention for repeat business for interim executive management services which indicates strong service lines related to nonprofit leadership continuity is critical for affecting subsequent purchasing while maintaining incremental revenue streams for the company between purchases.
Perceived Organizational Needs
The vast majority of clients of Third Sector Company identify one or more of the following specific situations as the most pressing organizational needs prompting consideration of interim executive management services:
FUNDRAISING … Perhaps reflective of the environment, Third Sector Company clients overwhelmingly expect a substantial fundraising contribution by the interim executive during their tenure with the organization as the primary leadership role and a deciding factor in the purchasing decision.
FISCAL ACCOUNTABILITY … Underscoring research conducted by BoardSource regarding board member knowledge of nonprofit financial management, Third Sector Company clients are not fully aware of the fiscal condition of the organization until a crisis has been reached indicating an immediate leadership change and a call for immediate financial action.
STRATEGIC PLANNING … There is a significant number of clients who seek an interim who can assist the organization in long-term planning prior to recruiting and placing a long-term executive, development or financial officer.
BOARD DEVELOPMENT … Many clients indicate that poorly understood and executed board/staff relationships was a causative factor in the vacancy occurring and there is a desire to bring clarity to the roles and responsibilities of management and governance during the interim period.
STATUS QUO … A surprising number of clients seek an interim executive who will maintain a “status quo” until the permanent replacement is recruited and hired. The most common response is “to hold the place together until we can get someone in there on a full time basis.”
Based on the perceived organizational needs indicated by the client, the “capacity-building” nature of Interim Executive Management is not recognized in the purchasing behavior. The point of entry for “capacity-building” is a tactical need determined as requiring third party attention in a context of urgency.
Actual Organizational Management Needs
Once Third Sector Company has engaged a nonprofit organization and has placed an interim professional, our research with the practitioners reveal the following needs represent the actual situations encountered:
TERMINATION MANAGEMENT … The most frequently occurring situation encountered by a Third Sector Company professional is managing the repercussions arising from a poorly planned and executed termination process. Our interims report high levels of upheaval associated with the predecessor’s position, distrust between staff and volunteers, pending wrongful termination litigation, and emotional reactions to a lengthy, and often agonizing, termination and position vacating process.
DIAGNOSTIC PROCESSES & VITAL DATA COLLECTION … Nearly every interim professional reports a lack of accessible administrative information from which to immediately begin operations oversight. Vital information is scattered throughout the information and requires the interim up to 90 days to assemble and present fundamental facts about the organization as well as conduct a basic organizational assessment and report organizational performance in key areas.
CRISIS PROJECT MANAGEMENT … The vast majority of Third Sector Company interims report the identified “need” of the client is more “symptomatic” of a larger organizational need. However, the causative nature is of little concern or given little regard until the symptom is addressed by the interim. The most frequently occurring examples are special events fundraising, contract management and compliance, audit management letter elements, and significantly paralyzed cash flow.
DYSFUNCTIONAL COMMUNICATIONS SYSTEMS … The events leading to transition significantly change the organizational communication patterns of the organization in which Third Sector Company interims enter into organizations with highly “siloed” communications environments, cliques, and self-organized power structures.
Actual Organizational Leadership Needs
As Third Sector Company professionals execute their responsibilities and client organizations evolve with their new interim leader, the following organizational leadership needs surface with the most frequency:
MISSION ALIGNMENT & VALUES DETERMINATION … During the interim engagement, the most significant leadership intervention is an organizational realignment process that refocuses on the fundamental values of the organization and its mission in service to a stated cause. In virtually every engagement, Third Sector Company clients have veered from values-based and mission-driven management principles. This essential prerequisite for capacity-building is often viewed as academic, theoretical, and not a good use of interim executive or organizational time.
POWER STRUCTURE RECONSTRUCTION … Making infrastructural changes in the nonprofit organization has been warranted in virtually every engagement in order to make a physical change in the operating environment of the organization. The nonprofit organization simply could not face the future with a changed definition without a modified infrastructure. A “change” committee, highly recommended by Harvard professor John Kotter, has been a frequent, and highly effective, intervention.
DELIBERATE CONSENSUS-BUILDING & DECISION-MAKING PROCESSES … Convening retreats, holding community forums, providing on-site training programs, or hosting all-staff or all-volunteer meetings were a fundamental part of a successful interim engagement because of the fractured or dysfunctional processes in place. The most successful interim professionals balance facilitative leadership with authoritative leadership during the engagement.
OBJECTIVE DECISION-MAKING ENVIRONMENTS… Due the subjective nature of discussions leading to a termination, most interims report that the lack of facts and data especially as it relates to fundraising, finances, program delivery, and community impact created an environment for poor decision-making by leadership. An inordinate amount of time is needed during the interim engagement to, first, gather the important information; second, package and present information in an understandable format; and, third, create an environment for leveraging the information towards objective decision-making.
LEADERSHIP DEVELOPMENT AND SUCCESSION PLANNING … The idea of succession planning was virtually nonexistent in Third Sector Company clients. In order to pursue the company’s mission of “Leadership Continuity,” a series of leadership development opportunities was essential to bring other resources into the interim equation in addition to a single person to adequately address the leadership development needs of senior managers and decision-making volunteers. It was determined that it is vital that the interim conduct an evaluation with the appropriate representatives to review the steps that led up to the vacancy and use the opportunity as a first-step towards introducing the idea of succession planning as a leadership responsibility in the nonprofit organization.
A successful interim position can stagnate the executive search process – whether volunteer-led or search firm-based. It is paramount that the replacement process begins from the moment of arrival in a planned and timed fashion.
REGARDING THE USE OF OUR RESEARCH:
The research information provided in this executive summary is the exclusive property of The Third Sector Company, Inc. and is the result of primary research methodologies employed by and paid for by The Third Sector Company, Inc. with its more than 300 nonprofit clients in the United States and Canada. Permission is granted to share the results of our findings when, and only when, proper attribution is extended to Third Sector Company, Inc., by name.
The recipient of this information is strictly forbidden from representing these findings as being generated from any source other than Third Sector Company, Inc. Such instances of infringement shall be considered a violation of the copyrights held by Third Sector Company, Inc. on its research instruments and the results derived exclusively from paying clients of Third Sector Company, Inc.