Transition to Strength: Making the Most of a Reset

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00:00 - 00:25

Boards and leaders of organizations that are engulfed in any kind of major transition often feel like they're under siege. And then when they're asked, “Who are you going to call?” Maryellen Gleason’s name invariably comes up among the many hats that Maryellen wears. She frequently steps into these interim roles, helping organizations really regain their footing. Today, she's going to share some wisdom she's gleaned from more than two decades of leading social sector transformations.

00:35 - 01:12

Hi everyone. Welcome to Inspired Investing. I'm your host, Clare Golla, head of Foundation and Institutional Advisory at Bernstein. This podcast is where we strive to connect and share insights with listeners like you who are engaged in the nonprofit philanthropy or broader social sector. So here we go. Maryellen Gleason has combined her passion for the performing arts with 20 plus years of leading mission driven organizations. She's equally at home in the corporate and nonprofit sector, which I very much appreciate. And she's been a nonprofit CEO five times. Maryellen, thank you. Thank you. Thank you for being here.

01:12 - 01:42

Thank you, Clare. I'm delighted to join you today. And you're right, I have had the unique opportunity over the past couple of decades to have been the CEO or executive director of a number of nonprofits from a professional sports event, a PGA tour event, to orchestras to health care organizations. I've had a kind of a unique experience, but I would say the through line really does have to do with some kind of transition.

01:42 - 02:00

That's great. And so, look, I have so many questions. I feel like we could take this conversation in a lot of different directions. But before I do, could you just share a little bit about how this path really led you to advising boards and leaders on this sort of transition to strength at an organization?

02:00 - 02:33

Sure. One thing I don't know if you've seen this meme on Facebook, it said, for any major problem, there should be a committee of eldest sisters that are put together. And I'm the eldest of eight children. And so I've had the opportunity to be responsible for a very long time. And I say that because typically these situations where I have been the CEO, it's been a it's been an intersection. I'll say opportunity and risk, but there has been a degree of fragility, if that's the right word for it.

02:33 - 03:10

But also, I come to it, I'm attracted to that kind of opportunity because of the promise and the potential. And it's often that I can see with board leadership this this envision future what it looks like or could look like on the horizon. And it's exciting to me to come in and work with the board and other leaders to really reimagine the trajectory of this organization and help them put the pieces in place and then lead it to a better place, to a different stage.

03:10 - 03:30

This is great. So suffice to say, you're accustomed to operating in complex environments, working with boards and leadership teams to really stabilize these organizations. So we'll get to some of your top tips, you know, for board members and leaders in a minute. But maybe first, you could give us some context or just a sketch of a typical situation where you might be brought in.

03:31 - 03:56

So in a couple of the situations, there were searches, national searches for a leader, and it made a bid in an industry where there were some reputational issues. So it was very difficult to recruit. I'd say subject matter experts in terms of the industry, but in terms of leadership and financial strategy, those are still common denominators.

03:56 - 04:16

Okay. So can you share a little bit more about. So is this kind of organizational sort of upheaval something that you see happening with increasing frequency these days? Because it feels that way to me. I'm attributing part of it to the great resignation, right, that we've been going through, really sparked by the pandemic. I mean, do you do you see anything further than that?

04:16 - 05:04

I do. I see it used to be that maybe there were some retirements or spousal relocation. Those were fairly typical situations. But now nowadays, so many people, so many executive directors and CEOs of social sector organizations are really rethinking how are they going to spend their time. And often they reprioritize some of their personal goals, life goals. And I think this is because for many of these kinds of leadership situations, it's an all-in kind of experience. It's a seven by 24 kind of responsibility. And I would say being an orchestra CEO certainly was pretty close to that.

05:04 - 05:39

So, yes, I see it. I see it so often now where I'm actually called in to help a board really think about what are we going to do during this transition. Sometimes I brought in as the interim CEO to help them create a path forward. I would say more often now it's a big surprise where the the board and the executive director really thought they were aligned and there was a longer term planning horizon. But in fact, the executive director decided they they wanted to do something else.

05:39 - 05:47

So tell me a little bit more about that. Why wouldn't they just get a search out there and start to find the next person.

05:47 - 06:35

Often to prepare for that next person? It's helpful to bring in someone who's actually an expert on transitions. And so often now I come in and sometimes have to do some difficult things in terms of maybe some staffing issues or really make suggestions about maybe the benefits packages that they're offering in terms of being attractive as an employer, in terms of cost structure, in terms of how how they even report to the board or how the staff interacts with each other. Sometimes I find that there are a fresh perspective, even for 6 to 12 months can really help the new executive director or CEO hit the ground running.

06:35 - 07:10

Okay. No, I completely agree with you. I'm just curious. I mean, I think about a board of directors. They're typically volunteer positions. They're not in the trenches day to day and really seeing necessarily what's under the hood or what's going on. And so I'm curious, you mentioned some sort of restructuring potential. How would you frame this? Is it sort of an opportunity to then revision the organization for the future? I'm curious about how you might embrace this as an opportunity for organizations to make the most of a reset.

07:11 - 07:33

That's a good question. I think it does depend on where they are in terms of their institutional development. If it's a recent founder led organization or it's a long time founder led organization, or perhaps they recently merged. So there's so many possibilities.

07:33 - 08:17

But I would say the most impactful kinds of initiatives that you can do when there's this sudden reset is to think about the financial structure and what success looks like and how that success is aligned with what kind of capital structure they have and what kind of receptivity, whether their revenue stream is primarily from contributor revenue or from service revenue or some kind of other governmental kind of contract. I think it just really depends on what their service model is and then also how they plan to finance that in the form of capitalization.

08:18 - 08:41

Okay. So let's break it down here, because capital structure, capitalization, those are often terms that are used in the private sector. So how is the capitalization of nonprofits different, for instance, from a publicly traded company or private company? And what sort of trends have you seen over economic cycles and, you know, the pitfalls and the opportunities boards and leadership might be navigating.

08:41 - 09:29

More recently with certainly with the COVID pandemic? I think that and even I'll rewind the tape back to 2008 and even in the early 2000s, I think boards and leadership really thought they had an understanding of what their capital structure should be. And often they might have been led to that because maybe they had a high fixed cost. Certainly in orchestras there's a very high fixed cost and revenue was very lumpy. And so there was a real tendency in terms of the most stable organizations that we would see that they understood they needed to have four or five times or even more their operating budget so that it would generate interest that would cover their fixed cost.

09:29 - 09:32

You mean in an endowment or some sort of long horizon?

09:32 - 10:09

Exactly. And so I guess to summarize it, at least in the nonprofit, I'd say I like to think about it, generally speaking, as three different kinds of funds the long term, the permanent endowment fund with a long, long horizon, possibly some really significant restrictions, then more of a middle term with a with the middle term, more of maybe a rainy day fund and or 6 to 9, 12 months an operating budget covering so a middle ground rainy day ish kind of flavor. But then, of course, their day to day checking accounts. So those kind of three things, I would say.

10:09 - 10:46

Yeah, that is music to my ears, no pun intended with the orchestra reference, but we do so much work. We've had so many organizations reach out to us over the last few years in particular saying like, how much cash should we be holding? Right? How how should we think about our project revenues or like what you just described this midterm? Right. The sort of intermediate duration means very. Different things to different organizations depending on their specific situation and their overall structure. Right. So I absolutely agree with that. I think that's a really interesting thing. Okay.

10:46 - 10:52

So, Maryellen, what is a second tip that you might have for leaders of organizations in transition?

10:52 - 11:32

One thing that I observed, having been an interim CEO five times in total is in terms of, I'd say, organizations that might be in crisis or there might be some kind of really significant set of challenges they're facing. I've noticed that there tends to be a practice of not even adopting their annual budget until after the fiscal year started. And I do have to say, Clare, once upon a time I was hard and fast. So there's got to be something really significantly wrong with this organization that that this has occurred, because it does tend to be kind of a sign.

11:33 - 12:07

But I've I've softened a little because I can see now that especially after COVID, that it's really hard to get the right resources sometimes in terms of talent and ability. And so resource constraints, I'd say, have sort of said maybe there are some reasons why, but I think that for organizations that are really thinking about what's going to happen, if I have a windfall, what is going to happen, right?

12:08 - 12:40

If you're NPR and Joan Kroc or a MacKenzie Scott, or you get a large bequest or one of your donors has a significant liquidity event and they suddenly want to be able to make an investment in an organization that they love. I always thought, I have to be ready to accept that check for at least $1,000,000. I must be ready and able and dressed up to go and meet with a donor and accept that check. And I think you really have to feel that way, that this could be the day every day. And it.

12:40 - 12:41

Could be.

12:41 - 13:23

I know it happens. I worked with one client that received a windfall, a very significant gift, $120 million. And it turned out to be a double-edged sword on one hand, obviously wonderful of great stability, all kinds of positives. At the other side of the sword was that some people in the general public perceived that money was no longer needed. And when you have the opportunity to receive a significant windfall gift, you have to be resolute in how you message that you still have need and that you it would be optimal to leverage the large gift to attract additional gifts, which is really the goal of the donor.

13:23 - 13:27

It's a good point. Like how do you prepare for this large gift?

13:27 - 14:00

I was doing a strategic planning exercise with a pretty large nonprofit and we did an exercise around what would happen if we received a $50 million gift. What would happen? Would that solve our problems? Would that be, you know, instrumental in changing our trajectory? And actually, we concluded that we didn't have the leadership or the discipline or even the operational track record to be able to take advantage of $50 million gift, which was more than our aha moment.

14:00 - 14:27

It was a shocking moment, right? Not only for me, I would say, but the other board members who participated in this exercise. But it focused us to really think about how we should change and how our organization deserved to change in terms of planning and securing the right kind of resources so that, frankly, we could attract a $50 million gift at some time in the future.

14:27 - 14:34

I think that's an excellent observation. It's a good it's a good exercise for a lot of organizations to go through to ask.

14:35 - 15:04

One of the things that we find you had mentioned transformational gifts, surprise gifts, unrestricted gifts that we're seeing more and more today than we ever had before. We're spending lots of time with organizations on the whole concept of how do we do this? How do we build an investment committee? How do we build an investment policy statement that reflects the short, the intermediate, the long horizon? Right, you know, sort of needs of the organization.

15:04 - 15:59

I think that it's really important that a board be disciplined and have a framework in which they not only have current state operational excellence, but also anticipate either something really challenging or something really spectacular. And what that looks like to me in practice is that starting with the end in mind, that the board of directors should plan on adopting our budget before the fiscal year starts and then even before that, I would say if you're going to have what I'd call themed agendas or discussion agendas, that in the in the fiscal year there should be at least four board meetings where these discussions take place. And the fourth one right at the end would be the adoption of the budget, because that's codifying what they're intending to do in the year ahead.

15:59 - 16:23

And the meeting before that, I would say, should be dedicated or before you're adopting the budget around strategy. Are we really on track with our strategy? How is it connected to our long range plan? And the meeting before that, I would say, would be all about programs and what are we doing with our programs? Are we still on track with what we thought we were going to be doing?

16:23 - 16:51

And then the first time when we begin this cadence of four theme discussions will be around people, human resources, ESG. So, by the time you get to the end, you've looked at your human capital, you've examined your programs and their impact and quantifying your success. You get to your strategy and your multiyear plan. And then finally, everyone's on the same page about adopting a budget before that fiscal year starts.

16:52 - 17:31

I love it. You know, it's so funny that you and I are very simpatico in terms of how we think we just put together this fiduciary calendar recently that we're pushing out to all of the committees we work with, which is exactly what you just said, themed agenda for each quarterly meeting and in advance of each meeting like a week or more, have the materials for the meeting delivered obviously to all of the committee members. But before that also the advisor meeting with the chair of the committee or the gatekeeper staffing that committee so that once you get there, you've got a unified message and you can really dig in. People are prepared.

17:32 - 18:18

And for us, first quarter, it could be fourth quarter, it could be first quarter is the investment policy. Right? So, reviewing really and updating not just based on and actually this really feeds right into the budget for the year, then the next quarter, looking at not just where are the capital markets looking prospectively, but where is our institution looking prospectively, where are we going ahead? Because you were just mentioning Merrill and like the short, intermediate and long horizon, you know, in terms of pools of assets. And so often all of this planning leads to the need for a revisioning of how those assets are bucketed as well. So, it's really interesting. I love to hear that the themed quarterly meetings. So. Okay.

18:18 - 18:22

So, then the third, my final bit of advice, what would a third tip be?

18:22 - 19:13

Well, I think, you know, I've never said no to a challenge, Clare, and I think that having the courage to take on leadership of one of these organizations really requires resolve and at the same time, a little imagination. And I say that because people when they come together to serve as stewards of a nonprofit, they really want to be their best selves and they want to really make a difference. And sometimes it's really hard with your ego and your love of the nonprofit to be able to compartmentalize yourself and to really focus on the greater good.

19:14 - 19:39

And my thought around, you know, how could you be your very best self is to ask yourself, am I really showing up as the kind of steward that this cause deserves? And am I really investing my time and my talent in a way that really is best service to the organization? And so, I think it requires some personal reflection.

19:40 - 19:42

Okay. And that's for the board members.

19:42 - 19:43

Board members, Yeah.

19:43 - 19:45

Okay. That's very.

19:45 - 20:12

Helpful. I can think of one story when I became a CEO of this organization and their board meetings look like a lunch, a luncheon with tables where all the people on the board were sitting at tables, and then the CEO made a presentation at the front of the room. There was not really an opportunity for the entire board as a as an entity to talk to each other about the strategy.

20:12 - 20:34

Well, it's interesting to think about. So an executive director or a CEO of an organization, right? They report to the board of directors. And so it's human nature and it's in their best interest to try to you know, I wouldn't say protect the board, but certainly act as a gatekeeper to the board in terms of, you know, putting your best foot forward and always present.

20:34 - 21:21

Take a picture. You know that things are moving along, but you know, the glass half full version of everything. And it sounds like because I've seen this again and again, that at so many organizations, it really has become a bit of a chronic cycle. Right. That you'll see certain C-suite positions continuing to rotate over time. And yet there really isn't anything significant changing at the organization. It's a head scratcher like, well, maybe there's something to this where we need to make some fundamental change and then potentially we could be maintaining this, this key leadership or more fluidity. I think in your point to your point, this the succession planning would be smoother in some way.

21:22 - 21:27

So you've talked a little bit about human capital from the, I'd say, executive team level. What about the board?

21:27 - 22:11

Well, it is becoming, I'd say, a greater and greater challenge as people, again, are prioritizing their personal time and their professional time. And of course, the good old skills matrix often is valuable in this conversation in terms of having a balance of professionals like financial professionals and as well as legal people that are passionate donors. I mean, you have to have a really good mix. And now more than anything, the funders are very funders scrutinize who's on that board, what kind of diversity equity inclusion practices are put into play and not necessarily just lip service. There's a lot of of demands, new demands.

22:12 - 22:22

That's a really good point. Yes. The matrix of and for. You're laughing because you've seen it many times before. Maybe you could share with the audience what you mean by that.

22:22 - 22:45

Well, a spreadsheet where we have well, we have a list of names on the left-hand side of the spreadsheet, and we actually plot different skills, so we know what our existing board has as assets. And then it becomes really obvious that we don't have a CPA and we need a CPA because by the way, we're like a financial literacy organization.

22:46 - 23:28

So we to have some people that are really conversant in that kind of vocabulary and mission and impact with the Matrix, you need to be very disciplined in terms of either it's the nominated governance committee or just the nominating committee, and they're hopefully meeting at least 3 to 4 times a year to examine what kind of leadership do we have on our board and then prioritizing who are we missing, and then having a recruitment plan, often from identifying donors that are already linked to your organization. And those tend to be the most viable prospects in terms of board service because they've already voted their wallets and said, We care about you. It's a.

23:28 - 24:02

Great point. Yeah, and always, always be recruiting, right? I find that working with boards on their messaging and how they describe why they're involved with an organization and their passion for it and what some of the needs are and why somebody could, you know, a specific individual could really make a difference. A unique difference on that board is is an interesting way to think about it, too. As we wrap up, any final words of advice to a board members, leaders of organizations out there that are going through some type of a transition?

24:02 - 24:55

Well, not not only to to be disciplined and doing your homework and understanding your situation from a very factual perspective. I hope that everyone will have involved, even in a transition or an ongoing, stable organization, will take the time to celebrate each other and to have a little fun once in a while. And while it could be a board retreat, that would be really wonderful, but it also could be wine and cheese or just sparkling water after a board meeting so that everyone has an opportunity to convene and to in a way that's a little less a little less structured, I'll say. And so, it'll really enable the decision-making process, the teamwork, and to really bring everyone together to serve the organization.

24:55 - 25:08

I love that in the world of Zoom that we're living in these days, I think those are strong words, a great message. So that is unfortunately all we have time for. Thank you so much for joining me today.

25:08 - 25:12

Thank you, Claire. It's been a delight to have an opportunity to speak with you.

25:13 - 25:41

Wonderful. Likewise. And thank you all to the audience for listening. If you would like to learn more, please see the link in this episode's description and if you enjoyed this episode and haven't subscribe to our podcast yet, please go to Spotify or wherever you go to listen to podcast to subscribe and rate us. Also, please email us with your thoughts and questions and feedback to insights. At Bernstein dot com. And be sure to find us on Twitter at BernsteinPWM. Thanks everyone.