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Mission-driven success:
Bringing lessons from the Family
Business to Nonprofits
Family business owners are typically energetic, driven leaders who enthusiastically embrace
challenges. When a cause captures that intensity, they are often inspired to launch a nonprofit,
believing that a mission-oriented venture will survive primarily on passion.
The reality, however, is that leading a nonprofit comes with many of the same operational and
governance challenges that family businesses experience. From Board structure to fundraising to
keeping the organization on course, there is a long list of parallels that founders should bear in
mind as they steer a nonprofit labor of love.
Paramount among the similarities is the importance of planning for succession. This is a
difficult subject for founders of all companies, but the emotional component that accompanies
family businesses and nonprofits creates added complexity. Many an organization has fallen on
the belief that the founder will always be in a position to lead or that their replacement will
materialize at just the right time.
The Harvard Business Reviewi noted the need for sound planning in an article examining an
international study of top tier players. “Family businesses cannot hope to manage internal talent
(both family and nonfamily) or attract the best outsiders without establishing good governance
practices that separate the family and the business and ensure oversight from a professional
board,” wrote the Review. “More than 40% of the companies in our study included members of
the next generation on their boards and committees in order to nurture their business and
management skills.”
Best practices call for close collaboration between the board, potential leadership candidates,
and the founder to build a reliable organizational structure. The framework of the future must
empower the next leader while enabling the founding generation to give up the reins with
confidence.
This may seem straightforward, but even well-intentioned efforts can be derailed by “Founder’s
Syndrome” – a pattern of behavior prevalent among leaders of Family Businesses and
nonprofits. According to Nonprofit Quarterly, Founder’s Syndrome is typified by leaders
whoii:
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Believe the organization exists to serve their ego
Resist delegating critical tasks
Are unable to make a smooth leadership transition
Do not evolve beyond their original vision for the organization
A poorly executed succession strategy (or losing even more ground to Founder’s Syndrome)
can lead directly to lost confidence in the organization, lost support from donors, and the
ultimate demise of the organization. To ensure that the mission will endure, founders should
apply three lessons from their role as Family Business owners:
1. Stay ahead of succession.
Especially when there are egos at stake, succession is a complex process. Creation of an
appropriate structure cannot be accomplished in one meeting or around the table at a
board retreat: this is a multi-year, evolving process of education and change.
At the outset, leaders should establish a values-based decision making process. The
board should agree on axiomatic principles or a mission statement, which will then
serve as a foundational part of the nonprofit’s Form 990 and external communications.
With that in hand, the organization will have a guidepost to decide how leadership is
selected or changed.
Nonprofits should also be sure that the founder is not the sole decision-maker when it
comes to succession planning. If a board task force or independent advisors are part of
the process, they can help keep the conversation focused on the future.
2. Find the right leader - not the most convenient one.
Founders are often tempted to appoint their successor without truly considering the
long term implications. Family members are sometimes selected based more on their
willingness to be involved than on their competence as a nonprofit leader, or major
donors who show an interest are chosen for political reasons.
Ignoring their shortfalls can mean missing out on a once-in-a-generation opportunity,
though; changing leadership does not happen every day, and getting it right can pay
enormous dividends.
The most effective leaders are those who embrace the mission in a way that allows
donors to identify and trust in their connection with the charity. Those impacted
directly by a disaster or health concern often make the best spokespeople, as their
ties to the issues are unquestionably sincere.
Michael J. Fox, for example, has given tremendous recognition to Parkinson’s Disease
through his foundation; his effectiveness came not only because he is a well-known
figure, but because victims and his fan base could relate to his plight.
3. Build a brand that can weather change.
Powerful founders who fall from grace can take an organization down with them;
surviving a scandal requires that the nonprofit’s mission is larger than the
founder’s personality and that the right succession structure is in place.
Lance Armstrong’s Livestrong Foundation makes for a fascinating case study, as the
organization faced an avalanche of negative publicity when Armstrong was stripped of
his Tour de France honors in early 2013. The event might have ruined weaker
non-profits, however Livestrong had successfully branded itself around a mission that
lay close to the hearts of millions of cancer survivors.
With Armstrong gone, Jeff Garvey, chairman of the foundation’s board, took over as the
face of the organization. Certainly the organization suffered losses in the wake of the
Armstrong scandal, but Livestrong’s leadership rose to the occasion and rebuilt around
the mission. In 2015, the organization made a statement with its $50M donation to the
University of Texas to launch the Livestrong Cancer Center. Garvey noted in his
explanation that “looking forward, it’s time for the Livestrong Foundation to embrace
an even bigger mission.”iii
Having the right leaders in place after Armstrong’s departure was the key to Livestrong’s
ability to bounce back.
While they make less sensational headlines, prestigious organizations such as Harvard
University show a similar characteristic: the strength of the brand looms far larger than
any specific leader. The allure of the institution makes it easier to attract great talent
when planning for the next leadership change.
Founders of businesses and nonprofits are inspired to bring an idea to life, but often do not
have a clear plan for sustaining their vision. To develop an organization that will live beyond
their leadership, they must cultivate a commitment to succession planning, develop an eye for
the right leader, and build a brand more powerful than their personal passion.
Endnotes
(i) Leadership lessons from great family businesses, Claudio Fernandez-Araoz, Sonny Iqbal, Jorg Ritter, Harvard
Business Review, April 2015
(ii) Rediagnosing "Founder's Syndrome": Moving beyond Stereotypes to Improve Nonprofit Performance,
Elizabeth Schmidt, Nonprofit Quarterly, July 1, 2013
(iii) Livestrong Makes Biggest Donation Since Lance Armstrong's Disgraced Exit, Paul J. Weber, Huffington Post,
August 19, 2014
Copyright © 2015 Hemenway & Barnes LLP
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