Chairman's Corner

Chairman’s Corner: March 2007

Walking the Talk: From Founder-centric to Institutionalized Organizatio

by Mario Morino, Co-founder of VPP

One of the most difficult challenges facing entrepreneurial, innovative leaders who found organizations—whether business or nonprofit—is knowing when it’s time to move to broader-based ownership so the organization becomes independent and capable of sustaining its long-term impact. Sooner or later these founders face a day when the organization they helped birth is no longer theirs alone.

To be sure, founders can be successful in the business world by remaining small, family-run operations and/or continuing as a privately held company. But for those who seek to grow their impact and need outside capital (hence investors) to do so, the chance for the founder to continue long term is relatively low. In many cases, when a venture capital or private equity firm makes the first investment in an established, founder-led organization, it is not unusual to set the expectation that the founder will likely yield to new leadership within 18 to 24 months! And then, they watch their organization reinvented about every two years thereafter to respond to changing times, needs, and opportunities. The successes of Bill Gates, Steve Jobs, and Jim Goodnight are more the exception than the rule.

The hard truth is that many organizations grow beyond the capabilities of their founders and need more and different types of leadership, skills, and broader mission ownership to succeed. This realization—that this time, the needed change falls on your doorstep—is a tough punch to the gut for a founder. I lived it during my commercial career. And I happily embrace it (again) in my nonprofit career.

Venture Philanthropy Partners is now at this stage. It must move beyond a founder-based organization and institutionalize itself and its work to multiply its impact on and value to the nonprofits in which it invests, the children they serve, and the region and field overall. We were honest about this change. We planned for it. We’ve struggled with it and made some missteps along the way. And now, we’re acting on it. Working hand-in-hand with the Board and management, I am enthusiastic and supportive of the changes we are taking to move VPP toward being an institutionalized resource and asset for our region and the field.

On February 21, we took major steps in this direction, when the Board established the new role of President and Chief Executive Officer and then elected Carol Thompson Cole as VPP’s first President and CEO. I will remain as Chairman, continuing to be active but in a non-executive role. These are just several of a series of actions underway to help navigate this transition.

Early False Starts

Although my fellow co-founders, Governor Mark Warner and business and civic leader Raul Fernandez, have played important roles, I have been the most intimately involved in characterizing and defining VPP’s work and approach. As far back as 2002, we began discussing how to move beyond the founder-centric organization to broader-based leadership and mission ownership. But change proved too difficult that early. Instead, we found ourselves continuously “retooling” our organization. As new team members came onboard, their various experiences caused us to change even more.
We correctly focused on building our organization, learning how to implement our investment approach better, and, most important, making investments and working with our nonprofit partners. But there was a cost as I did not give the attention needed to developing and engaging the Board. Fortunately, Carol, as Managing Partner, and others were assuming larger roles, learning what it really took to deliver our investment approach, and gaining the critical experience essential for the moves we are making now. Despite this less-than-systematic evolution, we stayed focused on our mission and continued to make progress because of the talent in the organization and the quality and talent within the nonprofit partners in which we invested.

Late in 2005, we held our first facilitated session of the Board to restart the discussion of leadership transition, strengthening our organization, and understanding how and when we could move to true Board governance. The session demonstrated we were still very much founder-centric and that we needed to move beyond that if VPP were to have the long-term impact we desired. Yet even pondering these new possibilities created uneasiness. Could Carol and I navigate this change? Would people incorrectly assume I was stepping back or leaving? Was the team ready for this change?

Triggers of Transition

These changes, however, took on a seriousness in the fall of 2006, when it was clear (initially to me and later to other key stakeholders) that we weren’t getting where we needed to be for the next stage fast enough and I risked being the impediment to VPP’s long-term progress. Part of this realization was grounded in the simple fact that I live in a different city and was constrained by the number of days I could be present physically in the National Capital Region. As much as I work remotely over the Net, management and capital raising require proximity. And, part of it was a function of living up to our side of serving our investment partnerships. Although it was what we needed to do, it also kept us from thinking about and planning for our own future. But, other factors also indicated the time was right for change, including:

• Carol forever changed the face of VPP here in the region, when she joined us in 2003. The respect and credibility she has earned within the various communities and nonprofits in which we invested creates a highly effective force. A leader of Carol’s competence and potential must be given the opportunity to fully realize her potential—for herself, for VPP, and for all those the organization serves.
• As much as I valued and benefited from our Board, I did not set up the opportunities to effectively engage them. Through no fault of its own, by the start of 2006, the Board—an excellent group of leaders—had been quietly anesthetized by my methodical nature. As one astute member of the Board recalled, “I would get this Board book that was as buttoned down as much as anyone could imagine, the issues were stated, the answers proposed, and the plans to get there meticulously laid out. It was thorough and the track record of the team good. So I would come to the Board meeting to listen—and not engage.” We’re changing that now. We are blessed by Board members whose impressive talent and contributions are being more effectively tapped. VPP’s progress and impact will multiply with a fully engaged Board, having the real opportunity to take ownership and contribute to specific assignments. Fortunately, the Board is very willing to take this opportunity on.
• Although less involved in VPP’s day-to-day operations since Carol took over the investment process after becoming Managing Partner in 2005, I remained the driving force behind the overall near-term strategy and most of our communications, research, and capital raising efforts, leaving little time or perspective for “big picture” thinking or promoting our mission and approach. And, worse yet, too often Carol had to counter members of the team basing their actions more on “what would Mario want?” than on what was needed and necessary. This pattern has to be broken to liberate our own team to realize their potential, and Carol and the team are well on their way.
• In capital raising, it became eminently clear that we needed additional individuals engaging prospective donors about our work. For the initial VPP fund, dollars came in relatively easily, thanks to friends in the region and a different economic climate. For our second stage—though I have played a lead role in helping raise the commitments—it soon became obvious that more people had to build relationships and engage both present and future investors. Establishing a development and investor relations capacity and Jack Davies stepping up to lead the Development Committee are important first steps that have already made a big difference.
• And, finally, VPP is going through its next generation of growth, and these were important steps to prepare us for what lies ahead.

Time to Walk the Talk

Here we were, facing the same kind of issues that we discuss with our nonprofit investment partners about making bold organizational and management actions—get the right people “on the bus,” strengthen leadership and management, ensure an informed and engaged Board—all aimed at making their organizations highly effective in what they do to improve the lives of children and youth. I was espousing these changes in columns and other writings, but, ironically, we weren’t practicing what we were preaching. The time had come to walk the talk ourselves.

So how are we “walking our talk?” What specific things is VPP doing?

Since September, Carol, our Executive Committee, our trusted advisors, and I have focused on the necessary changes.

Far and away, the most important action we have taken was to establish the office of President and Chief Executive Officer and elect Carol to this role, effective March 1 (see story below).

I will continue to be an active Chairman, serving as an advisor and sounding board to Carol, helping shape long-term strategic direction, providing Board stewardship and leadership, and being a key resource to raise capital and support our general communications. I look forward to this leadership role with the Board, with more and more of my time going to advancing the use of our investment approach more broadly and sharing what VPP is learning and doing through writing, speaking engagements, and media activities. If my past experience holds true, the unpredictable will happen to trigger new opportunities.

Members of our Board have stepped forward in a number of ways and are empowered, engaged and energized. Over the last six months VPP’s Executive Committee—Jack Davies, Charito Kruvant, Billy Shore, Les Silverman, and Ken Slaughter—along with our Board advisors—Bob Boisture, Rich McDonnell, Lynn Taliento, and Bob Templin—have worked with Carol and me to map out a leadership and organization transition plan that will be presented for Board approval at our annual meeting on March 21.

The Board itself is moving from a Chair-driven Board to a Committee-based leadership Board. A formal committee structure was approved in February. Jack, Les, and Artis Hampshire-Cowan have stepped forward to take leadership roles to chair the Development, Organizational Development and Compensation, and Governance Committees respectively. While Jack has played lead roles with VPP from the beginning, he has made a huge commitment to our capital campaign since September. Les has been working side-by-side with Carol to map out the new organization. And, we will activate an Audit Committee this fall and add several new Board members in the next few months, with a further expansion by the end of 2007.

VPP has, among its other accomplishments over the last seven years, assembled a substantial team of seasoned professionals in its organization and Board. In fact, we believe we had built one of the most experienced teams of its type in the country, but we also knew we had to become even better. The team is now headed by a recognized and highly respected leader who has devoted her career to public and social sector causes. And, to build on what has already been done, plans are underway to add to and strengthen VPP’s team of investment professionals. VPP will name a new partner in the very near term and plans to recruit yet another partner plus an additional resource to support investment activity. Additionally, Carol has taken important steps to formalize and strengthen VPP’s operational management team, naming VPP Partner and CFO Eleanor Rutland to the role of VPP’s Chief Operating Officer; Stephen Whisnant to Vice President, Development and Investor Relations; and Victoria Vrana to Vice President, Communications and Assessment.

The sum of these changes—putting VPP’s execution in Carol’s capable and experienced hands, adding to and building the team around her leadership strengths, expanding and engaging the Board, and enabling me to focus on messaging and actions to better showcase our work and influence broader change and field building—will help institutionalize VPP, making it a stronger organization. And as we fully implement and assimilate these changes, VPP will be “walking the talk” in terms of its own organizational growth, development, and institutionalization, which will be critical to its long-term impact and application to other regions.

Last, but certainly not least, we will increase our capital raising efforts for VPP’s next stage and already have an exciting campaign mapped out for the next 12 to 18 months.

A Template for Others

There may be other organizations considering this same type of transition. While there is no pro forma template and our journey was marked by its own share of missteps, some of our lessons include:

• Recognize that emotion and logic may battle. Understand that change is tough, disruptive, and uncomfortable, but then remember why you’re in this field in the first place. Just as I’ve implored others, actions should be based on how well they will help an organization achieve its mission. And, this applies especially to the role of founder. Put aside egos. The founder and Board need to find the way in which the founder will best benefit the organization’s mission—that may mean no longer running the day-to-day operations, or, in some cases, even separating somewhat to give others the room to step up to their new roles.
• Respect and use the Board’s expertise. Even with my less than perfect level of Board engagement (and thanks to their patience with me), I have always seen the VPP Board as a rich resource that aligns and supports VPP and its leadership. They worked with us closely on multiple iterations of this process. Make sure the Board or, at least, your Executive Committee is engaged and working with you to navigate your changes.
• Seek input and counsel from key stakeholders. Our transition was an orchestrated process that benefited greatly from trusted advisors like Ed Skloot, Executive Director of the Surdna Foundation and VPP Board member, and Michael Bailin, former President of the Edna McConnell Clark Foundation, in addition to the Executive Committee. Be ready to hear feedback that will be uncomfortable and push you out of your comfort zone—if you’re not getting this kind of hard push-back, then you’re either asking the wrong people, the wrong questions, or not hearing what they’re trying to tell you.
• Talk with others who made similar changes and gain the benefit of what they learned and experienced—especially what they would have done differently.
• Get “the right people on the bus” and allow time for them to learn about the organization, the model, etc., before “knighting” them into executive roles. Finding the right combination of skills and experience took us a long time, yet doing so greatly increases the likelihood of success and may well be the most important legacy a founder can establish. And, just when you think everything is in place, you’ll realize one more way to get better. Recognize that this is a never-ending quest, and that’s the way it should be.
• Execute effectively what is announced. Plans and well-drawn org charts are just that—nothing more than scribbling on paper. The proof is always in the implementation and follow-up, not the press release and talking points. It’s tempting to get caught up in the planning of transitions and let the “real” work be taken off course. In the end, it’s all about execution.

Moving Ahead

We are taking these steps proactively; this transition to institutionalization was not forced or the result of catastrophe. It was simply a matter of timing with the requisite pieces in place to allow VPP to prepare for its next stage of growth, development, and impact, never forgetting that children and youth are the primary reason for our work. We are blessed with a talented and engaged team, Board, advisors, and the remarkable leaders of our nonprofit investment partners and the time is now.
Certainly, the transition from founder-centric to institutional is hard work, a long process, and a formidable task for founders and their Boards and staff. Yet, it is a challenge founders and Boards must at some point confront and, hopefully, embrace. Thought through and executed well, this change can benefit founders, make their organizations better, and have greater impact for those they serve. I look forward to the continued journey with VPP and wish you the best in yours.