CEO-break-1In 2012, SEMO Electric Cooperative was facing the end of an era. The co-op’s general manager had decided to retire after 21 years in the top job.

Human resources experts know that workplace change always brings some staff anxiety, and that is often exacerbated when the change comes at the very top. But rather than view the impending transition negatively, SEMO’s board decided to view it as a chance to take a fresh look at the whole co-op.

“We used it as an opportunity,” says Rick Faulkner, president of the Sikeston, Mo.-based co-op’s board. “It gets you to look at things with a different perspective, and I think that’s very important because we all get comfortable with who we are and what we’re doing.”

That challenge is one that a significant number of electric co-ops are or will be facing in the near future. An NRECA survey last year of 893 cooperatives found that 25 percent of CEOs were already eligible for retirement and that 50.7 percent would be eligible within the next five years.

The potential turnover is made even more dramatic by the length of tenure of many CEOs. Electric cooperatives enjoy a stability in staffing and management that has become increasingly rare in the modern economy. When a CEO decides to retire, it often means the end of a management approach stretching back decades, with a co-op culture and a way of doing things that have become deeply ingrained.

A co-op’s culture may be generally healthy and successful, but even a well-functioning organization can benefit from the jolt of new energy that comes with a successful transition, says Martin Lowery, NRECA executive vice president for member and association relations. He takes a positive view of the coming changeover in the co-op community.

“It’s the opportunity to bring a new generation of leadership into the cooperative program,” he says. “I’m full of optimism in that regard.”

Daunting Project

Number of Electric Cooperative CEOs eligible for retirement.
Co-op CEO retirement eligibility.

Still, the prospect of replacing an established CEO can be daunting. The temptation, employment experts say, can be to take the easiest route: hiring someone the board is already familiar with, often from within.

Strong internal candidates deserve serious consideration, says Ken Holmes, NRECA director of executive search.  But, he adds, turning to a familiar face without wider consideration means a board forfeits an important chance to take stock of both the co-op and the board’s relationship with management.

“One of the things we talk to boards about in our initial conversations is, ‘What level of change do you think needs to take place or would you like to take place?’” Holmes says.

Board members often initially indicate they’re satisfied with the way things are going, he says, but deeper introspection frequently reveals areas where they would like to see change or new opportunities they think the co-op should explore.

“They realize there’s an opportunity for a new look at the organization and new directions without throwing the proverbial baby out with the bathwater,” Holmes says.

To do that, the board has to be willing to take a clear-eyed look at both how the co-op and the board function, says Michele Rinn, NRECA senior vice president for human resources.

“The hardest conversations are up front,” she says. “The relationship that the CEO has with the board is critical. If the board isn’t really honest with itself about governance practices, how it operates, and what it really wants from that CEO, and if the board doesn’t develop a profile, including the background and the experience they want, to fit that role, they’re going to find themselves going into a difficult situation.”

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The board needs to extend that scrutiny to co-op operations. “They have to have an idea of what is going on within the co-op itself,” Rinn says. “What are the strengths and weaknesses of the workforce? What are the key challenges and goals for the next five years? How should the CEO interact with the community? A thorough assessment process is critical to ensure you hire the right leader.”

‘Prime Opportunity’

CEO-break-4For the SEMO board, the self-assessment included acknowledging what was going well. “We were strong financially,” Faulkner says. “We didn’t want to lose that.”

But the board also realized it wanted to make a shift in culture. “We wanted someone that was a very good communicator, able to bring about some positive changes in that area—more communication between the employees, management, and the board,” Faulkner adds. “That was our number-one consideration: communication.”

Sean Vanslyke, the new general manager hired by SEMO, says that by establishing priorities, the board made it easier for him and other candidates to understand exactly what they were looking for from a manager.

“They were clear in their expectations,” he says. “They were looking for somebody who could provide improved communications internally and externally and continue to build on the good things that were already occurring at the cooperative.”

The result has been a successful transition of co-op leadership. Vanslyke has fulfilled the board’s mandate through a series of steps, using a blog to communicate regularly with members, establishing individual development plans for each co-op employee so expectations and opportunities are clearly conveyed, and even working with the board to invite all the employees to some board meetings, creating a new level of transparency and understanding.

Faulkner says it all proves that a transition can provide a “prime opportunity” to make positive changes. “You can change the role of your employees,” he says. “You can change the culture of your co-op. You can even change the culture of your board.”

The Process

CEO-break-2Still, even when a board knows what it wants in a new co-op leader, the process of finding the right person for the job can be challenging, notes Pat Mangan, NRECA director of governance education.

“This is not something to be underestimated in terms of time,” he says. “The number of applications you’ve got to sort through, the confidentiality requirements, the need to establish a procedure for handling all the paperwork, making the calls—some boards take it on themselves and find that it’s a heck of a lot more work than they expected.”

For those reasons, employment experts say there is value in turning to a consultant for assistance. “We strongly recommend that they work with an outside person, because it’s very hard for a board to take on the search on their own,” Lowery says. “We’re not saying only use NRECA, but in every case, it’s really helpful and healthy to look for outside support in conducting a search.”

Some boards shy away from the cost of hiring a consulting firm, but “it’s likely you’re going to have that CEO for 20 years … so being willing to make the proper investment in the search process is really important,” Lowery says.

In 2015, Coles-Moultrie Electric Cooperative, based in Mattoon, Ill., began a search for a new president/CEO when M.L. “Chris” Christman announced his retirement after 36 years at the co-op. Deborah Albin, Coles-Moultrie board vice chair, says there were mixed feelings among board members about how to proceed and whether hiring a search firm was necessary.

The board eventually decided to engage NRECA executive search, which Albin believes was a wise decision. “By using the national search firm, we got the very best candidates that were interested in us, and we didn’t have to deal with a lot of the initial steps,” she says. “They did all the initial screening, handled all the paperwork. It just saved all of us a lot of problems.”

Albin says hiring a consultant helped the board stay focused on its priorities and identify candidates that were a good fit. “We had several that were high contenders,” she says. “The caliber of those we had come through was just fantastic.”

Both Faulkner and Albin say the board shouldn’t feel rushed when it comes to deliberating among the final candidates. “You really need to give a lot of thought to applicants,” Faulkner says. “You need to spend some with applicants and be as specific as you can with questions, and really watch their reactions carefully. You need to watch their body language, so to speak, to see what they’re comfortable with.”

One of Coles-Moultrie’s priorities was making sure the co-op, which had just installed smart meters, was taking full advantage of the technology. “We knew there were a lot more capabilities,” Albin says. “We didn’t expect [the new CEO] to be the expert on that, but we needed him to know where to go and who to talk to to get that done.”

Kim Leftwich, who the board hired as new president/CEO after interviewing several candidates, had wide-ranging experience in the utility industry and was also a retired lieutenant colonel in the U.S. Air Force, giving him the combination of managerial and technical experience the board was looking for, Albin says.

Onboarding

CEO-break-3Identifying senior co-op employees who embrace the latest technological advances is critical, Lowery says.

“We’re going to see extensive re-engineering of the grid, and that’s going to require new thinking among our engineers and leaders as to how one looks at the potential of significant distributed generation resources, the Internet of things, and much more control by consumers managing their energy needs,” he says. Cooperatives will need to embrace a generation of co-op leaders with “an understanding of how emerging technology can make a difference in the efficiency of our system and improving the relationship with our consumer-members.”

Mangan points out that the challenge presented by a significant transition in senior employees goes beyond CEOs. “We know we’ve got 60 percent of our workforce at or facing retirement age over the next five years, and that’s going to be a major transition,” he says. The transition to a new CEO provides a co-op an opportunity to find a leader who can help manage employee turnover with an eye toward the future.

Rinn emphasizes that the board’s role in the process doesn’t end when a new top manager is hired. The board needs to establish an onboarding process that continues into the early tenure of the new CEO to help him or her succeed. “Give the CEO some guidance. What’s the plan for the first six months? Explain to the staff why you hired this person and what you’re asking this person to do as he or she is walking in the door,” she says. “When you give the CEO goals, make sure you explain them to the staff.”

Mangan says co-ops often have strong internal cultures that can take some time to figure out. “The bottom line is a co-op is welcoming a new member to the family,” he says. “You’ve got culture issues. You’ve got introductions that need to be made. It really needs to be done in a deliberate way to ensure that this new person feels comfortable, feels informed, feels welcome.”

Holmes says boards need to recognize that their legacy is tied to the success of the new CEO or manager. “I tell directors, you own this manager,” he says. “And you really need to do what you can to make sure the communication is there so everybody’s on the same page, especially if you’re going to go through some changes.”

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