The New Philanthropists: Laying the Groundwork for Leadership

Hiring a chief executive to scale a founder’s vision is one of the most consequential decisions a social impact organization can make.

Many in the new cohort of philanthropists that have emerged in recent years are facing this challenge, seeking to extend their impact beyond the current family office or philanthropic incubator within which their efforts have grown to date.

To ensure a successful outcome when hiring their first chief executive, founders must be prepared to answer questions about the core components of the organization they seek to build or scale. Potential candidates will seek clarity around vital questions such as:

• “What is the organization’s theory of change?”
• “What is the founder’s role relative to the chief executive?” 
• “What infrastructure do we need to support the outcomes we intend to drive?”
• “What governance mechanisms are in place to protect the organization?”

Many founders will find they do not have answers to each question. In fact, many organizations are hiring their first chief executive to help them answer those questions. But founders will attract higher caliber candidates and ensure that the search yields fit-for-purpose leadership if they can show that they have carefully considered these elements, and that the choice to define – or not define – answers has been intentional.

Defining the components of a new social impact organization

Whether an organization is brand new, emerging from incubation, or transitioning to a new stage of growth, there are several key components that – when determined with intention – can equip it for success:

Figure 1. The components of a social impact organization

Mission and strategy

Most organizations define their mission and strategy first. This includes the theory of change—the conceptual model that describes how impact will be made. An organization’s theory of change defines the actions that an organization will take, the resources and capabilities needed to make those actions possible, the short and long-term impacts those actions will yield, and a description of the stakeholders that will benefit from those actions. This component also includes the organization’s differentiators and understanding of its “value add,” which ensures that leaders have a clear vision for how the organization is addressing an unmet need and not duplicating existing efforts. This may also result in identifying existing organizations with whom to partner to maximize impact.

• Maturity of mission, theory of change, and strategy: Organizations begin with varying levels of clarity and precision regarding their mission, theory of change, and strategy, and are often seeking a chief executive who can help further define this. It’s crucial to provide candidates with clear and realistic assessments of each construct’s maturity, as well as how much they’ll be expected to contribute to them. Most importantly, candidates will understand if they have the right skillset to support such a role.
  
  
• Role in ecosystem: Candidates want to see evidence that an organization has a clear understanding of its role in the broader ecosystem and that the founder has a clear vision as to how their new org will be additive, rather than duplicative.
  
  
• Time horizon for impact: For grant-making organizations, it is helpful to provide candidates with a sense of the founder’s time horizon for impact, and whether there are intentions to eventually “sunset” the organization. Candidates will appreciate insight into the founder’s impact philosophy, even if specific timelines are not yet defined.

Structure and Operations

Depending on the organization’s maturity, its functional structures will vary in sophistication. This includes both the day-to-day operating model, as well as the longer term question of intended scale and geographic reach. The organization’s relationship to existing entities should be particularly relevant to new philanthropists, as many are housed in a family office, an existing foundation or other type of philanthropic incubator. In these cases, the chief executive will be expected to work with existing staff or stakeholders.

• Legal structures: Historically, foundations have been structured as non-profit entities, either as a 501c3 or 501c4 in the US, or other type of designated charity in other jurisdictions. However, new models are emerging – including Limited Liability Companies (LLCs) and other unrestricted for-profit tax structures – that forego some of the tax incentives of these charitable designations in favor of greater flexibility in terms of disbursements and governance. There is no single “correct” structure; each organization should consider its specific objectives, as well as the legal and tax regimes where it is operating in order to determine the vehicle best suited to its needs.
  
  
• Scale, sequence and composition of leadership team: Most organizations will start by hiring a chief executive, who is then tasked with building out the rest of the senior team. As such, chief executive candidates will want to understand the scale of the leadership team necessary for the intended impact, as well as any early thinking around the sequence in which that team should be built out.
  
  
• Operating norms: As more organizations move towards hybrid or fully remote operations, candidates will want to understand the founder’s operating norms. If the chief executive and/or senior leadership team will be required to work on-site in a particular location, that expectation must be communicated at the outset of a search.
  
  
• Existing staff and stakeholders: Clarify whether any existing staff (e.g., from a family office or fiscal sponsor) will be involved in an advisory or full time capacity in new organization, as well as their role in the search process. Especially if working with a search consultant, this clarity will ensure that the right stakeholders are providing input and the incoming executive understands the team they are inheriting.

Governance

The mechanisms that regulate and steer a nascent organization vary considerably, ranging from an initial, informal cadre of advisors to a formally appointed board with independent directors. This also includes norms around decision-making, and the founder’s involvement in day-to-day decisions. For founders who intend to bequeath governance rights to future generations – as is the case in many family foundations – the process by which that right is passed down and within generations is an important consideration.

• Governance structure: Candidates will want to understand whether the chief executive is reporting to the founder or an independent board. If a board is in place or in the process of being formed, candidates will also want to understand the founder’s thinking around the board’s role and its independence, as well as the CEO’s role in defining future succession practices.
  
  
• Relationship to other entities: Where the new organization is housed—in an existing family office, new family foundation, separate incubating organization or other corporate structure—significantly impacts the type of leader who will be successful as CEO. Candidates will seek clarity around the relationship between the new organization and any existing entities, to better understand any potential constraints or operational efficiencies.
  
  
• Decision-making processes: Beyond broader considerations of the founder’s role, candidates will want to understand how involved the founder intends to be. Whether the founder plans to be involved in day-to-day decisions or only in high-level strategic decision-making will significantly impact which candidates are interested in the role.
  
  
• Multigenerational considerations: If organizational governance will become an inherited right (as in the case of many family foundations), the founder should clearly define who within the family or personal network will be involved, how they will be involved while founder is still alive, and how the “governance right” is passed down across future generations.
  
  
• Role of advisors: Many new organizations start out without a formal board but benefit from the input of informal advisors or professional consultants who can provide alternative perspectives. As these informal advisors often help select the chief executive, it is helpful to introduce them and explain their role to any search consultants supporting the process, as well as the role those advisors might play in the CEO’s first year in office.

Culture

Even the smallest organizations with minimal staff must be cognizant of organizational culture’s role in shaping decisions and outcomes. Ensuring that the organization is adhering to its core values and operating in a manner consistent with their mission is vital to maintaining credibility. This also includes the degree to which diversity, equity, inclusion and belonging are prioritized in both internal decision-making and external funding decisions.

• Aligning operating models to mission and values: Social impact organizations are under increasing scrutiny from prospective employees and other stakeholders to demonstrate that they are “living the mission.” Reporting structures, employee benefits, transparency of internal communications, and other manifestations of organizational culture must align with the organization’s stated values.
  
  
• Making diversity, equity and inclusion foundational: While HR functions are often the last to be established in new organizations, it’s still important that all senior leaders are establishing operational processes and cultural norms centered around inclusivity. DE&I must be foundational priority for all senior leaders, not just those with a specific “people” remit.
  
  
• Influence of existing organizations’ culture(s): If a new organization will be housed in a family office, incubated in a donor collaborative, or spun off from an existing association, it is important to understand how other organizations’ cultures will influence this new entity. Candidates will want to understand the latitude they'll have in shaping the new culture, versus working within existing norms.

Leadership

To ensure future organizational success, the founder and inaugural chief executive need a strong and effective relationship. This will lay the foundation for all future leadership hires and impact all of the above components. The organization’s evolutionary stage and the founder’s vision will dictate what skills and competencies the CEO needs to bring to the table.

• Founder vs. CEO role clarity: Decision-makers need to be aligned around the chief executive’s role, particularly relative to the founder. What does the founder want to retain ownership of, and where do they seek the chief executive’s partnership? Some organizations may benefit from engaging with a third party leadership coach, who can help facilitate the working relationship and development of mutually agreed upon norms.
  
  
• Founder role evolution: Related to the above, the founder’s role will likely evolve over time. Some founders begin in a hands-on capacity and evolve into a removed advisory position, while others will wish to remain intimately involved in day-to-day operations. Communicating a clear and long-term vision for the founder’s role will reassure candidates that the dynamic has been established with care and is not likely to change at the founder’s whim.
  
  
• Leadership archetypes: As new organizations evolve, they require different leadership archetypes. Organizations should understand if they need an operator who can execute the founder’s vision or a strategist who can architect their own.

Ecosystem context

No social impact organization works in a vacuum, and every social challenge conceivably already has at least one existing organization working to address it. Understanding your organization’s goals within the broader ecosystem, as well as the resulting allies and partnerships, meaningfully impact its strategic direction and needed leadership style.

• Understanding landscape and partners: Candidates will want evidence that the founder has an appreciation for the ecosystem they seek to enter, and are respectfully engaging with what has been tried and achieved to date – even if they have new and innovative solutions to offer.

• Systems-change and role within ecosystem: The increasing emphasis on systems-change has led to a proliferation of organizations working at the ecosystem level, seeking to shape how that ecosystem collaborates and directs its energy. At the same time, every ecosystem requires organizations that are focused on the day-to-day work of social change. Candidates will want to understand the role that the founder sees their organization playing in that ecosystem, and how that connects to the organization’s theory of change.

An evolving landscape with evolving solutions

While these perspectives are informed by our experience advising funders who are currently experimenting with new models and approaches to philanthropy, this field evolves so rapidly that best practices and innovations are changing at a pace that challenges even the most expert practitioners.

As such, Russell Reynolds is embarking on a collective research effort to better understand the organizational structures, leadership profiles and governance practices that will define this next era of philanthropy. Future publications in this series seek to answer questions such as:

• Which chief executive archetypes are best suited to each model?
• How should organizations think about building a senior leadership team, and what is the correct order of appointment for functional roles such as chief financial officer, chief people officer and others?
• What successful co-leadership models can these organizations emulate?
• What have organizations that have been through this journey learned?

Whether you are a funder yourself, a practitioner with experience working in new philanthropic entities, or part of a social impact organization that receives funding from these new philanthropies, we welcome your thoughts on the questions above. Designing the new paradigm of philanthropy requires a concerted and collective effort to identify the best practices that will propel impact and create lasting change.

Authors

• Tory Clark co-leads Russell Reynolds Associates’ Global Development, Advocacy and Philanthropy practice. She is based in Atlanta.
• Vanessa Di Matteo is a member of the Russell Reynolds Associates’ Social Impact and Education Knowledge team. She is based in London.
• Jamie Hechinger co-leads Russell Reynolds Associates’ Social Impact and Education sector. She is based in Washington, DC.
• Stefanie Lukasko leads the Russell Reynolds Associates’ Social Impact and Education Research team. She is based in Washington, DC.
• Emily Meneer leads Russell Reynolds Associates’ Social Impact and Education sector Knowledge team. She is based in Portland.
• Katie Nivard is a member of Russell Reynolds Associates’ Social Impact and Education sector. She is based in San Francisco.
• Lexi Spaulding is a member of the Russell Reynolds Associates’ Social Impact and Education research team. She is based in San Francisco.