How to Properly Prepare for A Smooth Non-Profit Succession

Non-profits are in the throes of a leadership crisis. Executive turnover rates are at record levels, leaving many organizations flailing as they struggle to navigate the transition. An effective succession planning strategy is thus a crucial factor in ensuring your organization’s viability. However, the numbers suggest that many organizations don’t have such a strategy in place.

In its 2015 Survey on Board of Directors of Nonprofit Organizations, The Stanford Graduate School of Business interviewed 924 directors.

Some key findings from the survey:

  • 57% of non-profit boards do not benchmark their organization’s performance against a peer group of organizations.
  • 27% of non-profit directors do not believe their fellow board members have a strong grasp of mission objectives.
  • 32% are not satisfied with how their boards evaluate organizational performance.
  • 69% do not have a succession plan in place for the current executive director or CEO.
  • 78% could not immediately name a successor if the current executive director or CEO were to leave the organization tomorrow.

The survey also reports that it takes an average of 90 days to find a permanent replacement for a vacated chair. In light of this, leadership challenges must be addressed and the succession process initiated before the CEO’s departure.

Many non-profits understand the ramifications of inaction, but they are woefully unprepared for the transitional challenges ahead.

Results from the 2018 Concord Leadership Group’s Wake-up Call Report appear to support this state of affairs. According to survey sponsors, 1141 respondents participated in a study from September 2017 through November 2017. The importance of this study cannot be overemphasized: 67% of executive leaders are planning to leave their non-profits within 5 years.

Some important takeaways from the study:

  • Only 37.4% say their organizations are actively working to address gaps in leadership competence.
  • Only 55.8% of respondents agree that staff at all levels are engaged in the transition planning process.
  • Only 17.3% of respondents had performed a leadership competency gap analysis to determine the type of leaders they need at the helm.
  • Only 30-35% of respondents had access to leadership training or mentor-ship programs.

The above statistics highlight the magnitude of the problem. Organizations that fail to implement effective succession measures after an executive vacancy are at considerable risk. A key factor to consider is whether your organization can sustain current levels of income or fundraising thresholds in the event of a vacancy.

What Non-profits Need to Consider in the Face of a Major Transition.

Proper planning is needed to ensure that your organization remains in good hands, so the necessary resources must be directed towards this goal. Here are 3 key factors to consider in the face of an executive or board vacancy.

Has your organization identified the core leadership traits a successor must possess and addressed any challenges associated with the CEO’s departure?

When CEOs leave—especially if they are founding executives—an institutional reset may be necessary. Yet, many organizations struggle to address “founder’s syndrome,” when outgoing CEOs retain disproportionate powers after they relinquish their former roles. For example, these CEOs may continue directing staff activities or attempt a hijacking of the succession planning process. This scenario sets up bitter divisions and effectively multiplies the challenges a successor is likely to face. A comprehensive exit strategy can help ensure a smooth transition.

Is there a plan to keep donors and your board of directors informed about the transition?

It’s important to keep major stakeholders informed during the transition process. This is especially crucial if donors have been historically aligned with your departing CEO. By encouraging donor input and collaboration, you inspire continued trust and optimism in your organization. By extension, you avoid many of the fundraising challenges other organizations experience during similar transitions.

How will your organization handle the void in leadership in the interim?

There are many ways to navigate a leadership void, but all transition plans are not equal. Your organization will need to determine how it will handle the logistics of transition. Will it enlist a professional consulting firm to determine the timetable and budget needed for a successful transition? Or will it assemble a dedicated internal team to handle the transition and daily operational challenges? The latter will involve key goals such as sustaining current revenue streams, meeting volunteer recruitment levels, and maintaining compliance to regulatory requirements.

Succession Planning To Facilitate A Smoother Transition.

Leadership transitions are often emotional experiences. You walk a tightrope and hover between two seemingly irreconcilable states. You may feel compelled to retain the status quo, thus appearing to honor the former CEO’s legacy. If you adopt new measures, you do so conservatively. In any transition, the most challenging task centers on managing expectations. In that light, these 3 tips may help provide clarity and consistency, as you navigate the transition process.

  1. Adopt an emergency leadership transition plan. An effective emergency transition plan is indispensable. Ideally, it should begin the process of filling the immediate leadership void, as you explore the procedures for selecting a permanent CEO. A good plan facilitates operational excellence, as it prioritizes only those critical functions that contribute to operational efficiency. An effective plan also determines the order of succession and establishes the procedures for board restructuring.
  2. Hire an interim executive directorAn interim director can help maintain operational resilience, giving you peace of mind as you conduct your search for a new CEO. He can be an effective liaison, allaying the concerns of anxious donors and volunteers. An interim director can also preserve the integrity of your organization’s formal relationship with another important stakeholder: officials from the federal, state, and local governments. Last, but not least, he/she can identify current challenges and make recommendations to mitigate them. Of course, you must determine how an interim director will be compensated and establish parameters that govern key responsibilities and powers. However, the ideal candidate would be someone who is skilled in transitional management.
  3. Institute leader development succession programs to maintain organizational efficiency. An effective leader development succession program ensures that key roles that promote organizational sustainability are filled. Most importantly, your investment in internal talent development during a difficult period boosts morale. This may result in a smoother leadership transition for your organization.

Always Be Prepared

Establishing an effective transition process allows you to maximize your organization’s value and minimize its risks. At Barnes Wendling CPAs, we understand that succession planning can be a daunting process. However, you need not navigate its complexities alone. When you work with our professional advisers, you will have an effective transition plan that protects and strengthens your organization’s leadership infrastructure. As a result, your organization will retain its social relevance for generations to come.

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