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Five Steps to Stronger Succession Plans in Nonprofits

Resource Center - Foundation

By Charles Ingersoll and Divina Gamble

A “sacrificial lamb risk” ought to send nonprofit organizations and their boards sprinting to their succession plans. The term too often describes the hasty departure of a newly hired leader who had the misfortune of following in the footsteps of a long-serving CEO at nonprofits with subpar succession plans.

The departure of long-time leaders, especially founder/CEOS, is particularly challenging in the nonprofit sector. The failure of so-called successor CEOs within two years of assuming their roles is potentially catastrophic and all too common. New research from a University of Washington/Waldron survey reveals that 54% of nonprofit leadership teams could not identify potential successors if their chief executives were to suddenly depart.

This is troubling news that ought to light a fire under nonprofit succession planning efforts. Developing a more rigorous chief executive succession plan qualifies as a truly mission-critical organizational capability in the nonprofit sector.

Nonprofit-Unique Obstacles

Nonprofits are not alone in facing succession planning problems. A survey conducted by PDI Ninth House e-Learning found that 50% of companies with annual revenues of $500 million or more had “no meaningful succession plans” in place in 2008.

The good news for nonprofit boards and senior leadership teams is that developing a suitable succession plan for the organization’s top executive does not require a marathon effort.  A sufficient succession plan—even one supported by a sophisticated leadership competency model—can be crafted in as little as 60 to 90 days.

The less cheery news? Nonprofits face at least two unique challenges that often impede succession planning. First, the chief executives, executive directors, and presidents who head nonprofits generally tend to serve long tenures—terms measured in decades rather than in years. This is particularly common for founder/CEOs.

The departure of a successful and long-serving executive director causes a major transition for the entire organization. And how well the organization manages this period of significant change hinges on the quality of the succession plan that ultimately produces a successor.

Second, nonprofit boards typically have long lists of concerns and risks to address, and these priorities typically leave little time for succession planning. Fundraising challenges, donor relations, and operations issues consume the vast majority of senior leadership’s and board members’ time and attention. 

Additionally, the need for succession planning rarely represents a pressing issue—until it’s too late. The average tenure of private-sector CEOs remains significantly shorter than the tenure of nonprofits’ leaders. As a result, private-sector boards must think about succession plans more frequently.

There is a compelling reason for addressing these nonprofit-specific succession planning challenges. Boards are well aware of the massive loss of institutional knowledge that occurs when a long-tenured leader walks out the door.  Those who have experienced leadership transitions also know how deeply staff productivity can swoon, how many questions arise from donors, and often, how donations plummet during the transition to a new leader.

Going through that transition once is disruptive and costly enough. Going through it twice places the mission and the people it serves at great risk.

Get Started (Quickly)

Nonprofit boards and senior leaders can address these challenges and strengthen their organizations’ succession planning capability with tangible actions.  

Recognize the risk and get it on the agenda: The turmoil prompted by a poorly considered leadership transfer can sap morale, reduce productivity, slash donations, and, in worst-case scenarios, threaten the nonprofit’s mission. One way to kick-start succession planning is to integrate it into the board’s annual assessment of the chief executive. Start by asking some big questions: How long does the current CEO plan to continue? Who among the current senior leadership team might qualify as a succession candidate? How can we hire and groom future CEOs? 

Conduct a deeper assessment: Once potential internal candidates are identified, their leadership skills should be assessed in a rigorous, systematic manner through the application of formal competency models. These assessment tools help boards understand what leadership competencies they desire and whether such competencies exist among the next tier of senior leaders.

Fill the gaps: Formal leadership-competency modeling identifies gaps between the leadership talent that resides with the organization and what skills and experiences are desired from a succession perspective. Nonprofits can eliminate these gaps through strategic hiring and by putting in place new leadership development plans. Additionally, by developing a reputation as a cultivator of executive talent, a nonprofit is more likely to attract future leaders from an “employer of choice” perspective. 

Benchmark: Regardless of the level of “future-CEO” talent that a nonprofit possesses, it is valuable to compare these individuals to external candidates. Doing so can greatly strengthen the final selection decision regardless of whether the organization ultimately promotes from within or hires an external candidate.

This type of benchmarking also bolsters the credibility of the new leader throughout the organization and among all stakeholders. That credibility serves as a ringing endorsement of the incoming chief executive, and it represents a key ingredient of a smooth, low-risk leadership transition. Thinking and acting in a more strategic way regarding succession planning can prevent any chatter about “sacrificial lambs.”

Private Practice: Six Tactics from For-Profits

Two key elements of effective succession planning include starting right away and treating succession planning as an ongoing process. The following six tactics employed by private companies can help nonprofits’ leaders and their boards:

  1. Identify target leadership roles and positions.
  2. Determine the requirements of the target roles and positions and how the requirements of those roles support the mission and strategy of the organization.
  3. Assess the risk and impact of turnover in the target roles and positions.
  4. Identify succession candidates and assess their ability to effectively perform the target roles.
  5. Build and execute development plans to close any gaps identified by the assessments.
  6. Revisit and update succession plans periodically (e.g., integrate succession plan review into the board’s annual evaluation of the organization’s current leader).

 

Charles S. Ingersoll Jr. is senior client partner and co-leader of nonprofit practice at Korn Ferry. He brings more than two decades of executive recruiting experience, also leads the firm’s public sector practice, and is based in Washington, D.C. Divina Gamble is co-leader of Korn Ferry’s nonprofit, philanthropy and social enterprise practice. She is also a member of the firm’s Education and Diversity practices and is based in Washington, D.C.



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