Leatherstocking Agency Executives Association: Nonprofit Knowledge Matters

Thursday, February 19, 2015

Nonprofit Knowledge Matters - What’s not trending? Succession Plans

Why is succession planning taboo?

Did you ever wonder what two words would cause accomplished adults to behave like ostriches burying their heads in the sand? The answer seems to be “succession planning.” Apparently nonprofit board members and executives will do everything possible to avoid hearing or speaking those words. Yet succession planning is essential, and should not be taboo.

Interestingly, this phenomenon is not limited to nonprofits. According to research published in the Harvard Business Review, the for-profit “CEO succession process is broken in North America,” with about “half of companies with revenue greater than $500 million hav[ing] no meaningful CEO succession plan.” Even among “those that have plans [most] aren’t happy with them,” with “only 20 percent of responding HR executives [reporting they] were satisfied with their top-management succession processes.”

Still, that’s no excuse for nonprofits. A nonprofit undergoing a leadership transition is at a very vulnerable point in its lifecycle. All leaders leave at some point, sometimes unexpectedly, so all organizations need to prepare for this eventuality. But unfortunately, succession planning – if not “ostrich-inducing” – is the “elephant in the room” that no one wants to acknowledge. We hope that instead of avoiding this delicate issue, boards will behave responsibly by teeing up the issue of succession planning for a direct discussion. Board members who ignore succession planning do so at their nonprofit’s peril. They are ignoring serious risks to the future stability of the nonprofit, and abdicating their own fiduciary obligation to take care of the nonprofit (the legal “duty of care”).

When approaching succession planning, recognize that there are at least three distinct scenarios to address. The first involves “emergency” transitions, whether temporary (such as caused by a major illness) or any other unplanned departure. Taking a regular look at the organization’s plans for emergency leadership succession, such as annually during the CEO’s evaluation, keeps it fresh which can mitigate confusion in an emergency. The second scenario involves the advance planning that most people associate with “succession planning.” The final scenario is often the most overlooked: onboarding the new leader. Too often nonprofit board members think that their job is over once a CEO vacancy is filled. In fact, onboarding is a longer process that involves providing the new CEO with added support throughout the first year.

The responsibility for a smooth transition lies not just with the board of directors. Current CEOs/executive directors who are planning to leave have a huge responsibility too. Ideally they will help prepare the organization for a smooth transition of leadership. We find this post to be inspiring, as it describes a thoughtful and transparent leadership transition at the Princeton Community Foundation. In it, Nancy Keiling, former CEO of the Princeton Area Community Foundation, describes her role as the departing CEO, and how the community foundation approached its goals of both successfully onboarding the new CEO and keeping the board engaged as the new CEO stepped into the traces.

Engaging in a thoughtful succession planning process for both staff and board leadership is a key factor for a nonprofit’s ability to adapt and thrive. In its most recent national study of board governance practices, Leading with Intent, BoardSource reports that only 34 percent of nonprofits have written succession plans in place, while 50 percent believe they face a leadership transition in the next five years. BoardSource goes on to note that: “Boards are weaker at the more adaptive work (work where the problems are more complex, the path is not proscribed, and multiple solutions are viable)” than technical work, such as legal compliance. This is as true when dealing with board transitions as it is with transitions of the paid chief executive, as the findings underscore that recruiting/identifying the right board members is increasingly difficult. When polled, both board chairs and CEOs (22 percent and 25 percent respectively) reported that “building a stronger leadership pipeline” was among the top 3 areas needed for board improvement.

Read on for more information on leadership succession planning and resources your nonprofit can use.