The number of charitable organizations has grown exponentially over the past two decades. Today, many of the baby boomers responsible for this nonprofit growth are transitioning into retirement. According to the Pew Research Center, 75 million boomers are expected to retire by 2030.1
This trend surpasses the Great Resignation as the biggest staffing crisis.
Three national studies in the past decade have revealed that up to 75% of all nonprofit executives planned to leave their positions during the next five to seven years. In addition, 10 to 15% of all nonprofits hire a new executive director each year.
The departure of an organization’s top executive presents many challenges and opportunities. Preparing for this transition properly must be a priority for nonprofits.
In some cases, directors stay well beyond their effectiveness, no longer able to provide leadership. But because these individuals had devoted so many years of service to the cause, they were allowed to remain in the position. The board felt an obligation to honor their past accomplishments and overlook their current underperformance.
Or in a different scenario, a dynamic leader left abruptly, leaving the organization with an uncertain future and no one in place to take the helm.
Nonprofit leaders—especially founders or those with extended longevity—become inextricably linked to an organization. The community and donors place trust and resources into the nonprofit, sometimes based on the credibility and success of that one person.
For those organizations, the idea of replacing the well-known leader with someone new can be a tenuous proposition—one that is often avoided.
Why Plan?
Most nonprofit organizations have a small staff, limiting their ability to replace an administrative position internally. In the leader’s absence, all of the agency’s stakeholders—board, staff, volunteers, donors, and community partners—are faced with an uncertain future.
So, it would seem a necessity to have a succession plan in place. Yet a study conducted by the Kansas City Fed discovered that 68% of nonprofit organizations do not have a leadership succession plan.2 When asked why they did not have a plan, some said succession planning was simply not a priority. Others believed their organization was too small to implement such a plan.
Develop a Strategy
There are three basic types of succession plans:
- Strategic Leader Development: The idea is simple. Recruit and hire people with great potential, then invest greatly in them. Every current and incoming employee should be viewed as a potential leader.
Provide them with training opportunities and hands-on experience to prepare them for leadership roles. Leadership development will not work unless those in leadership, including the executive director and board members, make it a priority and are willing to invest sufficient resources.
- Emergency Succession Planning: This plan focuses on the potential that the top leader could be gone suddenly, with no advance warning. The departure could be permanent or long-term temporary (longer than three months).
Similar to a crisis plan, this plan clarifies who would be in charge (staff or board member), the duties of this person, how long the acting director would stay in the position, and how a new leader would be selected.
- Departure-Defined Succession Planning: This plan works for leaders who establish a definite departure date, which is usually two to three years out. With such advance planning, board members can work with the current director throughout the transition, clarifying the position’s duties and securing the best replacement.
Succession plans require honesty from everyone involved in the process, especially the outgoing leader. Some leaders hold information that no one else knows. Financial information, system processes, and donor contacts may not be known by other staff members (or even board members) within the organization.
Some leaders may intentionally withhold the institutional information, believing that keeping the information to themselves makes them indispensable. However, good leaders will provide all their organizational insights to others so the next leader can have a thorough understanding of the job responsibilities.
Who Is Involved?
Good leadership succession planning requires involvement from the board of directors, the outgoing leader, and key staff members.
Board members are often reluctant to openly discuss succession plans, fearing they will appear disloyal to the leader. In addition, nonprofit leaders may fear being replaced and develop an entitlement mentality, feeling the organization “owes” them for all they have accomplished through the years.
Board members are ultimately responsible for the organization’s success. They are pivotal in developing and keeping the best leaders to run the nonprofit, helping ensure a healthy future. Sometimes, this means making tough decisions regarding the organization’s leader.
Board member duties include providing annual reviews of the director, understanding the complexities of the executive director position, and leveraging the necessary resources to develop new leaders.
In unexpected leadership transitions, board members may be asked to temporarily assume extra duties during a director’s absence. This might involve financial oversight, fundraising, and human resources.
The outgoing leader can be very influential in the future of the organization. By mentoring and encouraging emerging leaders, the outgoing executive can leave the organization in a healthy position to continue accomplishing its mission.
An outgoing leader has the choice of paving the way for the new leader or, in an attempt to make themselves look irreplaceable, they might create a difficult path for the new person.
Key staff may not be as active in the recruiting of a new leader as board members. However, these members have the important task of keeping programs and services running smoothly throughout the transition. Once a new leader is in place, key staff can be supportive through orientation and training.
Succession planning should not be done as a stopgap measure. It should be included in the organization’s broad strategic planning and considered a key to sustainability.
Considering what’s at stake, a well-designed succession plan can help keep your organization’s work flowing throughout the leadership transition process.
Remember, if the work of your nonprofit organization is important and needed, you must take the necessary steps so it will have strong leadership readiness.
If you have questions or need assistance, please reach out to a professional at FORVIS.