The warning bell has been sounding for years, telling nonprofits that the sector will face an enormous leadership shift as baby boomers retire and new leaders take the helm. The 2006 Bridgespan Group study The Nonprofit Sector’s Leadership Deficit predicted that the sector would need 80,000 new senior leaders per year by 2016, and we’re reportedly on track. Yet too few boards, grantmakers and leaders are doing everything they can to prepare for leadership succession. Here are all-too-common practices that ensure failure.
Succession planning is a deliberative process, and mistake No. 1 is never talking about it. Succession for all positions should be a continuous topic among managers, and boards would do well to request regular reports on how managers are developing employees and preparing for departures. A well-run nonprofit should plan for succession across all positions. It should encourage employees who seem eager and ready for new challenges and “stretch assignments,” and it should assess risks that could result from any single person departing. Board members from major corporations can help nonprofits by sharing leadership development and succession practices from the business sector, where HR departments often have well-honed practices in this area.
Wise is the board that has a disciplined approach to performance feedback for a nonprofit’s chief executive. Beyond the obvious goal of helping the CEO succeed, in doing so boards generally seek input from internal and external constituents. These fresh perspectives can help boards understand the current CEO’s strengths and shortcomings, form relationships inside and outside the organization that will be helpful during succession, and engage in conversations that deepen their knowledge of the organization’s work and impact. These additional benefits make the CEO’s performance review an even greater imperative for the well-managed nonprofit.
Successful CEO succession requires an engaged board, and engagement is a practice and a habit that is best developed before necessity or crisis requires it. Boards that have been deeply engaged in strategy and planning will not only be well-positioned to carry the organization’s mission forward during a time of change, but also will be well-equipped to identify the characteristics of the leader they need to seek. Too often, strategy is developed at the senior leadership level and “presented” to the board, without the benefit of board members’ best thinking, involvement and experience. (See my earlier column, “Is Your Board Bored?” [bit.ly/1e0UlW6], about ways to make board involvement meaningful to an organization’s strategy and success.)
Both so-called “heroic leadership” and “hub-and-spoke” leadership styles define many nonprofit CEOs. In either instance the organization can then come to rely on the CEO to do anything and everything to keep the organization in motion. Maybe it’s the lifelong commitment to nonprofit causes that underlies so many nonprofit leaders’ willingness to play the hero. Unfortunately that often means forgoing a distributed leadership style that is team-based and less reliant on any single individual. CEOs and boards should give next-level managers and staff every opportunity to participate and excel in organizational leadership, and they should encourage them to enroll in professional development courses and activities that build their capabilities. As a further benefit to staff investment, one of these individuals may be a great candidate for the CEO role. Internal succession can be an effective way to ensure continuity and a smooth transition.
At the very least, organizations should have an emergency plan for how they will manage in the event of an unexpected departure, including an illness, accident or disaster. This requires attention to both the people who may be asked to assume new responsibilities quickly and to organizational systems for information management. Key documents, passwords, calendars, contacts and process information should be centrally located, with documentation so that they can be retrieved quickly in an emergency. For certain bank accounts and financial data, password-protected information may be all but permanently inaccessible without the correct credentials. The well-run nonprofit has a documented emergency plan and a practice of updating it.
Unrestricted assets, or money in the bank, give a nonprofit room to chart its own destiny and withstand the speed bumps that can result from a change in leadership. Donor loyalties may be tied to personal relationships that come to an end when the CEO departs, and other income streams may shift when leadership changes. Developing and maintaining a healthy balance sheet, with appropriate reserves, is a best practice at all times and critical during a leadership transition.
There are mountains of literature about succession planning. Among the most helpful is a book authored by Susan Kenny Stevens, formerly a Minnesota-based Clifton Larson Allen partner with deep interest in founder succession. Her book, Nonprofit Lifecycles: Stage-Based Wisdom for Nonprofit Capacity, is an important contribution to this subject. Beyond Stevens’ book, there are many resources compiled in an excellent list on the Foundation Center’s website. You can find it at foundationcenter.org/getstarted/topical/succession.html.
A CEO transition is not a question of whether it will happen, only of when. We’ll all benefit if Minnesota nonprofits get prepared.
Sarah Lutman is a St. Paul-based independent consultant and writer for clients in the cultural, media and philanthropic sectors.