Pacific Business News

May 20, 2005

Sooner or later, a nonprofit’s director will leave, so start planning for it now

by Sally Little

Having a succession plan for an executive director/CEO is critical in maintaining the high performance of a nonprofit.

Poorly managed transitions result in repeated executive turnovers and an extended period of underperformance. As a result, donors and government, foundation and corporate grant-makers may lose confidence in the organization and the nonprofit’s financial bottom line may suffer.

Recent studies have found that 85 percent of nonprofit executives will leave their positions in 7 years. In addition, the average tenure of a nonprofit executive director is four years. Yet only 25 percent of nonprofits have successions plans and only 10 percent have identified a replacement among the staff in case of an immediate departure by the executive director.

Without a succession plan, board members tend to react to the loss of an executive director with denial or panic. Rather than embracing the departure of an executive director as an opportunity to build effectiveness, discover new possibilities for the organization and establish a clear sense of direction for the new CEO, the board of directors tends to embark on a “search and hire” method for replacing the executive director.

An executive transition policy includes plans for the departure, recruitment, orientation and the first sixth month assessment of the performance of the executive director.

The best time to develop a succession plan is well before you need it. These tips will prove helpful in developing your executive transition procedures.

* Update your strategic plan frequently. A nonprofit’s strategic direction sets the stage for hiring a CEO. For example, if a goal of your strategic plan is to increase earned income by 50 percent, the board of directors should search for an executive director with these skills and experience. If your strategic plan is not current, then the first task of the board of directors upon learning of the departure of the executive director will be to update and perhaps revise the plan. This could be time-consuming.

* Develop a communications plan. Determine who will craft and communicate your message to donors and customers upon learning of the departure of the CEO. Determine how to communicate and create a procedure for giving frequent updates on your executive transition process. These messages should reassure the community, your customers and donors that operations are continuing as usual.

A nonprofit may purchase these services from a public relations firm. However, you should create a relationship with a public relations professional well before you may need his/her services. This will give him or her the opportunity to understand the nonprofit’s constituency and sense of place in the community.

* Set a specific time for updating your CEO’s job description. An executive director’s job responsibilities and required skill set do change. A good time to re-assess and update an executive director’s job description is during his/her annual performance review.

* Train staff for leadership positions. As part of their job descriptions, executive directors should develop staff for management positions. The CEO should be responsible for mentoring his/her replacement. As much as possible, staff should be cross-trained for other positions. In addition, transparency should be encouraged in all facets of the management of the organization. Well-informed and trained staff are a great asset in the transition process.

* Consider hiring a search firm or independent consultant. A search firm or an independent consultant can be very helpful in managing a smooth executive transition. A searc h firm will offer much more than advertising, recruiting, interviewing and helping select the prospective CEO. It will analyze the organization’s culture, the leadership skills needed by the new executive director within the context of the organization’s culture and establish a competitive compensation package. Again, the time to research and interview search firms or an executive transition management consultant is well before you need one.

* Hire an interim executive director. An interim executive director serves a valuable function as a bridge builder between the previous and new CEO. This transition phase can be particularly difficult if the previous executive director has left either a positive or negative legacy. It is important to have an interim executive director if the previous executive director was the founder of the organization or an entrepreneurial leader who turned around a struggling nonprofit. Transitions are complex when the identity of the organization and its leadership are synonymous.

* Budget for the unexpected. Engaging in the executive transition process can be expensive. Unfortunately, most organizations have only one or two months warning of the departure of their executive. With a succession plan in place, however, a nonprofit should have an idea of the cost and set some monies aside in reserves.

Few boards of directors like to think about their executive director’s resignation. For some it is like planning a funeral. However, a succession plan will guide the organization through this transition and reassure the customers, donors and funders that high performance services will continue.

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