By Mark Oppenheim
April 30th we are holding a free live Nonprofit Board & Senior Staff Succession Planning Clinic (click here to register).
Succession Planning & Management is the process of reducing risk to organizations during leadership transitions. Part 1 of this series describes and draws contrasts between succession planning for business and nonprofit entities; Part 2 is about costs and tradeoff when planning succession for nonprofit leaders; and Part 3 provides some practical tips & tools for board and staff succession.
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Staff and board succession planning does not have to be mysterious, emotionally fraught, expensive or complicated. Here are a few practical tips & tools you can apply today as you plan staff and board succession for your nonprofit, and you can always call us for added guidance.
Staff Succession Planning & Prioritization
We suggest ranking leadership roles by the financial and operating risk their departure would create for your nonprofit. This brings focus to staff succession planning.
Nonprofits have the same kind of general structure that business entities have, with key functional leaders reporting to a chief executive who in turn reports to a board.
The Mission defines the value produced by the nonprofit, and this mission is advanced by program areas, which can include a range of services, performances, exhibitions, educational programs, products, advocacy goals, facilities, health outcomes, environment impacts, etc. In arts organizations it’s not unusual to have co-equal and/or interconnected artistic and business leadership. Overhead Functions are what you’d expect: workflows, systems and people that enable the organization to deliver mission-related services. This includes driving contributed revenue, driving earned income, finance & controlling, marketing & communications, human resources, tech, legal, facilities management, and other support functions required to deliver on mission.
Not all leadership positions in a nonprofit are equally difficult to replace, and force ranking is a common-sense approach that simply requires planners to list all department heads (and sometimes the next level) in descending order… from the person that the organization can least afford to do without, to leaders that can take an extended sabbatical without harm to the organization. In most cases there are just a few key leaders who are extremely difficult to replace and whose abrupt departure would truly harm the org.
Leaders that are typically identified for succession planning are those who drive revenue (earned and/or contributed), manage finances and ops, or are central to the programs being delivered. Usually it comes down to three or four leaders with functional responsibilities that overlap with the CEO role. Rarely are nonprofits of a scale where succession planning is warranted for more than three or perhaps four positions.
Note that the CEO is not necessarily the most difficult person to replace! This is not about hierarchy – it’s about replicability and operating risk.
Once you have key people force-ranked based on the succession challenge each of them presents, it is fairly easy to shape management succession scenarios. Such planning will be informed by the answers to common-sense questions.
- Can you promote from within, or do you require a search if a key leader departs?
- How long will it take to find a successor, and are you already connected with a search firm able to run the search?
- Are there technical experts on the board who could step in, even temporarily?
- Do you have contacts external to the organization who are able to function in an interim capacity?
Answer these questions, which are generally straight-forward even for the largest of organizations, and before you know it you’ll have a reasonable succession plan in place for your key staff.
Board Succession Planning & Prioritization
We suggest periodically evaluating board membership so that you identify weaknesses, know what kind of new members to recruit next, and have a plan for reconfiguring the board as members roll off. This also promotes board vitality.
Boards generally don’t embrace formal self-evaluations, but it’s an extremely useful exercise and it should be done annually as a matter of routine.
If it’s too awkward to undertake a formal evaluation, no worries! All that’s really required is for board members, particularly members of the board’s Executive Committee (typically the Chair, Vice-Chair, Secretary, Treasurer and Development Committee Chair), to look around the table and evaluate each member’s strengths along four criteria:
- Technical skills & knowledge, which are required for a governance board to exercise proper oversight. Board members who are lawyers, accountants, experts on the mission, management experts, investment professionals, IT professionals, marketing and communication experts… all have knowledge that can be central to ensuring the board functions properly as a fiduciary, exercises its oversight responsibility, and steps into management gaps when necessary during staff transitions.
- Representation on the board is central for a nonprofit’s credibility. If an organization is serving young people or elders, people of various identities or income levels, different audiences or service cohorts, it is important to the organization’s credibility for those groups to have some sort of representation on the governance board. Lived experience drawn from communities served is a useful guide for the boards of nonprofits serving those constituents.
- Ability to drive earned and contributed revenue through fundraising, ticket sales, memberships, in-kind donations, sponsorships, government grants and other means fuels nonprofits and pays salaries. Part of each board member’s responsibility is to give, get or drive funding and income.
- Institutional knowledge should never be underestimated as a stabilizing force. Memory of what a nonprofit has done well and poorly in the past provides context for future decisions. Relationships fostered over years should not be thoughtlessly discarded, and people generally want to see others respected. There can, of course, be tensions between the Old Guard and newer board members, particularly as power shifts and new approaches replace those that once were new but have now become outdated. Such tension, if balanced, can keep organizations from rash actions while fostering creativity within a unified board that actively grapples with changes that come with time.
Evaluation of board members can be done very quietly and respectfully. As you look around and evaluate yourself and fellow board members, you should be able to figure out where technical knowledge is strong or lacking, who drives contributions, who knows most about the organization’s history, and whether constituencies served are represented.
You can easily gain a sense of whether the board represents a tight friends & family circle or communities served. Is there enough technical competence (finance, legal, management, program) around the table? Are these members able to advance fundraising? Is there too little or a lot of redundant institutional knowledge among board leaders, and are we wedded to a nostalgic past or rushing headlong into change without thinking of the organization’s abiding values?
Effectively functioning boards tend to have a high degree of technical skill, significant ability to drive earned and contributed revenue, and a strong degree of representation and institutional knowledge. Balance makes for a strong board.
Conversely, boards that fail to refresh tend to have memberships that tilt towards people who have served long terms and an overabundance of institutional knowledge. Such boards tend to be less well-rounded in terms of community representation, technical skills and fundraising capacity.
As you look around the table at board meetings, you can think over your board’s succession and recruiting strategy and discuss what you see with other board members. Such discussions can unfold formally or informally. Board term limits and standards in nonprofit bylaws that ensure periodic board rotation can remove part of the sting of needed change. Indeed, term limits can be a very considerate way to function so that all feel equally treated.
Succession Rollout
Staff succession means either recruiting from within the organization’s board or staff ranks or running a search.
There is no need to go to the time and expense of the search if there is an obvious choice for a staff role. And if there is good but not complete support for an internal successor… if there are still doubts from some quarters… then a board or chief executive can have a selected internal leader function as an interim in a new role in order to test that person before they are offered the role. Regardless of approach, once an internal candidate is in place, expect to reshape the organization to take advantage of the particular leadership attributes and strengths of the person promoted into a role. The transition process will take time and may involve backfill recruiting at a lower level.
If you decide to undertake a leadership search for staff, we have a broad number of articles on recruiting leaders to nonprofits – including separate articles on creating a search committee, evaluating candidates, and running the search itself. If you decide to undertake a search, the most important financial consideration is to budget time and funding for the search and then the onboarding process for a new leader. The search should be run not only as a search for a new leader, but as an exploration of strategy and how to bring new ideas and energy into the organization.
Board succession is a different animal entirely, and board succession is generally undertaken in two ways that can overlap.
Board officers are typically recruited from board members who have served and understand the nature of the organization. Officers can be selected by members via a popular vote, but there is another approach that can be taken for board officers and committee chairs – there can be a defined succession structure. So for the Board Chair, Secretary and Treasurer, and for Committee Chairs for Development, Investments, Audit, etc, there can be a designated successor for each. In other words, there can be a Chair, Vice Chair and even Chair Emeritus… or Development Chair, Development Vice-Chair and even Development Chair Emeritus. This means that entry into the ranks of being a board officer is through the Vice- position, and when succession happens there is simple a ratifying vote. This approach requires a deep leadership bench, and has the advantages of predictability, having successors trained by predecessors and strong continuity for the organization.
Recruiting new governance board members to succeed exiting members is generally a more open, less structured affair that runs through networks connected to existing board members, and the nonprofit’s CEO or senior staff. Rarely do boards engage recruiters for this purpose – it’s an option but we don’t recommend it other than in very specific situations.
For large boards – for museums, performing arts centers, educational institutions, hospitals, international NGOs, etc – it is also possible to have multiple boards that tie into a single governance board… with governance board members selected from those having served on an advisory board. This has advantages for larger organizations in that governance authority is invested in a smaller and manageable group, that can also leverage the capabilities of advisors at need. For smaller organizations such a structure is overwrought.
We do recommend that existing board members actively recruit successor members based on attributes missing from the current board. Our firm uses this approach when recruiting for our team: at any point in time we recruit for attributes that our team might not yet have in abundance. It gives diversity a whole new meaning – diverse technical skills, lived experiences, ages, perspectives and knowledge – and it makes us stronger in service to clients. In our experience, such a board recruiting approach makes nonprofit boards stronger.
Conclusion
Succession planning isn’t particularly mysterious – indeed, it’s fairly easy to undertake. The biggest impediment can be our reluctance to ask awkward questions.
Who on staff is most central to an organization’s health and most difficult to replace?
What balance do we need on a board to most efficiently advance the mission and our nonprofit’s financial health, and how are members gracefully exited as the board is periodically refreshed?
Businesses ask these questions every day. It’s easier to do when profitability is at stake, and since board members are generally shareholders then getting it right means higher profits to those shareholders. In effect, the board is being well paid to do what is optimal for the business.
Nonprofits can and should ask these same questions because at stake is something more important even than profit: a strong, capable and productive organization that advances civil society.