By Jeffrey R. Wilcox, CFRE
It’s too bad that whenever the word, “succession,” finds its way into conversations at most nonprofit organizations, most view its utterance as code for “someone needs to go.”
When an inevitable transition occurs, these organizations soon discover that having kept that succession in the closet ultimately costs their worthy causes significant amounts of time, money, and angst.
The Third Sector is no different than the other sectors when it comes to human resources and leadership. Most transitions in key positions aren’t planned, and messy exits can be a public relations challenge. And, transitions that should have happened earlier, but for whatever reason were avoided, create a domino-effect of other’s choosing to vacate their positions instead.
Unique Challenges of the Third Sector
While nonprofits face other common workforce realities such as the Baby Boomer generation retiring en masse and the difficulty of attracting and keeping up-and-comers, the sector has a couple of quirks that make leadership continuity slightly more complicated: The first is that each of these realities can be applied not only to paid employees, but also to volunteers. The second is that without term limits and a commitment to succession, great causes can easily evolve into family-run businesses disguised as nonprofits.
These factors sum up to a subject that is emotionally charged and filled with deeply-rooted confusion over what constitutes prudent succession planning for a nonprofit organization.
Replacing key positions, managing with a leadership void, and curbing high attrition are expensive propositions for any enterprise. For organizations that depend on people’s generosity to survive, however, these situations demand pro-active and visible attention.
The Daring to Lead study, released by CompassPoint Nonprofit Services in Oakland, dramatically illustrates the current state of the sector when it comes to succession:
• 17 percent of the 3,000 nonprofit organizations surveyed indicated having a succession plan
• 24 percent of nonprofit executives reported planning to vacate their positions within two years
• 45 percent had no executive performance review process to annually discuss succession
Based on these numbers, there is a significant quantity of important nonprofit organizations whose futures are at risk. Sadly, most of them have little idea how large the risk is because succession has been considered an unmentionable in their cultures.
For those who believe in investing time and money in leadership development, retention, and succession will hurt a nonprofit’s overhead calculations, the Daring to Lead numbers suggest that the day in court is nigh. The costs of sloppy human resource practices, poorly managed executive exits, replacing avoidable vacancies, and a lack of competent future board leadership creates a tab that is going to difficult to prove as circumstantial. The sum of these costs will be even more difficult defend as responsible fiduciary oversight in the name of charity.
Succession, like fundraising, is an integral piece of a successful nonprofit’s organizational culture. Both subjects are forms of resource development that are equally vital for fueling its future.
Vital attributes to a culture that values succession:
1. These organizations operate with a common understanding that succession is about ongoing efforts to assure a continuity of good leadership is in place for the organization. It is not about naming an heir-apparent or planning one person’s transition.
2. These organizations build a contingency operations plan every year and create a warehouse of vital organizational information should a key position become vacant for any reason.
3. They create a series of board-approved succession policies which mandate things such as performance reviews, term limits, human resource procedures, and nominations.
4. They demonstrate basic competencies in human resources.
5. They complete and manage a strategic plan that pays as much attention to developing human capital as it does to developing financial capital for creating its future.
6. They assign the task of succession to key people as part of their job responsibilities and performance objectives.
For me, nonprofit leadership succession has become an obsession. Perhaps I’ve stood on the curb for too many years watching people confuse or avoid the subject and declining to get on the succession planning bus. It’s painful to witness so many great executives, boards and organizations now at significant risk of being hit by it.
This article was originally published in the Long Beach Business Journal as part of the Third Sector Report Column.