We have been talking about succession planning* in anticipation of mass leadership transitions for nearly a decade in the nonprofit sector. When the subject arises, rather than pushing the panic button we tend to shrug our collective shoulders. How concerned do we really need to be? Numbers from “Shaping the Future – Leadership in Ontario’s Nonprofit Labour Force” are telling:
Nonprofit sector leaders
68% are between 45-64 years of age 72% are women 73% have a bachelor of arts or more (30% have a professional degree, master’s or PhD) 79% earn less than $100,000/year
In 2013, only 34% of organizations had a succession plan in place. That year, 55% of management hires came from within the nonprofit sector. Although 63% of organizations identify high performers, 44% of organizations reported losing high performers due to a lack of leadership opportunities. Perhaps more concerning, 27% of qualified internal candidates indicated they would NOT be interested in taking on the top job, a role that many associate with stress, overwork, burdensome administration, and under-compensation.
When the Chief Executive Officer (CEO) begins to think/talk about retirement, leadership transition planning should be underway. The information above could inform an organization’s approach to succession planning and leadership transition.
Nancy Axelrod urges boards to take a broad and integrated view of leadership succession planning. She notes that it, “Is not only about determining your organization’s next leader, it is a continuous process that assesses organizational needs, and creates a climate for an executive to succeed. An effective succession plan is linked to the organization’s strategic plan, mission and vision…”
What’s an organization/board to do?
At the system level, boards and leaders need to make leadership in the nonprofit sector more attractive to next generation leaders. This requires gaining a better understanding of what appeals to and motivates leaders from inside and outside the sector. Negative perceptions about various aspects of the role suggest the structure of organizational leadership might need rethinking, so that incoming leaders can succeed in demanding, multidimensional CEO roles.
At the organizational level, boards need to ensure that leadership skills and critical competencies are developed and nurtured throughout the organization. Strategic plans often highlight key skills and talents related to the implementation of strategic priorities. These competencies might be developed internally and/or recruited externally.
Three options
Hiring the right CEO is one of the most critical governing responsibilities any board undertakes. Boards must think carefully about what stage of development their organization is at and what type of leader they’re looking for – an innovator, builder, maintainer, transformer and/or collaborator?
Faced with the prospect of replacing a CEO, the board invests significant time and effort considering and implementing one of three options: hiring from within, hiring from without, or using the transition as an opportunity to restructure the organization and acquire a new CEO through integration. Considerations associated with each option are outlined below.
Hire from within
Opting to promote someone from within the organization to replace a CEO might be informed by several criteria. Organizations that are values-driven, effective and have a clear sense of their future would more likely sustain their trajectory by promoting an internal candidate. Often these organizations have been deliberate in using succession planning as a way to cascade values throughout the organization and to evaluate and develop staff (e.g. through formal training, special projects, mentoring). Key positions and related competencies are identified along with staff who have or can develop requisite competencies.
Boards of larger organizations sometimes encourage their CEO to groom/mentor a successor. A challenge inherent in this approach is board turnover; when the time comes, different board members may decide not to appoint the internal successor. This shift in approach may cause resentment in the person who was groomed but passed over. Some of these individuals, who are expected to mentor the new CEO, subsequently leave the organization and the investment the organization made in their development is lost.
In contrast, smaller organizations that lack the resources and capacity to offer professional development and internal promotion opportunities may be forced to look externally. These organizations may be the beneficiaries of the investments larger organizations have made in internal leadership development.
Hire from without
Most boards opt to open up the recruitment process to external candidates for comparison; after all, what if the best candidate is actually out there? Organizations are often overwhelmed by the volume of applications – from qualified and unqualified applicants. Those agencies that can afford to, often hire an executive search firm to conduct a professional search.
When a strategic plan outlines the need for transformational change, hiring from without may be a compelling option. Outsiders bring fresh eyes, different perspectives and experiences and may find it easier to introduce major changes since they are less invested in an organization’s history. Boards need to ensure that in addition to bringing a vision and creative ideas, the new leader has experience in change management.
Restructure the organization
Pressures to reduce duplication, integrate and amalgamate are decreasing the number of organizations in the nonprofit sector. As smaller agencies increasingly struggle to meet growing expectations for accountability, some amalgamate with larger agencies while others engage in joint ventures to deliver programs collaboratively.
Leadership transition presents boards with an opportunity to reflect on sustainability, the organization’s place in the broader system, and whether the agency should consider some form of integration. Boards sometimes appoint an interim CEO, to afford them the time and space to explore whether integration might prove the best way forward.
Leadership Transition
No matter what option is chosen, the board needs to play a more active role throughout the leadership transition process from recruitment to the end of a probationary period. The board and organization would benefit from bringing clarity to the direction of, and approach to, a change in leadership. After the appointment of the new CEO (with or without integration), the board’s work must continue in earnest. Well before the new CEO is appointed, the following strategies can be implemented to facilitate a successful leadership transition:
- Define a shared leadership approach between the board and CEO as the foundation for a productive long-term relationship
- Clarify the decision-making role of the CEO and the delegation of power from the board to the CEO
- Consider what an effective change management process would look like to ensure a smooth transition with minimal disruption to services, clients and staff
- Create a healthy and nimble culture characterized by open and honest communication.
Being proactive in creating a succession plan and process for leadership transition reduces the panic when the CEO announces his/her imminent departure. Be prepared to answer “O leader, where art thou?”
Questions
What critical conversations and questions do boards need to engage in related to succession planning and leadership transition? The sample questions below are crafted for organizations that are just starting out, and those that are actively engaged in, succession planning.
| Fiduciary (oversight) | Strategic (insight) | Generative (foresight) |
| What kind of succession plan is in place? Is turnover anticipated in the next 2-3 years?
Can we afford to hire a recruitment firm? How competitive is our salary scale – can we attract the leader we need?
|
What competencies do we need to move the organization forward in alignment with our strategic plan? Or to introduce a new strategy?
Should we be looking internally to maintain our organizational culture and strategy, or externally to introduce change and challenge our assumptions? How important is it that the individual is highly aligned with our organization’s values and vision? |
How might we restructure the CEO position? Do we need someone full-time?
Does this represent an opportunity for organizational restructuring, divestment or integration? Is there a leader at another organization we admire? How far can we reach to recruit the skills we need – e.g. recruiting out of province/country? What other opportunities for renewal does this represent? |
*Definition: “Succession planning is an ongoing and strategic process…to identify, and then meet, the future requirements of the organization by preparing candidates who will become equipped with the necessary competencies to excel in a job.
Where no current employee has the potential to succeed in the intended role, the organization will create contingency plans (e.g. a budget for executive search services) as part of its succession management strategy to hire qualified people who currently do not work for the organization.” Succession Planning, Jack Shand, 2009.
Ruth Armstrong and Sandi Trillo, VISION Management Services
Recommended resources and references
“Companies Need Not Hire Outside CEOs to Stimulate Fundamental Change”. Jim Collins and Jerry I. Porras. 1994
“Daring to Lead 2011: A National Study of Nonprofit Executive Leadership”. CompassPoint Nonprofit Services and the Meyer Foundation. 2011
“Executive Transition Initiative”. Greater Milwaukee Foundation. 2006
Managing Leadership Transition for Nonprofits. Barry Dim, Susan Egmont, Laura Watkins. Pearson Education, Inc. 2011
“Nonprofit Executive Succession-Planning Toolkit”. Federal Reserve Bank of Kansas City. 2009
“Shaping the Future: Leadership in Ontario’s Nonprofit Labour Force”. The Mowat Centre and University of Toronto. September 2013
Succession Planning: Succeeding at Succession. Jack Shand, Canadian Society of Association Executives, 2009