United States

Coming to terms with change: succession and sustainability planning

MUSE  | 

No matter how stable a nonprofit organization may be today, eventually things will change. Managers will turn over, executive leadership tenures will end, business processes and needs will evolve. Yet even though change is inevitable, many nonprofits do not have a well-defined plan for executive transition, nor do they have a clear plan for how the organization will sustain over time. 

 A surprisingly large percentage of nonprofit organizations have not made plans for leadership transition. For example, according to a 2011 survey by CompassPoint, Daring to Lead, 83 percent of nonprofit organizations report having no succession plan. A 2013 survey, Nonprofit Employment Trends, by Nonprofit HR Solutions, found that 69 percent of respondents had no succession plan. Among the reasons given by respondents for this were:

  • Confident the board of directors would hire the right successor
  • Felt their organization was too small to create a plan
  • Felt their organization was too small to require a plan
  • Just not a top priority

Yet research shows that approximately one in 10 chief executive officer (CEO) positions at nonprofit organizations turn over each year, and it's reasonable to assume that turnover will rise as baby boomer executives retire. Since every organization will eventually face this problem (all careers end at some point), succession planning becomes essential for its long-term viability. In fact, making sure the organization is sustained over time is an important duty of the CEO in any organization. Also, succession planning is important, not just for the CEO, but for all key officers, i.e., chief financial officer, chief operating officer and human resources director. In the end, organizations that plan for leadership succession are more likely to have a smooth transition to the next generation of leaders, with minimal disruption in the organization.

Succession planning defined

Succession planning is a systematic process for ensuring leadership continuity. The process involves identifying candidates, as well as engaging in ongoing development of leadership talent. The process can be divided into three major areas:

  • Leader development planning and talent management - An ongoing process of systematically assessing, acquiring, developing and aligning organizational talent in a way that builds the organization's capacity and provides a critical link between organizational goals and performance.
  • Departure-defined succession planning - A combination of organizational sustainability planning and capacity building to ensure organizational readiness for an executive transition. It is typically begun 18 months to five years ahead of the transition.
  • Succession essential - An executive backup plan and a board-adopted succession policy that provides the tools and processes necessary to ensure leadership continuity for all key positions in the event of unexpected departures, as well as planned transitions.
Leader development planning and talent management

The leadership development process is the strategic component of talent management. It benefits the company even when leaders are still in place and no departure date is known or expected. Such a general process broadens, strengthens and sustains leadership capacity, leaving executives fully prepared for unexpected transitions. A proactive process of talent management also helps to link leadership development to ongoing positioning of the company and to align strategic goals with leadership training. 

Other tasks included in this process are:

  • Developing, supporting and retaining key talent
  • Identifying and recruiting new talent, both internal and external
  • Identifying the right skills and abilities required for leadership roles
  • Making timely moves for organizational and individual development
  • Aligning the leadership team with community and diversity goals
Departure-defined succession planning

A different strategic process is involved if the departure date of the executive is expected or even known in advance. The goal of the planning is to increase the organization's capacity to deliver its mission under new leadership, when the transition finally takes place.

Preparation should proceed along two parallel tracks:

  • Executive preparation
  • Organizational preparation

These planning tracks should result in the following end products:

  • A capacity-building plan that strengthens the four critical elements of organizational sustainability.
  • A succession policy that outlines the board's policies and roles for an executive transition.
  • A backup plan that includes cross training to ensure continuity.
Succession essentials

If you are starting from scratch and don't have any written succession plans in place, here's a short list of the most basic plans that you will need: 

  • A backup plan for the CEO
  • A board-adopted succession policy
  • Backup plans for senior managers and other key positions

Included in these plans should be an agreement between the executive and his or her designated backup. The backup's duties and responsibilities should be defined, as well as the circumstances under which the designated backup will assume the role. 

The benefits of succession planning

Why plan for succession at all? The reasons are broad and deep, and cut across many areas of the organization. Among them are:

  • Helps ensure organizational sustainability
  • Helps mitigate general organizational risks
  • Increases the organization's resiliency and capacity to survive negative events
  • Builds bench depth and internal capacity
  • Minimizes the potential crisis of an unplanned absence (i.e., executive illness)
  • Identifies organizational gaps in human resource coverage

Sustainability planning

Sustainability planning is the broad-based process of insuring the entity's long-term viability. This involves more than just attending to the financial health of the organization; it takes into account other organizational elements, like culture, business model and resources.

To thrive on an ongoing basis, a nonprofit organization must be stable, sustainable and vital. It should have: 

  • A basic level of health
  • Enough resources to carry out short- to mid-term activities
  • Strong organizational fundamentals in place
  • The capacity to live, grow and develop
Four elements of organizational sustainability
  • Business model and strategy
  • Resources
  • Leadership
  • Culture

The business model describes how the organization creates and delivers value, and how it finances the value-creation process. It ensures that the organization:

  • Has at least five to seven years of life in front of it
  • Is built on quality services
  • Is needed by clients
  • Is valued by donors and funders

The business strategy is a coordinated set of actions aimed at creating and sustaining a market position in order to carry out your nonprofit's mission. It asks the following questions:

  • Is there a written strategy in place?
  • Is the organization positioned to meet future needs and demands?
  • Are the board and staff aligned with the business strategy?

The resources within an organization include both hard and soft assets. The organization should have:

  • Sufficient financial resources to meet short (six months) to midterm (24 months) commitments
  • Revenue streams that are properly diverse and which have longevity
  • Favorable trends in revenue, expense and margin and good ratios
  • A proactive resource development strategy in place
  • Linkages between business model a strategy a resource plan
  • Good stewardship of its hard assets
  • Growth trends in its soft assets

Leadership is undoubtedly one of the most important elements of succession and sustainability planning. Effective planning should include:

  • Leadership in place to meet current and future needs
  • Succession plans for top leadership
  • A board of directors whose work covers the three core tasks:
    • Shaping mission and direction
    • Ensuring leadership and resources
    • Monitoring and improving performance, including its own
  • A strong, positive relationship between board and executive leaders
  • Attention to diversity, plus cultural and intergenerational competence

Culture is the intangible, yet critical component of an organization that describes its core values and goals. An organization's culture must be:

  • Agile, flexible and nimble in the face of a dynamic environment
  • Resilient, i.e., able to bounce back quickly from setbacks
  • Future focused, results-oriented and action-based
  • Widely understood throughout the organization by everyone, including board, executives, staff and volunteers

Where to start–first steps for your organization

  • Engage staff and board in sustainability assessment and discussion.
  • Initiate and complete emergency backup plans and succession policy.
  • Initiate a sustainability review.
  • Combine sustainability and succession planning or integrate into your next strategic plan.
  • Pick the most important component of your assessment and take action on it.

National Sustainability and Succession Survey Trends

Finally, here is a snapshot of some of the trends that emerged from TransitionGuides' recent survey, National Sustainability and Succession Trends. The respondents were a group of nonprofit organizations from a wide variety of sectors, as seen in the chart below:


General trends
  • More organizations are developing written succession plans.
  • More organizations are finding executive transitions to be less traumatic than previously.
  • Revenue source diversification is a more important part of business models and fundraising strategies.
  • Planned successions and generational transfers of leadership remain a high priority.
Trends - Succession planning
  • Top leadership is aging out.
  • Emergency plans are becoming more widespread.
  • Most organizations lack talent development processes.
  • Most organizations have stable leadership.
  • High turnover in leadership continues.
  • Deep succession planning is not widespread.
Trends - Organizational sustainability
  • Leadership teams reflect strong alignment.
  • Strategic plans are no longer collecting dust.
  • Confidence in business models is mixed.
  • Boards are viewed as valuable.
  • Board recruitment is a weak link.
  • Funding prospects are positive.
  • Confidence in board succession is mixed.
  • Most organizations are confident in their cultural assets.

For more information

Submitted with permission by Tom Adams, president and co-founder, TransitionGuides, Inc. For more information on how your organization can develop a succession and sustainability plan, please contact Bob Billig, National Nonprofit Industry Leader, RSM US LLP at 301.296.3630.