Nonprofit Succession Planning

Presenter: Richard M. King President & CEO Kittleman & Associates, LLC Chicago, IL

The need for nonprofit organizations to design and implement leadership succession planning has never been greater ....

In the past ten years, from 1996 to 2006, the number of people between the ages of 55 and 64 in the US increased by 54%. Those in the age range of 25-34 decreased nearly 9%.

A national leadership study completed by the Annie E. Casey Foundation in 2004 confirmed that Baby Boomers account for nearly 73% of the chief executives of nonprofit organizations and that 55% are over 50. These Baby Boomers are going to leave the sector in two waves: the first by 2010 and the second by 2020. A little over half of the Boomers (57%) in Executive Director positions are planning on leaving by 2010. Nearly 85% plan to leave during the next 7 years.

David and Lucille Packard Foundation surveyed its grantees and discovered that 40% had experienced a change in Executive Directors within the last 3 years.

A study done by CompassPoint Nonprofit Services reported that nearly three-quarters of the Executive Directors said that their organization has no succession plan and the same amount reported either no plan or they did not know if there was a plan or not. Slightly over one-third identified someone on their staff as a potential successor, and 2/3 of those had informed this person of their possible candidacy. Almost all organizations that reported a succession plan also identified a possible internal successor. The conclusion: having a succession plan may mean little more than having an internal candidate in mind, not a formal plan for management succession.

National Recreation and Park Association Newsletter (2003) - "There’s a significant graying of directors, superintendents in the parks and recreation field. A survey by Elliot of more than 1,000 positions found that formal or informal leadership succession plans were inadequate, if nonexistent. Little was being done to identify potential successors or even interim leadership for transitional periods. If a second in command was identified, little was being done to prepare this person to take over the leadership of the organization for the future".

Calgary Center for Nonprofit Management (July, 2005): A mass turnover of nonprofit leaders within Calgary’s charitable sector may leave thousands of Calgarians at risk of experiencing interrupted services. Roughly 41% of the Executive Directors surveyed (36% across Alberta) plan to leave their current leadership position within the next 2 years. About 86% stated that their Boards have not created a succession plan for their position. About 62% have not identified a staff member experienced enough to lead the organization upon his or her departure.

WHY is this? Experienced CEOs tell us that:

1. SP is not a priority among critical priorities in the agency.
2. SP doesn’t get into the strategic planning process.
3. It’s a moving target!

Definitions of Succession Planning

1) The ongoing process of systematically identifying, assessing and developing talent to ensure leadership continuity for all key positions (American Society of Association Executives).

2) The process of planning appropriate action in the case that a person acknowledged to be a key person or who currently occupies a key position in the organization is no longer available to the organization (Jean Roberts: Managing Governance in Nonprofit Organszations in Australia (2004).

KEY POSITIONS AND KEY PERSONS

Key Position

In any organization there will be Key Positions that if not functioning effectively or not receiving adequate and appropriate support may place the organization at a disadvantage or at risk. Such positions are usually pivotal positions which means the effectiveness of other positions is dependent on the effectiveness of the key position. Usually Key Positions report to the CEO.

The vacancy of a key position has the potential to place the organization at risk. The immediate effect can be detrimental to the organization and it can be a great challenge for those that remain because they have to re-group in order to reclaim momentum.

Key Person

The contribution of the Key Person to the affairs or activities of the organization is recognized to be of major or even critical importance. Key person defined as someone who influences:

1) the performance, integrity or reputation of the organization as a whole

2) the level of job satisfaction among their colleagues.

Such Key Persons will usually - but not necessarily - occupy a Key Position. Where such person is identified within an organization, the nature and extent of their responsibilities should be appropriate to their value to the organization.

So, how do you determine who is a Key Person?

Key Person Characteristics

Now, if we combine the definitions of Key Position and Key Person we can determine the criteria for selection:

Key Position/Key Person Relative Attributes

1. The level of experience and understanding of the organization’s purpose and activities.
2. The amount of intellectual capital they hold in their head and heart.
3. The extent of commitment to the organization’s purpose and direction.
4. The importance of their professional input to the quality and range of service design and development.
5. The ease with which they undertake their responsibilities.
6. The confidence with which they are able to make wise decisions and sound judgments on behalf of coworkers or service recipients.

Determining who is a Key Person in a Key Position

Exercise: Think of a person in your agency who appears on the management-level organizational chart. Rate this individual 1-5 (low to high) on the above 6 indicators.

SITUATIONAL ANALYSIS REQUIREMENTS FOR EFFECTIVE SUCCESSION PLANNING

Leadership transition often leads to the loss of critical tacit knowledge that has built up throughout the years. To reduce this potential loss of knowledge, strategies such as intentional documentation, deliberate knowledge sharing and attention to effective recordation systems and processes can be implemented. But this is just the beginning. Creating a so-called knowledge-based culture in an organization can virtually eliminate most of the critical gaps caused by periodic leadership transition.

Before we can create a knowledge-based culture we have to be able to analyze the current state of organizational readiness for leadership transition or succession planning. This can be accomplished by looking at the organization through three different lenses of situational assessment:

1. ORGANIZATIONAL MOMENTUM & LIFE CYCLE (Organization as a Whole)
2. MANAGEMENT ORGANIZATION & STRUCTURE (Persons in the Organization)
3. INCUMBENT CHARACTERISTICS (A Specific Person in the Organization)

I. ORGANIZATIONAL MOMENTUM

1. the size of the object
2. the speed with which the object is traveling
3. the direction in which the object is moving

When momentum is interrupted, it can be due to a change in any one of these three components, but it will inevitably affect the other two. Example:

Translate this to a nonprofit organization.

ORGANIZATIONAL MOMENTUM

Glen McGrath (1984) Society for Nonprofit Organizations, Vol 2. #2

SIZE = assets, operating budget, headcount/structure, location(s)
(large, medium, small)

SPEED = governance, decision-making policies, regulatory requirements
(bureaucratic, streamlined)

DIRECTION = vision, aspirations, goals
(no strategy, totally focused)

What’s the affect of Organizational Momentum on SP?

Are you Large, Bureaucratic, with no strategy?

Are you Small, streamlined, totally focused?

A change in one component = change in the other two components

Examples:

• Change in governance may mean a change in direction

• Change in direction may mean a change in operating budget
Change in regulatory requirements may mean a change in headcount or structure

LIFE CYCLE PHASE

Life Cycle helps determine specific leadership needs based on the next phase of the organization’s life. Jean Roberts defines the following continuous organizational life cycles:

1. Innovation - focus is on need or problem as defined by end-user - cooperative and informal structure, rapid growth, new programs
2. Establishment - focus is on facility and service provision for end-user benefit - structure taking form and shape, broad growth strategies
3. Maintenance - focus is on continuity and refinement of quality and end-user satisfaction - structure mostly established, moderate growth
4. Evaluation - focus is on what is and why it is so (SWOT) - structure in question, no growth or retrenchment

II. MANAGEMENT ORGANIZATION & STRUCTURE

"Does Organizational Design Define Succession Planning
or
Does Succession Planning Define Organizational Design?"

In practice you have to think about it both ways:

1. Organizational Capacity - Human Resource Inventory (size)
2. Management Structure - Functional Reporting Alignment (hierarchy)

III. INCUMBENT CHARACTERISTICS

Indicators for decision making:
1. Type of Professional Experience
2. Tenure with Organization
3. Desire to Ascend
4. Public Perception
5. Personal Circumstances
6. "Flight Risk"
7. Health

Concluding Statement

Succession Planning requires continual updating of leadership transition scenerios using a variety of organizational, human resource and structural assessments. It is a task that is never completed.