Succession planning is an integral strategy for organizations of any type, but for the charity sector its importance has grown tremendously in recent years. Expansion of existing nonprofits and the introduction of many others have presented a need for addressing the issue of when and how to pass on the leadership torch.
A well-executed succession plan will provide for a seamless transition from one leader to another without negatively affecting the group—and this is typically and ideally done with an internal candidate. However, different variables (e.g., size of the nonprofit, cause of turnover, etc.) all affect what this actually looks like in practice.
Research teams at the Bridgespan Group, an organization that focuses on strengthening nonprofits and their impact around the globe, have closely observed the issue of succession planning. They found that succession planning has, from an organizational standpoint, outranked the other concerns of board members, CEOs, and other nonprofit leaders by a considerable amount.
Here are a few informative statistics on leadership turnover, along with a few considerations for strengthening internal prospects and mitigating some of the burdens associated with succession planning.
Recent trends in nonprofit executive leadership
In 2015 the Bridgespan Group tested their 2006 study which predicted that demand for C-suite nonprofit leaders would grow considerably in the coming years. They found that their calculations were correct; demand increased, as did the supply of these leaders. However, they found that retention still remains an issue. Between 2013 and 2015 roughly 25 percent of leaders either retired or relocated, leaving a gap at the senior level of their respective organization.
What presents an even larger concern is that almost a quarter of the individuals surveyed expressed their plans to leave their current position in two years. Extrapolate these numbers to the nonprofit sector at large, and turnovers could potentially take place in every senior-level leadership position by 2023. All of this movement begs the question, “Why?”
Forces at play in executive turnover rates
The reasons for leaders exiting an organization range from wanting better support from board members to wanting opportunities to advance professionally. With respect to the latter concern, the size of a particular nonprofit can lead to tension. Smaller groups simply do not have in place the same tiers of leadership and, by extension, promotional opportunity as their larger counterparts.
Another provocation of turnover is compensation. More than half of the responses in the Bridgespan survey pointed to compensation as a legitimate factor. Overhead restrictions often make hiring quality personnel at a competitive salary a significant obstacle in nonprofit work.
From the standpoint of professional advancement, survey respondents cited a lack of learning and mentorship opportunities. This stems from a general failure to invest in internal talent, something that few organizations have pursued. In addition, some nonprofit workers have acknowledged that micromanaging leaders have pushed them away, resulting in turnover at all levels.
Bypassing the option to develop and train staff members makes hiring outside talent seem inevitable, and when there is a consistent trend of hiring leaders in this way, employees take notice. Without a plan in place for producing “homegrown” leaders, the process becomes essentially cyclical.
Approaches to internal leadership development
Succession planning, turnover, and training leaders internally involve company culture. Nonprofit leaders can tune the environment of their organization to foster internal promotion in a number of ways.
One option involves focusing solely on skill development. This can be a beneficial route for smaller nonprofits where infrastructure may not accommodate mobility among leadership positions. The principle is to focus on improving the skillsets of each individual so that they feel satisfaction from progressing, even if the trajectory isn’t necessarily upward. Everyone benefits.
The Center for Creative Leadership (CCL), which designs programs for such fields as education, health care, and nonprofit, has put forth the 70/20/10 Model for Learning and Development. This approach is attractive due to its integration of mentoring and formal training into on-the-job experience.
In the CCL model, leaders break down their learning process into three percentages: knowledge gained while working (70 percent), interactions with a coach or mentor (20 percent), and training programs (10 percent), such as university education or professional workshops.
DonorsChoose.org has applied the CCL model, and the organization enjoyed perfect retention among senior-level positions for eight years. Any costs that might result from programs like these quickly fade in comparison to the price of frequent external hiring.
Costs associated with recruiting new leaders
Reports vary from nonprofit to nonprofit, but the general consensus is that replacing a leader or member of an executive team is expensive. Transactions alone for the recruitment and onboarding processes can mean paying salary-and-a-half for that individual’s first year. The cost also manifests in other areas, such as fundraising and event planning, where distractions can easily add up to five or six figures. All things considered, succession planning becomes easier as well as more beneficial to the budget and culture when an emphasis is placed on internal development.