Four Pillars of Success for Nonprofit CEO Successions
A smooth CEO succession is one of the key indicators of the ongoing success and sustainability of any non-profit. In our sector, the risk of handling a top leadership transition poorly can trigger donor attrition, missed revenue targets, and an inability to deliver needed programs. It’s not an exaggeration to say that how effectively a CEO transition is planned for and executed could directly impact the lives of individuals and communities around the world who depend on non-profit interventions.
There are variable factors in every non-profit transition — founder to non-founder, successors that are internal vs. external to the organization, board participation in the executive search process — but we, at Room to Read, have learned one unifying truth exists: Successful CEO successions require a thoughtful and deliberate approach that starts long before a new CEO is identified and extends beyond their first day in the job.
A study from BoardSource found that only 27% of nonprofits surveyed reported that they had a written succession plan in place. This is a recipe for failure, not just for the incoming leader, but the organization as whole. According to a 2015 study from McKinsey, when leaders struggle through their first months, the performance of their direct reports is 15% lower than it would be with high-performing leaders. Those team members are also 20% more likely to be disengaged or to leave the organization.
As a former CEO and current CEO who led Room to Read through this process 18 months ago, we are ready to reflect on how to navigate this evolution, bring your donors and staff along on the journey, and continue to strengthen your organization and program delivery in the process.
1. It’s Never Too Early to Have a Plan
In a mission-driven organization, being poised for the future is always an asset. Succession planning ensures stability and should be top of mind for every CEO and board of directors, not just in terms of future candidates for your management team and key staff, but particularly for your own role. What kind of leader will the organization need to progress? Do you see prospective candidates among your current team that you can cultivate and mentor? Leaders of non-profits regularly create growth plans that consider possible shifts in external forces such as the industry landscape, legislation and policies, and donor mindset. The question of what’s next should also include a potential future CEO, even if the current CEO plans to be in post for the next decade or more.
Benjamin Franklin once said, "By failing to prepare, you are preparing to fail." Being intentional about succession planning is one of the best ways to navigate through this high-stakes process for any organization. The period of time that precedes an eventual CEO transition sets the tone for the outcome, so consider using that prelude to your advantage.
2. Communicate and then Communicate Some More
Non-profits build a community that champions a mission and, therefore, that community becomes connected to the people leading the movement. A change at the CEO level could generate concern over the future of an organization, its ongoing impact, and even integrity. Communicate early and often throughout the process and build a comprehensive communications strategy that provides a roadmap for your board, management team, donors and staff. Ensure that every audience is included in your plan, starting with your employees and ending with a message that makes the news accessible for public consumption, such as an open letter published to your website.
At Room to Read, we shared our news internally and externally gradually over the course of a year prior to a changing of the guard. This allowed for sufficient time to cascade information in an organized manner, develop clear communications which proactively addressed questions, and successfully introduce our next CEO following a recruitment process.
Even if the only update is that you don’t have an update to share yet, be transparent and forthcoming with information. Stakeholders want to feel included and that their opinions are valued. Our outgoing CEO spent time with staff holding open forums and coffee chats to initiate conversations. For key investors, we held private meetings and calls followed by written communications to reinforce mutual commitments to maintaining these relationships.“Communicate early and often throughout the process and build a comprehensive communications strategy that provides a roadmap for your board, management team, donors and staff.”
Incorporating the board leadership into the CEO search process, ideally with the support of an executive recruitment agency who has experience working in the social sector, allows the outgoing CEO the space to support staff and steward donors during this time with minimal disruptions.
3. Timing is of the Essence
If a CEO transition is anticipated in the mid to long term future, strategic timing can be your most important asset in the transition. Many organizations have five-year strategic planning cycles. Planning for a transition in advance of the next cycle provides a successor with the opportunity to own that process. She or he can share their own vision for the organization, which can be game-changing for employee confidence, investor engagement, and overall brand perception. Too often, new CEOs are thrust into a company with a short timeframe to research, analyze and make decisions about the future of their organization. A compressed and rushed onboarding process could lead to enacting seemingly abrupt changes and can erode trust internally and externally. We believe slow and steady is the optimal pace when it comes to a non-profit CEO transition, especially for an organization like ours where we transitioned to a non-founder CEO for the first time.
4. Find Your Next Leader and Stand Together
A special committee of our board, led by the board chairman, conducted an external search, while simultaneously assessing prospective internal candidates. A single internal candidate was included in our pool of candidates, and was endorsed by the outgoing CEO, which mitigated fractured alliances within the organization during the search process that lasted for six months. By broadly investigating all options equally, the board ultimately determined that elevating a long-standing member of our management team to the position of CEO would set our organization on a path for continued growth and scale. Regardless of whether a strong internal candidate exists within your organization or not, proper due diligence to explore all options and clear communication about those plans is important.Learn about our Leaders
The final phase of a leadership transition should be a true partnership between the outgoing CEO and incoming CEO. Both parties can work in lock step to ensure that the new CEO can use the previous leader’s foundation as a launch pad for the organization’s future. Not every new leader appreciates having their predecessor stay on for an extended period, but according to a 2013 study by Patrick Wright of the University of South Carolina, 40% of departing CEOs remain involved with the company after giving up their title. At Room to Read, we navigated this thoughtfully. Our incoming CEO had the latitude to make bold new decisions about the future of Room to Read, while our former CEO participated in collaborative sessions during the transition period and joined the Emeritus Board, ensuring the new CEO had space to truly lead.
If an external candidate is selected as CEO, develop structures to impart extensive institutional knowledge. It is the job of the incoming CEO to consistently ask, “What else should I know, what more is there to discover?” and the responsibility of the outgoing CEO to be ready with the answer.
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