Leadership transitions — is your nonprofit ready?

In the 1970s, only about 250,000 nonprofit organizations existed in the United States.

Enterprising Baby Boomers created a great number of nonprofit organizations between the late 1960s and the mid-1990s, and according to federal data there are now more than 1.5 million nonprofits nationwide.

An estimated 10,000 Boomers are reaching retirement age every day, and this trend is expected to continue until the year 2030. As this occurs, several studies estimate that the nonprofit sector will need almost 80,000 new senior level managers and/or leaders annually.

The nonprofit sector is ill-prepared for this leadership gap. There are several reasons for this, including ineffective strategic planning, lack of succession planning, and changes in traditional funding sources which can lead to chronic financial instability.

Smaller nonprofits rarely have internal staff members who are prepared to move up to a leadership role if the executive leaves suddenly.

Nonprofit board members are seldom taught best practices in organizational oversight, including how to effectively evaluate the executive director and how to do succession planning for that position. Smaller nonprofits rarely have internal staff members who are prepared to move up to a leadership role if the executive leaves suddenly. The generation following the Boomers (Generation X) is considerably smaller in numbers, so there is less of a workforce to take the place of existing leaders.

Executive transitions often bring to light an organization’s financial instability and unsustainable financial models. Over the past decade or so, the demands on nonprofit executives have grown, while the resources available to their organizations have steadily diminished.

The Boomer transition applies to foundations as well as to nonprofits, and many foundations are changing focus as the reins of leadership pass to the next generation of trustees. This can mean a loss of historical income for grantee organizations, and nonprofit executives are often unsure how to replace that funding. In addition, governmental sources of funding have also diminished, so that organizations which have traditionally relied on state and local contracts are now struggling financially.

Sometimes, nonprofit boards will respond to these financial crises by asking a long-term executive to retire. When this is done without a succession plan in place, there can be a long gap in leadership before another executive is found. There is an increasing need for nonprofit executive directors, but a diminished supply of those willing or ready to take on that role.

Leadership gaps, especially those that last several months during critical time periods can exacerbate the financial turmoil the board members were trying to fix. The organization can miss critical foundation and governmental funding cycles and lose touch with or alienate individual donors. The latter issue often happens if the executive being asked to retire is a founder, where donor loyalty is to the person rather than the organization.

So what can organizations do in the face of this looming leadership crisis?

• Create a working strategic plan that includes succession planning now, rather than when an emergency occurs.
• Make sure that there is a point person, other than the chief executive, in each organization who knows the ins and outs of daily operations.
• Create a “substitute manual” that outlines a yearly calendar of tasks and deadlines, lists vendors and other important contacts, has information on all staff members and volunteers, and includes bank information and computer passwords.
• Make sure your donor database is up to date and that someone other than the chief executive knows how to use it. In times of transition, your donors can help to sustain you, but only if someone continues to keep them informed.

Become proactive rather than reactive about planning for the future, and you’ll be better prepared when that future arrives.