Succession planning has been described as a systematic and long-term practice that an organization follows to ensure it has the necessary pool of managerial talent to enable it to meet its business objectives and achieve its mission (Rothwell, 2002). The prevailing view in the literature is that a formalized process of succession planning should be followed. Subsequently, more than 2.8 million nonprofit executives reached the age of 65 in 2011; annual increases in those reaching age 65 will consistently rise for the next ten years, surpassing 4 million by 2020 (U.S. Census Bureau, 2012). Finding qualified, motivated leaders to fill all the vital executive positions vacated by this generation is going to present pressing challenges within the public and nonprofit sectors.
This mounting crisis in executive leadership within the demands immediate attention in light of the pivotal role played by organizational leaders. This central played by executive leaders with regard to organizational viability within both governmental and nonprofit organizations has been recognized for many decades. An early empirical study found that charismatic leaders, with professional independence and idealism, have potent influence on the direction and performance of nonprofit organizations (Newman and Wallender, 1978). Within the public sector, Wilson (1989) points to the central role played by executives in fostering greater levels of innovation needed to perpetuate organizational viability. Later work by Herman and Heimovics (1990, 1994) reinforces the notion of the chief executive as the single most critical factor underlying nonprofit effectiveness. They conclude that “chief executives occupy a place of psychological centrality” and “are assigned and accept responsibility for both successful and unsuccessful outcomes,” whereas “board presidents see themselves as affecting outcomes little” (Herman and Heimovics, 1990, p. 171).
Despite the considerable growth in the nonprofit sector, and central role of executives in leading these organizations, Froelich, McKee, and Rathge (2011) found in their survey analysis of 800 charitable organizations (tax exempt under Internal Revenue Code 501c3) and 859 cooperatives (IRS Code 501c4) that while nonprofit board members and hired executives deem succession planning to be important, few have implemented strategic plans for replacing their key leaders. Subsequently, this study concluded that nonprofits often exhibit a notable disconnect between the perceived importance of succession planning and actual concrete actions undertaken towards succession planning. The paltry board preparation for succession seems indicative of a “rose colored glasses” approach, possibly stemming from the paradox of a long-serving leader imparting a mind-set of stability (Froelich, McKee, and Rathge, p. 15).
The Changing Landscape of America
The case for succession planning in the nonprofit sector must also be analyzed through the lens of an increasingly changing racial and ethnic make-up of America. It is anticipated that the United States will experience a demographic shift between 2000 and 2050 making it a minority majority country with the biggest shift resulting from the growth of immigrants and their children. (Pathways to Racial Healing, 2013). Even though the number of African Americans in the United States has remained unchanged between 1970 to today (and projections indicate this will remain constant), the numbers of Asians and Latinos has been increasing dramatically. Not only have numbers of immigrant populations been rising, they have also begun locating to new urban settings and into new states around the country. (Pathways to Racial Healing and Equity, 2013). For example, data shows that instead of settling into the central city and later migrating to suburbs as economic growth occurs, a phenomena known as “ spatial assimilation” ( Massey & Denton, 1985) shows many immigrants choosing to land directly in suburbs. Another evolving location dynamic is completely new states. (Singer, 2004; Zuniga and Hernandez-Leon, 2006) and one of the target new locations is the South, especially what is referred to as the “Deep South.” (Pathways to Racial Healing and Equity, 2013) This increase in number and range of new residents will require not only an open minded approach to welcoming these individuals and families, but also a parallel commitment to fostering programs and services designed to accelerate their integration into the social and economic fabric of America. An important component of this integration work will likely take place at the state and local level where nonprofit organizations have “first point of contact” with these newcomers whether through getting driver’s licenses, enrolling their kids in schools or learning English. The nonprofit sector will undoubtedly play a major role in creating the safety nets within communities to help ensure economic mobility for, civic participation by and receiving society openness to immigrants. (Pathways to Racial Healing and Equity, 2013).
Consequently, leadership within the public and nonprofit sectors should begin to be more reflective of the populations they serve…meaning more diversity in president, CEO and director level positions within nonprofit organizations must begin to emerge if in fact they intend to be representative of and attuned to the changing need for equity and inclusion within the sector. This includes the ongoing call for more African American leaders in nonprofit organizations which now sets the stage for black and immigrant communities to organize around preparing and lifting up a next generation of public and nonprofit leaders.
Best Practice Strategies in Succession Planning
So now the question of succession planning begins to take on an even more complex nature in light of the changing demographics of America. How succession planning should respond to changing populations is a question for consideration. However, the lack of emphasis placed on succession planning and the measly board preparation in succession planning seems to indicate that this is an area greatly in need of new thinking.
Our recently published book Passing the Torch: Planning for the Next Generation of Leaders in Public Service, shows how a variety of successful nonprofits ranging from the largest in the country (Kaiser Permanente) to smaller rural hospitals and foundations have fostered work cultures that embrace intentional succession planning. A large part of the data collection process consisted of interviewing over 20 nonprofit CEOs in the United States and Germany about their organizational strategies. Here’s a quick synopsis of what they revealed about developing successful plans:
1) The board, not the chief administrative officer, needs to lead succession planning:
One of best ways to sabotage succession planning is to put the CEO in charge. All of the executives interviewed discussed how a key to their success included having board members play an active role in meeting ambitious employees with “executive potential” at annual board meetings, as well as in formulating leadership development plans.
2) The board needs to be informed about demographic trends that will inform succession planning:
Affirmative action is a controversial topic, to say the least. CEOs discussed how they approached diversity issues in succession planning by sharing demographic data about their service region, as well as demographics about their workforce. After considering both of these factors, the CEO of Hiefer International thought that his successor “needed to be a woman.” A careful review of these data by other nonprofits would probably lead most nonprofit board members to draw similar conclusions about their organizational leadership in light of the proportionately large number of white male CEOs in the nonprofit sector, especially with larger organizations.
3) Cultivating leadership from within should be a part of succession planning.
Identifying, developing and promoting internal candidates into executive leadership was described as an optimal but rarely practiced approach to succession planning. The former CEO of the W.K. Kellogg Foundation Sterling Speirn said. “So many CEOs at big private foundations don’t come from philanthropy, they come from academia, they come from government, they come from business. It’s almost as if, ‘you can work really hard here but when it comes to a leadership position we need other people.’” Sperin along with other CEO’s in this study describe how their own transitions from the corner office involve a strategy to promote candidates from within the organization and the process it took to get them there.
4) Board training, and overall board development are important components of successful succession planning
Providing best practice training as part of overall board development is one way to prepare board members for their role in succession planning. The CEO of the Winthrop Rockefeller Foundation Dr. Sherece West said “we did board training, especially with Board Source and the Center for Effective Philanthropy,”. “They talk about strategic planning, visioning, succession planning, you know, basically a board’s best practice, a succession plan is included in a board’s best practice. Our organizations are holding our nonprofits to a standard but we also have to meet that standard, and so it became important that we were doing best policies and best practices internally. And succession planning is one of those best practices” (West, pers. comm.).
In sum, succession planning is not something that just happens. All the executives interviewed emphasized the comprehensive and intensive nature of intentional leadership development. Nonetheless, the end result of fostering a culture of succession planning is increased organizational sustainability and growth. A vast majority of executives and board members would say it’s worth the price and energy invested.