CDAC Spotlight:
What Next? Succession Planning for Nonprofits

December 13, 2016
By  Andy Fraizer

At Prosperity Indiana (formerly known as the Indiana Association for Community Economic Development (IACED)), we believe wholeheartedly in the importance of planning ahead. We regularly develop strategic plans for member organizations and operate our own organization under a current board-approved plan that ultimately informs every staff member’s annual work plan to ensure the greatest level of staff and organizational capacity, service delivery and attainment of our otherwise lofty goals. Recently, we added to our practice the development (and maintenance) of a succession plan. We believe the two plans should work hand-in-hand to direct and protect the future of an organization.

The reason is simple: Nonprofit turnover is high and up to half of executive transitions fail. For leaders serving in new roles, estimated failure rates in the first 18 months range from 38 to 50 percent. One would assume that the leaders included in these statistics were hired into executive positions because they showed past success and great promise to perform well in their new role. These statistics are almost certainly not the result of organizations making poor hiring choices. According to Douglas Riddle from the Center for Creative Leadership in “Executive Integration: Equipping Transitioning Leaders for Success,” failure happens when effective executive transition plans are not in place. And because employee turnover has become more frequent as the workforce has changed, it is more important than ever to address this concern before it becomes an issue.

Prosperity Indiana has a well-tenured staff in comparison to historical retention. The staff has also grown and become more hierarchical in nature. While these attributes make us stronger than ever, they can also make us more vulnerable. Although we do our best to create systems to make the organization continue to run, independent of who is in a certain position, we are not naive about the fact that certain aspects of who we are and what we do have been etched out by the individuals in various positions of leadership. We also recognize that every staff member can’t know all of the intricacies of each person’s duties as well as who to contact and what to do in an unforeseen absence. So, we created a succession plan to manage the “if and when” of an unexpected departure for all director-level positions to avoid the potential trauma that can be created by a dynamic leadership shift.

HOPE of Evansville, a Prosperity Indiana member located in southern Indiana, operated under this same premise for more than a year prior to their executive transition. While Tom Coe, the executive director for 10 years, retired in October 2015, his successor—Josh Case—was hired as assistant director in July 2014 in anticipation of Coe’s transition. Then, in October, Case was named executive director and Coe became the housing development director to further ensure continuity and a successful transition. Coe remained on staff until September 2016.

“My transition into my current role was smooth and effective because HOPE had a plan,” said Case. “In partnership with the board of directors, Tom Coe knew he was leaving and planned ahead. They conducted a search. When I was selected as the ideal candidate, they created a new and specific position for me in order to assist with the transition. Since I was new to HOPE and had a lack of experience in a few areas, this helped me come on board and immediately take over the areas in which I had experience while simultaneously taking the time I needed to learn and develop in the areas in which I had less experience. Time, patience, flexibility and oversight from the leadership at HOPE helped me adjust well to this new role.”

Two succession planning philosophies exist: leader development and replacement. Leader development is focused on raising up leaders from within—creating and maintaining a pipeline of leadership by intentionally focusing on individual skills, competencies and abilities; developing talent over time; planning to cover key management and program roles; and implementing strategies to support plans. As a result, even when a departure is unexpected, the organization is poised for operational success.

Replacement is also a valid plan. But because of the reactionary nature of the replacement approach, even organizations that planned to respond this way may deal with some of the same struggles as those that had no plan at all. The replacement philosophy is focused on doing just the essentials to keep an organization going by figuring out who knows how to do certain functions, who understands immediate needs, and how to meet needs and commitments in an effective and timely manner until a successor is found. The benefit to planning for replacement rather than not planning at all is that there is less of a scramble to assign temporary roles.

Succession planning should not be considered just a tool for reacting to a staff member or executive director leaving the organization; it is a practice for sustaining healthy organizations. In completing its succession plan, Prosperity Indiana directors had to identify not only the tasks but also the skills needed to assume the roles of others in the event of a staff change. We can now build leadership and professional development plans for staff around the identified needs. While succession planning is most helpful in a proactive sense for the “what if” situations within an organization, it is also beneficial to the company’s professional and interpersonal well-being because such planning drives leadership development. Healthy organizations must be just as intentional when developing leadership as they are when overseeing programs and finances.

Another practice that drives healthy organizations is strategic planning to guide the next three to five years of organizational operations around SMAART (specific, measureable, aggressive yet achievable, relevant and time-bound) goals. Prosperity Indiana worked with HOPE of Evansville this year to develop just that type of planning for the organization to direct its near-term future with its new director at the helm.

Aside from having a plan that was outdated by about 10 years, Case had a number of reasons to develop a new plan. He said developing the strategic plan was an important part of shifting the direction of the organization to match his new vision while taking into account the rest of the staff’s and board members’ perspectives. Through the strategic planning process, HOPE staff and board members together established five goals, each with three to six strategies for achieving those goals, as well as action steps that will have assigned responsible parties, deadlines and metrics for measuring success.

“The transition of leadership naturally comes with opportunity, and different leaders are going to have different visions for how they want to run an organization and where they want to take it. I got to see Tom work for a year and see how he did it. I would think, ‘I like how he does this, and this is what I want to do differently,’” Case said. “Seeing where I wanted the organization to go, I needed a formal process to do that and I needed everyone to buy into it. We wanted everyone on board and involved in the process, and a plan is the perfect vehicle to come at that change.”

Case added, “I think it’s really easy to say you have the board officers and executive staff on board, that you all have a vision of where you want to go. But every staff member had something to add. Plus, it benefits them to go through the process. It was cool seeing staff members and board members really interacting for the first time—identifying together what our mission is and where we want to go. It helped break down those walls.”

Bridges is a regular review of regional community and economic development issues. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.

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