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How to Prepare for an Executive Transition

by John Franklin • November 2016

Did you know that if your CEO or executive director (ED) is within three years of leaving your organization, best practices dictate that your board should begin developing an executive leadership transition plan now? But don’t feel too bad if you’re a little late in preparing. BoardSource reports that, though 50 percent of nonprofit leaders intend to leave their positions in the next five years, only 34 percent of nonprofit boards have a CEO/ED succession plan.

Recognizing the importance of successful executive leadership transitions, the Murdock Trust hosted a one-day succession planning roundtable for founder-led organizations, led by executive search and succession planning expert Tim Wolfred. Every succession situation presents unique challenges, but the following principles apply to nearly every nonprofit leader transition.

Wolfred explains that nonprofit EDs have four jobs to do as they move toward career transition or retirement. In addition to simply continuing to lead the organization, Wolfred says leaders must take steps to prepare themselves, the organization and the board. Below I’ve summarized each of these critical steps. Together they ensure that an organization will have laid the groundwork for a successful leadership transition.

To prepare the ED for transition:

  1. Help the ED be sensitive to when it’s time to leave. Helping the ED recognize that it’s time to move on will make for a smoother transition. This self-assessment can help EDs think through the timing of their departure.
  1. Help the ED prepare for transition. This preparation is the responsibility of both the ED and the board. Visit succession consultant Don Tebbe’s executive transition website for help on preparing for this life-changing transition.
  1. Assist the ED in preparing a successor. In cases where the board and ED have identified the likely successor, the ED can play a critical role in creating a training plan that will help the organization evaluate the candidate’s progress while connecting the candidate to friends, donors and significant relationships—all without promising the job up front.
  1. Encourage the ED to create space for the new leader. “Letting go” isn’t easy, but it’s best for the outgoing ED to disengage from the organization for several months, if not a full year, even in cases where the board desires his or her continued involvement. This requirement should be part of the formal succession plan document.

To prepare the organization for transition:

  1. Put a focused mission and strategic plan in place. Having a written plan, owned and implemented by the board and executive team, helps ensure that the mission will not suffer when the ED leaves. A working plan also helps the board assess if its current leader is the right person to lead the organization to the next level.
  1. Check your business plan and finances. The board and ED are responsible to set the next leader up for success with a viable business plan and financial reserves in place. These insights on the elements of a healthy financial model will help your organization prepare your finances for a transition.
  1. Empower the team. An ED should authorize the management team to share the leadership of the mission rather than centering all organizational authority around his or her personality.
  1. Create a leadership development strategy. Creating a culture that fosters future leaders will give the incoming ED the best chance of success. Read Wolfred’s article on building a “leaderful organization” to create a bench of future leaders.
  1. Draft an emergency succession plan. Besides the planned succession, every organization must have a what-if-our-ED-got-hit-by-a-bus contingency plan. This emergency succession plan template will help you get started.

To prepare the board for transition:

  1. Adopt a succession policy. A formal written succession plan authored by the board is a critical element for a successful ED transition. Here is a sample ED succession policy.
  1. Create a sustainability plan. This entails forming a succession planning committee that begins meeting at least a year out from the planned succession. This committee will have the responsibility to create a candidate profile, determine the current ED’s transition tasks, conceive a recruitment and hiring process and think through an effective launch for the new executive.
  1. Attend to board development. A vibrant and engaged board stands a better chance of attracting a quality candidate and providing the leadership needed to ensure a successful ED transition.

During the Murdock Trust’s succession planning training, we’ve seen that founder successions present unique challenges. Founders may be tempted to stay on too long because their calling, identity, finances and personal sacrifice are often intricately woven into their “baby.” In addition, there’s a tendency for an organization’s key donor and stakeholder relationships to revolve around the founder. Organizations are sometimes stuck in the transition process due to the founder agreeing to a below-market salary for years, which effectively prohibits him or her from retiring while at the same time forcing the board to play catch up in growing its finances to a level where it can hire a new leader at the market value.

Successful leadership transitions rarely happen by accident. They are the product of thoughtful planning and deliberate execution. In fact, the amount of focus and energy required for an effective transition is so intense that organizations that can afford it should consider hiring a consultant to help out. Ultimately, the end goal of any transition is to equip the nonprofit to thrive and to make an even greater impact in the future.

John Franklin is a program director with the M.J. Murdock Charitable Trust.