Navigating Executive Transitions: How Nonprofit Boards Can Proactively Prepare – Part 2
By Karen Schuler, Partner, Nonprofit Search, Transition & Planning
This article is the second in a series on this topic. Part one was published in October, 2023 and can be found here.
Every nonprofit CEO will eventually leave their position, and many Board Chairs hope that such a departure does not occur during their term. While most boards understand their responsibility to hire the next CEO, many overlook the effort that the current board needs to undertake to help ensure they are ready to serve as an effective partner to the new CEO.
Boards of nonprofits led by founders or long-tenured executives can be uniquely vulnerable, particularly if they have a long-established pattern of interaction with the incumbent CEO. These boards must prioritize the work they need to do around board development and consider the timing to invest in this work so that the board is positioned to work well with and support the new leader.
One important factor is to assess the board itself. Nonprofit boards should consider their composition relative to the strategic functioning of the organization. Key questions to explore include:
- Is the size of our Board optimal for our nonprofit?
- Do we have the right mix of skills, experience, diversity, and representation on our board?
- Do we have a balance of longevity with institutional knowledge and fresh perspectives on our board?
The answers to some of these questions may be surprising. Boards may recognize that they are a small, founder’s board and need additional capacity, talent, and perspectives to effectively support a new executive. Or they may discover that they’re too large to work efficiently with a new executive and need to think about restructuring and scaling down. One approach is to leverage the organization’s long-range planning process, clarify strategic priorities and related goal-setting, and understand the organizational appetite for aspirational progress and risk with a new CEO leading the organization. Alignment and transparency around the board’s comfort with pace of progress and bandwidth for taking risks with a new CEO at the helm is especially important.
Just as nonprofits invest in leadership continuity and succession planning for the CEO (and other key positions), the board also should consider its own succession planning, especially for board officers. Key questions to explore include:
- What do our bylaws say about 1) the structure of board officer positions; 2) term limits for board officers and board members; and 3) the CEO position being a voting member of the board?
- How long has our board chair held their position and what challenges might we experience if our long-tenured executive and board chair depart concurrently or in close proximity?
- How do we plan for board chair continuity particularly when we are undergoing the CEO transition?
In contemplating the solutions to these questions, boards should seek a balance between being overly structured and unstructured. For founder-led organizations where the bylaws define the CEO position as a voting member of the board (and sometimes designate the CEO as the board president), the discussion around the legacy structure and whether or not to preserve or change this structure before the next CEO begins can be difficult. Ideally, this issue should be explored and resolved well in advance of the founder’s departure.
Additionally, boards can consider reworking the board structure and term limits to promote more effective board succession planning. Structurally, some boards create a predictable path to the board chair role; for example, the vice president serves as the chair upon the incumbent’s departure, or immediate past chair or chair-elect positions are added to the board structure. Setting terms and term limits also contributes to effective leadership planning. Staggering board members’ terms across two or three years limits potential turnover to less than 50% in any given year.
Board function is the third area for assessment. The primary question to ask is: How does our board currently function with our long-tenured executive? At the macro level, the answer is less about the label for the type of board (working, advisory, patron, governance, etc.) and more about the reality of board function. For example, what fundraising work, if any, is the board responsible for generating? In the context of strategic planning and decision-making, does the board actively engage in the planning work or does the board review and approve plans generated by the founder? Do board meetings consist of a series of report outs or do they include time for strategic discussions?
At the micro level, the focus is on current practices defining the CEO – board chair relationship and function. Some organizations expect weekly check-ins between the CEO and board chair; others reserve CEO – board chair communications for strategic issues that are outside the scope of the existing annual operating plan. If the CEO and board chair are both long-tenured, the level of trust in the relationship may be unusually high and not replicable after the arrival of a new CEO.
While boards often invest in transition planning to define how they will handle the departure of the incumbent CEO whenever it happens, they can overlook the value of investing in development and succession planning of the board itself. The best question that boards can and should ask themselves every year:
What, if anything, do we need to change now or in the next few years to be ready to work successfully with the next executive?