From Succession Planning to Sustainability: Are We Ready for the Next Generation?

This past fall, Third Sector New England conducted a study of leadership in New England. We surveyed 877 leaders – primarily executive directors – and 330 board members of nonprofit organizations to advance our collective understanding of nonprofit leadership in New England – who these leaders are and the challenges they face. The Nonprofit Finance Fund (NFF) conducts a similar national survey with a broader range of questions that assess the state of the sector as a whole, and examine a mix of programmatic, operational, and financial indicators. While the surveys are distinct and conducted separately, their respective core findings support and buttress each other in profound ways.

In the past several years, literature about the nonprofit sector has been filled with predictions of key trends that would decrease the sector’s effectiveness. For example, as the recession kicked in, observers inside and outside the sector posited that it would lead to a wave of closures and mergers of nonprofits. But guess what? The number of nonprofits has shot up since 2008. As of late 2014 there were 73,410 reporting nonprofits in New England, up from 44,688 in 2008[1]. People who see a need and have the wherewithal to start new nonprofits are still doing it; and some of these new nonprofits are exhibiting high levels of growth, innovation and impact.

The ongoing, against-the-odds resiliency of nonprofits in New England and across the country is remarkable to see. But as Leadership New England shows, and NFF’s survey confirms, it is a very fragile resiliency. The sector’s success and impact continue to rely on unsustainable trends, including: overworked and underpaid leaders and staff, a never-ending fight to balance shaky budgets with fickle funding streams, and little money for professional development and growth. These are not new challenges for the sector, yet they continue to be chronic issues. NFF’s State of the Sector Survey echoes these findings and continues to be a national bellwether, both nationally and locally, capturing the unique challenges the sector faces.

We are about to experience the biggest generational shift in this country as boomers retire. The departure statistics on New England leaders, which generally mirror national numbers, underscore the importance of supporting organizations to prepare for leadership transitions more effectively. The percentage of leaders saying they will leave their jobs in the next five years has remained fairly stable across similar studies for a decade (we are just beginning to see the start of Boomer departures) and calls for succession planning across the sector have been issued again and again in countless reports, blogs and other forums. Yet most organizations still do not have succession plans, and looking nationally, just 19% of NFF’s survey respondents reported that they were currently engaged in leadership succession planning.

Let’s face it: succession planning is not something that excites people, but it is a best practice for nonprofits, much like strategic planning. There are few resources to support succession planning, weak communication between leaders and the board about it (when a person plans to depart is a topic that is generally avoided given its sensitive nature), and misperceptions about what succession planning should include.

Now is the time for a major shift in our thinking: succession planning is not just about preparing for an individual leader’s transition, it is about ensuring organizational sustainability. Given that nonprofits from around the country cited long-term financial sustainability as their top challenge in NFF’s survey, we must push our thinking. Succession planning includes a process of identifying and addressing key strengths and vulnerabilities so that the organization is not dependent on any one leader and is more agile in the face of inevitable change. Succession planning touches on everything from framing choices for the future (including asking whether the organization should exist), developing sustainable business models, and strengthening staff and board leadership—in essence, all the core activities needed to support the success of the organization’s mission.

If you ask leaders and boards whether they think a succession plan is important, they may say “no” given all the urgent priorities in front of them - but if you ask whether they think it is important for the organization to be sustainable the answer is different. In the Leadership New England study, respondents told us they want two things to prepare for transitions: more support to develop sustainability strategies, and support to develop key staff. This is similar to NFF’s survey findings, which show that nonprofit leaders are overwhelmingly concerned with sustainability-related activities: long-term financial sustainability, the ability to retain staff and offer competitive wages, and raising funding that covers full costs.

Many question the readiness of the next generation of leaders — whether they have the needed skill, passion and dedication to lead. But even the best and brightest leaders will have trouble stepping into leadership roles in a sector with chronic sustainability issues — and in organizations that are underfunded, overworked, have little to no bench strength and do not have an effective board. Many of these next generation leaders will not want to step into these roles. This is not a recipe for success and it is time for a change.

The next generation of leaders are interested in working with organizations that are sustainable, value a work-life balance, and support shared leadership or alternative structures[2] to build leadership across organizations. Investing in the potential of that leadership pipeline is essential to the sector but financial support for this is far from the norm. In fact, over the past 20 years annual foundation support for leadership development has totaled just 1% of total annual giving[3], a bewildering level of underinvestment given the importance of our sector. And just 17% of State of the Sector Survey respondents reported feeling comfortable discussing organizational change or adaptation issues with their funders.

The resiliency of the nonprofit sector and its leaders can no longer be left to chance or to the ability of people and organizations to continue doing more with less. The biggest leadership transition the sector has ever faced is now upon us, and this change creates an opportunity for the sector to improve how it works. Given the chronic challenges identified in Leadership New England and in the State of the Nonprofit Sector Survey, it is our responsibility to use this rare opportunity to generate key shifts in the sector. Funders, capacity builders and nonprofits themselves have a responsibility to strengthen the sector while helping it move collectively from mere survival and stabilization to more impact – from “good to great.”[4] This means investing in nonprofits and leaders so they have what is needed to meet their missions and thrive.

Hez G. Norton is the Director of Partnerships and Leadership Initiatives at Third Sector New England in Boston, Mass. Third Sector’s new report, Leadership New England, includes information from more than 1,200 survey respondents in the six New England states. The report and interactive website is available online at http://www.tsne.org/leadership-new-england

[1] Internal Revenue Service, Exempt Organizations Business Master File. “The Number and Finances of All Registered 501(c) Nonprofits”, The Urban Institute, National Center for Charitable Statistics, http://nccsweb.urban.org/

[2] Next Shift: Beyond the Nonprofit Leadership Crisis” by Frances Kunreuther and Patrick Covington (The Annie E. Casey Foundation, 2007) www.buildingmovement.org

[3] In “Under-Investing in Social Sector Leadership” by Laura Callanan, February 2014, referencing Foundation Center data from 1992-2011.

[4] Jim Collins has written extensively on good-to-great concepts in both for-profit and nonprofit sectors, in Good to Great: Why Some Companies Make the Leap…And Other’s Don’t (2001) and in Good to Great in the Social Sectors: A Monograph to Accompany Good to Great (2005)