Executive succession planning is undoubtably one of the board’s most important responsibilities. Many, if not most, nonprofit boards will need to deal with finding a new executive within the next 5 years. And selecting the individual who will lead the organization’s day-to-day management, implement the organization’s plan, follow the board’s directives, ensure legal compliance, and reflect the organization’s values is perhaps the most critical decision a board will make.
CompassPoint’s Daring to Lead 2011: A National Study of Nonprofit Executive Leadership found that 67% of current executives anticipated leaving within 5 years.
10 tips for your board:
- Create or update your executive’s job description. Be prepared to review your executive based on this description. So make sure it captures your priorities.
- Start a conversation about the organization’s need for an executive succession plan. And the board members’ fiduciary duties to develop one. Consider the need for both (a) an emergency plan for an unexpected departure with no or little notice and (b) a more strategic, long-range plan which might involve an internal pipeline, broader search, and/or interim executive.
- Task a committee to develop succession plans. Recruit from outside of the board if necessary to get a broad range of expertise, experience, and perspectives.
- Get the buy-in and active participation of the current executive. Tactfully. Unless removing or terminating the executive is a consideration. But that will need to be covered in a future post.
- Consider engaging a professional succession planning consultant in the process. If hiring the executive is arguably your most important responsibility as a board, you should make sure you allocate adequate resources to do this right.
- Be informed about the market and the organization’s position/status with respect to an executive search. What are your organization’s strengths, weaknesses, opportunities, and challenges? How is your organization viewed in its space? Will you offer a competitive salary?
- Determine the qualities, expertise, experience, perspectives desired in the new executive. You may be looking for someone quite different from your current executive. Such determination should be made thoughtfully with lots of discussion. Don’t simply ask each director to prepare a list on her or his own and allow a consultant to collate the responses.
- Put on your best appearance. Make sure you get things in order to help assure you don’t turn off the best candidates. A legal compliance check may be in order. An engaged board, evident values, healthy financials, happy culture, and attractive orientation package may make a big difference in securing the right executive.
- Approve the compensation to be offered before it is presented to a candidate. For many organizations, using the rebuttable presumption of reasonableness procedures would be a sound risk management strategy that may effectively defend the board from a charge of excessive compensation (in legal terms, an excess benefit transaction that can expose the executive and board members who knowingly approved the compensation to penalty taxes sometimes referred to as intermediate sanctions). if you want to provide for the possibility of bonuses, include a clear description of that in the offer letter and provide a cap that is approved by the board as part of the total possible compensation, which must be fair and reasonable to the organization.
- Exercise reasonable care in vetting the candidates. Make sure those persons selected to interview the candidate are knowledgeable about how to conduct an interview, whether formal or informal. If the board gets back a glowing review from someone who just asked softball questions and loves boilerplate answers, you may end up hiring a strong interviewee but weak executive. And in a worst case scenario, an uninformed representative might ask the wrong questions causing the organization to be seen in a negative light or exposing the organization to employment law-related liability.
Needless to say, selecting the right candidate may be pivotal in maximizing the effectiveness and efficiency of the organization in advancing its mission. And it may make your board service all the more rewarding.