Episode 279: Succession Planning at All Levels: How to Not Get Caught in Bad Transition
I'm humbled when you take a few minutes of your day to join me, Randall, on this or on any edition of A round with Randall. About two months ago, I did a podcast episode, I think 268, on the idea of interim leadership, and it got a lot of feedback from it. Some good things, but really a couple of clients who tend to listen ask me the question around, well, if there are there ways of not dealing with interim leadership is often should we be getting out ahead of the problem?
Which made me really think I missed the point. And today I'm going to try to bring that all the way around and talk about succession planning. I want to start at the very top, because I think it's really important to define that succession planning isn't just for the CEO or for the chair of the board. This is for staff members as well.
And so in today's discussion around succession planning, we're going to cover various levels of the organization. In fact, probably spend more time talking about gift officers and that middle management level rather than just the CEO. Because you can do things to really allow for a more structured, a smoother transition from one employee to another that are that might be one taking over the job or responsibilities from somebody else, as we tend to do, we start at the top.
Why is this such a big deal? Well, we know that in our structure, as we talked about in the episode two, 6 to 8 on succession or on interim status, that the tenure of a lot of our positions in the nonprofit world are incredibly tenuous. That interesting study in the last year, that 67% of all employees in the nonprofit space have looked for a job, a new job, and a new organization within the within a year.
And that really our turnover rate is coming in nearly at about 20% of all employees, 86% of nonprofits actually express some type of difficulty in retaining employees. And then you start looking at ten years, as we discussed a couple episodes ago, as mentioned, the average fundraiser major gift officer tenure is somewhere between 18 and 19 months. For CEOs.
It's less than three years in the nonprofit space, and depending on the area, might be as little as 230% of fundraisers have indicated in some way, shape or form in a number of studies that they are looking to leave the nonprofit sector entirely. That CEO turnover is actually accelerating, that we're seeing massive amounts of CEOs announcing their retirement, leaving the profession just can't deal with it that they aren't in alignment with their board.
Lots of different reasons. All the combination of all of this is talking about the fragility of leadership and organizational strength, and thus, if we know this in the facts, tell us that it's going to hit all of our organizations, then we should be more prepared for it. That becomes a leadership board level CEO. Or maybe you're an employee and you're like, how do I move up?
Here's an opportunity. I have a client who is going through a lot of turnover. I don't think for a lot of great reasons but to happen. And I think that the idea of succession planning wasn't at the preeminent point in their thought process. And so what they end up with is all of these challenges that come from it.
What happens when you don't have succession planning at a high level? What are some of the outcomes that are negative? Well, the first is, is that there's revenue instability, particularly if it's for the major gift officers there, the relationship driven, trust based, part of your organization that reaches out into the community. And when these fundraisers leave, revenue can stall donor attrition can increase because people give to people, they give to the people they trust.
Yes, they believe in the mission, but they also believe very heavily in the relationship. In particular, at the highest levels. Gifts of 100,250, 500, a million in the people that they spend their time with that represent the organization of which the mission they are connected to. We also see organizational decline when there's mass amounts of turnover. Did you know that replacing a senior level can cost up to one and a half to two times the salary of that particular person in terms of their total impact, whether that's decrease in revenue, increase in onboarding searches, things of that nature.
When you add it up, it costs more, up to twice as much as the persons who left their total compensation. We can also have what might be considered cultural erosion that internally and externally, if there's a bunch of people leaving, people start asking questions. People internally might look at and go, wow, I'm not sure I want to be here.
The people I used to like or trust or know are leaving. People on the outside might say, what the heck's going on? And then that leads to confidence reduction or weakening of confidence. It might weaken the confidence a board or executive leadership has in apartment chair. So the head of philanthropy a board has in the CEO, as in the CEO of a nonprofit that funders and institutional partners might look at this and go, you know, we're going to kind of wait and see what happens.
There are immense risks in all of this. And if we break it down even further into the levels of the organization, I told you I was not going to talk about the CEO, certainly CEO and executive director or whomever your top leader their title might be. They're the one who sets strategic direction and culture. Well, if that turnover occurs and if there's not a planning process, what you end up with is change.
And that change could be from the direction and culture of the organization where we're headed inside the mission. It could be about external facing key donors and leaders and the institutional partners not having connection to what we're trying to accomplish. And it can often principal gifts can be a challenge. This is most endemic when it's at its worst during campaign when the CEO leaves and everyone's like, wait a minute, I invested in that person and the direction they were taking us.
This leads to strategy drift, donor hesitation, board overreach, meaning they're concerned. Well, we got to get involved where we don't want them. Loss of top gifts. If you lose your chief development officer, or if you're the chief development officer and you're not the CEO. Now we're talking about fundraising strategy, strategy and accountability, team performance, revenue forecasting. And it's the bridge between the CEO and their vision and the execution of philanthropy.
And finally, that usually the CEO, Chief Trump, development officer, chief, let's be officer holds really important relationships. So you could see pipeline collapse. You could see inconsistent messaging, breakdown of team accountability for gift officers when there's not a sense of succession or really strong planning use, they're the ones who will the individual relationships, if they hold relationships with 50 different people, you've got to rebuild those.
In fact, some studies have indicated that 50% of all revenue comes in in a nonprofit through the major gift team. Now, I think that's actually a little low. So if you compromised that with enough gift officers and not having succession plans, what you end up with is immediate donor disengagement, loss of institutional knowledge, long recovery of timelines. And so this idea of succession planning needs to be more affirmative rather than reactionary.
Recently, and you may not follow this particular team or this particular sport or sports in general, but I think it's really, really smart. Creighton University here in Omaha went through a change with its basketball coach, Greg McDermott, who has done a phenomenal job. And what happened a year ago is he went to his boss, the athletics director, and said, I'm not sure when I'm leaving, but it's sooner than later.
College coaching is tough. Sets are hard. There are certain number of guys that I think would fit who we are as a university, not just. And I'm not here to handpick my successor, but I think you should get on board with the succession plan. And the succession plan was Creighton went out, hired the guy they want to replace, Greg McDermott.
A year ago. He was the associate head coach. They had promised him the job. When Greg McDermott retired. I think there was probably some thought is it's a year or two, it's not going to be long term and you fit who we want to be. And when Greg McDermott announced his retirement on that Monday morning, on Tuesday morning there's a press conference with the new head coach and everybody was able to understand we're continuing forward in the same direction.
That's at the highest level. What are the tactical things that you can do to get to something that looks like that? Maybe you can't execute exactly that way, but that it's not haphazard. It's not guessing that you're doing so in a manageable, reasonable framework. Six things that you can do to concentrate. Maybe you look at it from the standpoint, I'm a manager of philanthropy, and I want to become a director.
So how do you edge into this and give yourself an opportunity to be seen and known to the CEO or CPO or whomever that says, I got to make sure all my ducks are in a row, that we can find the right people, and I want to really invest in the people that are going to be succeeding, potential people inside.
It's just easier to do this and less expensive. Also, it's career enhancing, so it's professional development at its finest if you do it in the right way. So number one is you need to build a framework. This is not a contingency plan, which means there's a difference between emergency succession and plan succession. Have another client where the relationship and this is going to come up in this particular tactical issue or tactical solution that they have such a great relationship.
The chief philanthropy officer with the gift officer that nearly a year in advance, that gift officer came to the chief department officer said, I think I want to retire at the end of next year and felt comfortable enough they weren't going to be run out. There was just a lot of positives, and it's given that CPO a year to find a replacement with a goal of bring somebody on sometime in July or August and literally going to put the two together so they almost like have one pair of shoes.
They're going to walk everywhere together, travel, see donors. So there's a natural process. Emergency situations occur and you should have a plan for that. If so-and-so leaves, this would be our natural. But that's more of the interim status. Succession planning is looking at it from the standpoint of who could we promote that would be permanent? Who do we want to know?
And so what you end up with, let's just take gift officers as an example. Having this succession planning in the emergency perspective means you're transitioning an immense amount of, donor relationships within 24 to 48 hours, maybe 72 hours. And that's really hard. And that person may only give. That's leaving only two weeks. It's not really feasible. So you can do things like do team activities or as we'll talk about, not allowing one person to own all of the key relationships.
That you develop internal talent so that it's not a contingency plan, but it's a framework that you spend time with HR if you have a department or if you're if you're a small organization, maybe with a board member, the chair of the board saying, we're strategizing internally about what happens if a leader believes or C retires or Kevin Smith dies, we need to make sure that we're doing this in the right way.
So the first thing is this should be discussed. It should be planned. It shouldn't be all of a sudden sprung upon people because somebody left and we're not sure what to do. Number two, particularly with gift officers, is not having a single point dependency when it comes to controlling all of the relationships. This is really hard in small organizations because there may not be enough people.
And in that case, there's not much that can be done. Maybe you have some volunteer board members or others that are involved, or maybe the CEO or the executive director has some fingers into the key relationships with, along with the chief philanthropy officer. But the key here, is that you have to find ways of creating a team environment.
Now part of that is the relational piece. Can you take people along with you? This is Randall. I work with Randall. You probably aren't going to see him as often, but if you ever need anything, you call him. Just that one meeting may be enough to have the sense of succession if something should happen. But the other part of it is, particularly at the high end, is planning joint donor meetings.
One of the things that I greatly appreciated in one of my well, actually both mentors, Tom father Tom petty and Glenn Fosdick is they took me along on meetings and they told me, you're not going to say very much, but I want you to hear what's going on. It was educational for me to learn what they were talking about, but it was also doing exactly what we're talking about here, not putting a single point dependency on any one person in the organization when it came to that relationship.
So these joint meetings can be highly effective, and they don't have to happen every time. But if you have 1 or 2 meetings and somebody knows Randall and I'm working for Glenn, and Glenn leaves, at least they know who I am when I call. The second thing is, is documenting everything in the CRM, because even if there isn't the planning piece, what's even worse is if no one knows exactly what's going on when somebody leaves.
And so it's a two part process. Single point dependency is number one. Can you do joint meetings? You bring people on. Can you make introductions. But number two is documenting what's going on. So if somebody had to pick up the pieces real quick, there's actually a record of what's going on. Number three is develop internal talent pipelines. Leadership should be about elevating people to the top level positions that they might seek and or can handle down the road.
I have another client where they've recently hired someone, and in five minutes of my first phone call with her, it was readily available. She's a rock star in the making to have all the knowledge. She really don't have all the wisdom, but man, she's got it and I can't even define it. But she's got it. And I'm on the phone less than a day later with the CPO saying, what are you doing to invest in her?
Because when you identify highly high potential staff and give them stretch opportunities, invest in them. They're more likely to churn to stay. It becomes not just about money, but about what their future might be. The second thing is then to cross train them into other areas. If they're a major gift officer, get them the opportunity you know about.
Plan giving, so maybe they can have a wider angle of opportunity into other jobs down the road. Maybe you want to create a situation where there's a deputy role in maybe it's not even with HR, it's just unofficially. Unofficially. When I'm not around, Reynolds kind of lead the team, and as a part, they get a little more information about interactions and really start to develop the opportunity to kind of take some leadership in my role at the university.
Excuse me, at Saint Thomas Academy in Saint Paul, Minnesota, before I went into health care. One of the things I really appreciated about the chair of the board, Tom Schreier, and my immediate boss, Tom Misch, the headmaster, was they started inviting me into executive meetings of the board to listen, to learn. I probably said too much, to be honest with you at times, but they were investing in me.
Now it turned out I left and that had nothing to do with them but the chance for me to come home. But at the end of the day, it was an important way of and it cost them nothing. And are you defining what I might call transitional protocols inside the CRM if someone should leave? So not only can you bring them along in terms of that process, can we institutionalize a way that it can be done?
So number three is invest in internal talent and give them the tools to be able to accomplish that series of opportunities. Number four is to standardize portfolio design and performance management. Here's why. If there's clear understanding and expectation support. So portfolio size donor mix and what I would call activity metrics, people are less likely to leave. I did a study which you can find on the website about four years ago in the middle of Covid, of employment of Gift officers.
And what came up, number one, was unreasonable expectations. Portfolio size is ridiculous, and there was no clear understanding what their job was. That was the number one reason they left. Now shortly behind that was number two was money. But if you can eliminate one of the things that causes people to leave, you actually are investing in succession planning.
Because what you're doing is you're saying we're going to have less people leave, which means I don't need as much succession planning. It doesn't mean you shouldn't do it. But if you invest in that structure and reduce the disruption that occurs when transitions come up, you actually are taking care of the problem before it occurs. So that might also include doing some analysis about who brings in the most amount of revenue of another client that I've worked with for a number of years, where it disproportional amount of money philanthropic dollars comes through one person.
And I've always been concerned about it because if that one person chooses to leave, what happens to the organization? And because of the level of activity, engagement, professionalism, drive wisdom that she offers to the donors of the organization. She's a unique unicorn, but is the organization better or worse for having her have all that control of those relationships?
If she ever chooses to leave? So you have to do some analysis. If too much is in one spot, how do we go back? Great. Some partnerships try to work that over time. So there's a reason why I'm not going to rip somebody away, because that's poor relationship management. But I'm going to be aware of, well, gosh, the top ten donors, nine of them are connected to one person.
We probably need some diversification of that relationship.
Number five, when you have high level departure, CEO, Chief Development Officer, Chief Philanthropy Officer, you need to engage the board appropriately. Now, if it's the CEO, that's easy because the board makes that choice. But there's other things that come from the choice. Is your board knowledgeable about the compensation? The transition issues that might be a part of this?
Are they aware of what might keep someone high level person versus maybe try to attract someone? And this is very pertinent with salaries that I've got another client going through, a huge, CEO transition and it's coming up that's in negotiation. They keep saying, here's the salary level and the organization does, and the person they're going to hire CEO and I work mostly with the CPO and the and the office.
There's a gap. Is the individual saying, no, no I need to make this much. Well that should have been handled beforehand. Now they've planned for it. So there's some time, but it's causing an issue. The second thing is, is that you need to be able to, with the board, put some restrictions up on where the board integrates into this.
Yes, it should be involved with strategy and keeping people. And you know, how do we make the environment the culture strong so we don't lose people but we don't want them in is involved? If someone were to leave in operational things, the principles of governance still stand. Strategy. Big picture. They ask a few more questions if the CEO leaves or CPO leaves, but we don't want them running the place, that's not their job.
A board level process will hire a CEO, but the CTO, if they leave, shouldn't have an over lot over amount of board involvement. If there's a it's like a director or a CEO. I mean, they may ask simple questions, but that becomes then from a from a succession planning perspective, getting people aligned and just kind of giving the board some understanding that there is a succession plan in place.
Sometimes when we have change depending on the level, the board seems to get more involved and then they stay involved operationally and that's not good. The last thing is, is that you need to do some planning. So this ties back to number one and not making it a contingency, but making it a framework communication. Are you pre drafting messaging to donors staff key stakeholders.
Are you transparent about what communication needs to be out so that there's not uncertainty or you know people are making up their own stories because you've left a void of information or fact and you need to sequence it that certain donors get certain communication, other donors may get other communication. Who gets a phone call versus who gets an email?
Now, if it's a CEO that requires an organizational structure in terms of communication, if it's a CTO that requires maybe a lot less, if it's just a gift officer, it's personal outreach to just maybe the top donors in that portfolio within days of that transition. But you need to kind of think about that, a planning of how to operate that if you do these six things, if you create a framework, if you really make sure that there's not a single point of dependency with the best and largest amount of most vibrant, most engaged donors, if you elevate the talent internally, if you set clarity around portfolio and performance measures, if you look at this as the board having a role, but not too much or not too little, and you create the communication plan what you'll do is you'll alleviate succession planning problems or at least limit them. Succession planning is about pre planning interim as we did in episode two. 68 is about well, we probably weren't as organized as we should have been or we were a little surprised and we got to hold the fort together.
The point is a succession planning is not a one time exercise. It's an operating discipline. You should be doing this all the time. And if you're a young person, you're like, what a great way to say I'd love to learn by going on meetings with so-and-so, or I'd like to learn more cross training, because what you do is you elevate yourself.
And for the leadership, what you get when you do it correctly is less chaos when it occurs. Organizations should be managing transition, not just adapting to it or dealing with it, and that by creating stability as much as we can, we see less of it. So there's a lot of preplanning, conversation to avoid interim leadership or just lack thereof, and to keep the best people and invest in the best people for the long term.
For the organization, succession planning isn't just about picking a person to take the job, it's about keeping the best people. It's about elevating talent. It's about pre-planning. And most importantly, it's about organizational culture to create a framework where we can do it on a regular basis. Everybody should do this. Everybody can be replaced. The question becomes, is your organization ready to do it when it occurs?
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We need nonprofits. We need you. We need philanthropy more so now than ever. The philanthropy sits in the in the gap between for profit, free enterprise who will only do certain things because it makes profit, and the government and the whole in between governments not all efficient for profit, doesn't want to do certain things.
That's where we sit in the nonprofit world, how we help other people. Which brings us to my favorite saying some people make things happen. Some people watch things happen. Then there are those who wonder what happened. We live in a world where there's lots of people, lots of things, lots of parts of our community, lots of organizations wondering what happened.
And your role. My role if you want to be a leader, if you want to invest yourself in philanthropy, in the nonprofit space, you're someone where someone. Hopefully that makes things happen with partner with other people, want to do the same. And in doing so, we help others. Love of mankind. The definition of philanthropy. That's what we should aim for.
And today you did some of that. If you're having kind of an off day, I bet you if you think about it, you can see some positives that will elevate tomorrow and give you an opportunity to do even more. And that's a great way to spend a career knowing that each day you're making a difference in the life and being of someone or something, that means something to your community.
I'll look forward to seeing you the next time, right back here on the next edition of Around with Randall. And don't forget, make it a great day.