Chances are, if you’ve been working or volunteering in the Canadian nonprofit sector over the past ten years, you’ve heard this before.

As you got your mid-morning coffee, you may have heard a coworker say something like “I keep hearing about the baby boomers retiring, I wonder if we’ll have a new boss next year,” or as you watched the evening news, you might have caught the anchor saying something along the lines of “prepare for the mass exodus of 60-somethings from the nonprofit workforce.”

Sound familiar?

For many years, decade-old prophecies surrounding the aging baby boomers seemed to spawn more questions than answers, offering little more than the headaches they caused umpteen members of nonprofit boards.

However, with the myths now dispelled, and a sector-wide general understanding that the baby boomer retirement era is at our doorstep, thousands of Canadian nonprofits will soon be facing the challenges associated with a massive shift in workplace demographics, if they aren’t already. Based on a survey conducted by the Ontario Nonprofit Network released last September, 40% of people in key nonprofit leadership positions – executive directors, chief executive officers, etc. – are over the age of 55. From there, a sobering projection was revealed: when asked how many more years they planned to continue working in their current role, 60% of respondents indicated they intend to leave their organizations within the next five years.

Translation: many nonprofit workforces will soon be throwing going-away parties for their bosses.

While these numbers represent only a small portion of the survey’s comprehensive results, the entire report, combined with other sector-specific data that has been released over the past few years, offers ample evidence to indicate that Canadian nonprofits could see an extraordinary leadership shift over the next five to ten years.

But just how big could this shift be?

“Around 80,000 executive directors could be transitioning away from their current positions by 2020,” says Linda Fairburn, president of Make Things Happen Ltd., a management consultancy providing succession planning and leadership transition assistance for nonprofits. “This shift in demographics has the potential to be unlike anything this sector has seen before.”

With all signs pointing to aging leaders leaving their roles en masse, the important question now gnawing at nonprofit organizations is “do you have a plan?” The short answer to this question, based on the results from the ONN survey, is “no.” Startlingly, fully two-thirds of respondents indicated that their organization does not have a formal succession plan for senior leadership.

“Other research has also found that upwards of 80% of Canadian charities have no succession plan,” adds Fairburn. “That’s more than 130,000 organizations.”

“And if these organizations are going to survive,” she warns, “succession planning is a key area where things need to change.”

What is succession planning?

A succession plan is a component of good HR planning and management. It recognizes that some jobs are the lifeblood of the organization and too critical to be left vacant or filled by any but the best qualified persons. Effectively done, succession planning creates an effective process for recognizing, developing, and retaining top leadership talent. Most succession planning focuses on the most senior manager, though key positions – positions that are fundamental for the operations of your organization and, because of skill, seniority and/or experience, will be hard to replace – are also typically included.

However, after scratching its surface, succession planning is revealed to be much more than the act of simply replacing an existing employee. The ultimate goal of this process is to have an organization think critically about what its requirements will be in order to move in right direction.

“The foundations of succession planning not only surround the hiring process, but also planning for the future, and recognizing there are going to be some staff skill gaps that need further development in order to meet organizational objectives,” says Jack Shand, president of Leader Quest, a management consulting firm that specializes in providing strategic planning advice to nonprofits.

“Organizations then invest in the individuals to close these gaps, to build that capacity, and to deliver on and meet the objectives that have been defined in the planning process,” he adds.

And yet, with so many nonprofit strategic planners trumpeting the benefits of succession planning, sector experts are left scratching their heads as to why so many nonprofits continue to avoid this process, even when it’s becoming increasingly apparent that it may not only prove to be useful, but also necessary for survival.

Rationale for reluctance

“With nonprofits I have spoken with, they’re well aware of the impending shift in demographics, and they have been for a while,” says Kathline Holmes, founder of British Columbia-based human resource consultancy firm Gailforce Resources.

So if the awareness is there, then why aren’t more nonprofits jumping at the chance to ready themselves for the imminent sector-wide changes?

As the majority of Canadian nonprofits describe themselves as small to medium-sized – 67%, according to the aforementioned ONN survey – Holmes suggests that most Canadian nonprofits simply don’t have the resources to conduct effective succession planning on their own.

“While most nonprofits are aware of the benefits of succession planning, they’re not necessarily prepared for it, because most of them don’t have that HR function that proper succession planning requires,” says Holmes.

As a result, many nonprofits end up adopting a very reactive approach to succession planning, and instead, “they often focus their resources around short-term projects, such as hiring, training and performance management,” she adds.

Another challenge keeping Canadian nonprofits away from succession planning are the costs associated with a plan’s development.

“The bigger, sustained cost is in the staff development investment for employees [succession candidates] who have demonstrated ability and potential, and ongoing training is required to close the gap from where they are now to where they need to be to be well qualified to succeed in a future role,” says Shand.

Shand lists certification programs, degrees and professional memberships as a few examples where succession planning costs can easily move into the thousands-of-dollars per year range, per employee, and admits that it can sometimes be a tough sell for a charity, especially those that see their funding vary from year to year.

Still, when succession planning costs begin to add up, nonprofits can take some solace in the fact that many Canadian HR consultants will not try to gouge their clients when it comes time to pay the bill.

“It is my experience that many consultants focused on the nonprofit sector understand financial realities and their fees reflect this, charging in the $125/hr to $250/hr range,” Shand adds. “There are plenty of great resources online to help get nonprofits started [in the succession planning process], and investing a couple of days in a qualified HR consultant will give the leadership what they need to have a succession plan that lives up to better practice standards. That translates into a budget well below $5000, and possibly as low as $2000.”

However, as Holmes notes, it can still be difficult for organizations to earmark dollars for this process.

“It’s tough to overcome, but if organizations simply make it a part of best practices, and leadership is aware that effective succession planning supports overall organizational stability and sustainability, it becomes an easier sell to the board,” she says. “It’s easy to shy away from the up-front costs of developing a succession plan, but in doing so, organizations can be forking over more money down the line.”

Risk aversion

Aside from serving as an introspective tool for organizational goal development, effective succession planning can also act as a fail-safe.

According to Fairburn, avoiding a failed hire is at the top of the list of reasons why succession planning helps nonprofits to avoid risk.

“If a nonprofit is being reactive – that is to say that their strategies are not up to date, they don’t have accurate position descriptions, they haven’t thought about the goals of their organization, etc. – they’re either going to hire someone just like the leader who is leaving, or they’re going to overcompensate for the defects in the old leader.”

Both of these scenarios do not bode well for nonprofits.

“These two pathways don’t go deeply enough into the organization to ensure that the individual is the right hire, and the organization is left with a crisis,” she adds. “More than a third of all executive directors are terminated by their board, and likely because it wasn’t a good hire in the first place, due to rushed judgment.”

If this occurs, nonprofits haven’t just lost time. As Holmes mentions, they’ve also lost “tens of thousands of dollars in the process.”

“You don’t want to end up with those stops and starts in the recruitment and hiring process, as there is a heavy cost attached, and more than just those associated with time lost in recruiting,” says Holmes. “When you have someone inept in a key leadership role, or the transition of the new staff member hasn’t gone smoothly, you are potentially losing contracts, or members of your donor base, and this adds up over time.”

Shand echoes these sentiments, noting that effective succession planning helps nonprofits avoid the risk of becoming complacent, outperformed by a competitor, or obsolete.

“There are just so many charities and nonprofit organizations in Canada, and with many of them being small, many are feeling increased pressure to find ways to set themselves apart from the pack,” he says. “There are telling signs that leadership need to acknowledge this fact as part of a succession process, as organizational succession, and not just individual management succession, has now become an area that also needs to be addressed.”

Shand calls on nonprofits to ask themselves organizationally focused questions, like “what is it we need to do to help effectively differentiate ourselves?” before asking individually focused questions, like “what skills are we looking for our ideal candidate to have?”

“Sometimes the most general questions are the most important questions for nonprofits to ask themselves,” he adds. “They help to dictate what kind of organization you aim to become, in order to ensure that moving forward, you will not just survive, but thrive.”

Sending the right message to staff

When nonprofits opt to take succession planning seriously, leadership may have fears that this move could send mixed signals to their staff; that the shock of the announced planning process will leave staff reeling and worried about their job security.

Holmes is urging these nonprofit leaders to quell these fears, as effective succession planning should do just the opposite by sending a motivating message to staff that their organization is on the right track to future success.

“From nonprofits that I’ve worked with that utilize effective succession planning, employee engagement does go up,” she says. “Staff see that their organization has a vested interest in career planning, and it signals that their personal growth can coincide with organization growth.”

Succession planning also gives managers a much better understanding of the skills and competencies that currently exist with employees and staff. While Shand doesn’t sugarcoat the fact that hiring externally is a very real possibility for many transitioning organizations, he notes that succession planning gives current staff members a very fair chance to showcase their skillsets.

“Proper succession planning can demonstrate the full value of the entire staff, as it not only identifies good candidates moving ahead, but also reveals where they may be able to help the organization in other capacities,” he says. “It could open up doors that staff members didn’t even know existed.”

As well, succession planning can protect an organization against losing knowledge when a key person leaves, and in doing so, should indicate to current staff members that they won’t be left picking up the slack when a critical position is vacated. Holmes has found that if a nonprofit doesn’t have a smooth on-boarding period with a new staff member, the organization runs the risk of losing important knowledge when the person currently in that role moves on.

“Everybody takes something with them when they leave a role – a certain level of knowledge or a certain ability that’s just really key to things flowing smoothly, and if that isn’t passed on – that unwritten knowledge – it leaves a huge gap for the organization,” she says. “However, if the transition is smooth, then it signals to the current staff that they won’t be left lurching as the new staff member tries to find their feet.”

Sink or swim

If organizations accept the fact that succession planning, in some capacity, is now crucial to survival, Shand is looking for nonprofit leadership to step out of their comfort zones to set a positive example for their staff and volunteers.

“I think EDs are uncertain, and maybe a little bit confused, about what they need to do for their organizations to survive, how they are going to thrive in a future environment that is still somewhat undefined,” he says. “But that’s the business of leadership to work through that, and if necessary, with perhaps some external advice, to define what it is the organization will need to become so that it can thrive.”

Shand understands that these are not easy questions for nonprofit leaders to ask themselves, but in an age where the threat of upcoming widespread retirement is very real, the time for hemming and hawing is over, as stagnation can lead to failure.

“I would suggest that if you’re not doing it, and if you’re not prepared to address these questions,” he warns, “then frankly, the likelihood of you surviving is very limited as an organization.”

While there still may be cold feet among EDs and CEOs, Holmes is encouraging nonprofit leadership to at least sit down with their board members to engage in some internal dialogue on the topic.

“Don’t leave this discussion until it’s too late, because at that point, it’s not really succession planning, it’s filling a gap,” she says. “It’s sink or swim, right now. The threat of potentially losing everything that your organization has stood for over the course of time is, at the very least, worth having that talk.”

And who knows? That one talk could mean the difference between a nonprofit’s rise to prominence, or its eventual failure.

Succession planning checklist for nonprofits

The following checklist offers a very brief overview of how nonprofits can begin to develop their succession planning process, via the nonprofit educational hub KnowHowNonProfit.

1. Analysis of the future

  • Look at the future goals and strategies of your organization for the next few years, identify key roles that are critical to the success of those objectives and strategies, and identify what kind of employees, particularly at senior/managerial level, the organization will need in those roles.

2. Analysis of jobs

  • Pinpoint key managerial competencies – skills, knowledge and attributes – that will be necessary within those roles. This can be done by using tools such as job descriptions, person specifications and competency frameworks.

3. Analysis of people

  • This involves performance management processes already in place, but more finely tuned and in line with steps 1 and 2 above. For example, performance reviews against objectives and also against competencies, to identify what people are achieving, and how well they are performing. An HR professional can provide advice, guidance and information in this area as well as conducting in-house assessments.
  • As well as looking at the potential of individuals, it is also important to look at their career aspirations, preferences and constraints, to ensure that issues such as work-life balance and any other external factors are addressed.

4. Analysis of training, learning, and development needs

  • Create specific development plans for people, so that they undergo a structured development program geared towards reaching a certain level of capability, rather than just ad-hoc activities.
  • Identify the skills gap – the gap between where people are now, and where they need to be in the future. Then the focus is on how to fill that gap.

5. Development

  • Provide training, learning and development opportunities for employees; however, the opportunities need to be ‘stretch’ assignments geared towards the level they are aiming for, not the level they are currently at. Therefore some of the opportunities they need may not be a natural part of their current job role, and need to be created. For example:
    • Providing additional responsibilities within the job role to develop new skills and experience, such as supervisory or people management skills
    • Work shadowing employees in senior roles in specific situations, such as interviews, meetings, etc.
    • Coaching or mentoring with other staff to develop knowledge in different areas of the organization
    • Attending events such as conferences, meetings, sector-specific events, etc.

6. Placing

  • Having done all the groundwork, the ultimate aim is to get the right people, with the right skills, knowledge and attributes, in the right jobs at the right time. A selection process would still be necessary, to ensure equality of opportunity both for people within and outside of the acceleration pool. However, the end result would be that people are brought into positions based on merit and not on length of service or current job role.

Brock Smith is a radio reporter/producer and communications specialist based out of Ottawa, with a special interest in the nonprofit sector. Brock can be reached on twitter at @brocktsmith.

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Photos (from top) via iStockphoto. All photos used with permission.