DRG's New Survey Finds Most Nonprofit Organizations Do Not Have Executive Succession Plans, Even When 40% of Nonprofit CEOs Say that They Plan to Leave Their Positions by 2008.

With 2 out of 5 CEOs planning to leave their job within the next 24 months, 58% of CEOs report that neither their board nor the management team have ever discussed succession planning, according to findings released today from the 2006 DRG Nonprofit CEO Survey.

"These numbers suggest that nonprofit organizations are unprepared for upcoming CEO turnovers" says DRG Managing Partner, David Hinsley Cheng. Following other recent studies, the DRG survey shows an increase in the number of CEOs planning to leave their positions in the coming two years. "Unless Boards and CEOs begin addressing leadership transition right away they will find themselves scrambling and competing to recruit talented senior executives and dealing with the disruptions that these transitions can cause"

In the survey, 84% of CEOs indicate that they consider themselves highly involved in developing their senior staff to be future executives. However only 34% report that their organization has formal training systems in place to develop senior staff. According to Cheng, "while it's very encouraging that a large percentage of CEOs indicate that they take a personal role in grooming future leaders, it's apparent that the nonprofit organizations, professional associations and others need to institutionalize training and development opportunities specifically targeted to potential executives."

Other findings also indicate a change in how those interested in the nonprofit CEO role should prepare for the job. In the current survey 55% of the CEO respondents recommend a Master in Nonprofit Management as the most important graduate degree for senior managers looking to advance their career. In a 2003 DRG survey, only 10% of respondents considered this degree to be useful. Meanwhile a Master of Social Work, long considered the degree of choice for earlier generations of nonprofit executives, was rated as least important by 22% of respondents when compared with 8 other graduate degrees.

• 40% of CEOs indicate that they plan to leave their job within 2 years or less. Of this group, 13% planned to leave in 6 months, 9% in 1 year and 17% in 2 years.

• 58% of respondents indicate that neither the management team nor the board has ever discussed transition strategy.

• 48% of respondents either strongly disagreed (15%) or disagreed (33%) with the statement that their organization has formal training systems in place to develop senior-level staff. 18% had no opinion. Only 34% either agreed (26%) or strongly agreed (8%) with the statement.

  Meanwhile 54% of respondents either agreed (34%) or strongly agreed (14%) with the statement that their organization identifies and develops potential executive leaders.

• Overwhelmingly, CEOs believe that they have been actively involved in internal staff development. 84% of CEOs either agreed (45%) or strongly agreed (39%) with the statement that they have been highly involved in developing internal talent. 9% had no opinion.

• Compensation is the most common method used by organizations to retain top performers. 19% focused on ensuring good staff morale and work environment such as allowing for greater staff input and providing positive staff feedback and recognition. 15% provided their top staff with greater responsibilities and promotions. 13% worked to enhance their benefits programs such as increase vacation days, funding an attractive retirement package, and instituting family leave policies and flexible work schedules.

• Disagreements with the Boards and retirement ranked as the top two reasons why CEOs have been stepping down. 23% of CEOs left because of board disagreements and 20% retired.

• The survey indicates that CEOs considered experience in working with volunteer board as the single most important skill set when selecting a CEO. In order of most important, the rankings were:
  1) Work with volunteer Boards
  2) Fundraising
  3) Staff Management
  4) Knowledge of specific field or sector
  5) Budgeting/Finance
  6) Prior CEO Experience
  7) External Affairs/Marketing

  These rankings suggest that by and large, the ability to work effectively with people is considered crucial. Cheng adds 'that unlike the corporate sector, the ability to provide leadership and engage board, staff and donors towards a vision are the core skills of a successful nonprofit CEO."

• A Master in Nonprofit Management was recommended most often (by 50% of all respondents) as the "most important" graduate degree to senior managers when preparing to become a CEO. A MBA and the MPA came in second and third respectively of the 8 degrees polled. 35% of respondents ranked a law degree as the least important while 22% said that of the Master of Social Work.

• CEOs believed that if their Board were to recruit a new CEO, they would most likely consider candidates coming from within a nonprofit in their same field. In order of most likely to least likely, the rankings were:
  1) A nonprofit in the same field
  2) Other nonprofits
  3) Inside your organization
  4) Corporate Sector
  5) Government
  6) Military

  48% of respondents cited "A nonprofit in the same field" as the most likely while 80% cited "Military" as the least likely.

• Management experience was cited as the most important skill for corporate executives looking to transition into the nonprofit sector. Marketing/Public Relations and Finance came in second and third, respectively.
  

  About the survey:
  
  This survey was emailed nationally to 1644 nonprofit CEOs during March 2006. There were 173 respondents.
  
  Of the CEOs responding, 55% had organizational operating budgets of under $5 million. 18% had budgets between $5-10 million. 10% had budgets over $10 million but less than $20 million. 17% had budgets of $20 million and over.