Special to the Philanthropy Journal

By Hannah R Grossman

A summary of Dr. Amanda Stewart’s 2015 research study’s key findings

As nonprofit executives from the Baby-Boomer generation near retirement and others quit due to the momentous stress of the position, the nonprofit sector is faced with the critical issue of executive turnover. Yet fewer than 25% of nonprofit organizations have a succession plan prepared, and though a great deal has been written on the topic of executive turnover in nonprofit organizations, this research study was among the first meaningful empirical investigations that sought to understand the relationship between executive turnover and a nonprofit’s performance.

Key Findings

Dr. Stewart’s research provides insights into how nonprofits can accomplish a successful executive transition that will ultimately benefit the organization.

• Strategic leadership from the nonprofit’s board is crucial throughout an executive transition. Nonprofit boards must:
  • Take advantage of executive transitions as a time for strategic planning for the organization and for an acute reassessment of the executive role.
  • Reinforce ability to direct an executive transition by way of preparation, planning, and careful supervision of the new executive.
• Following a turnover event, an organization’s size has a positive influence on its financial stability.
• Despite greater financial stability, executives entering large organizations found the nonprofit slow to change and difficult to corral, particularly if they took office after a long-serving executive or a prolonged executive search. This situation can be alleviated with board involvement and hiring an interim director and even executive consultants or coaches.
• New executives should be mindful and aware of the personal toll that comes with the new position. They must set appropriate boundaries and take practical steps for self care.
• Maintaining clear communication throughout the executive transition is essential. Communication can take a variety of forms, from an official, scripted notice to a casual conversation with the nonprofit’s staff and stakeholders.
• Nonprofit boards must respect the job relay between the former and succeeding executives. The former executive’s role in the nonprofit should be well defined and designed to benefit the new executive’s needs.
• A successful executive transition includes recognition of the former executive’s contributions and providing him or her with a smooth transition from the job position.
• Respect individual and cultural concerns arising in the organization as a result of the executive turnover.
• Stakeholders, such as donors and groundwork organizations, are able to help nonprofits connect and share their common experiences, such as with executive turnover.

Detailed Discussion

Conducted by Amanda Stewart Ph.D. of NC State University, who has over ten years of work experience in various nonprofit organizations, the study was implemented from the summer of 2014 to the spring of 2015. It investigates the disruption caused by nonprofit executive turnover, and identifies the contextual factors that help to moderate the relationship between turnover and nonprofit performance.

The primary hypothesis of the study suggests that nonprofits undergoing executive turnover will be less financially stable than nonprofits that had not undergone executive turnover. Furthermore, this study concentrates on two research questions: 1.) Which contextual factors lead to different turnover results in nonprofits and how do they affect results? 2.) How does executive turnover impact a nonprofit organization’s financial performance?

The research process was comprised of two major components. The first component entailed a quantitative analysis of the financial data, as recorded in nonprofit IRS tax filings, of 2,000 nonprofits from across the United States. These nonprofits’ financial performances, measured by their expenses, were compared between the organizations that had experienced executive turnover and those that had no turnover. The second component involved interviewing the current executives of 40 nonprofit organizations that had experienced turnover in the recent past. These interviews were designed to explore more broadly the outcomes of turnover, as well as identify factors that had a positive or negative influence on the nonprofit’s outcomes with executive. Also included were surveys of 178 nonprofit executives who were also part of nonprofits recently experience executive turnover.  

In the qualitative research, thirty-three of the 40 executives interviewed found positive outcomes to turnover regarding financial and mission-related components of turnover, as well as their entry into the nonprofit. They viewed themselves as an agent of change in the nonprofit organization.

Conversely, seventeen of the 40 interviewed executives found negative outcomes with turnover, including the fiscal costs, idling operations, operations slow to recommence under a new executive, and turnover interacting to situations external to the nonprofit. The executives identified the factors and moderators that helped to ease their transition, providing ‘take-aways’ for the nonprofit sector.

Executives stressed the important responsibility boards had in directing and facilitating turnover processes and aftereffects. Nonetheless, responses to the survey showed that fewer than 25% of nonprofit organizations had a succession plan prepared. Strategic leadership from the nonprofit’s board is crucial throughout an executive transition.

Boards have a crucial role in navigating and implementing an executive transition. The two-fold message that boards can take away from this study is to: 1.) Take advantage of executive transitions as a time for strategic planning for the organization and for a reassessment of the executive role; and 2.) Reinforce ability to direct an executive transition by way of preparation, planning, and supportive supervision of the new executive.

Aside from board involvement, of the other influencing factors which were assessed, only organizational size, as calculated by annual revenues, had a notable effect on a nonprofit’s financially stability. An organization’s size has a positive and considerable influence on its financial stability following an executive turnover event. Executives credited the positive effect not to financial resources, but rather to the organizational structures and staff size that occurs in larger nonprofits.

However, while the size and structure of a nonprofit may help safeguard the organization during a turnover, these factors also present their own challenges. Executives entering large organizations found the nonprofit slow to change and difficult to corral, particularly if they took office after a long-serving executive or a prolonged executive search. This situation can be alleviated with board involvement and hiring an interim director and even executive consultants or coaches.

On another note, as many are taking the position of nonprofit executive for the first time, and the career comes with great responsibilities, new executives should be mindful and aware of the personal toll that comes with this position. They must set appropriate boundaries and take practical steps for self-care. Executives also said it was very important to maintain clear communication throughout the executive transition. Communication can take a variety of forms, from an official, scripted notice to a casual conversation with the nonprofit’s staff and stakeholders.

Another take-away derived from the interviews was to be respectful of the job relay between the former and succeeding executives. The former executive’s role in the nonprofit should be well defined and designed to benefit the new executive’s needs, instead of the organization as a whole or other members of the staff. Without clearly defined terms and even timelines, the authority of the new executive may be undermined. A successful executive transition includes recognition of the former executive’s contributions and providing him or her with a smooth transition from the job position.

It is also important to be respectful of individual and cultural concerns arising in the organization as a result of the executive turnover. Staff morale and even productivity can be affected by uncertainty stemming from the turnover. The interviewed executives were considerate of these dynamics and took a delicate approach to entering their position, which appeared to help the organization’s staff, its performance, and even the executive. By addressing the individual needs of both their staff and executive, boards are also benefitting the nonprofit in the long term.

Concerning other moderators, the interviewed executives contended that, during the transition process accompanying executive turnover, the organization benefitted from maintaining and developing donor and other stakeholder relations through communications and other outreach activities. The take-away from the study for stakeholders is that they need to have assurance that the nonprofit can endure an executive transition, and they must remain a dependable partner to the nonprofit to avoid contributing to the disruption of the turnover. Donors can aid with capacity support to strengthen the nonprofit management and board development, and, if necessary, be available for guidance or financial backing to the nonprofit undergoing the turnover transition. Furthermore, stakeholders, such as donors and groundwork organizations, are able to help nonprofits connect and share their common experiences, such as with executive turnover.

The primary hypothesis of this study suggested that nonprofits undergoing executive turnover would be less financially stable than nonprofits that had not undergone executive turnover. Quantitative results showed that, in the year succeeding an executive turnover, nonprofit organizations had a 4% decrease in expenses. These results suggest that while executive turnover leads to a decrease in expenses, it does not lead to financial instability or the demise of the organization. Executive turnover seems to be a recoverable event for nonprofit organizations.

Summary

As nonprofit executives from the Baby-Boomer generation near retirement and others quit due to the momentous stress of the position, the nonprofit sector is faced with the critical issue of executive turnover. Yet fewer than 25% of nonprofit organizations have a succession plan prepared. Stewart’s research study provides insights into how nonprofits can accomplish a successful executive transition:

Boards have a crucial role in an executive transition.

1. Executive transitions are a time for reevaluating an organization’s mission and the responsibilities of the CEO.
2. Boards need to plan how the new executive director is brought on board. The context and process of the executive transition matters:
   1. Nonprofit organizations with larger staff are less likely to have activity slowed.
   2. Boards should provide for a graceful exit for the outgoing executive director.
   3. It takes resources (e.g. hiring an interim) to navigate a transition. Funders should invest in the process.

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Hannah R Grossman is currently pursuing a Bachelor of Arts Degree in English with Creative Writing Emphasis at NC State University. She contributes to the Philanthropy Journal’s US and NC News.