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Why Focus on Executive Transitions--What’s at Stake?

Preliminary research estimates that 10% of nonprofit CEO jobs turnover each year.  Though they happen infrequently to individual organizations, leadership transitions are becoming increasingly common in the nonprofit sector.  In a survey of 130 of their community-based grantees, a recent study by the Annie E. Casey Foundation found that 85% of executives will likely leave their positions during the next seven years.  Similar surveys suggest that in the next five to seven years, the rate of transitions is likely to climb by 15 percent or more as the baby-boomer generation--many of whom founded core organizations in their communities 20 and 30 years ago--begin to reach retirement age.[1]  

Effective leadership is a crucial ingredient for successful organizations.  It's not surprising then that executive leadership transitions are fraught with risk. It is a particularly challenging time for small- and medium-sized nonprofit organizations where the executive director wears multiple hats, playing several hands-on roles in the daily operations and/or service delivery.  Sorting out and prioritizing those roles (and addressing them during the interim) can be especially challenging.

The costs of a failed leadership transition--or one that results in a poor or strained fit between an executive and his/her board--occur on multiple levels.  There are the direct costs of conducting a search for a new leader, which can range up to tens of thousands of dollars, including advertising, executive search, relocation and other expenses.  There are also hundreds of volunteer hours spent by the board of directors (estimates range from 500 to 1,000 volunteer hours). Then there are the indirect costs, which can include increased staff and Board turnover, missed opportunities for program growth, or loss of hundreds of thousands of dollars of client services due to program shrinkage or closure.  In the worst cases, a mission critical organization goes out of business.  The community loses an essential service institution, and in some cases, a broad-scale systems reform effort may be derailed.

"10% of nonprofit CEO jobs turnover each year.

Transitions are fraught with risk."

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1/16/03