An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage. 

— Jack Welch

One of the Top 10 governance responsibilities for a nonprofit board is the identification and selection of the CEO who leads the organization. In addition to selecting the CEO, the board also is responsible for performing an annual performance evaluation of the CEO, which must be formally documented. 

About 17 million baby boomers born between 1946 and 1964 are now retiring at the average rate of 10,000 per day for the next 15 years. This demographic tsunami has resulted in a critical void in nonprofit leadership, particularly at the CEO level, but also in the recruitment and retention of board leaders. The resulting effect is that every nonprofit organization must have a succession plan for both CEO and board leadership. The focus of this column is on CEO succession planning. However, many of the recommendations included here can be easily applied to board leadership as well. 

After nearly four decades of specializing in nonprofit organizations, I have developed a three-legged stool metaphor that is universally applicable to all tax-exempt organizations. We all know what happens when one leg of a three-legged stool is weak or non-existent. The first step in succession planning should be a self-assessment of your current organization regarding the strength of the following three legs of the stool:

– Management and board leadership

– Fiscal strength, sustainability, and access to private-sector fundraising

– Cost-effective, high-quality services in fulfillment of the mission

In this decade of nonprofit consolidation, affiliation, and merger, the three attributes described above have consistently produced successful organizations that are able to maintain some form of local control and autonomy. 

There is no question that effective, energetic, and enthusiastic leadership is of significant value to the successful tax-exempt organization. Therefore, with another variation of my now ubiquitous Top 10 Lists, I offer the following advice regarding an effective CEO succession-planning process.

1. When should the planning process start? The best time to begin a succession-planning process is years in advance of the actual need to replace the CEO. That is, every organization should have a documented succession-planning process that can be tailored and modified when a CEO search / replacement process is necessary. I suggest that using the following nine suggestions will put you well on your way to a successful and formally documented succession-planning process. 

2. Is the CEO retiring or being replaced for lack of performance? The process to follow is similar in either case. However, CEO retirement should be made known to at least the board chair / executive committee about 12-18 months in advance of the retirement date. But CEO replacement for lack of performance will compress the timeline described below. 

3. Are there one or more qualified internal candidates? This is a key question that should be addressed by the full board before final decisions are made regarding the actual search process. It is important to recognize that qualified internal candidates must understand why the board has decided to conduct an external search. The primary reason for this is that qualified internal candidates may take great exception to a board’s decision to conduct a formal search process if the rationale is not adequately explained to the internal candidate(s). A search process should ideally never result in a qualified internal candidate seeking employment elsewhere before the search process begins. 

4. Who should be involved in the search process? Most common and most successful, in my experience, is a search committee composed of board leaders. This can be a committee made up of board-leadership positions and certain committee chairs or, in many cases, the executive committee. What is most important is to have informed, confidential board members involved in the search process while limiting the number of members to preferably fewer than 10.

5. Is a search consultant / facilitator necessary? This is a decision that must be made by the search committee with input from the full board, if necessary. As with any professional consultant, interviewing and selecting the appropriate person is critical to a satisfactory result. Costs and related fees must be affordable and reasonable for the organization. 

6. What type of person does the board want? Using the current CEO job description and the most recent performance evaluations of the current CEO, the search committee should develop and recommend to the full board the most desirable CEO skills and performance attributes that will influence the ultimate decision. 

7. Should the search committee / board operate in isolation? It depends. However, I strongly recommend that input from the current CEO, management team members, program funders, and long-tenured former board members is an important element of a successful search process. 

8. When should the search process start? In the case of a planned retirement, I believe the optimum time frame for beginning a search process that involves external candidates is 6-9 months before the planned CEO retirement date. This window of time allows for sufficient planning and execution of a successful search process. The question of whether overlap should occur between retiring and new CEO should always be addressed. The answer to the question depends on facts and circumstances. However, if overlap is considered desirable, it should be between 30 days and 90 days.

9. Who will be involved in vetting and interviewing CEO candidates? Generally speaking, either the full search committee or, in my view, a sub-set of the search committee should be prepared to interview each candidate with a list of pre-determined questions to be asked of each and every candidate. Checking references for the final candidate(s) should be performed by either the chair or a designated member of the search committee.

10. What is the most effective process for finalizing a compensation package and approval of the selected candidate? I believe it is imperative to have either a letter of agreement or a contract with the CEO that formally documents all of the terms and conditions of the CEO’s employment. Agreement regarding compensation, fringe benefits, severance, involuntary termination, etc. should involve legal counsel.

The selection of a CEO is, without question, one of the most important responsibilities of sustaining a successful tax-exempt organization. If you follow the approach described above, there is a high probability that you will choose the right candidate. However, it is important to recognize that if the board has made a mistake in selecting the wrong individual, no more than 12 months should pass before the mistake is acknowledged and a new CEO is recruited. 

Always remember that the ability to acknowledge a mistake and take timely action to correct it is a vital component of success.

Gerald J. Archibald, CPA, is a partner in charge of the management advisory services at The Bonadio Group. Contact him at garchibald@bonadio.com

Lawyers are occasionally guilty of speaking legal jargon that a non-lawyer has no idea what the lawyer is talking about. For example, an estate-planning lawyer (or perhaps an estate-planning website you found) may suggest that you execute a living will in addition to a will, health-care proxy, and power of attorney.  

Like the article title implies, a living will really has no relation to a will. A will primarily deals with directing who will inherit your assets when you die. It is only effective after you pass away and an order accepting probate of the will is issued by the appropriate court.

By contrast, a living will is a document that is effective only while you are alive, does not require a court order to be effective (unless someone challenges its validity), and has nothing to do with your assets. Its purpose is to set forth a person’s instructions about treatment to be followed in the event the person becomes incapable of making treatment decisions and primarily involves life-sustaining medical treatment. 

For example, a living will may state that, “If I become terminally ill, I do/do not want to receive the following treatments…” or “If I am in a coma or persistent vegetative state, with no hope of recovery, then I do/do not want…” These statements are then typically followed by special instructions about certain medical treatments you want withheld (or continued) such as artificial respiration or artificial nutrition and hydration (i.e. nourishment and water provided by feeding tubes). 

There is no statute or “official” form for a living will in New York state, as they are primarily a creation of case law. New York case law has permitted the use of living wills as clear and convincing evidence of a person’s intentions regarding health-care decisions.

Similarly, there are no legal guidelines for execution of living wills but the general practice is to execute a living will in the same manner as a traditional will (i.e. two disinterested witnesses).

It is also wise to discuss your health-care wishes and end-of-life preferences with your health-care agent and give him or her a signed copy of your living will.

After signing a living will, you still have the right to make health-care decisions for yourself as long as you are able to do so.

So what is the big deal if you do not have a living will? If you tragically end up in a persistent vegetative state and there is no clear and convincing evidence of your wishes about artificial respiration or feeding tubes, it can turn potentially even more tragic if your loved ones get into a dispute about what should be done. This is what happened in the Terri Schiavo case, a story that made national news involving a Florida woman who fell into a persistent vegetative state that led to a protracted legal battle between her husband and her parents about whether to remove her feeding tube or not. If Schiavo had a living will in place explaining her wishes, this nasty dispute may have been avoided.

So while a living will is not really a will at all, one can see that it is no less important. 

Ryan Emery is an attorney with Mackenzie Hughes LLP in Syracuse. He is a member of the firm’s estates department. Emery focuses his practice in the areas of estate planning and trust and estate administration in both New York and Florida. This viewpoint article was drawn from the Mackenzie Hughes blog, called “Plan Talk.” Contact Emery at (315) 233-8368 or email: remery@mackenziehughes.com