Other organizations are taking a similar approach. The Annie E. Casey Foundation in Baltimore has pushed its "mission-critical" grant recipients to engage in succession planning, while in Silicon Valley, the David and Lucile Packard Foundation expects to give $3 million to more than 60 different nonprofits to help them improve their organizational effectiveness—grants that cover succession planning as well as other measures.

Incremental Changes
Ideally, nonprofit succession planning involves a series of baby steps, interspersed with consensus building. With a contingency plan in place, directors can then move on to instituting regular performance reviews of the current CEO or executive director.

When the time comes to replace a retiring executive director or an underperforming nonprofit president, boards will be drawing on a shrinking talent pool.

Sacred Heart Community Service had completed just such a strategic review less than two years before Vorwerk’s sudden resignation, Pope says. That nine-month process culminated in the decision that the organization needed to shift its emphasis from simply delivering aid to the working poor in the San Jose area to offering educational resources and other services that would help make those individuals less dependent on the group’s ability to provide emergency housing, food and clothing. "This meant that we couldn’t just dust off the old job description, but had to take three or four weeks to write a new one," Pope says. "We realized it also meant that we had to spend a lot of time with our constituency to make sure there was an understanding both of that new mission and the role of a new E.D. in the process."

NONPROFIT SUCCESSION GUIDE Begin comprehensive annual reviews of top managers to improve understanding of their roles and their skills, so that when change comes, you can draw on that knowledge. Talk to the executive director about succession planning, making it clear this is a general strategic discussion and not a hint that the person’s performance is being questioned. Undertake periodic strategic reviews of the organization, ranging from its mission to its capabilities. What will its future needs be in terms of resources? Discuss succession planning with large donors and see if they have resources available for organization-building and/or management training. Identify or recruit promising younger managers, and groom them for senior management roles by ensuring they are familiar with all areas of the organization and not just their own role.

Even after a nonprofit board creates a clear picture of the kind of executive it needs to steer its organization, directors agree that simply prepares them for the larger challenge: building consensus. Most nonprofits serve many different constituencies that must be consulted in the search process. An educational charity, for example, may need to consult with donors, local teachers, volunteers, staff, city or regional governments and professional associations when picking a new leader. "If you conduct the search openly and correctly, the new person will arrive and be welcomed, because no one will feel blindsided by the process," says Jim Stern, managing partner of Cypress Group, a private equity investment firm, who holds annual review meetings with the president of a college whose board he leads.

But even the best-prepared board members are likely to face a lengthy external search process. Christine Fahlund, a senior executive at T. Rowe Price and a director of the Maryland chapter of the Arthritis Foundation, knows that if the head of the foundation’s regional operations resigned tomorrow, she and her fellow board members would be forced to undertake a regional, or possibly national, search for a successor. "There is no bench strength," she says. That’s true of most nonprofits, which have ultralean organizations and are reluctant to spend resources on anything that doesn’t relate directly to the mission.

That attitude—institutionalized at agencies like Charity Navigator that rate nonprofits on efficiency and governance—is counterproductive, Bridgespan’s Tierney argues. "In business, we are trained to think about reducing overhead, but we know that there is a difference between good overhead and bad overhead," he says. "You know you have to spend money to recruit and hang on to good people: salaries, benefits, training, sabbatical policies and so on." That outlook, he says, needs to spread to nonprofit boardrooms. "You wouldn’t pick the hospital that paid its doctors the least if you needed an operation, or send your kids to the school that spends the least on educational resources," says Tierney in exasperation. "The best nonprofit boards of the future are going to be those who recognize when it’s necessary to spend money."

Thanks to the board’s proactive approach and preparatory work, Sacred Heart Community Service was not left without a chief executive a day longer than expected. "Getting this right has, I think, strengthened our organization and the commitment of our board to the mission," Pope points out. "Despite all the effort, we all feel re-energized."

Suzanne McGee is a Brooklyn, N.Y.-based business writer and a regular contributor to Worth.

Art by Ken Orvidas.