Succession Plan for Nonprofit Finance Leadership

Any entity, whether a community-focused nonprofit organization or small family-owned food market, should have a current succession plan for all key leadership positions. Especially in this very fluid job market where long-time, dedicated executive officers get an unsolicited opportunity of a lifetime and exit with relatively short notice.

Nonprofit organizations often have a documented succession plan for the chief executive officer. It can even be standard operating procedure; board of directors completes an annual evaluation of the CEO, including compensation and goal setting and somewhere in the process one year a succession plan was drafted. Some entities may even revisit the plan each year or on a less frequent basis. All good.

Succession planning for other key leaders, such as the chief financial officer or equivalent for smaller nonprofits is less frequent. And the sudden departure of the CFO can strain an organization dramatically causing undue stress on the board and remaining staff. Volunteer board treasurers are suddenly called into action to bridge the time gap until a successor CFO is recruited and onboarded. Financial reporting gets less timely and perhaps key filings such as grant requisitions get missed and needed funding is critically delayed. Things happen. Not good.

Succession Planning – Nonprofits

One best practice to consider is to have the audit or finance committee of the board of directors be responsible for the succession plan of the CFO. This can be effective. It can become an annual process to review and update.

Several other items to consider:

• In order to facilitate an effective CFO transition, it is best to have a comprehensive list of critical responsibilities of the CFO ideally prioritized in weekly, monthly, quarterly, and annual categories. Items to include are key financial reports and filings, bank and investment accounts, related external contacts, websites, usernames and passwords. Essentially, a road map to enable the continuing financial operation of the organization during a period of considerable change. Too often, these things are documented in various notes filed in desk drawers, stickies (really?), on the organization intranet, or the CFO’s laptop. Get this information organized and in one spot!
• Have a coordinated plan with your external auditors/accountants. Due to independence rules, they may not be able to step into the CFO role temporarily, but they may have a strategic relationship with other accountants or firms that can relatively quickly provide outsourced accounting support and have nonprofit financial reporting experience. The audit/finance committee can be responsible for this part of the CFO succession plan.
• Encourage cross training within the finance department. This can minimize the disruption in any finance staff turnover by having at least some accounting functions picked up seamlessly by other remaining staff.

Put a succession plan in place for the CFO position to keep the organization’s financial function humming in a time of transition. It will also let the treasurer sleep more comfortably at night!

Please contact us if you have questions about the information outlined above, our seasoned and experienced employee benefit plan professionals are here to help. You can also learn more about our Nonprofit services by visiting our website.

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