Many boards put succession planning on the back burner while they concentrate on current and sometimes more pressing issues. But without a well-prepared plan of succession, a board can dissolve into disarray if a chairman or a key director unexpectedly leaves.
Not-for-profit organisations are becoming more aware of the need to plan for succession, according to an Australian Institute of Company Directors (AICD) survey.
The NFP Governance and Performance Study 2014 found that nearly a third of NFPs would be changing one or more of their governance documents in the next 12 months and, of those, nearly half were planning to amend their board structure or change directors’ terms. Nonetheless, NFP boards reported spending around 7 per cent of their time on succession planning.
"Few organisations do it well," says Dianne Jacobs, Principal of The Talent Advisors. "One of the reasons is that they tend to treat succession planning as an event, in other words when the need presents or they tend to look at it more as replacement planning – they know a term is ending and they might look at replacing one individual.
"But replacement planning isn’t necessarily succession planning, it’s a very different mindset," says Jacobs.
The high turnover on some NFP boards can be an issue for board effectiveness and makes it important the board has a well-thought strategy for its own renewal, according to AICD’s Good Governance Principles and Guidance for Not-for-Profit Organisations.
Linking board succession planning with the strategic direction is crucial, says Jacobs.
"One of the solutions is that the mandate of the nominations committee – and obviously it also should be part of the mandate of the chair – is an ongoing approach to succession and development of current and future directors. Because succession planning can also mean the plan for existing directors to take on different roles. It also means looking at whether they’re in the right subcommittee or developing people to eventually chair a subcommittee," she says.
It’s about constantly checking whether the board has the skills capability to meet its strategic direction, says Jacobs, and if it doesn’t, you can fill the gaps. With enough planning in advance, it means that some gaps may be filled by developing capability internally, rather than needing to bring in new directors.
Succession planning for a board also helps to manage the risk of losing a key director, says Jacobs.
"Part of the succession planning approach is to look at each person on the board: their term and when that’s up for renewal; the skills they bring; and the risks of them leaving prior to the term or even not wanting to renew the term. You should also assess how easy it would be to find a replacement. Better boards have an ongoing list of potential directors and start to engage them early in the organisation’s activities," she says.
In other words…
- Succession planning is a critical activity for boards
- Planning for skills capability, known and unexpected departures and director development should align with the strategic direction
- A succession plan is also part of a board’s risk management
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