What is the effect of a long-term CEO and management team on a nonprofit? What is the effect of a board with relatively little turnover? The 990 reports the name and position of each board member and senior manager annually. Let’s compare the lists over a 4 year period (2013-2016). Unfortunately, the truth is a wise and subtle mix of factors
- Effect of Long-Term CEO – The vision of an effective CEO is one of the magic quantities needed to produce success.
- One CEO in the study is in the 8th year of service. The nonprofit has more than doubled in revenue during that time to almost $30 million. Positive news articles have been written and many local school districts have signed contracts. These effective managers are rare outside of medicine and higher education (and not common anywhere – just ask Penney’s and S
- ears!). He has been able to articulate strategy, keep the leadership moving together, and has grown in his own skills to manage a much larger company.
- Unfortunately, another nonprofit with news reports about corruption also has a long-serving management team with board and management retention at 100% over 4 years. One way not to get caught is if you never leave!
- Another nonprofit lost its way and the recent audit has a ‘going concern’ paragraph. I had only heard about them! This is a first. The founder stayed for 30 years and did not grow in capacity to match the growth and challenge of the $9 million agency.
- Effect of a Long-Term Board – The growth companies in the study had board retention rates in the 80% range.
- A nonprofit incubated by people from Harvard has a board retention rate of 94% over 4 years. The annual revenue growth rate for this nonprofit is 127% annually.
- Nonprofits in existence over 25 years have more trouble keeping board members. They have a retention rate of about 50%. Many are teetering with ill-planned financing.
- New successful nonprofits benefit from a startup with a skilled CEO and Board chair. One promising startup in stress has a board retention rate of about 10%. The Board Chair was inexperienced and could not drive the board to support the agency in networks.
An effective leader and an effective board chair drive success. Effective boards need term limits, additional volunteer committees, and board members committed to learning.
Effective management requires a leader with time to preach a vision, arrange a team for flawless execution, and work with the board for abundant cash to fuel growth. There is often a plan for succession in these nonprofits. One consultant said that successful nonprofits hire management from within. It reduces the shock of succession. Normal succession with an outsider has a management turnover of 50% within 18 months. This is necessary when the nonprofit is stressed.
Note to all: The CEO/ED job is challenging. A business coach can help and contact me if you need support to go through this process.