Managing Risks in Non-Profit Executive Turnover

The recent “Silver Tsunami,” as reported by workforce analytics firm Lightcast, has seen about five million workers leave the labor market since 2020, with more than 80 percent of them over the age of 55. This exodus has triggered a major shift across industries, but for non-profits, the risks are particularly acute. As illustrated in the chart below, the rate of CEO departures has surged to record-breaking levels in recent years.

Closer to home, data from New York State’s Consolidated Fiscal Reports (CFRs), submitted by Health and Human Service providers, reveals a similar trend. Although not all CEO turnover has been due to retirement, the pattern closely follows national averages, with many executives exiting the workforce, either voluntarily or involuntarily.  This surge in CEO and C-Suite departures—whether through retirement, resignation, termination, disability, or death—presents a growing risk for non-profits.

The High Stakes of Executive Turnover

Non-profits are uniquely vulnerable to executive turnover because of their dependence on long-standing relationships and the specialized knowledge built up over time. When a key executive leaves, the organization risks losing:

1. Institutional Knowledge: This includes decades of accumulated insights on operations, funding strategies, and staff dynamics.
2. Stakeholder Trust: Funders, government agencies, and private donors have likely established deep relationships with outgoing leaders. New leadership must quickly build that trust to avoid losing vital support.
3. Mission Disruption: An ill-prepared transition can lead to delays in services, potential loss of funding, and a disruption in achieving the organization’s mission.

Key Elements of Risk Mitigation

To mitigate these risks, non-profit boards and executive management teams must implement a robust leadership transition plan. Below are five key elements to help safeguard against the potential fallout of executive turnover:

1. Thorough Skills Assessment: Failure to align leadership capabilities with the organization’s mission, size, and strategic direction can destabilize operations. Before replacing an executive, conduct a comprehensive assessment of the skills needed to lead the organization. This reduces the risk of appointing someone who may lack the necessary expertise to continue delivering on the mission.
2. Planned Knowledge Transfer: One of the most significant risks during executive turnover is the loss of institutional knowledge. Identify critical relationships and operational insights—such as funding mechanisms and regulatory requirements—that must be passed on. The risk of gaps in operational knowledge is too great to leave unaddressed.
3. Strategic Recruitment Process: Rushing the recruitment of a new executive can lead to costly mistakes. Whether you choose to use a professional search firm or internal resources, it’s essential to weigh the pros and cons carefully. The wrong hire could exacerbate existing risks, leading to a loss of stakeholder confidence, increased staff turnover, and operational instability. Ensure the decision-making process is transparent and involves key stakeholders to mitigate potential conflicts.
4. Adequate Transition Time: A leadership change can lead to disruptions that ripple through the entire organization. We recommend a well-thought-out transition plan that can span from six months to three years, depending on the complexity of the role. A rushed or poorly planned transition increases the likelihood of service delays, funding issues, and even internal confusion about leadership direction.
5. Managing Role Transition Risks: Once a successor has been selected, managing the transition of roles and responsibilities is critical. Risks during this phase include a lack of mentorship from the outgoing executive, inadequate transfer of technical knowledge, and potential morale issues among direct reports. All of these factors can undermine the organization’s ability to execute its mission effectively.

Understanding the Retiring Executive’s Ability to Assist in Transition

Another key risk often overlooked in leadership transitions is the mental and physical state of the retiring executive. If the outgoing leader is disengaged or unable to provide the necessary support, the risk to the organization’s continued stability increases. Ensuring that all parties—executives, boards, and staff—are aligned on the mission and the importance of a smooth transition is crucial. When alignment can’t be  achieved, it may be necessary to reevaluate the transition plan and take decisive action to protect the organization.

Risk-Driven Planning

Executive turnover is inevitable, but non-profits can mitigate the associated risks with proactive planning. The loss of institutional knowledge, stakeholder relationships, and leadership continuity are risks that can disrupt an organization’s mission and financial health. Developing a detailed leadership transition plan reduces these risks, helping to safeguard the organization’s future.

If you need further guidance or have any questions on how to develop a leadership transition plan, we are here to help. Please do not hesitate to reach out to discuss your specific situation.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.