Maintaining Your Nonprofit’s Financial Stability Through Leadership Transition
So far, NFP Partners has written about nonprofit financial planning, monitoring, operations, and governance in the series A Guide to Strong Financial Leadership.
Next up, although not an ideal situation, is the possibility of nonprofit financial leadership transition due to resignations and retirements from the following:
- Executive Director
- Donor Manager
- Development Officer
- Finance Controller
These leadership changes can have a significant impact on the nonprofit organization and succession planning will help with a smooth transition.
While maintaining your nonprofit’s strong financial leadership, it is important not to overlook transition planning of finances. You’ll also want to keep in mind the potential financial effects of a transition.
As you probably already know, the nonprofit financial leadership transition can be disruptive for long-range plans, strategies, and the organization’s financial stability. During times of executive change, and even in succession planning, it is crucial for leaders to prioritize sharing financial knowledge and anticipate how the change may affect financial performance.
While much of NFP Partner’s work is on nonprofit accounting, in many instances, we fill in when there are staffing changes. The following are a few suggestions to help ease the sometimes bumpy road of financial leadership change.
BUILD KEY FUNDING AND PARTNER RELATIONSHIP CONTINUITY
Before a transition occurs, have more than one staff relationship connection with top donors, funders, or contractors. If a key staff person leaves, relationship continuity can help ensure that funding doesn’t also leave with that staff person.
COMMUNICATE THE MISSION INTERNALLY AND EXTERNALLY TO SHARE FINANCIAL INFORMATION
During a transition, be candid about the organization’s strengths, challenges, and needs. Be open and transparent to both internal staff and external audiences/funders. No matter who the audience is, it is important to address financial red flags head-on. You can do so by recognizing issues and sharing a plan for rectifying the situation.
TAKE A FRESH LOOK AT FINANCIAL MANAGEMENT AND STRATEGY
Allow time for the new executive to catch up on the financial health, management practices, and strategy for the organization. Yes, take a look at what works well and what may need to change, but avoid making a change just for change’s sake.
Consider providing staff with a forum for ideas and improvements in financial management. This can be an effective and efficient way to uncover new opportunities. You may also want to answer the following questions:
- Are financial reports clear, timely, and reliable as necessary for staff and Board audiences? NFP Partners has several articles on nonprofit financial reports, including Nonprofit Accounting Reports and What to do With Them.
- What tools or analysis would help make financial plans stronger?
- Does available financial data allow for action?
Leadership transitions can be complex and emotional processes with many important needs to focus on. It is also important to pay attention to the financial implications to ensure stable and improved financial health.
If your organization would like support with accounting staff succession and transition planning, please contact us today!