Key points covered in this article:

• Succession planning helps nonprofits prepare for leadership transitions, reducing disruption and ensuring organizational stability.
• Executive and finance leader departures can impact operations, compliance, and financial oversight without a continuity plan.
• Boards should establish leadership transition strategies, knowledge transfer processes, and backup staffing plans before vacancies occur.

Executive directors and senior finance leaders hold two of the most consequential roles in a nonprofit organization. The executive director typically provides organizational leadership and maintains important relationships with the board, funders, and community. The CFO or finance director likely provides strategic financial oversight and holds a significant amount of knowledge on the organization’s funding and reporting requirements.

At some point, both roles will need to be filled by someone else or supported in a different way. Yet finding the right people can be difficult. According to the Nonprofit Finance Fund’s 2025 State of the Nonprofit Sector Survey, 69% of nonprofits reported some difficulty finding staff with the right skill sets, while 58% said identifying and developing the next generation of leaders was a challenge. Succession planning gives nonprofits time to prepare for these transitions before a vacancy forces a decision.

The Readiness Gap

Despite the clear need, fewer than a third of nonprofits have a written succession plan in place, according to research cited by the National Council of Nonprofits. That means most organizations are navigating a top operational risk without a roadmap.

A succession plan does not need to be a lengthy or complicated document. It identifies who would step in if a key leader departed tomorrow, outlines how the organization would manage the transition, and describes how institutional knowledge will be preserved and transferred. It also shapes how the organization invests in developing its people over time. Organizations that build this strategic planning into their governance practices are better positioned when there is any type of leadership transition.

Leadership Continuity Protects Strategic Priorities

When a senior leader departs without a succession plan, the consequences may be felt beyond having to list an open position. Executive searches can take months, and many funders could pause or reduce support during leadership changes, affecting cash flow and revenue at a time when the organization most needs stability.

Leadership vacancies also affect the rest of the workforce. Key responsibilities often shift to other employees during a search, increasing workloads and adding stress to teams. A recent nonprofit survey found that 25% nonprofit CEOs said staff burnout was already a top concern. Leadership instability can add to that burnout, making it even more challenging for the nonprofit to retain experienced team members.

For finance leadership, the risks have additional urgency. On a small finance team, a single departure can disrupt the established segregation of duties and other key internal controls, increasing financial reporting and compliance risk. Audits and reporting deadlines continue regardless of staffing changes, and institutional knowledge takes time to transfer and replace.

Succession planning can protect mission-critical operations and program delivery.

Preparing for Leadership Transitions

Executive succession is ultimately a board responsibility, and the finance role deserves the same level of attention. The board relies on the finance leader for accurate financial reporting, strong internal controls, and an effective audit process, which gives it a direct interest in how that transition is handled. A complete succession plan generally covers two situations: a sudden absence and a planned departure.

Emergency Succession

An emergency plan focuses on the first days and weeks after a leader becomes unavailable. A board-approved succession policy should identify an interim designee for each role and establish who has authority to confirm the appointment. If the bylaws are silent on interim appointments, legal counsel can help the board add that authority.

For the finance role, continuity depends on access as much as on people. Bank signatory authority and system access should extend to more than one individual, for example. Grant compliance requirements and the audit and filing calendar should be documented so an interim leader can step in with the information they need. Organizations that already work with an outsourced accounting firm have an advantage here, as the firm can provide continuity from day one.

The board should also have a plan for communicating with staff and funders during a sudden change. A brief, timely message from the board chair reassures supporters that the nonprofit’s work is continuing.

Planned Succession

Planned succession gives the board space to be more deliberate. The board can use this time to assess each role and decide if it should be structured differently going forward. The skills that make someone effective today may not be exactly what the organization needs from a successor tomorrow. For some organizations, assessment may make a case for outsourced or fractional finance support rather than a traditional full-time hire.

When a leader gives advance notice, an overlap period allows for direct knowledge transfer and gives the outgoing leader a chance to introduce the successor to key funders and partners. Building an internal pipeline through mentoring, cross-functional exposure, and leadership opportunities can also strengthen the organization’s long-term resilience.

Succession planning works best as a routine part of board business. When it appears on the agenda regularly, it is easier for the executive director and finance leader to contribute valuable institutional knowledge and insight to the plan.

Considering Future Leadership Options

When a vacancy occurs, organizations have more options than they sometimes realize.

An internal candidate may be the right choice when the organization has developed someone with the experience and leadership capacity to step into the role. Internal successors already understand the organization and many of its important relationships.

External recruitment may be an option when the organization needs capabilities that are not available internally. A transition can provide an opportunity to reassess the role and determine what skills will be needed for the next stage of the organization.

An interim executive director or finance leader can maintain decision-making capacity while the board or management team conducts a permanent search. This can reduce pressure to make a long-term hiring decision quickly.

Fractional leadership and outsourced accounting teams have become an increasingly practical option. For example, a fractional CFO or finance director provides senior-level capacity for nonprofit organizations that need experienced leadership without a full-time commitment.

The right approach depends on the organization’s size and future direction. A leadership transition provides an opportunity to determine which responsibilities should remain in-house, which can be redistributed, and which may be supported externally.

Looking Ahead

Organizations that invest in succession planning are building the institutional strength needed to support long-term mission delivery. Thoughtful planning can help maintain donor confidence, support staff through periods of change, and position the organization to make better long-term leadership decisions. PBMares works with nonprofits on the full range of challenges that accompany leadership transitions, from audit and grant compliance to outsourced accounting and virtual CFO services.

For more information on succession planning and leadership continuity, contact PBMares Not-for-Profit Partner Bo Garner.