Ensuring Continuity: Succession Planning Strategies for Nonprofit Finance Teams

Nonprofit organizations have been experiencing significant labor shortages for years. But recently, increased demand for services and fewer people interested in joining nonprofits has made the situation worse. Many organizations are finding it difficult to fill roles, especially in the finance department. And even when you have a full roster, people retire, move, or decide to change jobs.

Having a stable workforce can lead to significant efficiencies and cost reductions. While it’s difficult to imagine a stable workforce during a time of labor shortages, your organization can help to ensure uninterrupted processes and continued missional impact by developing a robust job succession planning strategy. Proper planning can allow your finance department to withstand any type of staff turnover or mobility in stride. 

As your organization contemplates formalizing its job succession preparedness strategy within the finance department, there are three major areas to consider: segregation of duties and cross-training, safeguarding of assets, and cross-organizational impact.  

Segregation of Duties and Cross Training 

It is not uncommon, especially for small organizations, to have challenges with segregation of physical access, recording, and authorization functions. When your organization’s finances are handled by a small team, it becomes even more important to properly prepare and plan for personnel changes. 

While you may have a formal accounting and internal controls manual, documenting how processes should work, what happens in practice may be very different—accommodating workarounds for new technology, staff access, and enhanced compliance reporting. Before you start to work on a succession plan, identify what each employee does and their roles and responsibilities. 

Any type of job succession plan involves proper segregation of duties through cross-training and redundancies. Mapping out processes and procedures and developing backups within the department also allows employees to go on vacation and truly recharge. Even though senior management may be hesitant for staff to be cross-trained due to the confidentiality of certain information which the finance department handles, like payroll, it is necessary to ensure proper coverage, to reduce dependencies on any one individual, and to lower institutional risk.

During normal operations these individuals wouldn’t have regular access, but under certain circumstances they should be pre-trained and available to provide an extra set of hands. This cross-training prevents the same person from performing more than one function if a finance staff member is on vacation or leaves the organization. 

Properly identifying these individuals and processes will make any job succession easier. Selected staff will be able to step in on the various functions with the confidence of knowing they were properly trained, understanding the documentation, and feeling empowered to assume such tasks. Following this practice not only reduces the potential risk of fraud but it also ensures the team meets deadlines and accomplishes time-sensitive tasks, even when staff need to be out of the office. This type of intentional planning promotes teamwork and leverages existing staff for efficiency.

Safeguarding Assets

A second key element of a successful job succession analysis is making sure the organization’s assets are protected. This is important not only for physical assets, like cash and equipment, but intellectual property and recordkeeping. To make sure your assets are protected during a transition, you need to determine the state of your process documentation, the availability of information in secure, yet easily accessible form, and create an adequate plan for records and information retention. 

Because most nonprofits are already highly digital, physical access is becoming less of an issue than electronic access to your organization’s assets. During a finance department’s staff transition, the risk of inappropriate access to company’s systems becomes elevated, as outgoing staff may “hold the keys to the kingdom.” If certain institutional knowledge is not properly documented, management may not be aware of user accounts for grant sites, local, state, and federal government reporting portals, bank accounts, or vendor and payroll processing logins. Making sure all systems have been identified, and new users have been granted access will mitigate any disruption. This process will also allow the organization to deactivate access for the outgoing individuals to ensure the security of the data and the assets it represents. 

Cross-organizational Impact 

How the finance team functions within the organization can determine your overall financial success. Developing working relationships across the various departments of the organization creates synergies and efficiencies during the year.

When employees leave, these relationships can be vulnerable, especially during the rush to fill the vacancy. However, the reporting and information-gathering requirements provided for and gained from other departments are still critical.

When you develop succession plans, you let the other organizational departments know they will not be lost during the transition. The plans inform key stakeholders of the mechanisms in place to ensure continuity and reassure them that their needs are still a priority, enhancing organizational culture, productivity, and teamwork. 

Create Smoother Transitions with Documented Succession Planning

Management’s response to turnover and headcount changes will have a lasting impact on the organization, and intentional, proactive and thoughtful job succession planning is important for all levels of staffing. It allows for transitions to be smoother and more manageable, increases confidence in the continued accuracy and accessibility of financial reporting, and showcases the forethought and leadership skills of the organization’s management. 

To learn more about succession planning for your finance team, check out our webinar, “Preparing for Transition: Smart Succession Planning Strategies for Nonprofit Finance Offices.”