3 Themes Taking Us Into 2023

2022 continued to be a year of rapid change for our mission driven clients and for the health and human services, association, credit union, and higher education sectors they operate in. 

As organizations worked tirelessly to address the ongoing change, we have had the pleasure of supporting our clients in achieving a number of goals and experiencing a great deal of success. 

A few highlights including:

• The development and implementation of a digital education strategy moving the association from a single-state service provider to a national service provider within their niche offering

• The designing of an organizational structure that will better support the massive growth and scale achieved by a credit union

• The merging of two elder service organizations to create a stronger workforce

• The building of a large human services network to improve access and outcomes for present and future clients

• The restructuring of an Association Board of Directors to align with large scale growth initiatives and strategy. 

As the major shifts in the landscape show no signs of slowing, our nonprofit consultants have identified three themes that have been the focus of 2022 that will carry over into 2023: nonprofit consolidation, succession planning, and enhancing board governance.

Nonprofit Consolidation

Each nonprofit sector is experiencing different internal and external pressures that have, and will continue to drive consolidation in the form of mergers and affiliations.

The competition among Associations will continue as education has gone digital and members have increased options for obtaining value.

The need will remain for Health and Human Services organizations to achieve better margins to afford staff salaries and implement technology to track and manage data in more effective ways.

As the demand for technology from retail and commercial members continues to grow, Credit Unions will need to maintain pace while operating in a compliance environment that continues to add to the cost of operations. 

Declining enrollment and digital/hybrid business models will continue to plague Higher Education Institutions, in addition to the need to differentiate the value of on-campus learning and the expansion to a multi-campus learning model.

All of these pressures are pushing leaders and Boards to utilize M&A Strategy as a solution to sustainability.

Succession Planning

It is estimated that 70-80% of nonprofit CEOs will retire during the next 10 years. This should make succession planning a top priority for nonprofit Boards of Directors. Whether the CEO transition is expected or untimely, Boards must be prepared and ready with a process and plan for:

• Fully owning and driving the succession plan and process

• Determining the strategic needs of the organization

• Hiring and engaging with an executive search firm

• Conducting both an internal & external search

• Transitioning the outgoing CEO

• On-boarding and orientation of the new CEO

There are a number of options to consider when the planning process begins and this should be established by the Board and facilitated by a Search Committee. Some of the options and succession pathways are:

• Recruiting an external candidate

• Promoting a single internal candidate

• Establishing a competition between two or more internal candidates

• Conducting an internal and external search

• Mergers and affiliations

We most often recommend that Boards conduct both an internal and external search to allow for a broader comparison of experience and skills. In addition, we recommend small to mid-sized organizations consider mergers or affiliations as a viable solution to sustainability. 

Succession planning will continue to be a leading priority and focus for Boards in 2023 and while it can be a challenging undertaking, it is necessary for sustainability and continuity.

Governance & Board Development

With the ongoing change and disruption occurring, organizations are experiencing the need to hire new staff or a different variety of talent with expanded skillsets. Equally important will be the need to improve governance operations to align to strategy as well as bringing on board members with new or expanded skills and expertise. 

The process for assessing current and future needs has already begun for many boards as a first step in building a plan for improving capabilities. Some of the common capabilities our nonprofit consultants are seeing include:

• Technology sophistication related to organizational architecture/infrastructure management

• Technology related to business model changes such as: HealthTech, FinTech, EdTech, etc.

• Workforce and Human Resources/Staffing skills

• Expertise in scaling or managing large infrastructure

• Marketing and User Experience (UX) sophistication

An additional factor to consider is each individual board member's experience in working with organizations larger than your own. The infrastructure complexities between a $20MM organization versus a $200MM organization are significant and having individuals on your board that understand the complexities of larger scale (dollars, geographic, services, etc) can help the CEO and operations move in a positive growth direction.

As 2023 progresses, the need to address these themes will become increasingly important. Whether focus is set on one, two, or even all three areas, it is critical to work and act intentionally to achieve the results that will carry your organization into the future.