Create effective leadership for your nonprofit organizationSkilled leaders are the lifeblood of nonprofits, supporting optimal performance and mission delivery. But in recent years, keeping these leaders has been difficult at best.
In a 2006 study of U.S. nonprofits, the Bridgespan Group predicted the need for 640,000 new senior managers over the next 10 years. Bridgespan tested this projection in 2015 by surveying more than 400 nonprofit C-suite executives, interviewing senior and emerging leaders, and analyzing related outside studies. The conclusion? Their prediction proved true.
Between 2013 and 2015 alone, survey respondents had filled 43 percent of C-suite positions. While some vacancies were due to sector growth and retiring baby boomers, the vast majority were due to senior staff leaving the organization. Moreover, nearly one in four C-suite leaders said they would leave their positions in the next two years. Should that happen, nonprofits will need to replace the equivalent of every C-suite position over the next eight years — almost 80,000 new leaders per year — which is no small challenge given the already-constrained supply.
A U.K. study among senior charity leaders in 2014 found that one in three cited talent as the most important ingredient for success, yet 81 percent said their organization didn't prioritize talent highly enough. TPP Recruitment, a London-based search firm, reports that four out of five charity chief executives in the U.K. come from the private or public sector — showing a lack of leadership potential from within nonprofits themselves.
Moving on instead of moving up
All of this begs a fundamental question. Why are leaders leaving? According to Bridgespan, the major factor is a leadership development deficit — senior staff who go elsewhere, citing three key barriers to success:
- Low compensation
- Lack of development and growth opportunities
- Lack of mentorship and support, including support from the board
This is grim news for nonprofits. Not only is strong management a leading factor for organizational success, the cost of undesired turnover is high. For example, according to some estimates:
- The cost of finding, recruiting and training a replacement can cost up to half an annual salary, especially at the senior level
- Onboarding an external hire may cost up to twice the annual salary
- As many as 40 percent of externally hired executives fail within 18 months
Success starts with a plan
The good news is that the situation is addressable, and the smartest place to start is a succession plan focused on growing leaders from within. Here's why. Organizations that fail to develop internal talent have more difficulty achieving their goals. For-profits typically understand this and invest accordingly. In fact, many corporate CEOs dedicate significant time and focus on cultivating talent from within.
Nonprofits, on the other hand, have historically looked outside the organization to fill vacancies. From 2013 to 2015, only 30 percent of nonprofit C-suite roles in the U.S. were filled from within — about half the rate of for-profits. This was true even in larger nonprofits, which have a larger pool of talent to draw from.
Steps to reverse this trend include:
- Defining the organization's future leadership requirements
- Identifying promising internal candidates
- Providing the right mix of stretch assignments, mentoring, formal training and performance assessments
Learning instills a sense of being valued
Helping people grow isn't simply about getting promoted. It's about building new skills and experiences throughout a career, or asking people to do things beyond their current roles — and doing so in a way that aligns with organizational goals. But this doesn't necessarily require expensive training or programs. Studies from the academic and corporate worlds underscore that the most indelible lessons stem from a combination of three things:
- Learning through doing
- Learning through hearing or being coached
- Learning through formal training
Some nonprofit CEOs and boards fear their leadership development investments will walk out the door, but recent for-profit research suggests the opposite. Staff members who feel their growth is supported stay longer than those who don't, which is good news for smaller organizations with fewer opportunities for promotions. Plus, employees perform better when they feel valued.
All of this is especially important when it comes to nurturing the next generation of nonprofit leaders. Millennials, who were born between the early 1980s and the early 2000s, place a high priority on learning and career progress — and by 2025, they'll account for an astonishing 75 percent of the global workforce.
While there's much more to be said about the nonprofit leadership deficit and how to address it, one thing is clear. A great deal is at stake, calling for all nonprofits to be part of the solution. Clear succession plans are essential, as well as an investment of time and money in turning internal talent into the leaders of tomorrow.