Looming leadership deficit
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Looming leadership deficitAs nonprofits cut costs, they shortchange a new generation of potential leaders within their ranks. How can they fill the void?
San Francisco Business Times - by Sarah Duxbury
Finding enough suitable leaders in a post-boomer workplace could be the biggest long-term threat to the nonprofit sector — more serious even than the current economic crisis.
The problem is twofold. First, the sector is growing so fast, averaging about 6 percent growth a year, according to Bridgespan Group, that it will be hard to find enough people to fill all the executive positions that will exist within a decade, nevermind filling them with experienced nonprofit leaders.
That touches on the second problem: Nonprofits operate on such tight budgets they lack the resources to invest in training and mentoring for their own internal talent.
The worker shortage threatened by retiring baby boomers has been well-documented across the private, nonprofit and government sectors. But the nonprofit sector is perhaps unique in its limitations to get ahead of the problem in a meaningful way.
“Often in the nonprofit sector, because of the scarcity of resources, issues like training, professional development, leadership development are viewed as the most discretionary items and are the first to go in difficult economic times,” said James Canales, president and CEO of San Francisco’s James Irvine Foundation. “This is really important to the long-term health of an organization and of the sector.”
The nonprofit consultants at Bridgespan found that two-thirds of the time, a nonprofit board hires from outside the organization to fill a leadership position because there just isn’t the strength on the inside. Compare that to the estimated one-third of private sector CEOs being recruited from outside an organization, said David Simms, managing partner of Bridgestar, which spun out of Bridgespan to tackle the leadership deficit.
“The average nonprofit out there doesn’t have a deep bench,” Simms said. “There are not a lot of middle managers as there might be in corporate America, learning the ropes and then able to step into a leadership role.”
The scarcity model on which nonprofits operate, coupled with the difficulty of obtaining unrestricted operating funds, makes the sort of training programs common in private industry a luxury that few in the nonprofit sector can afford.
Change in San Francisco
That’s starting to change, thanks to efforts by Bridgestar, the James Irvine Foundation and Compass Point Nonprofit Services.
Bridgestar opened a San Francisco office in mid-October with two full-time executive recruiters. Their mission is to help nonprofits engage in the sort of searches they need when they can’t afford an industry giant such as Korn/Ferry. Bridgestar also provides ground-level training to people who want to pursue careers in the sector.
The decision to open an office here, Bridgestar’s third after New York and Boston, is based on the strength of the Northern California job board it has run for several years. This year, some 2,000 nonprofit executive positions will be listed there, Simms said.
According to Simms, 90 percent of senior leadership jobs in the nonprofit sector are not posted anywhere online. Rather, board members and employees do a sort of friends-and-family ask to fill positions, which is at best an uncertain way to find quality, experienced leadership.
“We believe fundamentally that results depend on leadership, strategy and capital … and that leadership is the most important to build a strong organization,” Simms said.
Funders like the Irvine Foundation are equally concerned, and have taken a different approach.
Alert to the looming leadership deficit, the Irvine Foundation established its fund for leadership advancement in 2005. Since then, it has awarded 39 grants worth over $2.5 million to provide customized support to executive directors of the foundation’s grantees through executive coaching, visits to peer institutions and funding to attend seminars. The awards have been between $35,000 and $70,000 each.
The foundation is evaluating the program’s effectiveness, but Irvine CEO Canales said that early feedback has been positive and grant recipients are reporting higher job satisfaction.
That, as well as results from a 2006 study called “Critical Issues Facing the Arts in California,” has Irvine prepared to dig deeper into leadership issues facing California arts organizations. The study won’t be complete until 2009, at which point the foundation will determine how it can act to address specific needs for leadership in the arts.
Skills and numbers
Where Bridgespan looked at numbers — how many individuals it would take to fill the gap between expected turnover and recruitment and the available pool of new talent — Compass Point has focused on the skills it must cultivate in the next generation of nonprofit leaders. It has received numerous grants to develop training programs for the sector.
There are some bright signs that could mitigate a leadership shortage. Many baby boomers retiring from their primary, money-making careers choose to put their professional skills into community service at a nonprofit.
And just as many dot-com veterans flocked to the nonprofit sector after the tech crash, many believe there could be a similar migration as a result of the current economic crisis.
“That’s the good news on the supply side, that a bad economy can lead to really qualified talent being available to address huge social needs,” Simms said. “The flip side is, will nonprofits have the resources necessary to avail themselves of the talent.” Indeed, many nonprofits have implemented hiring freezes in a bid to preserve programs.
Nor is the millennial generation, socially conscious as it is, the answer since few yet have the executive experience these nonprofits need, particularly in a recession.
“Boards, in particular, have a critical role to play in terms of nurturing and supporting leadership in the organizations they oversee,” Canales said.
That includes making sure a nonprofit develops its bench and invests in professional development, and that employees, particularly at the top, receive good salaries and benefits. The executive directors themselves must also take responsibility for mentoring their staffs.
But Canales warned against shortchanging the present in an effort to stave off future disaster.
“We’ve been focused on what we can do to help our grantees to foster the current generation of leadership,” Canales said. “A lot of time and attention could be diverted to the next generation, but let’s not do it at the expense of the current leaders, many of whom are on the verge of burning out.”
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