CEOs From For-Profits Lack Culture

July 1, 2013       The NonProfit Times      

Foundation and nonprofit CEOs are “more than ever” willing to hire from the private sector for positions on their leadership teams, according to new survey, but among their most common concerns were unfamiliarity with the culture and lack of commitment to the cause. The most likely executive posts to be filled by an internal candidate were in finance and program, according to “Social Sector CEO Trends 2013 Survey.”

The Nancy Bell Evans Center on Nonprofits and Philanthropy at the Evans Schools of Public Affairs at the University of Washington and Waldron, a Seattle, Wash.-based consulting firm, last week released results of the first in an annual survey series.

“The survey broadly illustrates how the lines between the public, private and social sectors are blurring,” according to the report. “Foundation and nonprofit CEOs are more than ever willing to hire from the private sector for positions on their leadership teams. Many mid-career private sector execs are yearning to find more meaning in their work and therefore pursuing impact careers in the social sector.”

Two-thirds of CEOs came from executive leadership or general management but none came directly from a purely HR or fund development position. This likely was due to the CEO role requiring “generalist experience,” according to respondents, as “deep and narrow functional experience is not as useful.”

Only 1 in 10 respondents transitioned to the CEO role directly from the public sector while 34 percent transitioned from the private sector, suggesting “either that boards view prior experience in the social or private sector as essential, or that experienced candidates from the public sector may not be applying for nonprofit CEO roles.”

The issues that caused at least moderate concern about executives transitioning to the social sector were unfamiliarity with the culture (57 percent), lack of commitment to the cause (52 percent) and higher compensation requirements (46 percent). Compensation requirements, however, rated a high concern among the most respondents (31 percent).

For executives transitioning from the public sector, by far the most common “high concern” was a lack of fundraising experience (52 percent), but the next highest concern registered among only 30 percent, which was “a steeper learning curve.” The most common “moderate concern” clearly was a lack of experience working with boards of directors (58 percent), ahead of unfamiliarity with the culture (47 percent).

If there was an opening on the executive leadership team, the most likely posts to be filled by an internal candidate, on a scale of 1 (not at all) to 5 (extremely) were program (3.83) and finance (3.32). Least likely were legal (2.5), human resources (2.82), and marketing communications/external affairs (2.91), although the latter two nearly achieved a neutral score of 3.

Discretionary spending for executive leadership development is most likely to be on performance management, at about 63 percent, followed by executive coaching, 52 percent. About a third might be spent on retreats, and almost as much on succession planning. About a quarter of respondents said incentive compensation and only 15 percent said healthcare coverage.

The top talent-related challenges faced by organizations were cited as:

  • Employee career development, 70 percent
  • Sourcing talent, 65 percent
  • Succession management, 42 percent
  • Ability to offer competitive compensation and benefits, 40 percent

Nearly 500 CEOs, executive directors and presidents of non-governmental organizations (NGOs) and foundations in the United States were targeted for the survey, with responses from 65, for a 13 percent response rate. The survey included 51 questions. NGOs with budgets greater than $25 million and foundations with assets of more than $150 million were targeted but university and hospital foundations were excluded.