Nonprofits Face Internal Leadership Shortfall

Nonprofit senior managers are engaged in an elaborate game of musical chairs, with 44 percent of C-suite positions filled during the past two years taken by members of other organizations. Internal promotions have resulted in just 29 percent of new hires, half the rate of the for-profit sector.

“The Nonprofit Leadership Development Deficit,” produced by The Bridgespan Group of Boston, Mass., and released today, follows up on its similar 2006 leadership deficit report, according to Katie Smith Milway, the paper’s co-author and partner and head of knowledge at Bridgespan. In 2006, Bridgespan predicted that a large need for nonprofit leadership would be caused by the retirement of Baby Boomers. The recession reduced the impact of retirements, but leadership gaps still occurred due to what Milway described as a “revolving door.”

“The turnover has been really high,” Milway said. “That’s critical as turnover is expensive. We think of it as the leadership development deficit, the failure to develop internal leaders.”

The report’s findings include:

  • 43 percent of the 438 C-suite executives surveyed for the report had filled a C-suite position during the past two years;
  • 13 percent of those surveyed filled a newly created position;
  • 10 percent replaced leaders who had left for a position at another organization;
  • 7 percent filled positions previously occupied by employees who were asked to leave; and,
  • 6 percent replaced retired leaders.

Further turnover is likely coming, according to the report’s authors. Of those surveyed, 32 percent indicated that they plan to remain in their current roles for two years or less and 69 percent stated that they plan to move on within five years.

Pursuing higher compensation was cited by 57 percent of leaders who took positions at other organizations, according to Kirk Kramer, co-author of the report and partner at Bridgespan. Half of moving leaders described a lack of leadership development at their previous organization as a reason for departing. Bridgespan learned through interviews with senior and emerging leaders that a desire to expand skillsets within roles and a lack of learning and growth opportunities also led for movement. “We heard in our interviews that people felt compelled to move on to move up,” said Milway.

Turnover poses potential negative effects, such as the risk of improper fit and productivity lost as a new leader adjusts, according to Milway and Kramer. “What worries us about the 44 percent from nonprofits is it’s unnecessary,” Kramer said. “Would you have less of that if there was more development, less potential for a cultural misfit? To us, it’s a treadmill that has productivity loss that we could avoid.”

Boosting leadership salaries would be a challenge for many organizations, Kramer acknowledged. Improving leadership development, however, is more management challenge than expense. Creating a performance potential matrix for employees with axes for job performance and leadership potential is a means of identifying future leaders, Kramer said.

After identifying a few areas in need of improvement for the employee to grow, organizations might use a 70/20/10 method to develop future leaders. The method puts a 70-percent emphasis on stretch opportunities, 20 percent on mentoring and 10 percent on training. The sorts of stretch opportunities, mentors and training the employee is provided with are informed by the needs of the employee, according to Milway and Kramer. “You get to develop capabilities. People who do that systematically find that they are able to retain folks and build much more of a pipeline,” Kramer said. “I don’t think it’s magic. It’s work by the executive team to work to think how they think about development.”