The Nonprofit Leadership Development Deficit

10/22/2015

Summary

Succession planning is the No. 1 organizational concern of US nonprofits, but they are failing to develop their most promising pool of talent: homegrown leaders.

In more than a decade of research on nonprofit leadership, we at The Bridgespan Group have observed little change in the No. 1 organizational concern expressed by boards and CEOs: succession planning. In survey after survey of nonprofit leaders succession planning comes out on top. In fact, it is mentioned twice as often as the next concern.[1] Our most recent research provides a clue as to why. Only 30 percent of C-suite roles in the nonprofit sector were filled by internal promotion in the past two years—about half the rate of for-profits.[2] Even more concerning, this low promotion rate did not vary by the size of the organization: larger organizations, which should have more opportunities to promote internal talent, are not doing so.

Despite the many articles and numerous discussions about the need for organizations to develop their human capital, too many nonprofit CEOs and their boards continue to miss the answer to succession planning sitting right under their noses—the homegrown leader. Our new study surfaced what we call a leadership development deficit. The sector's C-suite leaders, frustrated at the lack of opportunities and mentoring, are not staying around long enough to move up. Even CEOs are exiting because their boards aren't supporting them and helping them to grow. This syndrome is coming at a significant financial and productivity cost to organizations, undermining their effectiveness and hampering their ability to address social and economic inequities. "In the for-profit sector, I saw organizations saying 'a known is better than an unknown' and work to promote from within," says Amy Smith, chief strategy officer and president of Action Networks, at Points of Light. "I see nonprofit organizations looking outside first for talent instead of exploring the expertise they already have in house." This syndrome won't change unless boards, management teams, and funders change their ways.

Notes

1 Kirk Kramer and Preeta Nayak, Nonprofit Leadership Development: What's Your Plan A for Growing Future Leaders, Amazon.com, 2013, p. 14.

2 Thomas J. Tierney, The Nonprofit Sector's Leadership Deficit, The Bridgespan Group, 2006, p. 17. The Bridgespan Group's June 2015 "Leadership Development Deficit Survey" received replies from 438 nonprofit senior leaders. Jean Martin, "For Senior Leaders, Fit Matters More than Skill," Harvard Business Review, January 17, 2014.

3 Many interpreted this prediction as a "shortage" of leaders—but our focus was in fact on whether organizations would find the quality of leader they needed.

4 The interviews for this study were conducted between 2014 and 2015 and included a mix of survey respondents and other emerging and senior nonprofit leaders.

5 In this study, "senior" leadership was defined as CEOs and all senior functional leadership that report directly to the CEO or COO.

6 Some have hypothesized that low nonprofit leader retirement rates can be explained by financial concerns caused by the recent recession. Our data, however, do not foreshadow a significant uptick in retirements in the coming years. Survey respondents predicted the same rate of retirements in the next two years as they saw in the last two years.

7 David Allen, "Retaining Talent: A Guide to Analyzing and Managing Employee Turnover," SHRM Foundation, 2008.

8 Penelope Burk, Donor-Centered Leadership, Cygnus Applied Research, 2013.
http://www.afpnet.org/ResourceCenter/ArticleDetail.cfm?ItemNumber=17839

9 "Churn: The High Cost of Principal Turnover," School Leaders Network, November 16, 2014.

10 Jean Martin, "For Senior Leaders, Fit Matters More than Skill," Harvard Business Review, January 17, 2014.

11 Ibid.

12 "The CEO's Role in Talent Management," The Economist Intelligence Unit, May 2006.

13 "Readiness, Reticence, and Reality: Social Sector Leadership and Succession Planning," Waldron and Evans School of Public Affairs, University of Washington, 2014.

14 Morgan McCall, "Recasting Leadership Development," Industrial and Organizational Psychology, 2010.

15 Ellen Van Velsor, Cynthia D. McCauley, and Marian N. Ruderman, Handbook of Leadership Development, Center for Creative Leadership, 2010.

16 Preeta Nayak, "DIY Leadership Development," Stanford Social Innovation Review, March 10, 2015.
http://www.ssireview.org/blog/entry/diy_leadership_development

17 The New Path Forward: Creating Compelling Careers for Employees and Organizations, CEB, 2015.

18 Kramer and Nayak, op cit. p. 85

19 Rusty Stahl, "Talent Philanthropy: Investing in Nonprofit People to Advance Nonprofit Performance," Foundation Review, vol. 5, no. 3, 2013; Laura Callanan, "Under-Investing in Social Sector Leadership," Philanthropy News Digest, February 2014.

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