Nonprofits face a stark choice: provide meaningful professional development opportunities for potential next-gen leaders, or watch their best talent leave for greater opportunities with other nonprofits. Author Rebecca Koenig makes the case for thoughtful succession planning.
by Rebecca Koenig
A decade ago, an ominous prediction shook the nonprofit world: By 2016, charities wouldn’t be able to recruit the 640,000 managers needed to keep pace with hiring needs caused by growth and retirements. The dire warnings in the 2006 Bridgespan report prompted concerns that a dearth of strong leaders could cripple the work nonprofits do.
Ten years later, nonprofits seem to face the opposite problem, experts say; a lack of opportunities for young, ambitious workers to advance, creating frustration and disillusionment with their career prospects.
The problem is compounded by nonprofits’ lack of investment in manager training, leaving charities unprepared for succession when the day finally comes to turn over leadership to the next generation. The leadership puzzle has become so confounding that some nonprofits have begun to explore doing away entirely with traditional management structures and experimenting with something less hierarchical.
"There’s a lot of young, creative, passionate, committed, smart leaders out there. We just have to give them the opportunity to grow," says Timothy McClimon, president of American Express Foundation, which launched the American Express Leadership Academy with help from the Center for Creative Leadership in response to the 2006 Bridgespan report. The program has served 2,200 nonprofit and social-enterprise leaders.
Recession’s Impact
Katie Smith Milway, Bridgespan partner and head of knowledge, says the 2006 report’s predictions of a severe leadership shortage didn’t come to pass largely because of the recession. "There were fewer retirements, and the growth didn’t happen in as quick and furious a way as we had projected," she says.
Still, the retirements will come eventually, and experts caution nonprofits to be prepared. There are enough potential leaders in the charity world, but they’re not getting the support they need to climb the ladder.
In addition to stifling the careers of young nonprofit employees, lack of investment in leadership development leaves nonprofits without succession plans and vulnerable to high rates of employee turnover as staff members search for advancement elsewhere, says Ms. Smith Milway.
According to a 2015 Bridgespan survey, 12 percent of responding nonprofits saw top leaders leave in the preceding two years for jobs at other organizations. Half of respondents cited a lack of growth opportunities as a contributing factor for that turnover.
New Talent
Another reason the report’s predictions didn’t happen was that increased interest in managing nonprofits among both late-career business executives and talented millennials also helped fill leadership openings at charities, says Mark Lipton, professor of management at the Milano School of International Affairs, Management, and Urban Policy at the New School.
He’s witnessed a stream of corporate leaders — many of whom have experience on nonprofit boards — heading to management positions at charities before they retire.
"These are people who could easily keep coasting and doing meaningful work in prestigious corporations, and they decide to move to the nonprofit sector," Mr. Lipton says. They say, " ‘I want to run a nonprofit shop and really feel that I’ve done something important,’ " he adds.
Over the past decade, he’s also noticed more "very insightful, very sophisticated" people in their 20s choosing to pursue nonprofit-management graduate degrees rather than the MBAs their predecessors sought.
‘They’re Out of There’
But these young people also expect to get leadership training and have opportunities for advancement at charities. Training and professional development were the benefits most often asked for by people applying for nonprofit jobs, according to a PNP Staffing Group report, released in February, that surveyed organizations in New York and Washington.
"They’re treating the nonprofits the same way they would treat a technology start-up," Mr. Lipton says. "If that nonprofit is not leading and managing themselves in a progressive way and they don’t feel they’re learning every day, they’re out of there."
Yet according to Bridgespan’s research, only 29 percent of vacated senior roles at nonprofits are filled by internal promotions, Ms. Smith Milway says. She noted that’s half the rate of for-profit companies, which tend to have strong talent-management systems.
At nonprofits, "it’s really hard to grow within an organization," she says. "People felt they had to move in order to take on responsibility." Many charities are simply too small to accommodate much upward movement by employees. But medium and large nonprofits that could promote their most deserving workers should do so, Ms. Smith Milway says.
More Training
Although external leadership programs like those offered by the American Express Foundation can help train tomorrow’s charity leaders, they are not the most efficient solution, say consultants at Bridgespan and CompassPoint, another nonprofit group that provides consulting services to charities. They call for nonprofits to offer more on-the-job training and mentoring, which they say can cost less and accomplish more than outsourcing those services. And while providing adequate leadership training is top of mind for some in philanthropy, others are more concerned about redefining the very nature of nonprofit leadership.
To Jeanne Bell, executive director at CompassPoint, that means questioning traditional hierarchies and experimenting with leadership structures that "allow for much more organic emergence of people’s talents."
CompassPoint recently adopted "holacracy," a management system most notably used by the retail company Zappos that does away with the traditional hierarchy and distributes leadership responsibilities among employees.
Working to ensure that charity CEOs reflect the communities they serve should be another priority for nonprofits, says Frances Kunreuther, co-director of the Building Movement Project, which studies and helps foster leadership at social-change groups. That requires preparing charities to support new kinds of leaders.
"If we hire a differently thinking leader and then the board freaks out, that’s not going to work," she says. "If we hire a person of color and they’re in an all-white setting and no one is giving them support, that’s not going to work."
She sees the oncoming retirement of baby boomers as the "perfect opportunity" to seek nonprofit leadership models that draw on "new styles, new ideas, new people."
"You want organizations to move forward. You don’t want them to stay the same and stagnant," she says. "We want to honor what came before and now pivot."