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Celebrating the Nonprofit Difference

(I share authorship with Gavin Fenn-Smith on this one. A shout out to all the wonderful nonprofit leaders.)

For the past decade, there has been a push to get nonprofit organizations to look and operate more like for-profit corporations.  The reasoning goes something like this.  Nonprofits are underperforming due to notoriously lax management practices, undisciplined decision making, overly emotional responses to challenges, idiosyncratic organizational structures, inadequate operational oversight…and the list goes on.  You get the point.  That is not to say that nonprofits are summarily trashed on all counts.  But as the trend towards greater accountability and measurable outcomes has risen, so too has the insistence that leaders demonstrate more effective management (sic. corporate) capabilities.

At the same time, many talented for-profit leaders who are looking for more meaningful work have flocked to nonprofits to offer their more traditional styles and skills into these organizations.  They, and the nonprofits that hire them, have high hopes that their discipline and experience will bring order to the chaos.  And in some cases, that is exactly what happens.  But the research suggests that at least half the time that dream is never realized.  Corporate types fail to convert a critical mass and leave everyone frustrated and mistrustful…most of all themselves.

This raises an obvious question.  Why do for-profit managers fail so frequently when they enter the nonprofit environment?  But we think the more intriguing question is why do these organizations resist being molded into a corporate image?

We believe the underlying premise is flawed.  The view of nonprofits as deficient is wrong.  We believe that nonprofits are fundamentally different than for-profits and those distinctions need to be understood and celebrated.  To superimpose corporate models and practices onto nonprofits simply does not fit.

Understanding the differences

 Let’s flip the usual equation of forcing corporate disciplines onto nonprofits and imagine instead a for-profit organization shaped to comply with nonprofit operating norms.  To make this a valid comparison, think of organizations with more than 50 people but less than 500.  (In the for-profit world, this includes companies that have moved past the initial startup phase but are smaller than those listed on the Fortune 1000.  For nonprofits, this includes a vast number of organizations.)

Walk into an all-staff meeting and the culture is on full display.  The leaders are not seated in a row looking out at the group but interspersed throughout.  Staff members design and run a good portion of the meeting.  There is an expectation of discussion and challenge on many of the agenda items.  For topics that require decision-making there is an invitation for lively input and a tendency towards consensus.  There are moments to share anecdotes that reinforce the mission or highlight a new idea or learning.  Nearly everyone has protected this time in their schedules so they can be engaged in the conversation.  People want to be with each other, get the scoop, acknowledge achievements and influence the thinking and decision-making.

On any given day, the Executive Director may be called upon to meet with donors, approve grant proposals, attend community meetings with key collaborators, facilitate the staff to reach consensus on a major initiative, solve problems with a field office manager and attend a policy session with the mayor.  These responsibilities are rarely delegated because this is the job description and there are a limited number of functional managers to hand off these duties.  The core skills the ED must demonstrate are passion for the mission, acute and agile interpersonal and communication skills, consensus and coalition building, persuasion and flexibility.

Organization charts are simple and used primarily to identify roles and supervisory responsibilities.  But if you observe daily work-in-action you see people at all levels doing whatever is necessary to get the work done.  There are few hard lines drawn between staff roles and activities.  At the macro level, everyone shares responsibility for achieving the mission so the norm is to pitch in if you are needed.

Some processes and systems are well developed especially if there are government compliance requirements.  But internal work processes are created only when necessary and are generally followed.  There is more attention given to the exceptions rather than the rules when it comes to abiding by routine protocols.  The filter for this is “what is best for this particular client or project”.

The physical office space is adequate and designed to be comfortable for client visitors more so than for the staff.  There are few corner offices, the conference rooms are used for meetings with external partners, visitors frequent the kitchen and there are couches everywhere.

Imagine a for-profit enterprise where the CEO bounces from one discipline to another without functional specialists to delegate the work to.  Imagine a group of employees who wouldn’t dream of missing a staff meeting because of the opportunity to meaningfully engage with colleagues.  Imagine large groups of people coming together to hash out decisions until they arrive at a consensus.  Imagine sharing heartfelt stories about the positive impact on the people you serve.  Imagine fluid and flexible roles with limited concerns about stepping on each other’s toes or stealing the spotlight.  Imagine the energetic focus being on achieving the mission rather than on profits or personal gain.  Imagine an ethos where doing the right thing is more important than following the rules.  Imagine an office space that is designed for outsiders rather than for a hierarchy of leaders and staff.

The research is quite clear.  Many for-profit managers who transition to a nonprofit encounter these norms and want to hit their heads against the wall…even when they have been forewarned.  This environment is not for everyone.  But that doesn’t mean that nonprofits should conform to a set of standards that are counter to their DNA.

 How did we get here?

Why aren’t nonprofit practices viewed as the role model and adopted by for-profits?  Why aren’t these differences seen more positively?  Why is there so much emphasis on nonprofits being run more like businesses?

This whole thrust came about as nonprofits were asked to measure and demonstrate the results of their work.  This unearthed a deficit in many organizations.  They didn’t know how to track, measure and analyze their activities so they needed to learn a whole new set of skills.  As it happens, those skills are deeply instilled in many corporate settings.  Looking more closely, nonprofit leaders appeared to be lacking a host of other accepted management practices.  Decision-making seemed cumbersome and overly consensus-based, roles were unclear and overlapping, systems and processes were loose and idiosyncratic.  In short, nonprofits were seen as lacking basic management practices and many nonprofit leaders were shipped off to classes or received mentoring to develop more “businesslike” disciplines.

That’s all fine and good.  We agree that many of these leaders need to manage their organizations more proficiently and some of the missing pieces are these very skill sets.  But we believe this movement has been overly zealous and may be throwing the baby out with the bath water.  There has been precious little conversation about the more unique requirements for successfully leading a nonprofit.

By imposing traditional (albeit effective) corporate structures and management norms on nonprofits, well-intentioned interventions run the risk of missing the mark. Applying standard practices without an appreciation for the inherent complexity of leading these organizations is short sighted and incomplete.

A third way

Let’s reframe the dialogue.  Rather than retrofitting nonprofits to look and operate more like for-profits, let’s appreciate the distinctive leadership requirements.  Once that is understood then it is clear which corporate management habits fit, and which do not.

Understanding the context of a nonprofit is essential.  The mission is to create social change through services, research or advocacy.  The nature of the work is more “on the front lines”, connected to many constituents, focused on change, embedded in a network of interested parties and emotionally charged.  The leadership responsibilities and challenges unfold within this complex web of relationships, politics, partnerships and ever-changing landscape.  These leaders spend more time out of the office engaging others in the cause than they do inside managing the staff and operations.  For them, the organization is the springboard for impact, not the end result.

In this environment, these leaders must exhibit exceptional emotional intelligence, finely tuned relationship skills, a propensity towards collaboration and consensus building, a high tolerance for ambiguity and uncertainty, an understanding of how all the disparate parts interconnect, an ability to cross multiple boundaries and the flexibility to shape-shift continuously to take care of whatever is needed.  Nonprofit leaders are in the business of change and the instincts and capabilities they bring to their causes are of a different nature.

To be clear, you won’t find most of these competencies and skills listed on a traditional leadership model or on a professional development course curriculum.  This constellation of requirements is unique to the nonprofit reality and critical to their success.  Let’s feature these.  Let’s provide learning experiences to enhance or teach these.  Let’s encourage for-profit folks to take a lesson or two, exporting some fresh ideas into the corporate arena.

Similarly, the internal structures, roles and operations of nonprofits create a different type of culture that also factor into their success.  Here again there is more fluidity, less formality and more attunement to emotions and relationships.  There is greater emphasis on robust discussions, shared decision-making, collaboration and nurturing an esprit de corps.  Although you might witness some of these behaviors in for-profit settings it would be more anecdotal rather than the predominant culture.

We agree that nonprofits would operate more smoothly if the leaders were proficient in standard management practices.  Disciplined standardization of systems and processes, improved monitoring of progress and results and sharpened clarity around roles and responsibilities would have a positive impact on productivity.  That said, it would still play out differently than you see in a typical for-profit organization because of the cultural differences.

Rather than viewing these nonprofit leadership and management behaviors as problematic we see these as strengths.  In fact, many for-profits have spent thousands of dollars on fancy programs trying to create some of these very habits in their staffs with mixed and limited results.  So maybe there is a great deal to value here.

If you blend these unique and admirable skills, behaviors and norms with some well-honed management practices then you have a dynamic and winning combination.  More routine operations can free staff up to focus more intently on the work and bring simplicity into the leader’s day.

Where do we go from here?

Over the coming decade, we will need tens of thousands of new and well prepared nonprofit executives.  The operative word being prepared.  This suggests an imperative for a vigorous focus on talent development in terms of financial backing and creating the most effective learning experiences.

Capital aggregation holds some promise for a more sustainable and strategic funding approach.  A group of funders pool their resources to target a larger group of grantees over a longer period.  Progress is monitored and the expectation is that outcomes and impact will improve without the constant worry about money.  It is too soon to know if this is working but we suspect it will.  Why not target these investments on talent development?

Partnerships and coalitions need to be forged to build the nonprofit talent pipeline much like these funding associations.  We suggest investing in leadership aggregation where one or more significant donors target their grants on a group of leaders within a specific sector or region or community.  The concentrated resources over several years would develop a cadre of prepared leaders to fill the gaps.  If you pull together both financial and talent assets this could go a long way in closing the widening nonprofit leadership gap.

If the funding and commitment were resolved that still leaves the challenge of creating more effective learning experiences that honors the unique circumstances of nonprofits.  New programs and models need to emerge that more accurately reflect the competencies of a successful nonprofit leader.  This needs to be significantly more effective than the ordinary fare that is currently available.  Methods and approaches need to match what is known about high impact adult learning experiences.  They must be experiential, grounded in the participant’s reality, immediately applicable, few classroom style lectures and supplemented by personal reflection and peer support and guided by knowledgeable experts.

We celebrate the strengths of nonprofits and their leaders.  We don’t believe they need to change their spots and become something they are not.  But we do believe they need more appropriate and effective development experiences to improve their own impact and to build the talent of those who are on the rise.  The combination of appreciating the hybrid that they are, more sustainable funding and a new set of learning experiences will go a long way to ensure the future of these organizations.

 

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