Greetings,
Gone
are the years when good employees were plentiful and it
was an employer's market. The nonprofit sector is about
to encounter a labor shortage. This could have serious
implications for your nonprofit's future. We thought you
should know about the latest research on this issue. I
hope you find it useful.
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Best regards,
Rebecca Worters
The Nonprofit Sector's
Leadership Deficit
Dear
Colleagues:
Those of us close to the sector appreciate all too well
the importance of building, nurturing, and retaining
strong leadership teams. We understand, as Jim Collins
noted in the February issue of Leadership Matters, that
having the right people in the right roles in nonprofit
organizations is critical to achieving social impact-and
to having a well-functioning society.
Most would believe, and financial realities often dictate,
that money is the resource in shortest supply; certainly
government funding for social programs has decreased.
Studies have shown that fund-raising occupies senior
leaders more than almost any other activity. I know I need
not convince you of this.
Although each of us has our own opinions as to where and
how philanthropic dollars should be distributed, the fact
is that, in total, contributions to U.S. nonprofits
continue to climb. Americans continue to recognize the
need to support nonprofit organizations, and we have dug
deep to support our religious, cultural, social, and
community institutions as well as organizations coping
with disasters worldwide. Moreover, during the next
decades, $6 trillion or more is likely to flow into the
nonprofit sector, as boomers transfer their wealth to
their children.
In addition, the sector itself is growing. The total
number of nonprofit organizations has tripled over the
past two decades. The number of organizations with
revenues exceeding $250,000 has increased from 62,800 to
104,700 in the nine years from 1995 to 2004-an annual
growth rate close to six percent. Almost 100 new
nonprofits are formed each day.
This growth reflects many dynamics, including people's
desire to contribute to society and the increasing
transfer of responsibility from the government sector to
nonprofits serving the public good. At the same time,
another essential resource to the nonprofit sector is
dwindling.
Last week, at the Grantmakers for Effective Organizations
national conference in Atlanta, Georgia, I had the
privilege of sharing "The Nonprofit Sector's Leadership
Deficit," a Bridgespan Group white paper inspired in part
by Bridgestar's work. We found that in 2006, U.S.
nonprofits with revenues greater than $250,000* will need
to add more than 56,000 new senior managers to their
existing ranks. Cumulatively, over the decade from 2007 to
2016, they will need to attract and develop some 640,000
new senior leaders-or the equivalent of 2.4 times the
number currently employed. Even if the sector were to
experience significant consolidation and
lower-than-forecast turnover rates, this number would
likely fall only as low as 330,000. On the other hand,
given historic trends, the total need could well increase
to more than one million new senior leaders! Independent
of financial resources, our sector is confronting a
serious leadership resource shortfall.
The causes for this imminent crisis are complex. The
growth of the sector plays a critical role, to be sure.
Demographics are also key: The oldest of the baby boomers
are just turning 60 and are preparing to step down from
leadership positions in both the private and public
sectors. Other studies indicate that in so-called normal
times, an estimated 10 to 12 percent of U.S. nonprofits
are experiencing leadership transitions. But now the
annual retirement rate could climb by 15 percent or more
by 2010. Who will step up into these roles?
The story told by demographics isn't exactly encouraging,
because a much smaller cohort stands behind the baby
boomers. From 2000 to 2020, the number of men and women
ages 34 to 54 will grow by only three million. Moreover,
very few nonprofits have the resources (or, as one
colleague noted, the luxury) to develop leaders
internally. Rather, as they have in the past, most will
attempt to find solutions through personal networks. Many
will be unsuccessful, however, especially as they find
that existing networks are hard-pressed to surface
candidates with the new skills and perspectives their
organizations need. And the new needs are highly likely to
occur, as government and donors increasingly call for
greater accountability and enhanced results.
The challenge of developing nonprofit leadership has
preoccupied many of us for several years; it was one of
the reasons for establishing the Bridgespan Group,
including Bridgestar. We noted that whereas the for-profit
sector has successfully created a robust infrastructure to
help organizations (companies) and senior talent find each
other, its nonprofit equivalent is significantly less
well-developed. Although our sector is supplied with a
number of top-flight firms that carry out executive
searches for large institutions with substantial budgets
and excellent freelance recruiters, we have neither the
capacity nor the extended pools of talent to respond
sufficiently to the escalating need for new senior
leaders. Serving the nonprofit sector by developing a set
of talent-matching capabilities that can be delivered
nationally (job board, advisory services) and regionally
(executive recruiting), focusing on organizations not
typically well-served by search consultants-and sharing
our knowledge and expertise-is our response.
The scale of the sector's leadership crisis dwarfs any
single organization's ability to respond. There are three
difficult but critical imperatives that all of us must
help to address:
Invest in leadership capacity. Skilled
management is the single most important determinant of
organizational success. Nonprofits must invest in building
skilled management teams-even if that means directing a
greater proportion of funding to "overhead." Boards must
reinforce the importance of building high-quality
management capacity. Philanthropy must deliver the
operating support these efforts will require.
Refine management rewards to retain and attract
top talent. To recruit more and better leaders,
organizations will have to structure more competitive
management packages, particularly in light of the push to
hold managers to higher performance standards. The
greatest rewards of nonprofit careers will always be
intangible, but more attractive compensation is critical
in times of a leadership deficit.
Expand recruiting horizons and foster individual
career mobility. Nonprofits traditionally tend to
hire from a small circle of acquaintances. This practice
is no longer sustainable. Recruitment efforts will need to
expand to new pools of potential leadership talent,
including baby-boomers who wish to continue working,
mid-life career changers seeking greater social impact,
and the young. Equally important, we must reduce
attrition. The sector needs to strengthen and expand its
mechanisms for attracting and developing managers and for
enabling talent to flow freely throughout the sector.
Ensuring career mobility for up and coming leaders is
essential to retaining our best performers.
The
leadership deficit looms as the greatest challenge facing
nonprofits over the next 10 years. As sector leaders we
are all responsible, and we must all be part of the
solution. We must press the philanthropic community to
invest for the future. We must work with our boards, or if
we serve as board members we must be fully cognizant of
what is at stake and support capacity-building efforts. We
have to be accountable for building high-quality
leadership capacity, and we can neither settle for
under-qualified candidates nor offer qualified candidates
substandard compensation packages for the roles we need to
fill. We must be certain that we have clear succession
plans in place, and that we are developing younger leaders
appropriately.
Unless we address these issues and prevailing practices,
the leadership deficit-with its debilitating
consequences-will only widen. I invite you to read the
paper, with the accompanying responses from 14 of the
sector's leaders, and to consider how we can work together
to nurture our sector's leadership capacity and meet
society's escalating social needs.
*We excluded hospitals and institutions of higher
learning from our sample, because of their distinctive
funding mechanisms, specialized pools of talent, and
well-developed infrastructure for developing talent.
Sincerely,
Thomas J. Tierney
Chairman and Co-founder
The Bridgespan Group
Reprinted with
permission from Leadership Matters, March 2006,
The Bridgespan Group.
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