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A nonprofit organization, much like a for-profit company, is only as strong as its leadership. Creating a thriving nonprofit sector that is fueled by innovation requires developing and retaining the best leaders. Businesses spent an estimated $12 billion in leadership development in 2011. The social sector spent $400 million, just .03% of the sector's $1.5 trillion total annual spending (Kapila, 2014). Businesses spend $120 per employee per year on leadership development, while the social sector spends just $29 (Callanan, 2014). From a funding standpoint, foundation support for leadership development was less than 1 percent of overall giving from 1992 to 2011 (Hirschfield, 2014).
Inadequate investment in leadership development has extensive adverse impacts, namely the loss of talent to other organizations and eventually other sectors. The need for nonprofit leaders has grown dramatically, not only due to growth but also because senior staff are leaving their organizations. According to a 2015 study by The Bridgespan Group, one in four C-suite leaders left their position in the last two years and nearly as many planned to do so in the next two years. Based on these projections, the nonprofit sector would need to replace the equivalent of every executive leader over the next eight years. From a purely financial standpoint, this is an exceedingly expensive problem.
Additionally, the costs in productivity are numerous and create a burden on the organization’s human resources. This includes recruiting, hiring inducements, new-hire orientation, and payout of accrued time off for exiting executives. Beyond the short-term costs on human resources, the failure to invest in leadership development can have a long-term detrimental impact that will cripple an organization and stunt growth.
In addition to avoiding the financial burden onset by executive turnover, investing in leadership development also yields a wide array of benefits for an organization. At an individual level, leadership development has been proven as an effective strategy to prevent burnout and leads to improvements in soft skills overall performance. Superior leadership means a better organization, with improvements in productivity and morale, and a greater capacity to achieve their mission. During tough financial times, strong leadership may be the difference between those organizations that thrive and those that are unable to survive. From 2005-2010, 93 percent of organizations participating in the Haas Fund’s Flexible Leadership Awards met or surpassed their mission-advancing goals, and 13 of 14 organizations saw budget increases averaging 64 percent (Kapila, 2014).
On a macro level, leadership development strengthens the nonprofit sector as a whole; it often leads to collaboration and innovation amongst creative leaders. It keeps visionary leaders and their innovative ideas in the field, which reaps benefits for the communities their organizations are built to serve. The social issues that many nonprofits address will not be solved over the course of just a few years, and thus continuity in leadership becomes even more significant in this sector. If the nonprofit sector is serious about seeking solutions to some of the world’s greatest challenges, it must not only keep its leaders from leaving, it must invest in making them better.
With clear benefits to the organization and the sector, the question becomes: what type of leadership development strategy should nonprofit organizations adopt, and how should they execute it?
According to a Bridgespan online assessment of nonprofit organizations, their two biggest obstacles to investing more into leadership are time and money. Assuming this challenge persists and more funding for capacity-building does not become available, organizations need to build leadership development into day-to-day practices. This can start with a top-down approach, where the board establishes the tone in how they will prioritize leadership development in activities like planning and budgeting.
At an operational level, leadership development can be delivered through stretch assignments, which have already proven effective in this context. Stretch assignments allocate tasks to employees that fall outside of their job description, and provide staff with on-the-job development. This emphasis towards hands-on learning is a product of the 70-20-10 model promulgated by the Center for Creative Leadership, which suggests that successful leaders learn through: 70% challenging (stretch) assignments, 20% developmental relationships, and 10% coursework and training.
The model consists of identifying areas for improvement in both professional and interpersonal skill development, and letting them take on the challenge while providing them with the support and coaching they need to succeed. These stretch assignments should be identified annually within the strategic plan, and internal decisions should be made on which employees show the greatest leadership potential to take on those opportunities as the year takes shape. This is usually done with the help of a performance matrix that assesses current leadership competencies and examines potential for growth. Once high-potential employees have been identified, it is necessary to connect that talent to organizational goals.
Leadership development needs to embedded in strategy and taken on with a high level of commitment. The organization is strategic about who it is investing in, and how it is investing in that person. Opportunities for growth are attached to broader goals of the organization, and skill development and mentoring are intentional to those specific areas. For organizations ready to invest in leadership development, this strategic approach should be considered to maximize the impact of the investment.
In order for the social sector to move forward and make the substantial impact it aims to achieve, it must do as the for-profit sector has done, and invest more heavily in leadership development. From funders and philanthropists to board members and executive leadership, actors within the sector must fundamentally shift their mindset around leadership development if this investment is to be realized. As perceptions shift, actions will be taken to incorporate leadership development into the everyday activities of the organization, and over time, it becomes a cornerstone of the strategy. When this happens, not only will nonprofit organizations experience a plethora of benefits, but as a result the sector within which they operate and the communities they serve will be stronger and healthier as well.
Callanan, L. (2014). Under-Investing in Social Sector Leadership. PHILANTOPIC. Retrieved from http://pndblog.typepad.com/pndblog/2014/02/underinvesting-in-social-sector-leadership.html
Hirschfield, I. (2014). Investing in Leadership to Accelerate Philanthropic Impact. Stanford Social Innovation Review. Retrieved from http://ssir.org/articles/entry/investing_in_leadership_to_accelerate_philanthropic_impact
Kapila, M. (2014). The Business Case for Investing in Talent (SSIR). Stanford Social Innovation Review. Retrieved from http://ssir.org/talent_matters/entry/the_business_case_for_investing_in_talent
Adam Rubin is the Co-founder and CEO of RENEW. RENEW is on a mission to inspire, empower, and enable young people to positively impact their communities. It holds workshops that help people realize their potential and empower them as leaders in their community. Adam has worked as a program director and program coordinator for The Foundation for Tomorrow and Support for International Change, respectively. He has also volunteered with the Tucson Interfaith HIV/AIDS Network. Adam has been a grant advisor for The Pollination Project. Adam’s work has been featured in Sedona Monthly Magazine, The State Press, and Sedona Red Rock News, among others. He started a club at ASU as an extension of RENEW and won the Changemaker Challenge and the Woodside Community Action Grant. He is a recipient of the Nonprofit Management Institute’s Nonprofit Management Certificate, and graduated with a Master of Nonprofit Leadership and Management in May 2016.