What The Next Generation Leader Will Look Like

We're walking into uncertain times

What type of talent should The Next Generation Executive Director cultivate in current staff?  What should they look for in new hires? The answer is critical to understanding the changes taking place in our current expectation of the Executive Director’s role and what tomorrow's leader should posses.  If you are running a nonprofit, this will impact your  effectiveness, the effectiveness of your organization and ultimately your career. The qualities that an ED values most in their team sets a standard that affects everything from program development, fundraising, collaboration and the long-term success of nonprofit.

Employer surveys over the past four decades document the growing emphasis upon those “soft” skills: communication, dependability, tenacity.  In fact, the transformation is now so complete that basic technical skills requirement no longer rank in the top five of what employers seek.  As one Director explains, “I can teach them what they need to do a good job, but they need those soft skills like persistence in order to do a great job and add real value to this organization.”

There is also data suggesting that priorities in rudimentary job skill requirements are changing in important ways.  In the public, private and nonprofit sectors it is creativity and teachability which dominate over the basic technical competencies in determining success on the job.

Note it doesn’t say administrative skill, passion or even commitment to mission. In the Age of Austerity, this is an interesting shift.  Thus as the economic environment changes, the threat to traditional nonprofit leaders is titanic.  Retrenchment of government budgets, private household debt burdens, the expansion of venture philanthropy, an emerging legal framework for public benefit corporations all represent fundamental core challenges to traditional nonprofits.  Uncertainty is confronting today’s ED, many of who sense a wave of change coming at them and thus generating a concern about the ability of their staff to deal with it.

This is why The Next Generation Executive Director views creativity and teachability as the essential leadership asset that must saturate a nonprofit.

Might As Well Break Your Business Model Before The World Does It For You

The Great Recession has shaken many of the assumptions held by those in charge. Since half of the EDs in America are 55 and older, this means the majority of our leaders cut their management teeth back in the 70s and early 80s, an age which valued basic administrative skill and virtually ignored creative leadership.  When you consider that 40% of human service nonprofits still conduct client intake via pen and paper, you get a sense that even before the recession we were a few decades behind the curve.

It’s not the technical hardware we’re talking about, but the interconnected mindset.  Most nonprofits just use technology to digitize existing systems, sometimes described by management author Tom Peters as ‘paving the cowpaths’. Today the world is massively interconnected — economically, socially, and politically — and operating as a system of systems. For too many Executive Directors, the answer is that their stakeholders are plugged into their individual social networks, but not to the nonprofit. So what does this look like for The New Nonprofit?  

In a networked age of connection and complexity, emerging nonprofit leaders are stressing fresh thinking and continuous innovation at all levels of the organization. The Next Generation Executive Directors are seizing upon innovation as the necessary element for nonprofits get nimble, reinvent themselves and thus remain significant players in the funding and service community.

Kill Your Sacred Cows

So you’re looking for creative talent and innovative thinking.  What does this do for the nonprofit?

• Question your status quo. Most nonprofits have legacy programs that are sacred cows. Often the need to perpetuate the ‘success’ of these efforts stifles creativity within the organization and thus leaving exciting new options open for other nonprofits to advance competing innovations.  The Next Generation Executive Director understands that new revenues will have to come from new sources, and thus be open to disrupt current programs to create mental space for new thinking.

• Rethink your business model. Directors who prioritize creativity as a need in their staff are more likely to pursue innovation by changing their business model. In an age of change, they surround themselves with talent that can think on their feet and move tactically rather than await direction from the laborious traditional strategy/planning sessions so beloved these past few decades.  Strategic Thinking matters more than Strategic Planning.  The Next Generation Executive Director builds staff capacity to favor continuous, rapid-fire shifts and adjustments to their business models.

• Destroy your institutional lethargy. The Next Generation Executive Director will not await certainty…nor near certainty. Nor will they tolerate it in their staff.  Creative leaders will develop a team that fights the bult-in status quo which urges going slow in the name of ‘considering all options’ or ‘waiting for more information’ before making decisions.  Staff must have strong analytical skills to sift through mountains of data and decide what is relevant. These talents drive decision making that is faster, more precise, and even more predictable.  Creating this type of staff environment takes a combination of vision, strategic awareness and intuitive confidence.  It also requires a certain tolerance of failure as innovation brings risk.  However, in an era of rapid change innovation brings far less risk than maintaining the status quo.  

Any questions?

The Next Generation Executive Director must create a culture which is far more transparent and entrepreneurial. The people in the organization must believe that the changing economy is an opportunity, not a threat. The New Nonprofit understands that risk is to be managed, not avoided. The Next Generation Executive Director is one who can build a fluid business model which gives staff the space to innovate and create.

Something significant is happening to the American economy and to the nonprofit sector. In response to powerful external pressures and the opportunities that accompany them, The Next Generation Executive Directors are redefining the job. They are leading the sector in showing to the rest of us that in an age of uncertainty that there is a creative path forward.  There is a new generation emerging. Is that you?

Hire Slow.....Fire Fast

Did you know that the median nonprofit spends 73% of it's budget on personnel?   Yep, three quarters of the cost of doing business is your people.  It's another reason why having the right talent in place means more than the right strategic plan or the right social media buzz.

But our experience is that nonprofit leaders (especially in human services or education) are reluctant to do what's best and cut underperforming employees loose.   Oh, there are the toxic employees, but were not talking about those.  It is the ones we like personally...the ones who work hard, get along with others, display all the emotional intelligence called for by management experts.....and yet they're not getting the job done.

In this two minute clip, Ken Schiller, co-founder of Texas restaurants Rudy's and Mighty Fine Burgers, provides an excellent example of well liked and respected employee who was an excellent manager when the company was small but did not grow as the company grew.  Becasue Schiller really liked the guy and appreciated all he had done in the early days, there was severe hesitancy to make the move.  But Schiller learned from this and his advice to us all is Hire Slow, Fire Fast

Can The Nonprofit Sector Stop Acting Like A 'Charity Case'?

I recently met Dan Pallotta at the Social Venture Partners International conference. He wowed the crowd with the argument that if society is to demand nonprofits ‘operate like a business’ then we should free these organizations to invest in non-program activities which can increase revenue and expand programming.  It’s central to the argument in his new book Charity Case: How the Nonprofit Community Can Stand Up For Itself andReally Change the World

Pallotta is well known for having a bit of an axe to grind.  His private firm, PallottaTeamWorks, was a highly successful fundraising company managing an array of high profile bike rides and walks.   Organizing of events for AIDS and Breast Cancer in the 1990s, Pallotta virtually created an entire mass Bike/Ride industry which generated over $500 million from donors and sponsors.  An impressive feat.  However, Pallotta’s business collapsed in 2002 after a flurry of news stories questioned excessive overhead and fundraising costs (one AIDS ride raised $28 million of which only $8 million found its way to the beneficiary nonprofits) .

Six years after the collapse of his business, Pallotta published Uncharitable: How Restraints on Nonprofits Undermine Their Potential, a book which asked the question: Why are nonprofits discouraged from employing business practices such as marketing, paying attractive salaries for effective leadership, or devoting more to overhead when the return on investment is warranted?  Charity Case builds upon this theme and proposes a set of intersting if somewhat problematic solutions.

We’ve witnessed the rise of  various ‘watchdog’ agencies which inundate the public with tales of astronomical overhead and excessive salaries at nonprofits.    Such stories coming out of groups such as Charity Navigator are guaranteed to get headlines with a news starved press.  And while these types of accounts about inflated expenses and sparse funds going toward the mission of the organization garner public attention, they are not representative of the nonprofit sector.  Still, they create a ‘master narrative’ that administration is evil and that dollars should go strictly towards direct services.

Dan Pallotta

Just because something can be measured doesn’t mean it should be measured. This includes “x% going to the cause”.   It's too crude to assess the effectiveness of a gift based on how much of that donation goes toward programming. In Charity Case, Pallotta rightly revolts at this simple evaluation. A low overhead does not mean the programming is effective, a high overhead doesn’t mean it is wasteful.  After all, who remembers the overhead ratios at the March Of Dimes?  Does that make a difference since the end product was a Polio vaccine?

Yet it's easy to default to examining overhead ratios and administrative salaries because the work of assessing the real impact of nonprofit’s work is significantly harder. It takes hard work to understand a nonprofit’s programs and thus assess the true impact. It is only in this context that one can understand what operating costs are needed to be effective.

This ‘overhead’ mindset ultimately inhibits the nonprofit sector’s ability to grow because of the demand that dollars go into direct services and not administration. Yet if nonprofits cannot take risks, innovate and grow, they can never build organizations of a scale needed to address our greatest human needs.  Pallotta provides several cases which highlight how  in the face of this dilemma, the nonprofit sector is silent, defenseless, and disorganized. 

Consider the case of Roxanne Spillett, the CEO of Boys and Girls Clubs of America (BGCA).  In her eight years at the helm she doubled the number of kids in BGCA and grew chapters to almost 4,000 nationwide.  Revenues tripled over this period to $1.5 Billion.  By almost any metric you wish to apply, her record of success is praiseworthy.  That was until Senator Chuck Grassley discovered her salary/compensation neared the $1 million mark.  Congressional Committees, media attention and public outrage ensued which eventually led the BGCA Board to accept her resignation.  But never once did anyone ask whether a leader who could triple the size of a proven effective nonprofit wasn’t worth a salary equaling 0.075% of the budget.

In a political era where anyone in any business making over $250,000 is demonized as some predatory leech on society, having the added burden of working for a nonprofit meant Spillett and BGCA didn’t stand a chance in the court of public opinion.   In Charity Case,  Pallotta cites a letter he received on this subject:  "The sector has fallen into a trap we created. By focusing on what we DON'T spend, and not on what has been accomplished, we have completely missed the mark in our messaging. We are part of this problem and it's up to us to educate our way out of it." 

The nonprofit sector’s wounds are self-inflicted.  We not only verify the public’s sack cloth perception, we encourage it. This is main argument of Charity Case and it is Pallotta’s crusade to turn around the public's perception of the work of non-profits.

Thus Charity Case vividly encapsulates the issues before us. Unfortunately, as the founder of Advertising For Humanity and the Charity Defense Council, Pallotta’s solutions come off sounding somewhat self-serving. To wit:

• An “anti-defamation league” to respond to and rectify inaccurate reports about the sector in the media
• Big public advertising campaigns for the sector
• A “legal defense fund” to challenge unproductive laws against the sector
• Work to create a “National Civil Rights Act for Charity and Social Enterprise” to support the sector

Some of this is flat out redundant as there are already similar efforts underway at CForward and the Independent Sector. However, the idea that the entire nonprofit world could rally around one or more advocacy organizations is suspect.  The legendary Pablo Eisenberg, senior fellow at the Georgetown Center For Nonprofit Leadership Institute, argues that “nonprofits will never share a broad consensus about which issues are most important. The best we can accomplish is to strengthen their individual advocacy and lobbying activities and join with other organizations in coalitions that fight for specific policy changes.”

While a provocative description of the problem, Charity Case offers solutions that are flawed and unrealistic. If the public’s perception of overhead ratios and administrative salaries is faulty, a more productive effort would be to strengthen the sector’s ability to communicate the actual impact of charity work. This is what keeps donors coming back.  One suspects that if Pallotta had been able to do that back in 2002, his fundraising business could have survived the questions about overhead ratios.

The trend in publishing is to put forth volumes such as “Problem ‘X’ and What To Do About It” or ‘The Latest Outrage: Three Steps To Fix It”.  So often these books fall flat in the ‘what to do about it’ chapters and Charity Case can be categorized as such.  However, sometimes it’s enough just to vividly describe the problem, and in this Pallotta succeeds.  This makes Charity Case a worthwhile read. 

Assessing Risky Strategies

Just got off the phone with an organization I've been advising for years.  They are, like some others, in a panic due to a reduction in their state grant....resulting in a loss of 55% of their income.  Yes, it's a crisis, but it's one of the most predictable crises imaginable.  Their work is tangential to core education, so was always likely to feel the ax....and when the financial meltdown came in 2008 I thought it would provide the motivation for the Board to take some risks in order to diversify funding. 

Although we looked at several projects and concepts, the Board never was willing to move in a new direction.  For them, Business As Usual was the strategic choice...and now there's hell to pay.  In the end, the Board was always reluctant to strike out on a different path lest they encounter failure.  It was easier (and more comfortable) just to keep on what they were doing in the past.

I've said it over and over and over, The Status Quo Is Not An Option.  So how can you encourage your nonprofit to open up to new possibilities.  I find a facilitated discussion of these five questions extraordinarily helpful:

• Why is this risky?
• Why is our new initiative better than doing nothing?
• What's the worst that could happen if we fail?
• Even if we fail, what can we learn from the new imitative?
• Is there expert opinion about our initiative?  What do these experts have to say?

If you're working with your Board on strategic discussion which will really push the boundaries of the organization, try these questions.  You'll make progress.