A Problem of Significant Proportion
And the scale of the problem is growing. Currently, a huge proportion of nonprofits are led by members of the baby boom generation who will be retiring during the next decade. Tens of thousands of new leaders will be selected by tens of thousands of boards of directors, managing millions of staff people and serving many millions of clients.
Some of the turnover, then, is natural: people aging, retiring, and giving way to a new generation of younger executives. But in many, even the majority, the displaced leaders are not older and ready for the next stage of life, and there is little about their departure that is natural, peaceful, or productive. Many depart on a sour and dispirited note. They have been fired or eased out, or, seeing the handwriting on the wall, they leave while they can still command good letters of recommendation—not necessarily given because board members believe in these recommendations but because boards would like to see a "peaceful" transition before circumstances get really bad.
Some CEOs are poor stewards, naïve about finance, marketing, and program development and poor managers of their staff. Or, at their worst, they are scoundrels who have embezzled money or betrayed the hope and dreams with which they had been entrusted. For their part, CEOs flee situations that they realize are untenable: unrealistic goals married to limited resources; demanding, micromanaging boards who raise few funds and provide fewer connections to those who have the resources; helter-skelter programs in search of any stray foundation dollar; and poorly paid staff with limited experience or ability.
There are also times when long-standing leaders depart with dignity, when illness makes leadership impossible, or when a bigger, better job looms on the horizon—when leadership "dies of natural causes." But, more often than not, the actual turnover follows periods of contention, behind-the-scenes rumors, wrangling, and accusations that divide and debilitate the nonprofits. Transitions don't generally begin with clear, rational decision making and at clearly marked times. Rather, they build and seethe over time. One of the problems with "rapid transitions" is that they really take place over long periods, during which ill will and organizational ineffectuality build.
Much can be lost in transition. Transitions absorb time and energy from boards and staff. They are costly. Credibility may be sacrificed. Funders and partners wonder if the organization has lost its way, whether it will have the ability to carry out programs, and whether it is trustworthy. Program development tends to slow or stop, awaiting the approval and guidance of the new leader. Staffs may grow indecisive or contentious without a leader to guide. Organizational memory can be lost.
During the transition period, conflict and chaos can sometimes be so unrestrained that the growth of the organization is seriously impaired for years to come. High turnover and poorly managed transitions all too often mean that organizations develop neither stable, experienced leadership nor the opportunity to grow in the planned and steady way that optimizes their potential. Perhaps worst of all, some organizations may fall into a downward spiral of events, precipitated by poorly managed leadership transitions, and move unavoidably toward dissolution.
Some leadership trajectories play out differently. In arenas like community health and legal services, leadership tends to be long lived; some would say it's too long, because the length of tenure clogs the pipeline of fresh younger minds and talents. Turnover in these stable organizations generally follows retirement. After 20 or 30 years with one leader, these organizations can be so set in their ways that it isn't chaos but stagnation that threatens. And it is hard to step into the shoes of the legendary people who founded and shepherded their organizations through so many good and bad times.
These days, however, frequent turnover is more often the rule. Downward spirals are created that go something like this. The organization experiences difficulties. Someone must be blamed; the leader is nominated, putting her under increased scrutiny and pressure and cutting into the trust and credibility that is her prime capital. As a result, she grows less effective, fueling the inevitable movement to replace her. As disappointed as the staff, board of directors, and funders may be in the leader, however, they are equally anxious about life without her, and they hurry to find a replacement. In their worry and hurry, they choose too quickly—a smart person, an articulate person, but one who may be not quite right for this particular organization. Then they place an exaggerated amount of hope in the new leader and her ability to rescue the organization. Almost invariably, she does not live up to the hype—maybe only by a small margin—but staff and board react as though she has betrayed their trust. The downward spiral continues.
There are about 1.4 million nonprofits in the United States today. Every year another 40,000 nonprofits are created. In many cities, they represent between 10 to 15 percent of a region's economy, including an important percentage of jobs and many distinctive services. Collectively, these organizations provide a huge array of services from which local, state, and federal governments have withdrawn in recent years. They are the source of many of the most innovative ideas in social services, environmental advocacy, and the arts, and they are the proving grounds for these ideas before governmental agencies, corporations, and society as a whole adopt them on a major scale. Nonprofit organizations represent both an advanced guard and a sustained voice for social justice. Ever since the nineteenth century, when Alexis de Tocqueville celebrated America's "voluntary societies," nonprofits have been the signature and one of the great bastions of our free society. Allowing them to weaken would be a national disaster.
At the same time, the proliferation of nonprofits during the past couple of decades has created problems. The majority, for example, are small, with revenues between $50,000 and $250,000 and staffs of two to six. They provide limited resources with which CEOs can build programs, staff, or infrastructure. It is hard to succeed in these organizations whose boards tend either toward a "rubber stamp" approach—"friends of Sarah"—with little accountability from the CEO or toward operational boards. Founding boards, for example, often have to roll up their sleeves to stuff envelopes, market services, and manage staff and are reluctant to yield control to anyone, including the CEO. In such cases, control problems naturally arise. Inexperience on the part of both boards and CEOs can exacerbate these control problems. They don't know what responsibility belongs to whom. They haven't lived and worked their ways through crises. They don't know what an effective relationship between the board and the CEO looks like.
The clash of inexperienced, not-so-confident forces—board presidents and CEOs—can provide a flammable mix. Without experience, each event, each challenge can take on a magnified appearance. In the best of situations, CEOs and board presidents balance and complement one another. Problems arise, and in the worst of situations, one person's anxieties fuel the other's anxieties, and one person's criticism leads to defensive responses from the other.
With relatively green CEOs and board presidents, there is a good likelihood of escalating levels of concern and conflict. Our research findings, then, should come as no surprise: Conflict between these two pivotal players may be the most influential cause of leadership turnover. If no lessons are learned with the first transition, this result is likely to repeat itself—the downward spiral mentioned previously. As a result, much too little leadership capital is built.
One hidden but significant victim of the trend toward rapid leadership turnover is leadership itself. There is little time for leadership to grow and ripen. It is rare that skilled leadership emerges full blown. There are those rare beings that had "it" from the start. They were presidents of the homerooms and high school classes—centers of attention in any room they entered. But most people take time to build the skills, confidence, maturity, or even self-image to lead others in effective and sustained ways.
During workshops with people currently in leadership positions, we have asked for a show of hands on who frequently feels like an impostor. Almost everyone raises their hands, expressing more relief at the company than embarrassment at being found out. At the Institute for Nonprofit Management and Leadership at Boston University, whose students are already practicing nonprofit executives, the biggest gain they report is in their level of confidence. Even when these executives are skilled—say in the creation and management of budgets—they tend to feel insecure in their knowledge.
Unlike business leaders who have taken the MBA path, many leaders of small to medium-sized nonprofits have had few objective standards by which to measure themselves. Although an increasing number of nonprofit executives do have MBAs, many are self-taught or taught by others like them. They have "built their ships while they sailed" and may not fully trust the lessons they have learned. They are often extraordinary people who have made do with much less than their corporate counterparts or even than their peers in large nonprofits. But they don't always know how talented they are, and they don't always have the specific training to help realize their talent.
Peter Drucker, a father of management theory and practice, sang the praises of nonprofit leaders—at the same time, tweaking arrogant corporate executives—when he called Frances Hesselbein, the then-CEO of Girl Scouts of the USA, the best leader in America. Bridgespan, the nonprofit consulting organization created out of Bain Consulting and Harvard Business School, implies the same when it says that nonprofit management is more complicated than corporate management. Corporations have only to please their customers and thereby their stockholders. Nonprofits have very different types of customers: the people they serve and the funders they have to woo with equal or even greater zeal. Top-notch nonprofit leaders who are able to manage both markets would be top of the line in any field. But this does not hold for all nonprofit leaders. Many find the complexity and extent of their work daunting.
The same is true for the volunteer leaders who form the boards of small to middle-sized nonprofits and are inexperienced and uneducated in the work of boards. Many have never served on boards before. Individual members might have experience and skills in management, but program or financial management is different from board leadership. Few have chaired boards, with their complex and demanding charge that minimally includes fiduciary oversight, strategy, and policy formation along with hiring, firing, and managing the CEO. Board presidents raise money themselves, connect CEOs to people of influence and wealth, and generally serve as all-purpose advisors to CEOs. It can be and often is a 15 to 30 hour a week job on top of their day job. And, even more than CEOs, many board presidents conduct their job by feel, with little to no formal education in mentoring or coaching to help them. As a result, they may lack clarity and confidence.
Collective leadership on boards is another kind of animal altogether. In fact, it is often the inability of boards to act in concert, to provide coordinated guidance to CEOs, that creates problems that weaken leadership. CEOs, for instance, often enough get caught between differing or conflicting board factions. Some boards drive CEOs crazy through their micromanagement—insisting on attention to and participation in the smallest details. Others act the role of loyal supporters: "Whatever Tom thinks is right is right by me." In the first case, control struggles tend to emerge. In the second, lax program and financial management is overlooked until crises occur. It is the combustible mix of inexperienced CEOs and their boards that leads most often to leadership turnover.