Yesterday a conversation with the executive director of a nonprofit organization reminded me of many similar conversations over the years.
“Nonprofit leadership is really, really hard. Why is that?” she pleaded. “I’m not sure if my board or staff really understand how much I struggle trying to run this organization. Was it meant to be this complicated?”
My simple answer (which took an hour): “Unfortunately, it is meant to be complicated. Leading the nonprofit organization is unlike anything else because it was designed to achieve a unique purpose.” Here are some reasons why.
Nonprofits have a distinctive social mission, purposes and goals that do not easily lend themselves to measurement. Peter Drucker, the “father” of nonprofit leadership studies, once said that NPOs “do something very different from either business or government. The non-profit institution neither supplies goods or services nor controls. Its product is neither a pair of shoes nor an effective regulation. Its product is a changed human being. Nonprofit institutions are human-change agents.”
The second reason is related to the first. Compared to most businesses with a singular bottom line (financial), most NPOs are asked to manage toward a triple bottom line: financial, social and environmental. NPOs are expected to seek a balanced financial bottom line despite an unpredictable revenue source (donations) and without equal access to traditional capital.
The social bottom line is measured in “outcomes” that identify and attempt to measure “human-change” (to use Drucker’s words). And the environmental bottom line goes way beyond just operating “green.” NPOs are often expected to lead society as environmental change-agents and innovators.
A major factor that creates challenges is often overlooked and underappreciated for its pervasive impact: NPO leaders do not own the resources they are expected to manage. The sector was established with one essential truth: no one person can own or financially benefit from the nonprofit’s resources. The NPO belongs to the community or society at large, and NPO leaders are stewards of resources on behalf of the common good. Non-ownership affects the structure of the NPO (with its stakeholders and boards), the accountability of its leaders, its culture, and even compensation structures and rates.
A familiar cry from many NPO directors is: “Why do we have to have a board? They are so hard to deal with and manage.”
It’s a good question. Why would anyone create a structure with diverse volunteers who generally know less than the director and only meet occasionally, and put them in charge? The board is the main steward or trustee on behalf of the community, donors, and stakeholders. As a diverse group, the board is positioned to safeguard the mission and resources.
Working with a functioning, focused and strategic board will always enlarge the capacity of any nonprofit director. But not every board functions at that level. Boards can impose their own assortment of challenges: intrusiveness, lack of knowledge, diverse priorities, meddling in operations, inactivity, etc.
Leading the nonprofit is also challenging because of the word ambiguous. We’ve said the nonprofit’s implicit “owners” are the community, donors and stakeholders. How much more of an ambiguous group can you assemble? They don’t speak with one voice or always have the same objectives. And their reasons for supporting the NPO are transitive.
Then there is the ambiguous nature of accountability. A for-profit leader’s accountability is defined by numbers: year-end profit, growth rate, ROI, etc. The nonprofit leader is expected to achieve objectives of the stakeholders (ambiguous), identify and measure missional outcomes (ambiguous), increase community support (ambiguous), and do all of this with very limited training or resources.
Finally, the NPO leader is expected to attract and motivate staff while having considerable constraints on compensation and reward opportunities. In the nonprofit sector, we ironically joke as leaders, “That’s why they pay you the big bucks!” No one who is conscientious is getting rich working in the nonprofit world, and yet leaders are expected to be able to attract top talent with the promise of “fulfilling work” and limited pay.
All of the familiar means of associating compensation systems with performance criteria are replaced with restricted budgets and public expectations of leanness and sacrifice.
And so, to all nonprofit leaders, you have our sympathy and respect. Yours is a demanding task that makes our community a much better place to live.
Kent Wilson is a business practitioner and nonprofit leadership specialist with Vistage International in Colorado Springs. Reach him at firstname.lastname@example.org.