It Takes a Great Leader: CEOs Can Make or Break Nonprofit Organizations

Nonprofits are a positive part of many people’s lives, whether they are clients in need of services, donors giving to organizations or volunteers participating in the mission. While most of us have had favorable relationships with nonprofit organizations, unfortunately, many of us can also cite frustrations with them.

Comments like, “If only they ran more efficiently,” “Why can’t they manage their money better?” or “Why do they have such high turnover?” can regularly be heard, and often point to issues that exist at the core of an organization’s infrastructure.

In most cases, the look, feel, practices, attitudes and organizational philosophy emanate from the person at the top of the organizational chart: the executive director/CEO. The board of directors may hire the executive director/CEO, but it is the executive director/CEO who manages the rest of the agency’s staff and who is generally the face of the organization in the community. It is their style, personality, competency and ability to lead that sets the tone.

Nonprofits face a difficult choice when selecting executives. Do they choose to promote someone through the ranks who has extensive programmatic knowledge, but little in the way of business skills? Or do they hire a candidate from outside the organization who possesses business acumen and experience, but who many not have in-depth knowledge of the organization’s programs or mission?

Run Like a Business

There has long been a sentiment in the nonprofit arena that nonprofits are not, or do not need to be, run as successful businesses by business professionals. This concept is described succinctly in Stephen R. Block’s “Why Nonprofits Fail: Overcoming Founder’s Syndrome, Fundphobia, and Other Obstacles to Success.”

Block says, “Historically, nonprofit organizations were not concerned with management proficiency and did not evaluate their progress or their capacity to ensure that they had top-notch managers running programs and effectively directing day-to-day operations.”

The idea that nonprofits do not have to run well to “do good” may have pervaded for decades, but demands from regulators and funders in recent years have become much stricter, increasing the level of knowledge that is required of a nonprofit executive in order to successfully and ethically run an organization. A significant, systemic signal of this shift is the relatively recent creation and availability of industry-related education programs; advanced degrees can now be earned in nonprofit leadership and management.

Because of the comparatively new necessity for nonprofits to be efficient and accountable, it has become apparent that a different type of professional is needed to lead in the nonprofit sector. This, in turn, has prompted many nonprofits to reconsider how they recruit and hire executive directors and CEOs.

“A new emphasis on accountability forced nonprofit boards to question whether their management staff could meet the expectations,” according to Block.

In addition to new regulations, the need for fiscal responsibility and sound management also stems from competition. Nonprofits are in close competition with each other for government and foundation grants, private donations, board members, volunteers, media coverage, legislative and other political support and qualified employees, according to Gary M. Grobman in his book, “The Nonprofit Handbook: Everything You Need to Know to Start and Run Your Nonprofit Organization.”

This phenomenon manifests on a global level. In the 2013 University of South Australia study, “Managerial Control and Strategy in Nonprofit Organizations: Doing the Right Things for the Wrong Reasons?” Basil P. Tucker and Lee D. Parker described the stage upon which nonprofits or non-governmental organizations  operate:

“A recurrent observation appearing in the nonprofit literature is that the lines dividing for-profit and nonprofit organizations are becoming increasingly blurred. Nonprofit organizations now operate in an environment in which they compete for resources and are required to prove as well as to improve their effectiveness. This has resulted in the greater perceived need for them to determine their ‘best’ strategic direction and control their efforts in pursuing this direction. In response, strategizing in nonprofit organizations has become more sophisticated, and control practices to improve efficiency and productivity in supporting strategy have been increasingly adopted within this sector.”

It is this need for sophistication that makes it relevant and timely to examine what we look for in leaders of nonprofit organizations. It is common for nonprofits to be run by executive directors/CEOs who have “come up through the ranks” of the organization, having started on the service delivery frontline. Some of these executives may even be the founder of the organization, who started the nonprofit based on a passion for the mission. An additional subset of these executives may not have experience in the for-profit sector and, therefore, have no basis for comparison.

This can potentially result in organizations that are led by executives who lack the business acumen to successfully plan for growth, manage funding sources and cash flow, and to ensure solvency and liquidity, as well as deal with facilities, logistics, public relations, marketing, fundraising and human resources.

Conversely, program staff and executives often voice concerns that executive directors/CEOs who come from the for-profit sector or who have a strictly business background do not appropriately understand the nuances of what is needed for service delivery and outcome reporting.

It Takes a Special Leader to Bring it All Together

What I’ve described is a pretty tall order for one person to handle. In fact, it would be physically impossible! That means effective nonprofit leaders must surround themselves with people who have the appropriate subject-matter expertise, then give those employees the latitude and authority to make decisions and act on them.

Good leaders cannot have fragile egos. They do not fear input from others, and they aren’t afraid of a flattened organizational structure. They lead by example and foster learning in their employees, encouraging a certain degree of autonomy. They create an atmosphere that allows open, multidirectional communication. They recognize and celebrate excellence in others. They trust those around them; they realize that sometimes mistakes will be made, but don’t use this as an excuse to micromanage in effort to control every eventuality.

Most of all, nonprofit leaders of today must show in word and action that they, and their teams, will act in the most ethical and transparent way possible. The organization will not lurk in the grey areas; it will stand out for following best practices and going above and beyond in order to earn and keep public trust.