February 10, 2013

Nonprofit Weaknesses Start With Too Few Leaders and Too Many Managers

Too many nonprofits are failing, and it is time to admit it.

To be sure, the nonprofit world is diverse enough that it’s hard to compare a rural health clinic in Alaska to a global fund with an endowment that rivals the size of some African nations’ economies.

But groups of all sizes and missions face glaring weaknesses we must confront:

Tactics outweigh strategy. Challenging economic times expose a common problem among nonprofit leaders: that they often work hand-to-mouth, chasing the next donation or grant, focusing on program and day-to-day operations. Operational expertise is essential to keep an organization running, of course, but nonprofits’ propensity to plug along without a strategic vision does not bode well for their long-term survival.

One reason this happens is that we are too focused on training managers rather than leaders.

Most college and graduate-level curricula about nonprofits do not include or require strategic thinking. Each emerging generation of nonprofit executives dutifully learns to write a budget, develop and evaluate programs, and engage a board of directors. The skills of considering complex external factors, along with learning to live with ambiguity, taking risk, and moving out of one’s comfort zone, continue to be in short supply. 

Executives and boards are chasing money rather than meeting needs. Nonprofit are weak where they should be strong, particularly in fundraising. Too few board members understand the implications or responsibilities of the role, yet because they serve as volunteers, everyone is loath to criticize them. I see boards with the best of intentions hiring the wrong executive directors.

Nonprofits face a dangerous gap in perception. We claim to be “the ethical sector,” but we have no actual code of practice for the important work we do with the public’s trust. Architects, doctors, lawyers, and, yes, even bankers have formal, regulatory structures for accountability within their professions and to promote the standing of their respective industries.

Fear rules too many foundations. Foundations are less inclined than ever to foster and promote innovation, deflecting criticism by pointing to the losses in their endowment values. But wouldn’t the bold way out of this mess be to support more innovation, more research and development, and promote changes in the systems that serve society? It is ironic indeed to consider that early 20th-century American foundations and philanthropists gave money to individuals and served as a needed catalyst for innovative methods and strategies. But fast-forward to the early 21st century, and foundations are now timidly content to support charities that deliver services and little else.

Corporate philanthropy is all but dead. Donations by businesses have been sluggish for decades, with only a handful of companies donating even 1 percent of profits. Any glimmer of social responsibility has been absorbed by marketing departments, so only those causes that provide value to the bottom line get support.

Business is taking the place of nonprofits. All but the very largest nonprofit players are losing their unique role. Companies can make a lot of money in education, health care, and other services, so massive chunks of nonprofit territory are disappearing. Can you really blame the corporate interests that see an opportunity, have capital to invest, and are ready with management models that far exceed those of nonprofits? But as business cherry-picks these profitable ventures, nonprofits are left to take care of basic services for the poor and disenfranchised.

Nonprofits take the wrong message from corporate America. Nonprofits may not be able to shift gears as rapidly as corporations do in pursuit of a new market or mission, but the least we can do is adapt more of the sensible and practical practices of the marketplace. Older nonprofit executives decry that their organizations are “being overrun by MBAs,” but most organizations need more, not less, management expertise to help them operate more efficiently and sustainably.

Inertia rules most nonprofits. Perhaps living too long in the world of serving the poor and disenfranchised has made nonprofits passive and unwilling to claim their legitimate share of the pie. When every recession comes—and I have lived through eight of them—nonprofits are hit harder and for a longer time than businesses or government. Better strategic thinking, leadership, and management could change the odds.

And nonprofits need to learn to merge or, in some cases, die. Nonprofits maintain weak and broken organizations in a delusional way that the real marketplace would never allow. “We seem to get stuck in our own quicksand of inertia,” one nonprofit veteran said to me recently.

Evaluation is still extraordinarily weak. Meaningful measurement on long-range impact would do much to build the credibility of nonprofits, especially among donors, but good evaluation keeps getting pushed aside for another day. Lean budgets due to donor hesitation have only exacerbated this problem. Donor confidence is flat at best because nonprofits do such a poor job of building meaningful measures for their performance.

Too few nonprofits pursue lasting change. Many nonprofits seem to get scared off by the idea of advocating and lobbying for the steps needed to effect real change. Nonprofits must be mindful of the legal rules on advocacy, but that doesn’t mean avoid it altogether. Learning how to navigate local government and the workings of the state legislature is a great start. Building strategic alliances is even better. But for too many nonprofit executives, getting asked to lobby is tantamount to being asked to hand out cigarettes in the schoolyard.

Turf and ego have collaboration in a choke hold. Nonprofit managers don’t think about mergers and partnerships, but leaders do. The redundancy among nonprofits, however created and perpetuated by well-intentioned people, is a terrible waste. No wonder the big foundations are frustrated. “Lone wolf” seems to be the default style of so many nonprofit founders and executives.

Bad economic times have once again underscored that nonprofits have no choice but to confront these challenges and change the way they work if they are to meet our commitment to society.

Richard Male is a Denver consultant to nonprofits.