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February 24, 2009

Closing the Leadership Gap in Nonprofits

Daniel M. Cain ’72
Member, Board of Overseers; Founding Partner and Chairman, Cain Brothers
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This is part of a series of posts to celebrate the 25th anniversary of the Social Enterprise Program and newly expanded nonprofit and social enterprise course offerings in Executive Education.

Today, the nonprofit sector is one of the fastest-growing areas of the economy. It is doing more and more of what the government used to do in social services, healthcare, education and culture. Along with the growth in this sector, there comes a greater need for leadership over bigger and more complicated enterprises. If nonprofit organizations are not performing efficiently, it affects our whole economy.

Nonprofit leaders have the same accountability to “stretch a dollar” as their corporate counterparts. We’re seeing a great deal more sophistication in how nonprofits operate and how they relate to the board and their constituents. Accountability is strong and forceful, and the media is playing a vital role in making sure nonprofits are accountable and transparent to stakeholders.

Another change we’re seeing in nonprofits is that wealth is no longer available to the same degree as in the past. Increasingly, there is more dependence on operating income rather than philanthropy. The skills required for growing capital on the inside are different from those you need for raising capital on the outside. This shift will transform nonprofits, because they now must be self-sustaining and enterprising.

I recently had the opportunity to work with Betsy Poirier ’08 at the Norman Rockwell Museum as part of the School’s Nonprofit Board Leadership Program. She brought a whole new level of expertise in how to commercially position the museum store on the Internet. Betsy’s experience exposed a real gap between the skill sets Columbia Business School students have and what most museums can attract and compensate.

How do nonprofits close that gap and attract that kind of talent? For starters, nonprofits need to offer compensation and benefits that can compete with for-profit organizations. They must also consider where they need talent. Do they need it at the operating level if it exists at the board level? The need for talent is acute at both levels, especially as demands on board members increase.

One solution to think about is to consolidate nonprofits under “umbrella” organizations. Perhaps several affinity organizations could operate within a “holding company” with administrative, IT and marketing services to better share limited talent and expertise. Nonprofits need to start thinking about what we can do collaboratively, given shrinking community resources. Nonprofits can use economies of scale to access leadership capital. They can also be more businesslike by creating growth paths and sharing corporate overhead and expertise. Community stakeholders will benefit as more output is gained from limited resources. In 10 years, we will not recognize the not-for-profit landscape as it enters the post-2008 world of economics.

Photo credit: Columbia Business School


by Osifo Akhuemonkhan | February 26, 2009 at 11:36 AM

Mr. Cain, I have always been of the opinion that individuals who choose to pursue careers in non-profit organizations are not doing so for the compensation or benefits these organizations offer. Since this is the view held by many, how do you think the boards of these non-profits can manage the paradigm shift that would be necessary to accomplish your first recommendation. That is, how can they convince their donors that it is ok to provide the employees of non-profits similar compensation packages to those received by individuals in the for-profit sector? Part of the allure of donating to non-profits is the admiration donors have for individuals with valuable talent, who have forgone high salaries and are working for the greater good. There is the chance that this admiration could be eroded if the process is not managed carefully.

by The Leading for Wellness Foundation | April 16, 2009 at 5:01 PM

Mr. Cain is quite right in pointing out that non-profit organizations can (and must!) look at innovative ways of blending the best of the non-profit and for-profit worlds. Without losing their inherent devotion to values- and cause-driven organizations, leaders in the sector should expect to be *reasonably* compensated for their talents and their success (take note, for-profits!). While charities/non-profits will never lose their need for philanthropic contributions, they also must be inventive in finding ways to be more innovative and entrepreneurial within the legal boundaries placed on them. This includes considering the option to cross organizational lines and share core services to reduce duplication, as Mr. Cain suggests. It might even mean making the difficult decision to wind down their own complementary (or even competing) programs and devoting their resources and talents to the efforts of other like-minded organizations that have made key breakthroughs which need additional support. Just as in the for-profit world, these are not "one-size-fits-all" solutions. Each has to be carefully considered by an organization's leadership to see what makes sense in terms of serving the broader societal good and the needs of the organization's clients. New thinking carries over to the "investors" that support non-profit organizations. Philanthropists and donors at all levels must recognize that many of the issues being addressed by non-profits are at a level and scale of social complexity (poverty, prejudice, disease, etc.) that may dwarf what a for-profit company is trying to address in producing and selling a new product based on known or even emergent technologies. While the best and brightest minds rose to the challenge of putting humans on the moon within a decade, societies have not figured out how to eradicate issues of poverty, prejudice, or homelessness despite thousands of years of trying. This isn't a question of the sector being inefficient, but one of societal priorities and focus. Building solutions in these areas takes time, effort, and talent that has to be nurtured and supported -- possibly with many potential pathways to success (including a share of failures along the way!). The unrealistic expectations that some funders seem to have for linear results, or that profound breakthroughs come from under-funded and under-staffed non-profits, also needs to be addressed when we're looking for ways to help the sector reach its full potential. In the end, it's worth pointing out that most non-profit leaders have long operated at a level of direct accountability for results that is higher than their corporate counterparts. There are few examples of exorbitant pay-outs or bonuses for non-profit leaders who haven't met their mandates for results, and donors don't tend to reward non-profits that don't deliver on their promises of results. Many have managed to achieve great things with a tiny fraction of the societal resources we are now throwing at failed or failing companies. The learning from today's experience can go both ways. Better leaders equal better futures in all areas of life. Visit www.leadingforwellness.com to learn more.

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