Nonprofits face leadership troubles

Nonprofit organizations face an unprecedented challenge in recruiting and retaining the next generation of leaders, according to a sobering report released this week by CompassPoint Nonprofit Services in San Francisco.

And unless it meets the challenge, virtually every sector of society will feel the effects, noted Linda Wood, senior program officer with the Evelyn and Walter Haas Jr. Fund, a San Francisco organization that three years ago began offering leadership development grants for nonprofits.

"As a society, we are more and more dependent on the nonprofit sector to deliver services, to have strong cultural organizations, to fight on behalf of people with respect to civil rights, to create strong and healthy communities and even to educate our children," Wood said.

Government is outsourcing more work to nonprofit organizations, said Jeanne Bell, executive director of CompassPoint. And most environmental organizations are nonprofit, she added, as are a growing number of community health clinics.

"If we're not building leadership in that sector, it's a no- brainer that there's a lot at stake," Wood said.

The seminal report, "Ready to Lead? Next Generation Leaders Speak Out," describes how the number of charitable organizations rapidly expanded in the 1970s and 1980s, and that longtime leaders of those organizations are ready to hand over the reins.

"What you're seeing are big cohorts retiring all at once, which is creating a lot of questions about the future of the leadership," said Marla Cornelius, projects director with CompassPoint and one of the authors of the report.

In addition, the number of non-profit groups keeps expanding, fueled in part by baby boomers who made fortunes in industry turning to philanthropic ventures, according to a 2006 article in the Stanford Social Innovation Review called "The Leadership Deficit," published by Stanford University's Graduate School of Business.

Between 1995 and 2004, the number of nonprofits with annual funding exceeding

$250,000 grew from 62,800 to 104,700, a growth rate of nearly 6 percent, the Stanford article stated. And between 1992 and 2002, each year saw the formation on average of 2,900 new foundations, which disseminate grant money to nonprofit groups that directly provide services.

As a result, noted Thomas Tierney, the study's author, the nonprofit sector will need to recruit an estimated 640,000 new executives in the next decade -- nearly 21/2 times the number currently employed.

Many nonprofit organizations, Tierney wrote, are "one person away from a leadership crisis."

The "Ready to Lead" report uses data from a survey conducted last fall of nearly 6,000 nonprofit employees, as well as from focus groups held in San Francisco, Milpitas, Omaha, Neb., and Washington, D.C. The survey was conducted by CompassPoint, the Casey Foundation, the Eugene and Agnes E. Meyer Foundation and the online job site Idealist.org.

While respondents reported that they found their work meaningful and satisfying,

69 percent felt underpaid, and 64 percent harbored financial concerns about committing to a public-sector career.

Nearly half of those surveyed worried they couldn't retire comfortably. A 2006 report from CompassPoint, in partnership with the Meyer Foundation, found that three out of four executive directors planned to leave their jobs within five years.

A lack of mentoring also emerged as a significant deterrent to nonprofit staff workers assuming leadership roles. While one in three aspired to lead a nonprofit, only 4 percent viewed themselves as being groomed for executive roles, according to the survey.

"A lot of young people in nonprofits want leadership opportunities," said Wood, with the Haas Jr. Fund. "I think that's as important to them as compensation."

In the corporate sector, two-thirds of senior management positions are filled by internal hires, but in the nonprofit sector, less than one-third of chief executives are hired from within.

Part of the reason, the CompassPoint report noted, may be continuing gender discrimination.

While women outnumbered men three-to-one among the survey respondents, a significantly higher number of men held senior positions, the survey report noted.

In addition, nearly twice as many men as women reported they were being developed to serve as their organization's executive director.

To attract enough high-caliber nonprofit leaders to meet the growing demand, the report outlined a series of steps that executive directors, boards of directors, individual donors and foundations can to take to recruit and retain leaders.

A key is for nonprofit boards and foundations, as well as the public, to support increased salaries and benefits for those working in the nonprofit sector. The report noted that "we tend to undervalue nonprofit work and the people who do it."

And along with better compensation, more support is needed to fund internal development programs.