Balancing the Mission Checkbook

When the Daring to Lead 2011 report was released a few months ago, a lot of the coverage about this survey of 3,000 nonprofit CEOs/executive directors highlighted that two-thirds of directors anticipated leaving their jobs within five years. The report itself calls attention to this on the first pages with bold letters: “Though slowed by the recession, projected rates of executive turnover remain high and many boards of directors are under-prepared to select and support new leaders.” Despite this, according to the report, fewer than 20% of nonprofits have a documented succession plan that could help boards respond to the departure of the director.

This focus makes me wonder about something: How much impact does the departure of an executive director have on a nonprofit? Of course the executive leadership role is important (as an ED myself, I certainly hope so). But if nonprofits are thrown into chaos or disaster by the loss of their ED, they have systemic problems that need to be addressed. A succession plan will give the board a roadmap to react to a departure, but building leadership within the organization is more proactive and effective. Some nonprofits groom another person to step into the ED role. There are lots of reasons not to lock into a selection prematurely, though.

Shared leadership is one approach to strengthening organizations by distributing authority and responsibility broadly. The article “Doing More with More: Putting Shared Leadership into Practice” in a recent issue of Nonprofit Quarterly reports on a two year study of 27 organizations that put this into practice. The concept of shared leadership isn’t radical or new, but as the authors note:

Most organizations continue to accept a hierarchical structure, with the executive director shouldering an enormous burden of responsibility for organizational success. The LLC participants generally reported that this was true of their organizations. However, we found that this concentration of power was not because executive directors were power hungry. Nor was it even deliberate. It was due to a lack of familiarity with the alternatives.

Implementing this approach requires nonprofits to un-learn some common practices. Success depended on senior leadership’s commitment to change, time to educate and plan fundamentally sound management practices, and engagement and accountability. They found that the 27 organizations adapted the practice to their organizations. One result was that “These organizations’ leadership capacity has expanded. (…) This reduces the stress and potential burnout on the part of executive directors, while helping to advance, develop, and retain other staff.” It seems to me that this would also make the departure of ED more easily managed. Boards could rely on the distributed leadership to maintain stability and agility and help define the profile of the next ED.

I’m also intrigued with the possibilities of this finding, “In many cases, shared leadership has also led to programmatic changes, and many of the participating organizations are beginning to think about how to expand the concept of shared leadership to their boards and allies.” Sharing leadership outside the staff chart could change relationships and impact significantly.

Another proponent of this kind of shared leadership is Leslie Crutchfield, one of the authors of the book Forces for Good. The book examines high-impact nonprofits to discover the common traits and practices. One of the six practices that help these nonprofits to produce results is to share leadership across staff, board members, and external networks.  I’m hoping to learn more about shared leadership and how to implement these practices from Crutchfield when she’s in Minneapolis this fall for United Front 2011. Crutchfield is speaking at the luncheon that is also part of the schedule for the MCN’s Annual Conference.

Nonprofits that develop broad leadership by sharing authority and responsibility effectively will be well positioned for transitions and departures – whether they have a written succession plan or not.

Ah, summer. A time for hammocks, reading on the porch, and leaving early every day. If only this were true. There was a time in my professional life when summers really were slower-paced, with fewer deadlines and urgent projects. I haven’t done any research on this, but it seems that the combination of technology, financial pressures, and recession-driven anxiety and uncertainty results in more demands at a faster pace year-round. Earlier this week in the StarTribune, the column Ideas come to the idle, and we are not by Christian McEwen helped me realize that the pace is not just stressful, it’s counter-productive. We all need some slack in our lives and not having it has consequences.

The same is true for organizations. One of the values of scheduling retreats and off-site meetings is to change the pace and build in some down time, but the need for slack is ongoing. In the article Organizational Slack (or Goldilocks and the Three Budgets), published in the Spring 2007 issue of Nonprofit Quarterly, Woods Bowman offers this definition of slack from management literature:

A cushion of potential resources which allow an organization to adapt to internal pressures for adjustment or to external pressures for change in policy, as well as to initiate changes in strategy with respect to the external environment.

It’s easy to think of all the times when our organizations have needed this. While we may initially think of financial resources, organizations also need a cushion of management, time and staff capacity. Recently many nonprofits in Minnesota needed this kind of slack really badly. In the six weeks or so leading up to the state shutdown, nonprofit staff and board members spent many hours (and many brain cells) developing scenarios, contingencies, communication and HR plans. Every nonprofit I talked with during that time was doing all of this on top of their already overloaded schedules. None of them had built much, if any, slack time in to their schedules or annual plans. In Woods Bowman’s definition, these organizations needed “a cushion of potential resources to adapt to external pressures”. The shutdown’s impact taxed everyone’s capacity. We at Nonprofits Assistance Fund also invested an enormous amount of time in shutdown preparation and response (read the summary of what we did here). Lots of other projects and plans were put on hold, and now the must-do list is really long. Without sufficient slack in our organizational capacity, our choices leave two options: require everyone to work unreasonable hours or take some projects off the list.

Another type of cushion, of course, is financial. Nonprofits that have operating reserves and reliable cash flow were able to prepare for and weather the shutdown with less disruption than those without. Bowman’s article delves into financial capacity as an indicator of organizational slack. Operating reserve balances seem like the obvious measure, but he emphasizes the importance of planned surpluses, capacity to borrow when appropriate and including contingency funds in the budget. Financial slack allows nonprofits to manage cash flow and budget hiccups AND to jump on new ideas, experiment with new strategies, and invest in program redesign. Financial slack also pays for  staff capacity and critical time, especially when needed surrounding the state shutdown.

The lesson I’m hoping I’ve learned is that both organizations and people need some slack all the time, not just for crises. If you’re headed into a planning cycle of any kind, think about how to build organizational slack. You know that you’ll need it.