To Solve the Succession Crisis, Invest in Homegrown Leaders

The social sector faces a crisis in succession planning. In a 2015 survey of 438 nonprofit C-suite executives, we found that top talent is leaving at an alarming rate. Over the past two years, one in four C-suite leaders departed, and nearly as many told us they were planning to do so in the next two years. If this continues, the equivalent of every C-suite position in the social sector would need to be replaced in the next eight years. No wonder succession planning has been the number one concern of boards and CEOs for more than a decade.

If you are a funder invested in helping an organization achieve impact, this treadmill of turnover should be a cause for concern. Beyond the significant costs and loss of productivity of departures, when leaders go, they also take expertise and stakeholder relationships with them. This directly undermines the ability of organizations to achieve their mission goals.

Just as troubling, when a leader leaves, management teams and boards typically look outside the organization for a replacement. A C-suite officer in a volunteer service organization explained that nonprofits "often start with the assumption that the perfect person is outside their organization." For funders, this should also raise alarm bells. For-profit research indicates that external hires typically take twice as long to become productive as people who have been internally promoted, and as many as 40 percent of externally hired executives fail in the first eighteen months. In the words of the same C-suite officer, hiring externally "often leads to challenges around cultural fit and loss of institutional knowledge."

Fortunately for America's nonprofits, the answer to this succession crisis is right under their noses: invest in the development of homegrown leaders.

In our study, while compensation was important in leadership departures, half of all survey respondents also cited a lack of career development investment as forcing them to leave. For funders, this means that investments in capacity-building activities that can support internal leadership development is key. With an approach that's grounded in academic and corporate research into adult learning, leadership development can be built with time and dedication, rather than expensive trainings or programs.

What does this look like in practice? The Center for Creative Leadership has championed an approach called the 70/20/10 Model, which is premised on the idea that adults learn approximately 70 percent through on-the-job stretch opportunities, 20 percent through coaching and mentoring, and 10 percent through training skill-based programs. This do-it-yourself model of leadership is designed to create a culture of continuous improvement and empowerment throughout the entire organization.

And it's working. At the education crowdfunder DonorsChoose.org, individuals assign themselves stretch goals and receive mentoring support to attain them. Since 2007, the organization has tripled in size and adopted innovative ideas surfaced by team members to achieve greater impact. Its entire seven-person executive team has been with the organization for eight years.

Across the sector, funder support is critical. In our study we found that 58 percent of survey respondents had not received any funding for talent development in the past two years. This is hardly surprising, when you consider that just 1 percent of all foundation funding now goes to leadership development. It is time for a change. As one funder explained, "Organizations need help making leadership development a priority since it is often too tempting to funnel all their time and funding into the programs themselves."

Funders can make all the difference with careful decision making:

Target the root causes of turnover, based on the field or context. This may mean directing resources away from more traditional structures such as fellowships and conferences in favor of building internal leadership development capabilities, enhancing talent management systems, and helping nonprofit leaders learn how to create and execute internal development plans.

Invest in recruiting, training, and performance measurement activities that are explicitly linked to talent development within nonprofits. You can start by creating personal performance plans for a few emerging leaders and grow the practice over time to include all your employees.

Support organizations that are candid about their dedication to capacity-building activities, such as leadership development and mentoring.

The success of vital social sector organizations depends on humans — both now and in the future. With practical, capacity-building incentives, funders can help organizations support and develop their leadership from within.

Libbie Landles-Cobb is a manager with the Bridgespan Group in San Francisco and a coach in the firm's leadership development program, Leading for Impact. Kirk Kramer, a partner in Boston, heads Bridgespan's Leadership and Organizational Effectiveness practice and co-authored Nonprofit Leadership Development: What's Your Plan A for Growing Future Leaders? Katie Smith Milway is a partner in Boston and co-author of Finding Leaders for America's Nonprofits. This article is based on a Bridgespan study, "The Nonprofit Leadership Development Deficit," published today on ssir.org.