Developing Leadership from the Inside Out: A Nonprofit Must-Do

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December 17, 2015; Harvard Business Review

Despite all the hoopla about developing new leaders and making plans for leadership succession, most nonprofits usually hire externally according to a study by the nonprofit Bridgespan Group. Only 30 percent of nonprofits fill C-suite roles with an internal candidate as compared to for profits where the rate is about twice that. The report suggests that even large nonprofits—the sort you might assume would have a budget for leadership development—tend to hire externally.  The article then links to another piece by Jean Martin, entitled “For Senior Leaders, Fit Matters More than Skill“.

Martin writes that “our research shows just how dramatic the problem really is. Outside hires take twice as long to ramp up as a leader promoted from within. Astoundingly, C-suite executives report that only one out of five executives hired from outside are viewed as high performers at the end of their first year in house. And ultimately, of the 40% of leaders who are hired from outside each year, nearly half fail within the first 18 months. The direct and indirect costs of the failures are staggering, far exceeding the cost of the search that found the executive.” The research she refers to is apparently done in larger corporate environments.

Some of the Bridgespan reported nonprofit and for profit difference in internal hiring rates might be explained by a lack of alignment between the timing of leadership opportunities in small to midsize organizations and of the development curve of talented individuals; many people develop different skills in different organizations and that leadership talent may be better developed in diverse smaller workplaces rather than with a single long term employer.

And some of the external hire tendency may also have to do with a feeling that the organization needs a different direction – a change and the hiring moment is then used as an opportunity to hire a savior to lead the organization into a new future. This, can, as we know, backfire quite significantly if it is foisted on the organization.

But with or without an executive transition, widespread aligned leadership is powerful, creating more opportunities for sharing power, responsibility and decision making. Even if a new CEO is not chosen from an internal pool, redundant leadership is a good hedge against chaos and the interruptions of an alien hire. After all, it takes time for an outside leader to develop relationships, learn the organization, and set an agenda. Internal guides can ease that transition.

The Martin article makes an additional interesting distinction that acknowledges a new network environment in workplaces and re-emphasizes the fit question, “leading companies are changing their hiring criteria — focusing not just on skills and cultural fit but also on network fit—how well the potential hire will fit with the way his or her new colleagues work. Hiring for this more colleague-centric type of fit can improve performance at the two-year mark by 30%, our research shows. It has more than twice the impact of assessing only for general culture fit.”

Jennifer Chandler and Bill Ryan have emphasized cross training, coaching, mentoring, and other development-under-fire methods, and this is all underscored by the need to encourage the taking of real risks with real consequences in a calculated way over time. Increasingly more organizations are even exploring shared leadership paradigms within and between organizations. Such approaches diffuse skill and leadership ability throughout the organization, creating additional capacity, creativity, and power. The methods pay off in the short term as well as the long term.

Developing leaders such that hiring from within is an attractive option is somewhat like cultivating a garden—it requires thoughtful planning, constant attention, and putting aside the frail individual ego in favor of a resilient system. And even then, one can never be certain that the fruit won’t be picked off by a mischievous squirrel—i.e., another nonprofit. But in the end, the development of a leadership pipeline makes the organization not only more stable but more vibrant and productive.

Another resource for nonprofit leaders seeking to improve their internal pipeline is The Talent Development Platform, a new book by Dr. Heather L. Carpenter and Tera Wozniak Qualls. — Jennifer Amanda Jones