Business Leader as Nonprofit Savior: Maybe It’s Not That Simple

Print Share on LinkedIn More

Money is cascading from the top of a skyscraper, representing the way a nonprofit board of directors can lose money by seeking leadership from the business world.

March 10, 2016; Washington Post

Over the last month, NPQ has been covering the leadership problem at Mount St. Mary’s University in Maryland. There, Simon Newman, the president, tried to use “corporate brash” as his style of leadership, summarily firing faculty and trying to “rebrand” liberal arts. His final gaffe was in trying to implement a scheme that would have lured students into filling out a self-development survey that would have weeded out potential underperformers. The language he used during that discussion was…well, ill-advised, and culturally a very bad fit for a university setting. But the structure of the performance is more and more common.

As small colleges and universities struggle with new economic realities, including lower enrollment rates, some have turned to corporate executives, who they believe will have the financial acumen to make their institutions work as businesses. However, this may not be the best of ideas, since these enterprises are rife with notions of shared governance and academic freedom:

  • “The underlying finances of the institution and the disruptive economy—that’s what’s bringing so many of these people to the fore,” said David Warren, president of the National Association of Independent Colleges and Universities. “Corporate leaders are much more prepared for disruption. Maybe that’s what’s necessary financially, but you can only make those financial changes if you engage the community, listen carefully, lay out the data, involve them in the decision-making.”
  • Michael Victor, a lawyer and former chief executive of a company that manufactured telecommunications products, was recently tapped to lead Mercyhurst University in Pennsylvania. He soon found that universities are far more democratic and transparent than businesses. “If you took a CEO and talked about shared governance, he would think you have two heads,” Victor said. “I think you will see more and more people with business backgrounds running liberal arts institutions across the United States. But I would caution: Unless they have experience as a trustee or a teacher, a visiting professor, they will struggle, and you will run into issues.”
  • Ray Cotton, a lawyer who has worked with presidents and trustees for decades, says simply looking for an outsider with business experience is not the answer. “Boards are looking for people from academia who are and will be respected by the faculty but also know how to run what they call the business side of the university—so they know how to deal with budgets, financing, management issues. They’re not looking for someone to come in from the outside, because they’ve seen some other failures besides the one we’ve seen in Maryland.”
  • Benjamin Ginsberg, a political science professor at Johns Hopkins University and author of The Fall of the Faculty, agrees. “Most scientists at a research university, they’re accustomed to multimillion-dollar budgets they have to handle for their research. Most college presidents who have been academics were deans first and had to learn how to balance the books for their college. […] So this idea of the starry-eyed academic who can’t make the books balance is ridiculous.”
  • John Williams, who took the position of president at Muhlenberg College in Pennsylvania, came in with a successful 30-year career in business, but he believes that argued his decades-long volunteer work on the board of Amherst College was just as vital to making a go of the position. “I understand this is not a business,” Williams said. “But at the same time, it is. It’s a business that has a well-over-$125 million operating budget every year…a lot of aspects that are businesslike. When it comes to curricular matters, student affairs, it’s really an enterprise in culture and understanding how those various constituencies, particularly the faculty and the students, think as people. That’s not a dimension of college that one treats in a dispassionate, businesslike manner.”

Universities are, of course, not the only venues in which such mismatches have been occurring. Readers may remember the case of the now-defunct Center for Building Hope, which bet its future on a businessman and lost the bet and the organization altogether. More recently, we can see the same dynamics at play in the Wounded Warrior Project fiasco, wherein Steve Nardizzi, the now-fired CEO, brought his version of corporate brash—reminiscent of a Nineties movie about stereotypically ugly corporate culture—to the nonprofit realm. Finding a future in a new era will be difficult, but it is not necessary or effective to sell the soul of the enterprise.—Ruth McCambridge

  • Tricia Baker

    Ruth, you are 100% correct in this analysis.

    Unfortunately, I see other institutions choosing the path of installing a business “savior” happening again in my state, with the new appointment of a business person as the head of the entire University of North Carolina system. Students and faculty have protested her appointment, especially since the selection process occurred behind closed doors, only with limited trustees participating. Watch the news in the next three years as the jewel of North Carolina becomes tarnished.

  • Mathieu Despard

    There’s nothing especially wrong with the idea of business planning in nonprofits, yet it needs to be done with a double or triple bottom line framework, with the financial bottom line subservient to social and/or environmental returns. Whether or not business executives can be brought in to lead nonprofits and do so effectively depends on their ability to effectively lead efforts around double/triple bottom lines.