March 1, 2005

Reversing the Confidence Deficit

Paul C. Light, a professor at the Robert F. Wagner School of Public Service, suggests that a lack of confidence in the nonprofit sector has helped fuel the leadership deficit. In this commentary on the 2005 Bridgespan Group report, "The Nonprofit Sector's Leadership Deficit," he suggests ways to make nonprofit leadership more appealing, both to promising candidates and to the pubic, who can help support building nonprofit capacity.

By: Paul C. Light, Professor, Robert F. Wagner School of Public Service, New York University

A commentary on The Nonprofit Sector's Leadership Deficit

The nonprofit sector’s leadership deficit is both a cause and consequence of continued public doubts about charitable performance. The leadership crisis creates inevitable meltdowns in nonprofit performance, which reduces public confidence, which whets the appetite for further investigations, which weakens the case for decent compensation and increased operating support, which in turn creates greater leadership turnover and vacancies. It is a classic vicious circle.

The confidence deficit began growing with the controversies surrounding disbursement of the September 11th relief funds. If charitable organizations received any surge in confidence following the terrorist attacks, it was gone by December 2001, and has not recovered since.

Two-thirds of the public now believes that nonprofits waste a great deal or fair amount of money and almost half also believe nonprofit executives are paid too much. Most importantly for explaining the current level of confidence, only 13 percent of the public says nonprofits do a very good job spending money wisely.[1]

Absent a strong national voice in their defense, many nonprofits have decided to fight these deficits with lower overhead rates. Rare is the nonprofit willing to report and defend an administrative cost structure above 10 percent; rarer still is the watchdog group willing to believe it.

The constant pressure to do more with less has taken its toll on nonprofit organizational capacity. Nonprofit employees report shortages in virtually every resource they need to do their jobs well, from technology to training. It is little wonder that the resulting stress appears to be a significant reason for the transitions that Tierney predicts over the coming ten years. Leaders can only take the pressure for so long. After all, the logical consequence of doing more with less is doing everything with nothing.

However, the sector must do much more than make its call to leadership more appealing. Although debt relief, decent compensation, and a welcoming embrace of for-profit executives who wish to cross over into the sector will increase the pool of potential talent, the sector must also make the leadership more inviting by building stronger organizations both before and after the new leaders arrive. The allure of leading what Tierney describes as a “life-transforming” nonprofit may be strong, but the administrative infrastructure cannot be so weak that talented leaders see nothing but repairs ahead.

Nonprofits and their supporters need only look to the public for the inspiration to provide the financial investments needed for continuous organizational improvement. The decline in public confidence is not about what nonprofits do, but how they do it. The public is not saying “show us the missions,” but “show us the performance.” The same goes for regulators, watchdog groups, state attorneys general, and legislators who see the nonprofit sector as a market for their own visibility and political gain.

Unfortunately for nonprofits, it takes money to spend money wisely and recruit talented leaders. At least for now, however, most nonprofits cannot raise the money to spend money wisely and recruit talented leaders until their can prove they spend money wisely and recruit talented leaders. Until they find the voice to stand together against the unrelenting pressure to cut operating costs, nonprofits will continue to build a sector in which leadership jobs are destinations of temporary resort.

 

FOOTNOTES


1 Paul C. Light, “Rebuilding Confidence in Charitable Organizations,” Public Service Policy Brief, New York: New York University, Robert F. Wagner School of Public Service, no. 1, October, 2005.

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