Answer Guide: Leadership and Innovation

Today’s executive director must manage, of course; but that’s only a small part of the job. The tough part is evolving from manager to leader. It’s not about hierarchy. It’s about injecting your vision to advance mission throughout your organization. Here we offer up guidance and some of the best resources we know of to help make the transition. 

Table of Contents

What does an effective nonprofit leader look like?

“A strong nonprofit leader drives a sense of mission down through the organization, upward into the board and outward in to the community. He or she is willing to do whatever it takes to enable the organization to follow their mission effectively.” (Light, P. 2002. Grasping for the Ring: Defining Strong Nonprofit Leadership)

Sound like a tall order? It is. In fact, leadership is the starting point to effective performance, organization-wide. To successfully lead and move his or her mission forward, today’s nonprofit leader needs to be more than just “the boss.” Research shows that today’s leader needs a comprehensive set of financial, operational and executive skills that combine the best qualities of corporate-world “C-level” executives (think CEO, CFO,COO, CMO and the like).

The best leaders:

  • Have strong executive, operational and financial skills.
  • Are emotionally intelligent – trustworthy, persuasive, perceptive and flexible.
  • Infuse the organization at every level with a commitment to the big-picture vision.
  • Advocate for the mission at every turn.
  • Collaborate with people and organizations that can help to advance the cause.
  • Motivate people with passion, a proactive attitude and a commitment to set and reach goals.
  • Fundraise and encourage the board to do so too.
  • Clarify board and staff relationships and encourage open communications.
  • Embrace participation, build strong teams and encourage risk taking.

A great nonprofit leader is of course a “big idea” person. But he or she is also the organization’s chief storyteller, brand advocate, brand guardian, crisis spokesperson, chief marketing officer and chief fundraiser. To be effective in these roles, he or she must be authentic, and be able to connect, collaborate, persuade, mediate and negotiate with the best.

A great leader is also the ambassador for the health of his or her organization, both structurally and financially. This means he or she is responsible for building and maintaining relationships that enable the organization to flourish. He or she must recruit and retain the talent, and supply the tools necessary to develop a strong infrastructure and a culture that builds morale.

A great leader is “tapped in”, to his or her constituents, staff, board and the social and economic conditions that affect their mission. Faced with funding shortfalls, increased demand for services, and donors seeking demonstrated results for their dollars, today’s leader is a master at adapting, recognizing challenges to be overcome and seizing opportunities as they arise. Innovation is the name of the game, and a great leader is adept at making tough decisions that drive the mission forward, and keep the organization financially stable.

Most of all, a great leader, leads. Everyone around you should understand where you are headed and why. Ideally, they will live for it. This is where it’s your job to constantly express the mission with enthusiasm and build the big picture into absolutely everything. If it seems like it’s not working, resist the urge to blame. Instead, explore the motivations and interests of employees, volunteers and board members. Maybe it’s time to get some insights into what’s driving people (or not) toward your mission.

What is emotional competency and how does it relate to effectively leading a nonprofit?

Effective leadership is not simply about being a charismatic person. Instead, it’s about gaining a specific set of skills to help you do the job right.

In fact, research has shown that effective leaders have a strong set of emotional skills in common that manifests in a variety of leadership “styles.” This is where a leader becomes more than a manager. And where a nonprofit evolves from an organization doing good to an organization doing great.

These emotional competencies allow a leader the flexibility to choose an appropriate leadership style or approach, to respond fluidly to situations that arise, adapt as needed, and ultimately elicit the best results.

Adapted from The Six Leadership Styles at a Glance, Leadership that Gets Results, by Daniel Goleman, Harvard Business Review, March-April 2000.

By emotional competency or strength, we’re really talking about the ability to manage yourself and your relationships effectively. This is achieved through five fundamental capabilities:

  • Self-awareness. This is the ability to recognize and understand your moods, emotions and drives, as well as their effect on others. Self-aware individuals are self-confident and recognize not only their strengths but also their weaknesses.
  • Self-regulation. This is the ability to control or redirect disruptive impulses and moods and think before you act. This results in trustworthiness and integrity, comfort with ambiguity and openness to change.
  • Motivation. This is a passion to work for reasons that go beyond money or status and a drive to pursue goals with energy and persistence. This results in a strong drive to achieve; optimism, even in the face of failure; and organizational commitment.
  • Empathy. This is the ability to understand the emotional makeup of other people and the skill to adapt according to the reactions of others. This skill allows leaders to build and retain talent. It also results in cross-cultural sensitivity and the ability to effectively service constituents.
  • Social skills. This is the ability to manage relationships and build networks. It’s the ability to find common ground and build rapport. It allows leaders to be persuasive, build and lead teams, and drive change. Source: Harvard Business Review, Nov. – Dec. 98.

It goes without saying that an effective leader needs to have vision and passion along with the analytical and technical skills necessary to master the responsibilities of the job. But emotional competence is really the key to putting it all into practice.

Getting there is possible. With study and practice, anyone can readily overcome tendencies that might negatively affect their ability to build and maintain healthy professional relationships and effectively manage situations that arise. To help facilitate your process, try practicing the skills above. Then, ask for feedback from others and adjust as you go. If you’re unsure, consider approaching a leadership coach for assistance. A coach can offer objective insight to help you see yourself and situations more clearly and guide the changes you wish to make.

What nonprofit functions are most in need of strengthening?

Nonprofits are typically organized into major functional areas, such as: central administration, governance, and programming. To be sustainable over the long term, each functional area must operate efficiently and effectively and take its place as part of the whole.

The problem arises when cutbacks, programmatic shifts, changing funder and donor needs and the like, take the stage. In such cases, resource-strapped nonprofits are stretched too thin. As a result, less essential functions may become neglected and begin to weaken. This, in turn, affects the organization’s ability to fulfill its mission.

According to a recent study by the Weingart Foundation, today’s nonprofits identify the following functions as most in need of attention:

Board leadership and development The need for a strong nonprofit board cannot be overstated. Board members connect the community with an organization’s mission, vision, and values. As stewards, they educate the community about the organization’s work and they support the organization with resources needed to fulfill its mission. They hold the organization accountable and provide fiscal oversight. Many nonprofits are struggling to recruit members who can help move their mission forward and, once recruited, they are unsure of how to keep boards active and participating. For tips on keeping your board engaged, see Boards and Governance.

Program evaluation and strategic learning Nonprofits recognize the need to regularly assess and evaluate programs and operations in order to better target to their constituency, maintain morale and keep their organizations energized. Unfortunately, many of these nonprofits are simply overwhelmed keeping programs running. As a result, they forgo the evaluation and learning opportunities necessary to help build a more sustainable operation. To learn about how you can easily incorporate program evaluation and strategic learning into your nonprofit, read Strategic Planning and Evaluation.

Human resource development Nonprofits need to focus on leadership transition. They need to find new ways to recruit and cultivate “next generation” organizational leaders. They also need to build capacity to recruit and keep talent and supply the technical resources necessary to carry out their work. To learn about strengthening your HR function, see Managing People.

Financial management Nonprofits need to build the financial capacity necessary to maintain organizational stability. And financial viability is key. A stable nonprofit is able to adapt to changing environments and more effectively serve the community. To learn about building financial capacity, read Finance.

Fundraising Though nonprofits and their boards often understand the impact of fundraising in maintaining a strong, sustainable organization, they may think that bringing more dollars in the door is the single answer to their problems. As a result, they underemphasize the need to integrate fundraising with marketing and communications, board governance, evaluation, HR and financial management. In Fundraising, and Marketing & Communications, you’ll learn more about amplifying fundraising and communications by building strong functions in every area.

How to strengthen all of your nonprofit functions Seek out nonprofit capacity-building services in your community. Look for nonprofit coaching and consulting services, organizational assessment services, training and workshops and more. In Southern California, visit to learn more.

What is all this talk about capacity building?

What areas can be addressed to build organizational capacity? How can it be integrated into the organization?

Nonprofit capacity building refers to the activities that help an organization fulfill its mission and sustain itself. This may manifest in the development of mission-focused communications, recruiting new talent, keeping sound financial records, adopting efficient technologies or creating key partnerships. When capacity building is at its best, it allows you to drive your mission forward, meet your goals and have a real impact on the community you serve.

According to Paul Connolly and Carol Lukas, authors of Strengthening Nonprofit Performance: A Funder’s Guide to Capacity Building, organizational capacity should be addressed in six fundamental areas, all of which are critical in building and maintaining a strong, healthy nonprofit.

1. Mission, vision and strategy

These are the agents that power your purpose and direction. A strong, focused mission and a clear understanding of your organization’s brand identity is key. Focused organizations keep their constituency in mind. They are able to articulate value and tie strategy to mission and organizational capacity.

Activities to help you build capacity in this area: Strategic planning, scenario planning, organizational assessment and development.

2. Governance and leadership

A nonprofit is only as strong as those who lead it. This means you need an engaged, supportive board with the tools and resources to effectively oversee policy, mission and goals, programs, finances and the performance of the executive director. You also need a “tapped in” leader, alert to community, funder and board needs, able to recruit and retain talent and supply the resources the organization needs to thrive.

Activities to help you build capacity in this area: Leadership development, board development and executive transition planning.

3. Program delivery and impact

Programming impact is why you’re here. And effective programs are those that truly serve community needs. Evaluation should be a priority as it informs goals, highlights successes and illustrates the impact on the target constituency.

Activities to help you build capacity in this area: Program design and development and evaluation.

4. Strategic relationships

Relationships are everything. Strong nonprofits are led by active, committed individuals who place priority on building and maintaining alliances within the community, as well as connecting with their constituency.

Activities to help you build capacity in this area: Collaboration and strategic restructuring, marketing and communications.

5. Resource development

To be effective, your goals and objectives should be clearly aligned with your mission. At every touchpoint, your organization should link strategic messages to resource development. Support for resource development should come from a variety of sources, creating a diverse, stable revenue flow.

Activities to help you build capacity in this area: fund development and business planning for revenue-generating activities.

6. Internal operations and management

Efficient and effective operations and strong management support systems are necessary to keep your nonprofit healthy and sustainable. Sound accounting principles should be paramount. Your organizational culture should promote open communication and respect, and encourage everyone to do their best. Asset risk and technology management should also be a priority.

Activities to help you build capacity in this area: HR management and training, financial management, operations, technology systems, facility planning, legal issues, volunteer recruitment and management, conflict resolution.

What role does collaboration play in nonprofit management?

In the face of a changing economy, dwindling budgets and stretched-thin staff, nonprofit leaders are beginning to recognize they can’t afford not to collaborate. As a result, organizations are seeking out opportunities to work together in new ways- to leverage resources, share strengths, increase efficiencies, reduce overlap and develop scaled-up organizational model- to tackle our most complex social issues. In fact, collaboration can even be appealing to funders because it increases the likelihood that they’ll see a greater impact for their investment.

What does it mean to collaborate? Simply put, a collaboration is a mutually beneficial relationship with a purpose of meeting common goals. Jean Lipman-Blumen, author of Connective Leadership: Managing in a Changing World, calls collaborative leaders “connective” and writes, “they ethically and altruistically use the self and others as instruments for accomplishing goals.”

Collaboration and partnerships come in many forms. Information sharing, shared grant writing, shared office space and administrative activities, joint programming ventures, organizations that advocate together, and even mergers of two or more organizations are all examples. In every form, nonprofit collaborations result in efficient uses of resources and significant cost savings for the organizations involved. The right partnerships can also bring “like-minds” together to solve larger, more complex social issues.

How to make collaborations work? Collaborations have lifecycles. In the early stages, structure is typically kept to a minimum. As the value of the collaboration increases and membership grows, more attention needs to be paid to the details. Here are some key steps to help you make your collaborations a success:

  1. Know your organization, your constituency and your goals. The more able you are to articulate your mission, values, purpose and goals, the more likely you are to create collaborations that work.
  2. Define the collaboration clearly and tie it to goals and objectives. Ensure each participant’s purpose is understood. Define roles and responsibilities and hold individuals accountable. Build relationships based on trust and open communication.
  3. Get buy-in. Involve key stakeholders and get support from those who can help move the collaboration forward and create impact.
  4. Create a plan of action and follow it. Create measurable goals and evaluate outcomes as you go. Evaluation will help you determine whether to continue the collaboration and in what capacity.

Source: The Fieldstone Nonprofit Guide to Forming Alliances uses the above categories, based on the work of Michael Winer and Karen Ray (Collaboration Handbook) and David LaPiana (The Nonprofit Mergers Workbook).

What does it mean to be a social entrepreneur?

The task of clearly defining the social entrepreneur is not an easy one. The Skoll Foundation defines a social entrepreneur as “society’s change agent: a pioneer of innovation that benefits humanity.”

In Social Entrepreneurship: The Case for Definition, Sally Osberg and Roger Martin define a social entrepreneur as:

“Someone who targets an equilibrium that causes the neglect, marginalization, or suffering of a segment of humanity, who brings to bear on this situation his or her inspiration, direct action, creativity, courage, and fortitude, and who aims for and ultimately affects the establishment of a new equilibrium that secures permanent benefit for the targeted group and society at large.”

And here’s a summary from Wikipedia:

“A social entrepreneur recognizes a social problem and uses entrepreneurial strategies (typically found in the corporate world) to organize, create and manage a venture to make social change. A social entrepreneur focuses on creating social capital. Thus, the main aim of social entrepreneurship is to further social and environmental goals. Social entrepreneurs are most commonly associated with the voluntary and not-for-profit sectors, but this need not preclude making a profit.”

Social entrepreneurs play the role of change agents in the social sector by:

  • Adopting a mission to create and sustain social value (not just private value).
  • Recognizing and relentlessly pursuing new opportunities to serve that mission.
  • Engaging in a process of continuous innovation, adaptation and learning.
  • Acting boldly without being limited by resources currently in hand.
  • Exhibiting heightened accountability to the constituencies served and for the outcomes created.

Source: The Meaning of “Social Entrepreneurship,” J. Gregory Dees, 2001

In other words, unlike a business entrepreneur, a social entrepreneur’s goal is to generate long-term social value as opposed to profit. Their focus is not only toward immediate, small-scale effects, but larger, more sustainable change.

What are social ventures and how are they funded?

A social venture is an undertaking by a social entrepreneur seeking to provide systemic solutions to achieve a sustainable, social objective. Social ventures can be for-profit or nonprofit. What’s important is that they focus on social issues and addressing ways to get society “unstuck,” not just by solving the problem at hand, but rather by changing the entire system, building awareness of the solution and educating and encouraging others to get involved.

Often structured as nonprofits with wide-scale social change as a goal over profit, social entrepreneurs do face significant challenges when looking for funding for their social ventures. Potential sources can vary. If you’re starting a social venture, you might consider approaching banks for loans, or corporations for funding. For example Citibank operates Citi Foundation, a grantmaking organization that may offer funding to social ventures. For-profit social ventures should think about taking advantage of angel investors and venture capital funding. And, there are a number of foundations offering seed-stage grants that can get a social venture started. Try Ashoka and Skoll Foundation to begin. If grants look unlikely, investigate program-related investments (PRIs), which are essentially foundational loans.

PRI basics

PRIs or program-related investments are hybrid grants/loans that provide capital for charitable purposes at below market rates. Specifically,

  1. A PRI helps a foundation accomplish an exempt purpose (charitable, scientific, literary, religious or educational) where the production of income or appreciation of property is not significant.
  2. A PRI should not be used to influence legislation or for political purposes.

PRIs can take a number of forms such as equity investments, below-market loans or loan guarantees, and are often used by foundations to fund requests outside their grant-making guidelines. Though grants are still the preferred choice for funding, PRIs may be a financing source for social ventures.

To learn more about PRIs, visit the IRS website.

How can a nonprofit go from good to great?

In the nonprofit world, where funding is typically mission-driven, innovation often lags behind the need to pursue everyday programming activities. But that’s not to say it’s not out there. Organizations all across the country are innovating to create more impact. In fact, research shows many of these nonprofits utilize similar practices to help them go from good to great.

Recently, Leslie Crutchfield and Heather McLeod Grant published a two-year study of high-impact nonprofits and uncovered six innovative practices that any organization can use to address organizational challenges, build capacity, effectively fulfill their mission and create more impact in the communities they serve. Here’s how your organization can go from good to great:

  1. Advocate and serve. Innovative organizations have recognized that it’s not enough simply to serve a constituency or advocate for it. Great nonprofits bridge the gap between service and advocacy and get good at doing both. This significantly increases their organizational impact.
  2. Make markets work. Innovative organizations are in bed with business. These nonprofits find ways to work with the private sector, influencing business practices, building relationships and developing earned income ventures, all in an effort to leverage the market to achieve larger scale social change.
  3. Inspire evangelists. In the eyes of innovative nonprofits, volunteers, donors and the like are more than just extra hands on deck or dollars in their pocket. These individuals are cultivated, inspired and engaged as evangelists for the cause. As committed voices, evangelists build and sustain networks of “believers” to help the nonprofit achieve larger goals.
  4. Nurture nonprofit networks. Innovative nonprofits see competitors in a different light. They’re keen to build alliances, recognizing networks help people help each other. In this way, everyone thrives.
  5. Master the art of adaptation. Innovative organizations readily listen, learn and adapt to changing conditions, modifying their strategies as needed for a better chance at success. This allows them to sustain impact by staying relevant.
  6. Share leadership. Innovative leaders share power to be a stronger force for good. Leadership is delegated appropriately throughout the organization and the network. Leaders empower staff, board and partners, motivating and driving others to participate, reach and hold themselves accountable.

What role does the board chair play in support of the executive director?

What about succession planning?

As our economy changes along with our social landscape, the challenges facing nonprofits are getting bigger. As a result, nonprofit boards are, by necessity, becoming more diverse, strategic and engaged.

In the past, board responsibilities were viewed as volunteer work and not held to the same standards as for-profit boards. For this reason, members often held more passive roles, tasked with setting policy, receiving reports and approving management’s plans and strategies. To be effective today, board members must take their roles and responsibilities very seriously, as they work hand in hand with the executive director to guide policy, connect with the community, provide financial and strategic support, implement programs and meet goals and objectives.

Today’s board does work that matters:

  1. It concerns itself with crucial “do or die” issues central to the institution’s success. It works with management to set and implement policy and agendas and solve problems together.
  2. It is goal driven, defining clear measures of success. It seeks results that are linked to defined timetables.
  3. Its structure and the actions of members are driven by strategic priorities and circumstance. Emphasis is on flexibility, participation and action.
  4. It requires the engagement of the organizations’ internal and external constituencies. It recruits team members with an eye to collective capabilities and a commitment to support. Adapted from the Harvard Business Review, Sept. – Oct. 96.

Today’s board chair is committed to operating under the guiding principle of what’s best for the organization. He or she facilitates board leadership and good governance. In this way, the chair molds the board’s culture, work and impact.

For this reason, the relationship between the board chair and the executive director is critical, as the two – collaboratively – drive the organization’s mission forward. Here, trust is key. Communication should be open and candid, and each should rely on the other’s strengths in pursuit of their common goal. Both the executive director and the chair should also have clearly defined roles and responsibilities so that everyone understands where one individual’s authority ends and the other person’s begins. This helps to determine what issues matter for the board, and what issues lie in the domain of the organization itself. Adapted in part from BoardSource and the Board Chair Handbook, Second Edition.

Succession planning is another leadership area in which the board should be very involved. Often, nonprofits will operate without a succession plan, expecting to put one in place if the executive director announces his or her departure. But what happens if that departure is unexpected? Have others been groomed for leadership roles? Does the executive director hold critical relationships that couldn’t be quickly taken over by someone else? Will the board know what actions to take when the time comes? It’s also worth noting that there are often other management, staff or board positions that should be considered in a succession plan.

In the Free Management Library, HR expert Sheri Mazurek offers the following tips for succession planning:

  • Do not wait until the employee will be leaving.
  • Focus on policies, procedures and practices, not on personalities.
  • Succession planning is a responsibility of the management, not just the employee.
  • Succession planning should be in accordance with up-to-date personnel policies.

To learn more about board leadership read Boards & Governance.

Is nonprofit sustainability a reality?

The nonprofit landscape is changing and you’re faced with a real challenge. You want to create impact and build a sustainable future for your nonprofit. But is it really possible? Experts say, yes! In fact, Jeanne Bell, Jan Masaoka and Steve Zimmerman, authors of Nonprofit Sustainability: Making Strategic Decisions for Financial Viability, say that when nonprofits begin to understand how to bring programmatic goals together with financial goals, they’ll start to make decisions that lead to organizational sustainability. These experts say that sustainable nonprofits follow these core principles:

  1. Financial sustainability. Sustainable nonprofits always tie impact goals to financial goals. Remember, fiscal health and the maintenance of adequate working capital is as intrinsic to success over the long term as community impact is.
  2. Effective management of hybrid revenue strategies. Nonprofits today are supported by diverse sources. Many nonprofits are looking at alternative revenue-producing models to mitigate funding cuts. Management of hybrid strategies can be a challenge. For this reason, different financial goals must be set for different revenue streams and each must be managed in a different way.
  3. Development of an explicit nonprofit business model. Strategic business decisions can’t be made without an existing business model. For this reason, every nonprofit needs to develop a viable business strategy that brings together all of the organization’s activities under the umbrella of the organization’s mission. In the nonprofit world, programmatic impact strategies will be a significant part of the business model. But each activity should be associated not only with an impact strategy but also a revenue strategy. Thus, the sustainable nonprofit has a “dual bottom-line” – impact and financial return.
  4. Continuous decision-making. Today’s nonprofits face unprecedented challenges. Evaluation, assessment and continuous decision-making are necessary for survival and success when change is constant.

You should also keep in mind that succession planning is also a critical aspect of sustainability because it ensures that staff, leadership and board members don’t take critical knowledge and relationships with them when they leave.

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