Striving for No Difference: Examining Effective Leadership Between Nonprofit and For-Profit Contexts

Article and Author Information

Eric Johnson wrote this article in December 2012 for the Capstone 3 Research Analysis and Interpretation course. This executive summary assignment is the culmination of a nine-month capstone research project. Eric will graduate from the MSLOC program in 2013. He is the Director of Development and Capacity, Illinois Network of Charter Schools and serves on the board of the Association of Fundraising Professionals - Chicago Chapter.

Abstract

This study seeks to contrast leadership in nonprofit and for-profit contexts and to develop a richer understanding of how effective leadership emerges within one context over the other, or within both. The study's primary purpose is to address the question: To what extent does effective leadership vary between nonprofit and for-profit contexts?

Through interviews, 10 Chicago-based, nonprofit chief executives with corporate leadership experience illuminate contextual distinctions between the sectors. Most notably they suggest that, contrasted with for-profit enterprises, nonprofits may have 1) employees with fewer skills or less experience, and a wider range of professional motivations; 2) more diverse workforces, 3) more obstacles to measuring performance; and 4) a wider variety of stakeholders. Nonprofit leaders must consider these factors in order to effectively lead their organizations.

Research Question and Methodology

Many popular articles and reports have addressed the U.S. nonprofit sector's leadership deficit during the past five years. In particular, The Bridgespan Group published a seminal research study in 2006 that sparked widespread attention among practitioners concerning the next generation of nonprofit CEOs, Executive Directors, and top-level managers. The Bridgespan study suggests that over a 10-year period nonprofit organizations would need to develop 640,000 such leaders, nearly two and a half times the number of executives and directors employed in the sector at the time of the study. Under a worst case scenario, the study proposes that this figure could be as high as 1 million (Tierney, 2006, p. 34).

Several other popular studies soon emerged to reinforce interest in the future of nonprofit leadership. Many such studies trend towards existing talent within the sector. They put forth recommendations regarding sector leadership (current and emerging) based on self-reported survey data of nonprofit employees (Bell, Moyers, & Wolfred, 2006; Cornelius, Moyers, & Bell, 2011; Dobin & Tchume, 2011; Solomon & Sandahl, 2007). Other works cite multiple leadership sources, suggesting that nonprofits would need to employ a variety of means, including recruitment across sectors, to identify new leaders (Johnson, 2009; Tierney, 2006). While they debate its severity, such studies acknowledge that inter-sector talent pipelines can mitigate the potential deficit suggested by Bridgespan.

The nonprofit sector is now past the midway point of Bridgespan's 10-year forecast, and several timely developments color the conversation regarding the sector's future leadership. Both academic and popular literature discuss, for instance, various related phenomena: 1) the emergence of nonprofit marketization, processes by which nonprofits assume behaviors and characteristics of for-profit enterprises (Beck, Lengnick-Hall, & Lengnick-Hall, 2008; Dempsey & Sanders, 2010; Eikenberry, 2009; Eikenberry & Kluver, 2004; Hansen & Villadsen, 2010; Sanders, 2012); 2) sector-bending, a range of developments according to which nonprofits and for-profits "are behaving more similarly, operating in the same realms, or both" (Dees & Anderson, 2003, p. 16); and 3) consistent calls, more generally, for charitable organizations to "act more like businesses." Scholars, pundits, and practitioners alike, while their opinions on the topic may vary, are increasing their focus on how the nonprofit and for-profit orbs are colliding.

According to the literature, however, research has not sufficiently distinguished the context of nonprofit and for-profit organizations, especially how it effects leadership in either sector. One reason for this owes to the wide range of definitions under which context can be considered. Context can represent discrete organizational components, such as culture and structure (Porter & McLaughlin, 2006; Shamir & Howell, 1999) and work settings and geographic location (Rousseau & Fried, 2001), or a by-product of social construction, where it is up to the actors involved to interpret their environment and its meaning (Fairhurst, 2009). In addition, in their studies of context across sectors, scholars have focused on specific contextual elements of nonprofits and for-profits, one or a few at a time (Beck, et al., 2008; De Cooman, De Gieter, Pepermans, & Jegers, 2011; De Hoogh, et al., 2005; Egri & Herman, 2000; Sass, Liao-Troth, & Wonder, 2011), rather than taking a general view that seeks broader contextual distinctions.

To the extent that the nonprofit and for-profit sectors are "bending" towards each other, it is unlikely that the two will ever fully overlap. The nonprofit (or "third") sector occupies a unique space between the public, governmental sector and the market-driven, business sector (Sanders, 2012). As such, meaningful contextual distinctions could characterize nonprofit and for-profit organizations indefinitely, a condition that is especially relevant for nonprofit practitioners as they mine multiple sources for new sector leadership. However, there is no doubt that the relationship between the nonprofit and for-profit worlds is shifting. There is also little doubt that a significant number of nonprofit leaders will continue to come from outside the sector.

This study seeks to address the question: To what extent does effective leadership vary between a nonprofit and for-profit context? In doing so, the study will contribute to the current academic taxonomy, but it will also put forth practical applications. For the broader sector, it will help to determine the extent to which individual nonprofits must 1) train or prepare for-profit leaders entering the sector; and 2) build the capabilities of current nonprofit employees, should they be more likely than their for-profit counterparts, to effectively lead within a nonprofit. For nonprofit executives, especially heads of organizations and human relations and operations officers, such insight would help to improve succession planning and to more effectively consider situation-person fits. For associations, consortia of organizations, and consultants, this study can enhance understanding of the larger "private" sector, which includes for-profits and nonprofits, and the relationship between the two. And for business leaders, generally, who seek "radical" career changes, it can help them to recognize and better prepare for positions in nonprofit leadership.

Research Methods

This study took a phenomenological approach to understanding the experiences of executives who have held leadership positions in both sectors. By exploring the "lived experience" (O'Leary, 2010, p. 119) of leaders who have made career transitions from a corporate to nonprofit environment, the study targeted highly-credible data that compares and contrasts leadership in both contexts.

The researcher used a semi-structured protocol to interview nonprofit executives who have had these experiences. Such a format afforded each participant ample opportunity to answer at length and in detail, but allowed the researcher to maintain control over the interview's core purpose (Rubin & Rubin, 2012). The interview protocol employs concepts put forth by Porter & McLaughlin (2006) in their review of leadership and organizational context. These concepts include 1) Culture/Climate, 2) Goals/Purposes, 3) People/Composition, 4) Processes, 5) State/Condition, 6) Structure, and 7) Time. This study assumed little variability related to the seventh concept, Time, and conducted its interviews based on the remaining six components. The researcher conducted interviews (approximate 50-minute average length) with each participant in person to capture the richness of information transferred between interviewer and interviewee.

The study employed purposeful sampling to develop a homogenous pool of participants who 1) share important similarities related to the research (i.e., leadership experience in nonprofit and corporate contexts), yet 2) reflect diversity of race, sex, and sub-sector (e.g., education, healthcare) (DiCicco-Bloom & Crabtree, 2006). Participants included 10 chief executives, including the Chief Executive Officer, President and/ or Executive Director, of Chicago-area nonprofit organizations with budgets ranging from $300,000 to $300 million. The participants consisted of six men and four women; six Caucasians, three African-Americans, and one Latino; and representation in museums (one), education (four), hospitals (one), youth & family services (three), and a network of nonprofits (one). The researcher assigned each participant a pseudonym to maintain her/his anonymity throughout the study. Please see Interviewee Profiles below for more details:

Figure 1

Note: Figures for "Budget Size" (revenue) and "Employees (Full-Time)" self-reported by interviewees

Analysis & Results

Transcripts of participant interviews represent the raw data for this study's analysis. The researcher analyzed the transcripts inductively so as to "discover themes and eventuating theory by allowing them to emerge from the data" (O'Leary, 2010, p. 261). The researcher reviewed the transcripts according to both a priori concepts and grounded theory coding, including two phases - initial and focused coding - which provided a preliminary set of codes by which to compare and refine the data over several weeks (Charmaz, 2006). Throughout the analysis, the researcher consistently evaluated the full data set to weigh the relevance (i.e., frequency, application to the research question) of specific codes and to produce the most significant themes - broader codes - under which to present the study's findings.

Study Results

Had you asked me eight years ago when I came here whether or not I ever saw myself in the nonprofit sector, I would have told you 'no'.

- Anne, chief executive, education organization

The participants in this study arrived at their current positions by taking very different paths, although it is important to understand their pre-transition attitudes about the nonprofit sector. Four executives mentioned they were actively pursuing productive "second careers" with nonprofit organizations. Three others were recruited to their positions from corporate, having never given nonprofit professions much (or any) consideration. The remaining three participants admitted that they had low opinions of nonprofits before assuming these roles, in some cases through peer pressure or persuasion. Nonetheless, all 10 participants intimated moderate to high levels of satisfaction with their transitions, whereas just one interviewee is considering a return to corporate work at some point (one participant has since retired).

Interviewee preconceptions of the nonprofit sector were, indeed, distinct and diverse prior to their current leadership roles. This underscores a notable pattern that emerged. A majority of study participants (seven of 10) emphasized - throughout or at points in the interviews - that no differences exist between nonprofit and for-profit contexts. This prompted for the researcher several questions: In instances where interviewees expressed little consideration or regard for nonprofit work as a career choice, were their initial opinions, then, underdeveloped or uninformed? Did their opinions change post-transition? Or, perhaps, by putting forth a "no differences" argument, are they articulating an "ideal" state, as yet unmet, to which they are steering their respective nonprofits?

Study results tend to support the latter point of view. Ed, one of the seven interviewees contending "no differences", is hesitant in making this argument, in both his tone and language. In fact, later in his interview, he cites "turning this sector around" as an opportunity he values in his current position, suggesting an "effectiveness gap" between nonprofits and for-profits that requires closing. Participants may state that nonprofit and for-profit contexts are identical or, at least, very similar, but the perspectives they lend during the interviews suggest an opposing, collective viewpoint - contextual differences between the sectors are real, and they do require different leadership in order for organizations to be effective. Analysis of the interview data suggests several themes that support this hypothesis, the most prominent of which include: 1) workforce competence, 2) employee diversity, 3) employee motivation, 4) measurement and evaluation, and 5) leadership authority.

Workforce Competence

The biggest challenge for the not-for-profit sector is to draw in those people who are excellent at what they do, and be able to staff it up with 'A-teams' in every single part of the sector.

- Jan, chief executive, youth and family services organization

Study participants brought up the issue of workforce competence in various ways during the interviews. Rather than asking about employee competence directly, the researcher asked interviewees to compare "typical" corporate employees with their nonprofit counterparts, an open-ended prompt that elicited important perspectives on employee training, behaviors, and other qualities (e.g., educational attainment). Throughout the interviews, participants associated the abilities of their current employees with different skills, such as problem solving or teamwork. Steve, for example, discusses how, after assuming his position, he conducted an inventory of employee competencies to assess the organization's health. Implicit in the process was Steve's contrast of his current employees with his previous, for-profit workforce. He points out that where his staff lacked critical skills (e.g., financial literacy) that his corporate employees did not, he began to counsel people up or out accordingly. Overall, a majority of interviewees (eight of 10) cite workforce competence as a current challenge - they suggest nonprofit employees as less proficient, generally, than their corporate peers - and discuss how they maximize workforce productivity in this context.

Workforce competence appears to be at once a sensitive issue that study participants also treat matter-of-factly. Participants are careful to cite the effort and "heart" that nonprofit employees put into their work, but suggest that such employees have less developed, more specialized, or smaller skill sets than corporate employees. The mission or specific conditions of a given nonprofit, of course, can attract an unskilled workforce. For example, in Anne's organization a majority of the volunteer-driven workforce is under the age of 25. Anne recognizes the importance of instilling in them a "change-the-world" attitude, but adds that the conflict between empowerment and inexperience (or, as she labels it, an "amazing sense of entitlement") presents a difficult atmosphere in which to lead. More broadly, though, study participants suggest that in professional, nonprofit organizations, professionalism - an implicit set of expectations for high performance - can be lacking.

Customer service represents one important area in which interviewees express concern about their employees' professional skills (seven of 10 make mention of the role customer service plays in their organization). Ben, the head of a Chicago-based school network, contends, "In the for-profit, we're all clear about the customer. In not-for-profit land, [many employees] think, 'I'm doing [the customer] a favor.'" He suggests that, in order to act with customers in mind, nonprofit employees require training similar to corporate workers. Rob further suggests that his employees, who work directly with low-income youth, build meaningful relationships with customers, but stop short of understanding the degree to which they actually add value for them (e.g., help reduce criminal behaviors). Jan, having transitioned from technology-based, Fortune 500 companies, credits the customer-centric training she received during her corporate experience for her success, but admits that from her vantage point, her organization is struggling with the question, "How do we do the segmentation needed to understand our customer better?"

Study participants take two distinct approaches in building the strongest possible workforce - training from within and recruiting from elsewhere. The strategy that chief executives employ, according to the data, depends on their views of the nonprofit sector as an adequate training ground. Kate, for one, believes that nonprofits do not prepare their employees or build "hard" skills as well as for-profit companies do. She holds in higher regard individuals with experience in "business in a serious context" (i.e., corporate) who, she says, require less training. Sue laments having employees who lack corporate assimilation, and Anne says she would not be effective in her current role without the hard skills she attributes to her corporate experience, such as analyzing financials and decision-making under pressure. In addition, Jan is quick to point out that she has recruited her entire administrative team from the corporate world. In contrast, other interviewees, such as Rob, Ed, and Steve, attempt to raise the overall profile of their employees' skills by role modeling and emphasizing management and coaching.

Employee Diversity

The range of people that I'm leading here is wider than it was [in my corporate experience], so I have to learn how to deal with different kinds of people.

- Rob, chief executive, youth and family services organization

Multiple study participants identify two "types" of nonprofit employees throughout the interviews. According to interviewee perspectives, nonprofit administration appears to be most analogous to the corporate "C-suite" (highest level executives) and includes accounting, fundraising, and finance. Operations staff, the second type, is responsible for delivering the mission - what the organization "does" - and, as interviewees suggest (five of 10), is much more varied than the skills and backgrounds of administrative staff. Such staff focuses on service delivery, program, and business "on the ground" - for example, the youth volunteers in Anne's organization, the clinicians in Steve's hospital, the social workers in Rob's agency, and the scientists in Doug's institution. They also include, as Doug notes of his "full-service" organization, roles including building engineers, janitors, and retailers. It appears that the distinction between nonprofit administration and operations is similar to that between their corporate analogues. However, within a nonprofit workforce, it also seems more likely that variances in the breadth and depth of employee skills and experiences can be greater than in the corporate world.

As such, study participants affirm throughout the interviews that they lead organizations more diverse, generally, than those in their corporate experience. Interviewees (seven of 10) raise employee diversity as an important issue impacting organizational performance and their own effectiveness as chief executives. Just one interviewee, Anne, describes the diversity of her employees in terms of demographics (e.g., race, gender); she considers her organization's intentional approach to recruiting for and managing a demographically diverse workforce to be a significant asset. More consistently, though, study participants refer to employee diversity according to a fuller set of qualities characterizing their larger workforces, with a special emphasis on professional experience.

Kate neatly summarizes what several interviewees describe about their role in leading such workforces - "trying to mesh all" of the different backgrounds, skill sets, and other individual characteristics into "some organized framework." Study participants describe various efforts to achieve this. Anne approaches her workforce with multiple tactics to engage the veteran, administrative staff member and the inexperienced, volunteer teenager with equal effectiveness. Meanwhile, Mike uses a strategy brought over from his corporate start-up experience, in which he dedicates "time to develop a process that's sensitive to" a wide variety of employees. Underscoring such strategies, it appears that managing for employee diversity is time-consuming, especially compared to interviewees' corporate management experience. Kate admits about the corporate world, "Everyone is very much like you. You're trained to solve problems very similarly, your language and your problem solving approach is very similar, so it's a lot easier, and I think a lot more productive, quite frankly." At the very least, a more homogenous, corporate workforce lends to greater efficiency, and requires less patience of the chief executive, than the more heterogeneous, nonprofit employee base.

Employee Motivation Without Financial Incentives

I could show you a photo of a family I was out with last night that is 100 times more motivating than anything I ever did [in my corporate experience].

- Ed, chief executive, youth and family services organization

The study reveals a striking commonality among participants in how they view employee motivation. In discussions about workforce motivation broadly, all of the study's 10 interviewees point to significantly fewer financial rewards available to incent nonprofit employees, contrasted with each interviewee's previous experience in the corporate world. Furthermore, they confirm what findings from previous research suggest, in that altruism, a social service-oriented mission, and the alignment of personal values with such a mission tend to play more prominent roles in driving nonprofit employees (De Cooman, De Gieter, Pepermans, & Jegers, 2011). In addition, none of the interviewees volunteer any differences that a flood of cash and benefits would make in attracting and retaining nonprofit employees, or encouraging their performance.

In fact, Ben asserts that greater financial rewards tend to have the opposite effect. He says that his employees and the employees of peer organizations "actually get insulted," adding, "The more money that could be made, the less happy [the employees] were…It's like you devalue what they're doing." Ben's observations run counter to the findings of De Cooman, et al (2011), which maintain that monetary compensation shows little variation as a motivator among nonprofit and for-profit employees. The consistent mentions of money and monetary compensation by interviewees may not necessarily align with proven practices to motivate employees, but they do reveal a significant implication - that the interviewees feel they are missing a tool from the corporate world that they "know" to be important in doing so.

Furthermore, the study participants' self-reported behaviors reveal a wide range of strategies and thinking related to employee motivation, suggesting that management in the nonprofit sector is more nuanced, even more complex. Seven of the interviewees hinted that greater workforce homogeneity in the corporate sector - similarities in employee backgrounds, work ethic, and personal agendas - kept in check the ambiguity that they otherwise face in motivating nonprofit employees. For example, Rob, demonstrates uncertainty, almost discomfort, about how effective he has been thus far in motivating his current team. Describing his performance, Rob says, "Maybe I just need more time, but I haven't yet been able to pull the whole team here, together. We've done great things, but it's taken different pushes and pulls by me. I can't always rely on everyone rising to the same bait." In using some of the more heavy-handed tactics that he employed in his corporate work, he admits that, like other interviewees, he still has "bruises," outcomes of a continuing fight to motivate a diverse employee base.

Several study participants also suggest that they struggle to motivate employees in what they deem an environment of lower collective self-esteem. Using a crude analogy, Steve describes the mindset he encountered after assuming his current position. "Did you ever go into a bar, and you see this guy who really isn't good-looking?" he asks. "He's just average, but, man, he's walking out with one of the sharpest looking girls in the bar by the end of the night. It's my belief it's the same thing here." If the organization feels good about itself, if it feels confident, Steve suggests, it will undoubtedly produce better results, and so he, like Ben and Ed, spend significant time boosting the confidence of their broader workforces. Ben cites his use of repetition, stressing over and over again specific "wins" that his schools have achieved, while Ed mentions trying to convince his agency's employees, quite simply, that they can have high standards for the organization, especially in how they measure their work.

Measurement and Evaluation

It's nice you're doing God's work, but you need to do God's work very well.

- Ben, chief executive, education organization

Nine of 10 study participants cite the roles that measurement and evaluation play in their organizations, and by and large, they follow a clear trend - interviewees consider current practices to understand service and program impact to be deficient. Mike emphasizes that "the single biggest thing, that's been eye-opening for [him], has been a lack of data-driven decision-making" among the dozens of nonprofits with which his organization partners. He says that by not measuring outcomes adequately they hinder their own abilities to strategize and invest resources effectively. Doug seems hesitant to admit his organization's lack of discipline in examining performance. He starts and stops multiple times before deciding that there is "less immediacy" around measuring results than what his corporate experience demanded. Sue describes her frustrations with the lack of know-how among staff members to meet data management expectations. She tells of a recent situation in which she requested from her staff information about program impact, only to receive spreadsheets of raw data with no analysis - a "data dump" - for which she blames herself in becoming frustrated. "What's wrong with [my employees]?" she asks, adding, "There was nothing wrong with them. There was something wrong with me. I didn't understand that I had been trained, almost through osmosis [in the corporate world], to think this way," implying that her current staff lacks similar training.

Sue's perspective is revealing, and representative of how many study participants describe their experiences. It is conventional knowledge that nonprofits and for-profits can differ dramatically in how they measure performance results. However, for a chief executive new to nonprofit administration, it appears that practical, hands-on immersion is critical to understanding how the organization measures impact and makes use of data, and recognizing how employees differ in their skills and attitudes about such processes. In addition, many interviewees suggest that nonprofit environments can be too ambiguous and too complex to respond to "hard" changes in measurement quickly, if at all. In the corporate world, they contend, managing to an economic "bottom line" is not only possible, it is paramount. In nonprofits, on the other hand, non-economic decision-making, though sometimes unpleasant or undesired, appears to be a vital executive skill.

Ben and Doug illustrate that adherence to mission is a significant, non-economic factor that drives nonprofit decision-making. The mission of Ben's organization focuses on serving children in Chicago, but the availability of public funding from the city, on which Ben is reliant for revenue, is inadequate. He admits that opening schools in other markets would produce better financial results, in addition to improving academic outcomes for kids. Instead, whereas his organization remains committed to Chicago due to mission-driven dictates, it is consistently under financial stress. For Doug's organization, in which environmental preservation is core to its mission, measuring results (especially financial) in relation to the "tragedy of the commons" principle - the extent to which forests are not cut down - is not hard and fast. How much is an acre of rainforest worth, and to whom? Absent proposing radical mission changes, Ben and Doug must validate decisions that sometimes make little economic sense.

Kate describes challenges to measurement and evaluation as "80% logical" in the corporate world; she contends that it might be the opposite in nonprofits. "I hate to say it," she says, "It's nuts. There is no rationale. A CEO of a major corporation [recently] said to me, 'You know, usually when we think about investments, as a company, you think about investing in something that's going to give you a reliable return.' I have no idea what the reliable return of [my organization's work is]." To be clear, it is not a lack of mission-driven clarity that discourages Kate, but rather the number of obstacles (e.g., conflicting stakeholder agendas, political obstructionism) that nonprofits can face in projecting and achieving their impact systematically. Furthermore, interviewees must meet the challenging expectation - Kate cites it as a top management challenge - in motivating employees to gauge meaningful results in an environment that can be inexplicable.

Leadership Authority

I think somebody that was able to get through the for-profit sector with just brute force would have a harder transition than I did.

- Mike, chief executive, network of nonprofit organizations

Each of the 10 study participants suggests that leadership authority - the influence and power of the chief executive, particularly - is more diffuse in nonprofits, contrasted with their corporate counterparts. The top-down, bottom-line orientation of the corporate world simply does not translate neatly into nonprofit work, at least according to their experiences. Anne, capturing the viewpoints of several interviewees, says that in her current position, she can no longer be the "militaristic leader" that she was (or to whom she once reported) in her corporate life. Fostering teamwork and integrating herself into the larger organization have replaced Anne's previous way of leading, which, to the hypothetical, past employee, she role-plays: "I don't have to talk to you. I don't have to convince you. You don't have to like it. You have to do it."

The investment of a more diverse base of stakeholders (e.g., staff members, service clients, foundation funders, corporate backers), contrasted with the corporate environment, appears to create a sense of inertia through which the nonprofit chief executive must produce results. Key among these stakeholders are boards of directors, which eight of 10 interviewees view as vital to their organizations' health. However, a majority of interviewees also suggests that, in several ways, boards represent a major factor diminishing their overall authority and their ability to get things done. Jane and Mike suggest that nonprofit board members, as volunteers, have limited incentives to act quickly and can slow the organization's progress. Ed and Rob suggest that board members have lesser expectations for nonprofits than corporate enterprises, and chief executives must work harder to keep expectations high. Board members, Jan, Rob, and Ben say, can micromanage and become preoccupied with operational minutiae, distracting the chief executive from real priorities. Finally, Kate contends that a wider variety of motivations encourages board members to become involved with nonprofits (contrasted with for-profit businesses), and as a result, the chief executive must exert more time and energy to effectively direct different agendas towards larger, mission-driven outcomes.

Considering the diversity of board members and other stakeholders, a majority of interviewees (eight of 10) cite a shift in their attitudes or behaviors that they have made in order to effectively lead. These changes include the use of "soft" tactics in either tempering the "hard" ones they have transferred from the corporate world, or replacing them wholesale. Consensus building, for example, emerged as among the most frequently discussed skill sets on which interviewees have come to rely (six of 10 interviewees). As Ben thinks about nonprofits and for-profits, he emphasizes that in the corporate world leadership is "allowed to make decisions and just move ahead," but that in nonprofit organizations, "you have to talk to people, listen to them, explain your decisions." Consensus building requires practicing more frequent communications, sometimes customized for many audiences, and drawing upon a great deal of patience (eight of 10 interviewees mention one or both habits). It also requires of the chief executive an adjustment to a slower, organizational pace, a natural by-product of the greater role that democracy - or, at least, the illusion thereof - plays in a nonprofit.

Limitations

This study's intent is to contribute to the existing literature regarding leadership effectiveness and employment sector context, specifically differences between nonprofit and for-profit organizations. To the extent that the study achieves this, there are limitations to its design and findings that are important for readers to understand. The sample of study participants is narrow in size (10 interviewees), restricted in geography (Chicago-based organizations), and limited in fields represented (i.e., nonprofit sub-sectors, such as human rights, homelessness, and veterans affairs, are absent); the study would benefit by broadening the pool of qualified, nonprofit chief executives in accordance with these three characteristics. Each study participant self-assessed her/his performance in current and past positions, but the study's design does not include additional sources, including employee reports and peer executives, to provide alternative viewpoints or to counter biases that participants may have expressed. In addition, many of the interview stimuli were open-ended. While this allowed interviewees to talk freely about on their experiences, it also allowed for different interpretations of the concepts raised during interviews. For example, although the study aimed to compare and contrast nonprofit and corporate contexts, six study participants discussed differences related more closely to organizational size rather than employment sector; the researcher eliminated these data from consideration in the study's analysis.

Interpretation and Recommendations

Throughout the interviews, study participants discuss their effectiveness in their current roles, relative to their experiences in the corporate world. In fact, many of the prompts posed by the researcher ask participants directly to compare their performance in each context. All study participants, at least once during their respective interviews, provide a definitive, straightforward response. For example, Mike asserts, "I actually think that I've been equally successful [in both contexts]. Let me put it a better way. I feel equally good about [my performance in both]." In comparing such responses, study participants are roughly split - six interviewees say they have been equally effective in their nonprofit and corporate roles, while four admit having greater challenges since making the transition. Ben says, quite simply, of his previous corporate experience, "I think the difference is, actually, I found it easier."

However, an analysis of each interview, and especially of all interviews collectively, tells a richer story. The limitations of self-assessments aside, what study participants say about their performance is cursory, even immaterial, compared to the professional experiences they describe throughout the interviews. Their experiences shed light on important differences between the nonprofit and for-profit sectors for which nonprofit leadership must account in order to lead organizations effectively. The study's findings offer the following conclusions and practical implications, especially for chief executives and other nonprofit leaders:

  1. Nonprofit employees may be less skilled or experienced, especially in important skill areas such as customer service, than their for-profit peers. The approach of nonprofit chief executives to strengthen their workforce - developing from within or recruiting from outside the sector - may depend on their confidence in the sector as a sufficient training ground.
  2. Nonprofit workforces are more diverse, in terms of background and professional experience, than their corporate counterparts. Nonprofit chief executives may need to dedicate more time differentiating strategies to maximize the performance of diverse individuals, and coaching other executives and managers to follow suit.
  3. Nonprofit employees may be less motivated by monetary rewards than for-profit workers. Nonprofit chief executives must recognize that a lack of financial resources to provide such rewards could be moot - they may be better suited differentiating as well how they motivate a workforce driven by various purposes or aspirations.
  4. Nonprofit organizations and their employees may be less proficient at measuring outcomes - at the organization, program, or individual levels - than their corporate equivalents. Nonprofit chief executives should understand the obstacles (e.g., social, political) that may inhibit robust evaluation, and work to develop proficiency in non-economic decision-making.
  5. The authority of nonprofit staff leadership, chief executives in particular, is more diffuse than that of top corporate leadership. Nonprofit chief executives may share influence or decision-making with a broader base of stakeholders, including volunteer boards of directors, and as such, they should consider developing expertise in "softer" management approaches, such as consensus building.

The results of this study help to hone practices related to recruiting, retaining, and developing effective leaders in the nonprofit sector. The conclusions drawn offer important insights into the talent necessary to successfully lead nonprofit organizations. Whether current or future leaders have come up through nonprofits, or have transitioned from other fields (e.g., the corporate sector), its findings put forth knowledge critical to understanding nonprofit context, generally, and the qualities of leadership that - embedded in this context - are most likely to render positive outcomes. In addition, the study offers a window into the ambiguity that may distinguish nonprofit and corporate work. Understanding the contextual intricacies of nonprofits stands to produce more responsive and well-informed leaders.

Additional Research Questions

This study also raises several additional questions important to understanding organizational context, leadership, and its effectiveness. Such questions include:

  1. How do the nonprofit and corporate sectors differ in developing core skills (e.g., customer service) in their employees?
  2. To what extent do nonprofit employee attitudes vary in determining organizational and programmatic impact?
  3. Are there characteristics that a nonprofit chief executive must have to make decisions effectively based on non-economic factors?

In addition, the study suggests other questions and topics that, due to their complexity, could merit a longer view to building new knowledge for the field.

Multiple Measures of Leadership Effectiveness

Again, this study is limited in its ability to measure leader effectiveness within different contexts. It is unlikely that future studies could capture sufficient perspectives (e.g., subordinates, peers) about a subject's professional performance, especially across multiple organizations. However, long-term studies that integrate observations and multiple interviews could provide a more robust picture of leader effectiveness. A well-designed study could track an organization's trajectory related to multiple outputs and outcomes, and the associated behaviors of its chief executive to achieve them.

Management by "Sticks" and "Carrots"

Kate comments during her interview that corporate culture is just more "hardcore" than that of nonprofits, but no interviewees indicate that they are ready to exercise the "Because-I-said-so" approach recalled by Anne. Perhaps the effectiveness of hardnosed, leadership behaviors is diminishing, regardless of context, but maybe such behaviors simply do not work in nonprofit organizations. A deeper "dive" into the topic could uncover how nonprofit employees respond to "hard" management approaches, and reveal the limits of consensus building among diverse constituents. Similarly, a design study to further examine how monetary rewards impact the performance of nonprofit employees would have tremendous utility.

Leader Demographics as Context

The tone struck by female and minority study participants was generally more assertive than that of their male, Caucasian counterparts. The approach taken in the interviews may represent the by-product of "growing up" in the corporate world. Anne discusses her previous corporate career, in which she had to fight to be taken seriously in a sector historically dominated by white men. A closer examination of the transitions that executive women and minorities make from corporate to nonprofit work would likely produce compelling results, especially in comparing similar transitions by their white, male contemporaries.

Conclusion

The degree to which this study's participants have been as successful in their nonprofit leadership as they were in their corporate positions remains conjectural. And like any tenure, time will tell how effective they prove to be in driving results long term. However, the suggestion that no contextual differences exist between nonprofit and for-profit organizations is difficult to defend. As per the study's findings, real differences may exist, and they do matter. As the nonprofit sector continues to build contemporary leadership, characteristics that make it contextually unique, contrasted with the corporate world, require leaders with suitable skills, attitude, and behaviors. It is for the livelihood and sensible growth of mission-driven work that the fit between individual and organizational context be given sufficient investigation.

The logical next step following this study is to probe deeper into the differences of nonprofit and corporate contexts. It is important for practitioners, including nonprofit boards of directors and executive leadership, to understand where these differences are lasting, and where nonprofits may move to "act more like businesses" in the future by adopting corporate practices. Such knowledge will help to make informed, strategic decisions about the "right" leadership and what it means for leaders to maximize their effectiveness.

References

Beck, T. E., Lengnick-Hall, C. A., & Lengnick-Hall, M. L. (2008). Solutions Out of Context: Examining the Transfer of Business Concepts to Nonprofit Organizations. Nonprofit Management & Leadership, 19(2), 153-171.

Bell, J., Moyers, R., & Wolfred, T. (2006). Daring to Lead 2006: A National Study of Nonprofit Executive Leadership. San Francisco: CompassPoint Nonprofit Services.

Charmaz, K. (2006). Constructing Grounded Theory: A Practical Guide Through Qualitative Analysis. London: SAGE Publications Ltd.

Cornelius, M., Moyers, R., & Bell, J. (2011). Daring to Lead 2011: A National Study of Nonprofit Executive Leadership. San Francisco: CompassPoint Nonprofit Services.

De Cooman, R., De Gieter, S., Pepermans, R., & Jegers, M. (2011). A Cross-Sector Comparison of Motivation-Related Concepts in For-Profit and Not-For-Profit Service Organizations. Nonprofit and Voluntary Sector Quarterly, 40(2), 296-317.

De Hoogh, A. H. B., Den Hartogb, D. N., Koopmana, P. L., Thierryc, H., Van den Bergc, P. T., Van der Weided, J. G., et al. (2005). Leader motives, charismatic leadership, and subordinates' work attitude in the profit and voluntary sector. The Leadership Quarterly, 16, 17–38.

Dees, J. G., & Anderson, B. B. (2003). Sector-Bending: Blurring Lines Between Nonprofit and For-Profit. Society, 40(4), 16-27.

Dempsey, S. E., & Sanders, M. L. (2010). Meaningful work? Nonprofit marketization and work/life imbalance in popular autobiographies of social entrepreneurship. Organization, 17(4), 437-459.

DiCicco-Bloom, B., & Crabtree, B. F. (2006). The qualitative research interview. Medical Education, 40(4), 314-321.

Dobin, D., & Tchume, T. (2011). Good in Theory, Problems in Practice: Young professionals' views on popular leadership development strategies. New York: Young Nonprofit Professionals Network.

Egri, C. P., & Herman, S. (2000). Leadership in the North American Environmental Sector: Values, Leadership Styles, and Contexts of Environmental Leaders and Their Organizations. The Academy of Management Journal, 43(4), 571-604.

Eikenberry, A. M. (2009). Refusing the Market A Democratic Discourse for Voluntary and Nonprofit Organizations. Nonprofit and Voluntary Sector Quarterly, 38(4), 582-596.

Eikenberry, A. M., & Kluver, J. D. (2004). The marketization of the nonprofit sector: Civil society at risk? Public Administration Review, 64(2), 132-140.

Fairhurst, G. T. (2009). Considering context in discursive leadership research. Human Relations, 62(11), 1607–1633.

Hansen, J. R., & Villadsen, A. R. (2010). Comparing Public and Private Managers' Leadership Styles: Understanding the Role of Job Context. International Public Management Journal, 13(3), 247-274.

Johnson, J. L. (2009). The Nonprofit Leadership Deficit: A Case for More Optimism. Nonprofit Management & Leadership, 19(3), 285-304.

O'Leary, Z. (2010). The Essential Guide to Doing Your Research Project. Thousand Oaks: SAGE Publications Inc.

Porter, L. W., & McLaughlin, G. B. (2006). Leadership and the organizational context: Like the weather? The Leadership Quarterly, 17(6), 559-576.

Rousseau, D. M., & Fried, Y. (2001). Location, location, location: contextualizing organizational research. Journal of Organizational Behavior, 22(1), 1-13.

Rubin, H. J., & Rubin, I. S. (2012). Qualitative Interviewing: The Art of Hearing Data (3rd ed.). Thousand Oaks: SAGE Publications, Inc.

Sanders, M. (2012). Theorizing Nonprofit Organizations as Contradictory Enterprises: Understanding the Inherent Tensions of Nonprofit Marketization. Management Communication Quarterly, 26(1), 179-185.

Sass, M. D., Liao-Troth, M. A., & Wonder, B. D. (2011). Determining Person–Organization Fit for Healthcare CEOs: How Executive Equity Sensitivity Relates to Nonprofit and For-Profit Sector Selection. Nonprofit Management & Leadership, 22(2), 199-216.

Shamir, B., & Howell, J. M. (1999). Organizational and contextual influences on the emergence and effectiveness of charismatic leadership. The Leadership Quarterly, 10(2), 257-283.

Solomon, J., & Sandahl, Y. (2007). Stepping Up or Stepping Out: A Report on the Readiness of Next Generation Nonprofit Leaders. New York: Young Nonprofit Professionals Network.

Tierney, T. (2006). The Nonprofit Sector's Leadership Deficit. San Francisco: The Bridgespan Group.

+ Read More
blog comments powered by Disqus
Request More Information
Apply Now