What Can Business Leaders Learn from the Nonprofit World?
5 minute read
It’s not easy being a corporate CEO today. Just look at the recent travails of leaders at high-profile companies like Boeing, Disney, or Starbucks. They, and many others, are struggling to navigate multiple, often competing and invariably vocal, constituencies. And the clamour is only going to grow. So perhaps it’s time for business leaders to look to their nonprofit and charity counterparts for guidance on how to navigate this febrile world.
Corporate CEOs face pressure for being too woke or not woke enough, lobbied to take a position on the Gaza conflict, crunched between investors, activists and politicians on sustainability issues, and scrutinised for their labour practices. Action that mollifies one vocal constituency risks aggravating another. Many long for less complicated times – though they won’t be returning any time soon.
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But this world of competing constituencies is a familiar one to nonprofit leaders. They have long had to operate within a more amorphous leadership context, with multiple stakeholders wanting a say over what they do and how they do it. It’s a world in which they often lead less by command and control and more by persuasion and influence – all underpinned by their organisation’s purpose. And it’s an approach to leadership that has a lot to offer business leaders struggling with a more complex and volatile public space.
Leading business experts have lauded skilled nonprofit leadership. Jim Collins, author of the influential business tract Good to Great, declared, “Running a major company is an order of magnitude easier and less complex than building a great social sector enterprise.” To my mind it’s not so much about comparing which is easier, than understanding they are different and there are lessons to be shared and learned across sectors.
The business leaders who successfully navigate this increasingly volatile world will be those who can best absorb the lessons that their nonprofit counterparts have long internalised when it comes to dealing with ambiguity and diffuse power structures.
Perhaps it’s time for business leaders to look to their nonprofit and charity counterparts for guidance on how to navigate this febrile world
What equips effective nonprofit leaders to act as guides to business leaders struggling with these issues? The starting point is their practice of putting purpose at the centre of their work. It’s also their experience operating in environments where outcomes are far less certain and difficult to measure and where power is shared between multiple stakeholders. All of this requires a significant degree of emotional intelligence and humility to navigate successfully.
When it comes to purpose and impact, the principal objective for businesses is clear – it’s about maximising financial returns. Some companies may have secondary goals around doing good, but these invariably take a back seat to financial considerations. And in terms of impact, financial performance can be readily measured, and compared against peers.
For nonprofits, the objective is to do good, as defined by their mission. While businesses often struggle to find a meaningful purpose, nonprofits have such purpose at their core. It may be reducing homelessness, addressing hunger, researching cancer, resolving deadly conflicts, ending slavery. Whatever their purpose, it is inherently difficult for them to measure success. Charities will usually be working in a crowded field, and it can be challenging to determine the progress overall (how are we going on homelessness, conflict, climate, cancer, etc?), let alone a single organisation’s contribution compared to others. Businesses have the advantage here.
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Next, we have stakeholders. Given businesses’ focus on financial returns, their principal stakeholders are their shareholders. Again, they will have secondary stakeholders of greater or less importance, but in most cases, when push comes to shove, financial interests reign supreme.
Charities have multiple, often competing, stakeholders, all of whom have significant sway over what the organisation does. They have the communities they serve, their funders, staff, board members, and the broader public. Given the focus on doing good, as opposed to financial returns, these stakeholders all have relatively more power than in the business world, which can make leadership a tricky juggling act. Just look at any number of large charities today, dealing with their activist staff, vulnerable communities, social media pile-ons, opinionated funders, and a large and diverse volunteer board. Navigating these hazards successfully takes skilled leadership and a laser-like focus on purpose.
The business leaders who successfully navigate this increasingly volatile world will be those who can best absorb the lessons that their nonprofit counterparts have long internalised.
Third and last comes power. Power is usually more hierarchical or executive in business. There is generally more command and control – think Jamie Dimon at JPMorgan Chase or Elon Musk at any of his companies. But power is generally more diffuse at nonprofits, and, given the multiple stakeholders, a leader often has to spend more time persuading than directing. As a result, the job of the charitable leader is often more akin to, say, a parliamentary leader having to coax and persuade different factions to achieve a common position.
To succeed in such fluid contexts, skilled nonprofit leaders need to maintain a focus on purpose while bringing multiple stakeholders on the journey with them. Which sounds like something that today’s business leaders could usefully learn from.
Nick Grono is an Australian human rights campaigner and CEO of the Freedom Fund, a global fund which exists to mobilise the knowledge, capital and will needed to end modern slavery. His new book How to Lead Nonprofits: Turning Purpose into Impact to Change the World is available to buy now.
