“Strong leadership is critical for effective social sector organizations, yet the sector chronically underinvests in its leaders.”
So began Leveraging Social Sector Leadership, a 2015 report by U.C. Berkeley researchers for Grantmakers for Effective Organizations (GEO). The GEO report calls leadership development—for activities such as coaching, mentoring, executive education—the highest form of capacity building for the social sector.
And yet historically only 1% of all foundation grant dollars from 1992 to 2011 went toward leadership development, according to Foundation Center data, or $400 million in 2011.
The GEO researchers attributed this low level of funding to the following factors. Individual donors traditionally preferred to support nonprofits with low overhead ratios, a number that serves as a proxy for how much nonprofits spend on business operations. Governments wanted to pay nonprofit service providers only for program success, so nonprofits have had little incentive to spend money on the professional development of their personnel. And foundations historically devoted the vast majority of grants to specific projects, rather than providing unrestricted money that nonprofits can use at their discretion.
But there is increasing support for leadership development. In a survey of foundations in 2015, The Bridgespan Group found that approximately 60% of the funders prioritize making leadership investments (spending about 3% of total grant money on leadership development) and 40% plan to increase their leadership investment amount in the future.
This change in funding patterns has been influenced by a variety of developments, including:
- The Overhead Myth campaign, launched in 2013 by Guidestar, The BBB Wise Giving Alliance, and Charity Navigator to focus the social sector on the true cost of running a nonprofit—including administrative (which, in turn, includes professional development of those administrators) and fundraising costs.
- The new generation of business people getting involved—as staff, board members and consultants––is pushing for more business-like practices. These practices include professional and personal development of leaders and staff. “It would be irresponsible to try and grow a business without investing in its people. Why should we expect nonprofits to be any different,” said Year UP Founder and CEO Gerald Chertavian in a 2014 GEO report, What do Nonprofits Need to Make Leadership Development a Priority?
- The increased social sector focus on collaborations and networks as a mechanism for tackling complex social issues has also contributed to new forms of leadership. “In this turbulent environment…leaders at all levels must adapt and innovate, developing new approaches to capacity building, leadership development, strategy and more” wrote the authors of Toward Complex Adaptive Philanthropy, a 2013 report by the Management Assistance Group.
- Finally, foundations are also sharing the greater wealth they are enjoying. With the stock market roaring back to more than double its 2008 value, foundation assets are growing and, in turn, driving a growth in grant dollars.
In the past year, a number of large foundations have made significant commitments to leadership development:
- The Ford Foundation launched BUILD a five-year, $200 million initiative is focused on institutional strengthening and general overhead support, including leadership development for grantees.
- Atlantic Philanthropies recently announced a $600 million Atlantic Fellows program to be spent by the time Atlantic sunsets in 2020. The foundation wants to develop a cohort of leaders and the institutions that support them to as they continue to tackle issues of equity and inequality.
- The Robert Wood Johnson Foundation has launched the Advancing Change Leadership program, which includes $40 million, multi-year commitment to build leaders across four health sectors.
What do these changes mean for other funders and the organizations they support?
Join us on Thursday, September 8 for Meet the Changemakers: Funding Resilience, Building Leadership Capacity, a panel discussion featuring foundation leaders who have been developing targeted, strategic leadership development support for their grantees. The program is also being livestreamed.
RACHAEL GROSSMAN is a certified executive coach and consultant with extensive experience in the corporate, non-profit and social enterprise sectors. She has managed Organizational Advancement divisions encompassing new business development, fundraising, public relations. As a C-level executive, she has developed marketing and strategic partnerships for Parenting Magazine, Women.com, and the Women’s Funding Network.