Leadership Effectiveness in Non-Profits: The Role of Funders

Leadership Effectiveness in Non-ProfitsWhy does the importance of managing people resources matter just as much, probably more, than managing financial resources? Because competence translates financial resources into increased profit. Isn’t that the whole logic of the financial advisor vs. money under the mattress model?

Leadership effectiveness is a key metric of organizational competence and success within the non-profit sector. Strong and diverse leadership capabilities collectively leverage funding pools into increased social capital – where the social value of services provided to the community is greater than production costs.

When these organizations fail the typical forensic audit sequence starts with the financials and work backwards to leadership effectiveness; maybe it’s time to change this groupthink approach.  A recent article which details the demise of yet another non-profit illustrates how leadership effectiveness impacts organization success.

A Need for Different Funder Expectations

Community Microskills Development Centre is a multi-cultural centre with a 30 year history. It services a geography characterized by high immigration, poor working class and racialized with a focus on supporting two key client groups – women and youth.  Interestingly, these combined geographical and client base characteristics are worthy of consideration in the province’s “precarious employment” dialogue which, at present, seems to be localized in the private sector. But that’s for another day.

The article suggests that a contrast in leadership styles of senior leaders at different times to deal with insurmountable challenges and marshal employees around the mission as possible causes of the current predicament. Indeed, the impact of different leadership styles on organization success is well documented. What’s more interesting is that a core funding agency with awareness of the Centre’s financial deficit did not appear to pursue a deeper level of operational inquiry. If your money manager mentioned that your investment portfolio yielded a negative return, would you want some additional details on a corrective course of action?

Non-profits, like private sector firms, typically have governance policies which require financial audits by a chartered account firm – annually. This is a key funder requirement. Unfortunately, there are no policy governed requirements for third party assistance in auditing leadership effectiveness.  Monitoring budget deficits is a rear-view mirror approach for gauging leadership effectiveness.

Perhaps it’s time for funders to reexamine the criteria in their (recipient) risk management assessment tools to preempt these surprising failures.

Within the context of risk mitigation, are there different questions funders should ask of recipients specific to 1) governance and 2) human resource effectiveness in order to gauge leadership effectiveness?

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By Dave Nanderam, Managing Partner, ASSOCIUM Consultants. Through our collaborative approaches, innovative HR products and customized advisory solutions we impact four leadership priorities: managing risk, driving productivity, strengthening talent capabilities and supporting your bottom line. Let’s connect to find out how ASSOCIUM Consultants can help your organization.