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Man on a Mission

A conversation with Thomas J. Tierney, chairman and co-founder of the Bridgespan Group, advisor to the nonprofit sector and its donors, sought-after speaker, and co-author of Give Smart: Philanthropy That Gets Results. He serves on the boards of eBay and The Nature Conservancy, and chairs the Harvard Business School Initiative on Social Enterprise.

Tom Tierney

Tom Tierney is on a mission to increase the impact of giving and bring about meaningful social change. In early 2012, GCN hosted Tierney for two days of presentations and “deep dive” sessions with Georgia nonprofit and philanthropic leaders, where he challenged both groups to rethink the terms of their relationships, and offered constructive steps to spur self-evaluation and facilitate change. In a follow-up conversation, we asked him to weigh in on nonprofit/funder relationships and to share his perspective on the challenges of sector leadership today and where it must improve.

The Donor-Grantee Trap.

“What is partnership?” Tierney questions, observing “the harsh reality” that, while the label ‘partner’ is often used to describe these relationships, the current donor-grantee paradigm is generally not one of true partnership, but rather a “trap”—in which funder and nonprofit goals and strategies are often poorly aligned.

“When strategy and shared goals are not aligned, the relationship is unproductive,” he asserts, and the unintended, but likely, consequence is that nonprofits do not get what they need, and the communities that both funders and nonprofits strive to serve are shortchanged.

How does this happen? A major contributing force, says Tierney, is the “tremendous power imbalance” between funders and nonprofits. As an example, Tierney cites the nonprofit starvation cycle, “where funders are disinclined to fund overhead; nonprofits often lack skill at making the case for funding these critical operating expenses; and the consequence is underfunded capacity.”

The title of his latest whitepaper says it all: The Donor-Grantee Trap: How ineffective collaboration undermines philanthropic results for society, and what can be done about it. In it, Tierney and co-author Richard Steele drill down to the underlying causes, shining a bright light on shortcomings of both funders and nonprofits.

While Tierney’s focus is on results and how they are undermined, his message is about what can be done about it, not finger pointing. He urges both groups to reexamine their own practices and move toward a truly collaborative partnership on more equal footing.

A high bar for nonprofit CEOs.

Speaking more broadly about the challenges of nonprofit leadership, Tierney shared insight on the top qualities of effective CEOs, comparing and contrasting them with their for-profit counterparts. He observed that nonprofits operate in a far more complex environment and set of challenges than businesses. “The bar is very high,” he acknowledges, so “it is harder to lead a nonprofit in a way that delivers exceptional results.”

CEOs must interact and collaborate with a far more complex array of stakeholders.

Drilling down, he ticks off the layers of complexities. There is the tricky work of achieving and measuring results; the strategy of how to use scarce resources to achieve those results; and the necessity to motivate and align a complex set of stakeholders.

While the skillset to effectively lead a nonprofit is daunting, nonprofit CEOs excel at much of it, observes Tierney, far more so, in some respects, than for-profit executives. One critical skill at which nonprofit CEOs tend to be highly adept is “motivating and rallying an organization around a compelling mission,” and, he adds, they understand how to “inspire folks who work enormous hours and strive to implement a mission for reasons that are not associated with stock options or personal bonuses.”

They could also “teach their business counterparts a thing or two about influencing a vast array of stakeholders that do not have direct financial interest, but do care,” he observes. For-profit executives exert a high level of control, and their stakeholders are aligned around a vested shared interest in profit goals, whereas nonprofit

CEOs must interact and collaborate with a far more complex array of stakeholders—each with their own agenda—ranging from funders to board members and volunteers, other organizations, government, constituents, and the communities they serve.

To successfully manage these components, says Tierney, requires a different and more difficult approach to leadership, one based on “influencing, not control.” Borrowing from Jim Collins description in his book, Good to Great and the Social Sectors, Tierney says these leaders must exercise “legislative power” rather than “executive power.” Adding to the mix, the nonprofit CEO is time-strapped, serving as chief executive as well as “chief salesperson,” with between two-thirds and three-quarters of their time spent fundraising.

And, while strong leadership is a ‘gating factor’ to attracting money, staff and volunteers, Tierney explains, “leadership alone is insufficient to get the job done.” He cites a further area in need of improvement, with the observation that “nonprofits tend to be strongly led, but undermanaged,” and that management, an equally critical skill, is, in his view, “underinvested and underappreciated.”

How to strengthen sector leadership. 

How can the sector improve the effectiveness of its leadership and, hence, its results? Tierney stresses three interconnected areas in which nonprofit CEOs need to step up, “wearing their leadership and management hats.”

First, he says, “ensure you have the right people in the right jobs at the right time.” Nonprofit CEOs must be vigilant about continually strengthening their teams, “as you will never get A-level results without an A-level team.”

A second opportunity, says Tierney, is for nonprofit CEOs to build their skill at translating an inspiring vision into practical strategy and effective execution. Having passion, vision and defining a mission is the relatively easy part, says Tierney: the harder part is “effectively translating your mission into strategic clarity that articulates how to allocate resources and guides decision-making.” It is a set-up to failure to assume that “grandiose vision will somehow be realized,” he warns.

The key to developing successful strategy is to answer: What is success and how will we achieve it?

The key to developing successful strategy, advises Tierney, is to answer this crucial question: what is success and how will we achieve it? Then, he adds, you must be both aggressive and clear-minded about what it will take to get the job done. To underscore the point, Tierney adds this reality check: “If you are clear-minded about what is success and how it is to be achieved, but you don’t have the resources to implement that strategy, then you don’t have a strategy.”

Turbulence and opportunity ahead.

Despite a tough economy and perennial funding challenges, the sector is gaining traction and market share, says Tierney. “Over the past 20 years, the role of the sector has been broadening and escalating,” he says, and today, “there are more nonprofits, and more nonprofits scaling, and they are becoming more and more central to society.”

Guiding voices like Tierney’s, coupled with new capital and new talent fueling the sector, present a new set of opportunities for nonprofits to leverage, if they are poised to seize them. “More and more foundations are being funded,” says Tierney, “and we are seeing more resources being devoted to social sector organizations.”

Collaborations between business, government and nonprofits, which “blur boundaries,” are also on the rise, and there is an influx of new talent moving in through multiple channels. Consider that the largest student club at the Harvard Business School is the Social Enterprise Club, he notes. Teach for America received 50,000 applications for 5,000 positions. More highly qualified people are pursuing “encore careers…choosing to move from ‘success to significance.’”

Yet, the sector continues to struggle with a leadership deficit. Surveys show that, while nonprofit CEOs have been staying in their jobs longer, a retiring wave is on the near horizon. This comes at a time when there is growing emphasis on capacity building, which requires a new generation of skilled CEO talent. “This idea of scaling what works,” says Tierney, “means the sector needs more management leadership talent.”

“It is relatively easy to lead during good times,” Tierney concludes. “Leading in unstable times and periods of enormous uncertainty is harder. However important leadership excellence was in 2006, it is far more important today, in 2012, and looking ahead.”

Betsy Reid is VP, Marketing and Communications, at GCN. 

 

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