By Pritha Venkatachalam and Danielle Berfond*
High-performing NGO leadership matters. Exemplary leaders stretch limited resources. They inspire teams to perform their best and grow to their full potential. They accelerate the mission. The implication could not be more clear: organizations must develop a deep bench of strong leaders in order to scale and sustain impact over time.
Studies have revealed the significant returns from investing in leadership development. These range from improved organizational performance to higher competitiveness for talent.
Unfortunately, investing in leadership development is not the norm in the social sector. According to a 2014 McKinsey & Company study, which analyzed 20 years of spending by foundations in the United States, such institutions allocate just 1 percent of their annual funding to leadership development. This equates to US social sector spending on leadership of around $29 per employee, versus $120 per employee in the private sector.
The US trend holds true in India, despite a growing recognition among the nation’s NGOs of the value of developing leaders.
Of the 250 NGOs in India we surveyed, an overwhelming 97 percent called leadership development important to their organizations’ success. But they do not match this recognition with investment or action. Rather, NGOs and funders invest almost exclusively in programs that directly benefit constituents.
This fundamental underinvestment in building leadership capacity afflicts a large part of India’s social sector. More than 50 percent of NGOs responded that they have not received any funding for leadership development in the past two years. For the most part, NGOs and funders address leadership only when an urgent problem arises, such as when an NGO’s founder steps down or when the organization underperforms.
Meanwhile, pressure is mounting on NGOs. From 2011 to 2016, total philanthropic funding to the sector grew by an annual average of 9 percent, thanks in part to the 2013 mandate that companies spend at least 2 percent of their net profits on corporate social responsibility (CSR). However, as investing increases, so does the focus on results, which places greater demands on leadership.
Another accelerating trend makes leadership development even more urgent: a looming transition from NGO founders to a new generation of leaders. These leaders had founded NGOs some 20 or 30 years ago and are beginning to give up the reins.
Consequences of Underinvesting
The Indian social sector recognizes that exceptional NGOs rely on exceptional leaders. Yet recognition has not translated into investment of time and resources. This systemic gap in leadership development investment threatens NGOs’ sustainability.
Three significant consequences emerge from our interviews and NGO survey:
- Overdependence on a single leader, often the founder
- Lack of a second line of leadership
- Limited organizational leadership skills
- Overdependence on a single leader
Many NGOs, particularly smaller and start-up organizations, feature a dynamic and charismatic leader, often the founder. But no single leader can keep pace with the needs of an entire, growing organization.
“Generally, in a small NGO, one leader is responsible for all key decisions and oversees most of the critical activities,” summarizes Priya Naik, chief executive of Samhita, which collaborates with companies to develop CSR initiatives. “This inhibits the ability of the organization to scale.”
As organizations grow, so does their complexity and the array of problems that need solving—a challenge for any single leader to navigate. Vishal Talreja, co-founder and chief executive of Dream a Dream, which helps vulnerable young people build life skills, faced the solo-leader conundrum a few years ago. “In the early days, it was a very Vishal-centric organization,” he recalls. “But I realized that if the organization was so linked with me, there was no way we were going to solve the problem. Dream a Dream could not be just about one person.”
There is another downside to relying too much on a single leader: if a leader is not committed to building a learning culture and supporting team members’ efforts to expand their skills, it is likely that fewer promising leaders will emerge, perpetuating the vicious cycle of overreliance on that leader.
Lack of a second line of leadership
Every organization needs a second line of strong leaders—individuals who oversee specific organizational functions or programs and can step in for the senior-most leader if needed.However, when most decision making is vested in the person at the top of the organization chart—an approach prevalent across many Indian NGOs—second-line leaders have far fewer opportunities to take on new responsibilities and grow. The problem is often compounded by unfilled leadership vacancies and lack of succession planning.
“The gap between the founder or senior leader and the rest of the organization is often very wide,” says Daniel Lobo, director of Leaders’ Quest, a global social enterprise that develops effective, compassionate leaders. “There usually isn’t a conscious effort to develop the capabilities of people on the second rung.”
A study of Indian NGOs by the Center for Creative Leadership also surfaced this troubling trend: “A concern is that many NGOs had not substantially enhanced their ability to embed and share leadership [authority] within the organization. In some cases, founders and senior leaders hold a tight grip over shaping the course of the organization.”
An organization without a strong second line is unlikely to sustain itself over the long run.More than 50 percent of the survey respondents say they lack confidence that someone could effectively lead the organization in the absence of their senior-most leader.
Even among NGOs with more than 200 full-time employees, presumably the more advanced organizations with more at stake, less than 60 percent are confident in their second lines.
Limited organizational leadership skills
“There are a lot of NGOs who are doing good work, but the leadership is not sustainable,” says Dr.Vandana Nadig Nair, founder director of Phicus Social Solutions, which aims to strengthen social sector leaders. “The ability to build organizations, not programs, is missing.”
A majority of respondents share Dr.Nair’s observation. When asked to rank the types of leadership competencies—organizational, technical, functional, and individual—that require the most investment, almost half selected organizational competencies first. And as NGOs grow in size and impact, organizational competencies are increasingly important to cultivate.
NGOs rated their leadership teams to be the weakest in such organizational competencies as change management, business and operations expertise, developing others, and strategic thinking and planning—skills essential for creating high-impact, scalable, sustainable organizations.
Indian NGOs often grapple with all of the above three consequences of underinvesting in leaders, especially since they are interconnected, mutually reinforcing, and likely to perpetuate leadership challenges.
Arnav Kapur, program officer for policy and strategic partnerships at the Bill & Melinda Gates Foundation, summarizes the implications. “Since many organizations find it challenging to invest in building a strong second line of leadership, this might be part of the reason why they find it difficult to diversify their funder base and scale up their work. Many funders say they are willing to increase their financial contributions, so there is a supply of philanthropic capital—but it is not being appropriately invested due to what they see as inadequate senior leadership talent at NGOs.”
*Excerpts from “Building the Bench at Indian NGOs: Investing to Fill the Leadership Development Gap”, by the Bridgespan Group, with support from Omidyar Network, drawing on a survey of approximately 250 leaders from Indian NGOs and the Indian offices of international NGOs. Click HERE to download the full report