Steward Leadership in the Nonprofit Organization

Kent R. Wilson

• Publisher: IVP
• Year: 2016
• ISBN:
  9780830893409
• Topic: Theology & Religion
• Subtopic: Religion

Most approaches to nonprofit organizational leadership are borrowed from the for-profit sector. But these models are often inadequate to address the issues nonprofit leaders face. We need a new framework for nonprofit management that is rooted in historical precedent and biblical principles yet is also appropriate for the nonprofit context.Nonprofit consultant and researcher Kent Wilson presents a comprehensive model for steward leadership, in which leaders act as stewards or trustees, never as owners. Scripture and history give concrete examples of stewards who manage resources on behalf of others for the good of others. Wilson applies this classical understanding of the steward to modern organizational management, defining and developing steward leadership as an alternative to its cousin, servant leadership.Steward leadership offers great hope for the transformation and effectiveness of nonprofit leadership for stakeholders, board members, executive directors and staff members. Designed by a nonprofit leader for nonprofit leaders, this fresh approach to leadership gives you a new focus to lead your organization with excellence.

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The Distinct Challenges of Nonprofit Organizational Leadership

Walter had lots of business leadership experience. He had worked in engineering for decades in different management and leadership positions, which gave him the confidence in his late forties to fulfill a dream and move to the nonprofit sector. He assumed that his years of business leadership would be a significant contribution to a nonprofit organization in Colorado Springs. Sure, the pay scale wasn’t even close to what he was used to, but he had been frugal and was willing to take a paycheck hit in order to replace career ascension with significance. The interview process seemed to point to the organization’s desire for the business skills he brought to the table, and as a result he felt affirmed when he was given an executive role. The nonprofit was in obvious need of cleanup and turnaround.

In the first few months Walter focused on getting to know the staff, the board and the constituents. He didn’t come with a ten-page plan, just an openness to listen and learn before he gained the emotional right to suggest a strategy. At the time he heard enough comments in the vein of “Finally we have a leader who knows something about business and organizations” that he didn’t notice the equally cautious remarks about how “We do things a little differently here than you may be used to in business.” As long as he was learning, things were positive. But as soon as Walter started to suggest specific changes in processes, staffing and programming, resistance became more overt. Staff members started commenting that “mission is more important than efficiency” and “numbers don’t tell the real story.”

Working with the board started feeling like a tug-of-war as members exerted their authority over some of Walter’s strategies. Walter had worked with an advisory board in his previous privately held company, but that board was full of industry specialists, whereas his nonprofit governance board was made up of average community members with little or no real leadership experience. He was courageous enough to start giving honest feedback to underperforming staff members but equally perplexed by the resistance of their supervisors and even some board members who spoke about “Mary and Eric’s long years of service and sacrifice to the organization.”

Walter wasn’t trying to turn the organization into a business. He was trying to bring business disciplines into the organization to balance its enthusiasm and passion for mission. “Why can’t an organization be as exceptional in its business skills as it is in its social impact?” Walter suggested out loud. He got lip service in return but painfully slow follow-through. As he met more and more donors, he received both affirmation and confused looks as he talked about his vision for the organization. Even the stakeholders he thought would give him unified affirmation seemed to be mixed in their desires and goals for the ministry.

No one who has ever tried to lead an organization would say that leadership is easy. And among the myriad organizations one could lead, the nonprofit organization presents some of the most formidable challenges to the modern leader. In many ways nonprofit organizations share the same qualities and challenges as any other organization, be they corporations, governments, cooperatives, educational groups or other formal organizations. However, they do present some unique and demanding opportunities and challenges. The nonprofit organization is not just a corporation that happens to have donors.

That’s why we as leaders of nonprofit organizations need to provide the best leadership we can to organizations and communities that rely so heavily on our services. This book is about learning how to lead your best as a nonprofit board member, executive director or CEO, or staff leader. The fate of our organizations, which are built on public trust, and the fate of our communities, who rely on our services delivered often without charge, rest on excellent leadership.

What Makes Nonprofit Organizations Different?

Nonprofit organizations (NPOs) have unique characteristics that separate them from for-profit corporations. In an attempt to summarize the greatest difference between the two types of organizations, Peter Drucker focuses on the nonprofit organization’s ultimate objective in his foundational book Managing the Nonprofit Organization:

It is not that these institutions are “non-profit,” that is, that they are not businesses. It is not that they are “non-governmental.” It is that they do something very different from either business or government. . . . The “non-profit” institution neither supplies goods or services nor controls. Its “product” is neither a pair of shoes nor an effective regulation. Its product is a changed human being. The non-profit institutions are human-change agents.1

Other authors have also defined the unique characteristics of nonprofit organizations that separate them from businesses. Here are the primary distinguishing characteristics referred to most often.

Preoccupation with nonfinancial outcomes. Most nonprofit organizations do attempt to break even or make a small financial profit to ensure their future viability and growth, but profit is not the primary “bottom line.” The for-profit corporation has one overriding objective—to generate profit as measured on an income statement. Although other key indicators are also used, the main criterion of success is always profit. For the nonprofit organization, the overriding objective is less clear, less measurable and less objective—the accomplishment of mission.

Tendency toward providing service. Drucker is on target when he emphasizes the nonprofit organizational role as “human change agent” (most researchers refer to this as a nonprofit’s public service role). Although it is true that some nonprofits do create products and compete in the commercial world with for-profit businesses, the vast majority provide a service to the community that is inadequately provided by government or for-profit organizations.

Different tax and legal considerations. Government and society in most countries have chosen to allow nonprofit organizations certain tax concessions, but such concessions usually come with unique legal and reporting requirements.

Private sector non-ownership. Nonprofit organizations are institutionally separate from government, but they are also excluded from any public or private ownership. Nonprofit ownership is implicit or indirect in nature; it is found in stakeholders such as constituents, donors or society in general. Throughout this book the term stakeholder will refer to any group or individual that has an implicit claim or share in the organization’s outcome by virtue of a direct contribution to or engagement in the organization. This lack of direct ownership presents unique challenges for nonprofit management. The majority of books and articles on nonprofit leadership do not give this challenge justice, and yet, based on my experience, it is one of the foundational realities that a unique model of nonprofit leadership must address in detail.

Self-government. Nonprofits generally are governed by an independent board of non-executive directors who control their own activities separate from government intrusion. As we will see in later chapters, both boards and executive directors can be considered stewards or trustees; the former govern and the latter lead tactically.

Ambiguous accountability. Boards and executive directors both are accountable to the stakeholders of the nonprofit organization. But the definition of who the stakeholders actually are and how the organization’s leadership is accountable can be ambiguous. Minimal research has been conducted on the exact nature of this accountability. The challenges created by stakeholder ambiguity are some of the most daunting in nonprofit leadership and need additional research and guidance.

The Challenges of Defining Nonprofit Leadership

Resources created for pastors and leaders of churches, one of the earliest forms of nonprofit organization, date back well over a century. However, leadership studies for nonchurch NPOs only began to surface with any significance after the 1980s. Sources dealing with nonprofit management are far more frequent than those addressing nonprofit leadership, but our focus will primarily be on nonprofit leadership. It is frustrating to observe that when these sources try to define the distinctive challenges of nonprofit leadership (as opposed to for-profit leadership), each study comes up with its own list that only partial overlaps other studies. Since research on nonprofit leadership is relatively new, hopefully there will be more coalescing of the distinctive differences over time.

Dennis Young, who has written a number of articles and books on nonprofit management, begins his 1987 article “Executive Leadership in Nonprofit Organizations” by acknowledging the dearth of studies on the topic.2 He goes on to highlight the challenges nonprofit leaders face compared with those of business leaders, focusing on external and internal functions. He condenses the nonprofit leader’s many external functions in the concept of entrepreneurship, asserting that the entrepreneurial risks undertaken by nonprofit leaders are not that different from those faced by for-profit leaders, with the exception of certain differentiators such as regulatory and stakeholder control and lack of equal access to capital. However, Young sees the nonprofit leader’s internal functions—which mostly revolve around personnel management—as highly differentiated from those of the business leader. Nonprofits’ ­personnel-related challenges involve recruitment, public image, quality orientation, missional commitment and resource constraints. Nonprofit leaders are also constrained in their ability to implement compensation systems that reward performance. As one of the earliest studies on nonprofit leadership, Young’s findings are a strong starting place for additional studies.

Building on earlier works, Paton and Cornforth also analyze how nonprofit management differs from for-profit management in their article “What’s Different About Managing in Voluntary and Non-Profit Organizations?” According to the authors, nonprofit management is different because of

• distinctive purposes (nonprofits pursue social goals that do not easily lend themselves to measurement);
• restrictive resource acquisition (primarily funded by donors who have different expectations than customers);
• diverse stakeholders and governance (there is a much wider variety of stakeholders, which changes the nature of governance); and
• distinctive culture (nonprofits have more participatory forms of decision making and are value driven).3

In an article titled “Executive Leadership,” Herman and Heimovics find that leaders of nonprofit organizations face special challenges when they are expected to integrate mission, resource acquisition and strategy. According to the authors, in spite of the CEO’s subordination to the board of directors, the CEO is still expected to exercise “executive or psychological centrality.” They describe six board-centered leadership skills that characterize effective nonprofit CEOs: facilitating interaction, showing respect and consideration, envisioning change, providing useful information, maintaining board structure and promoting board accomplishments. One characteristic the authors particularly single out is usefulness in understanding the political frame, or thinking and acting in politically effective ways.4 Herman and Heimovics’s research provides a supportive focus on the CEO-board relationship—one that is crucial for effective CEO performance. But their research misses a considerable aspect of that relationship: the trustee role that both C...