640,000 New Senior Managers Will Be Needed to Run Nonprofit Groups in Next Decade

Nonprofit organizations will need to hire an additional 640,000 senior managers in the next decade, according to

a new study by the Bridgespan Group, a Boston nonprofit organization that provides strategic-planning advice to charities.

The study examined the leadership requirements of charities with revenue of at least $250,000 and found that organizations will experience a nearly 40-percent increase in the annual need for new managers, requiring roughly 56,000 new managers this year and 78,000 by 2016.

Those estimates do not include hospitals or colleges, because, Bridgespan said, the path to senior management at such groups is not comparable to that at other nonprofit organizations.

A report on the study said that charities could face a tough time recruiting enough senior managers to meet their needs. One reason for the shortage, the report said, is that the oldest members of the baby-boom generation turn 60 this year, and over the next decade retirements of top executives will increase by 15 percent.

Meanwhile, the number of nonprofit groups is expected to continue to grow, having already tripled since 1986. And existing charities are also expanding, both in budgets and personnel, leading to a need for new senior managers.

Complicating matters, the study found that nonprofit organizations invest less time and money than businesses do in recruiting and training junior managers, with the result that charities are less likely to fill senior-management jobs by promoting from within.

While businesses fill up to 65 percent of top positions through internal promotions, the report said, charities fill 30 to 50 percent of such openings in that way.

Filling senior-management positions from outside an organization can be more difficult for charities because the majority of graduate programs in business administration, as well as most executive-search firms, are focused on the corporate world, the report said.

‘Self-Defeating’ Approach

To head off the potential crisis in charity leadership, the report urged nonprofit organizations to invest more resources in developing their “leadership capacity,” defined as recruiting expenses, training costs, salaries, and benefits.

The report noted that donors tend to believe that such business costs should be held in check, but said that a failure to make those kinds of leadership investments could be “self-defeating.”

“The amount of social impact a nonprofit organization delivers is primarily dependent upon the capability and performance of the people in that organization — no management principle is more fundamental,” said Thomas J. Tierney, chairman of the Bridgespan Group. “If nonprofit executives, philanthropists, funders, government leaders, and others who care about the social sectors do not aggressively address the leadership deficit, the effectiveness of nonprofits will decline, undermining social results and shortchanging our communities.”

Charities should expand their recruiting pools beyond the “small circle of friends and acquaintances” that has become part of the “close-knit cultures” of many nonprofit groups, the report said. In addition, it encouraged them to seek out retirement-age executives from the business and nonprofit worlds who wish to continue working for organizations with a social mission, as well as graduates of the growing number of nonprofit-management graduate programs that universities offer.

The Bridgespan Group also asked 14 nonprofit leaders to comment on the study’s findings, and their responses are available in a separate document. The Nonprofit Sector’s Leadership Deficit report and the commentaries are available free online at http://www.bridgespangroup.org/kno_articles_leadershipdeficit.html.