Innovative Leadership Needed to Navigate Economic and Societal Changes

The economic crisis and other changes sweeping society have put nonprofit leaders in unfamiliar territory, forcing them to move quickly to make decisions that could spell the difference between whether or not their organizations — and their own positions — survive.

To adapt, management experts say, the best leaders will change the rules of the game, restructure parts of their operations, and redefine the way people work.

Easier said than done, but some innovative models have started to emerge.

A big problem is that too many foundation and charity leaders are hunkering down and waiting for things to return to normal while they apply familiar short-term fixes such as staff reductions and across-the-board budget cuts, says Alexander Grashow, managing director of Cambridge Leadership Associates, a Massachusetts business that advises charities and other organizations. Applying short-term solutions that have worked in the past to a completely new environment, Mr. Grashow says, “is like talking louder to someone who cannot hear. It doesn’t work.”

Vincent Hyman, who is revising a book he wrote with other experts to help charities weather the 2001 recession called Coping With Cutbacks, says charity leaders are just beginning to understand the scope of the changes required by today’s economic shift.

“I asked people what they thought the other side of this recession will look like, and one person said they didn’t think there will be another side,” Mr. Hyman recalls. “There’s a sense that we’re in a long-term reorganization of the economy. We’re riding a big wave in a changing environment.”

To cope, some charity leaders are moving fast to fundamentally change how they manage their organizations. Among their approaches:

Let employees make key decisions. Julia R. Wilson, executive director of the Public Interest Clearinghouse, a San Francisco charity, decided to give her employees more autonomy after her organization lost about $40,000 in foundation grants, donations from law firms dropped by 15 percent, and she was forced to lay off staff members.

The stark budget situation forced her to take a new approach to leading the organization — one in which she encouraged her subordinates to decide how the group would meet its mission to provide legal aid to the poor. She gathered her staff members and “we literally sat down around a table and wrote down what had to be done on index cards, and people picked up the things they could do or wanted to do. We based this on stuff people were drawn to; we detached leadership from positional authority.”

Since the change was made a few months ago, she notes, some employees now lead teams that include people who previously were their bosses.

The result: “It has worked beautifully, and we are actually getting more funding now,” says Ms. Wilson.

For example, a young staff member came up with the idea of expanding volunteer opportunities for law-school students so that they could provide legal advice and other services to people in rural areas. Ms. Wilson says that one idea prompted a local foundation to increase its one-year grant to the clearinghouse by 20 percent, and to make a new multiyear commitment to help the rural program continue.

“We went through this really tough financial time, and things got really exciting,” says Ms. Wilson. “It sort of catapulted us. We are doing the most relevant and responsive work we’ve done in recent history.”

Decide what is essential. “When nonprofit groups are told to do more with less, they have to realize that is a fantasy,” says Mr. Grashow, the leadership consultant. “You have to stop doing some things or do things differently.”

But to get there, charities must first determine what matters most to their organization, Mr. Grashow and his colleagues say. “That’s hard for nonprofits,” he admits. “They have a difficult time figuring out what to stop doing because it all feels mission-critical.”

The Council on Foundations, which represents about 2,000 grant makers, has been forced to drop some programs, as it faces a decline in dues-paying members, as well as attendance at its conferences. A recent gathering for community-foundation leaders, for example, drew only 600 people, down from 1,600 before the recession.

Because of the council’s financial woes, “we did a comprehensive plan to see what we do well and focus on that instead of things others can do better,” says Steve Gunderson, the organization’s president. “If things don’t fit, we turn them away.”

For example, the council has dropped several of its research studies, Mr. Gunderson says. Other organizations already provide adequate research on grant makers. He says the council has also reduced what it was spending to help foundations deal with legal issues and stay on top of government decisions and pending legislation by moving materials, such as answers to commonly asked questions, onto its Web site.

Look beyond obvious solutions. In a time of rapid change and uncertainty, solutions to problems are sometimes the opposite of what might have worked before or what people assume is the correct answer, says Carlina Hansen, executive director of the Women’s Community Clinic, in San Francisco. Like many other nonprofit leaders, Ms. Hansen says, she always assumed that hiring contract workers was cheaper than adding new staff members, especially in a bad economy.

But after an analysis of the money the clinic was spending on two part-time contractors who provided proposal-writing and technology services, Ms. Hansen says she realized she was wrong. The clinic has since replaced the contractors with two new part-time staff members. Not only do they cost the clinic $30,000 less per year, Ms. Hansen says, but they also work three times as many hours as the contractors did.

Collaborate to save programs. Ms. Hansen says finding ways to share resources with other local charities has been essential to helping her organization survive. For instance, the clinic could no longer afford to pay the salary of a staff member who manages a program that enlists volunteeers to provide health counseling and other services to women and children who live in subsidized hotel rooms throughout the city.

Ms. Hansen says that the clinic was on the verge of eliminating the program when it learned that a local mission that works to ensure that landlords honor the rights of hotel residents was looking to expand its work. The two organizations agreed that the clinic’s volunteers could be trained to ask hotel residents about living conditions while also continuing to provide health services, and the mission is now paying the salary of the clinic’s volunteer manager.

“She continues to be our paid staff, but the money comes from the other organization,” Ms. Hansen says. “We’re like a subcontractor.”