CEOs must navigate diverse conflicts and challenges to successfully lead an NGO through the financially challenged period of 2013
Western democracies are increasingly outsourcing Human Services (HS) to Non-Government Organizations (NGOs), Not-For-Profits (NFPs), and Faith-Based Organizations (FBOs). Increasingly, however, the leaders of these organisations are not executives from the NGO sector, but rather executives from the private sector, with a deep understanding of the commercial drivers behind business, as well as the social and political challenges of running an NGO.
These key executives must be able to position their organizations to influence government policy and decision making – and, equally important, put the right architecture around their business to attract the funding from the end consumer.
Our local NGO practice provides a unique window on the challenges of leading the rapidly developing – and changing – NGO sector.
In this blog, I want to examine the sector’s development, current and future prospects, and describe the ideal (and rare) profile of those extraordinary chief executives who have the ability to lead NGOs into a successful future.
Why is the NGO sector expanding so rapidly?
Providing for human services, for most Western democracies, has turned into a financial black hole. Now that all Western democracies are under budgetary pressure – trying to bring in balanced budgets and/or draw down deficit budgets – one way to lighten the pressure is to remove those large social/service obligations from government balance sheets.
Governments increasingly realise that these NGOs, NFPs and FBOs are much more effective in the delivery of targeted, on the ground services. Governments also realise there’s no votes in failing to satisfy the insatiable needs of our communities for cradle to grave services. The Baby Boomers are leading that demand for better, more exclusive and comprehensive services in areas such as aged-care, with their children wanting increasing quality built into childcare. Since the mid 1970s, incredible increases in wealth have created a layered, non-egalitarian society – and that’s showing in the desire for stratified services, from basic to gold-plated.
Where’s the money coming from – and will it get less?
Government redistributes funds to the service providers or the end users. Basically, the government then says we’re going to allow these organisations to deliver our policy on the ground and, for the most part, it is up to those organisations to appeal to the end consumer to spend their dollar with them.
As governments gradually reduce the amount of money, fund-raising becomes an integral part of the service: That’s why many services have been taken up by faith-based organisations, because they have traditionally had balance sheets that can subsidise or support the provision of these services
The UK and Canada have similar government models, My Canadian Partner, Sylvia MacArthur from IRC Toronto says: “In Canada, almost all major NFP’s are now headed up by seasoned business executives. The aim was to bring more rigor and business discipline to these organizations. It has really changed the focus of these organizations, and they are now far more sophisticated in capturing wallet share.”
According to Alam and Robb, in ‘Issues of Economic Efficiency of Human Service Delivery in Australia1’ : “Public investment is also influenced by social factors. For instance, both public sector agencies and non-government organisations, including charities, religious and not-for-profit entities, have a long and sustained history of involvement in the funding and provision of human services such as disaster relief and support for people with a disability and other disadvantaged groups.”
I would add that current models can cause conflict: some FBOs are providing tiered services to the end user. For example, in aged-care, if you can pay for it you can live in a resort-like facility, while other aged-care facilities can be far more basic with shared wards and more modest services.
Alam and Robb state that, while a range of models in delivering human services is possible and desirable both from society and government perspectives, “many human services are provided to people who are poor, and therefore cannot afford to pay a market price (e.g. service for homeless people) and pose a challenge to the viability of a for-profit provision or ‘user-pays full price’ service model”.
Increased government divestment means the services will necessarily become more money driven. In Australia, it follows the line we’re moving to models of more self-funded retirees – so that’s a very big part of it. This generation of people who are approaching retirement (55+) are expected to pay for retirement from their own pension savings.
Is there an ideal CEO?
The successful CEO must understand the commercial imperatives that drive the sector. The profit-and-loss model, and the challenges these businesses face having to manage across the social and political interface. And in that sense, CEOs need to be able to position their organizations as a peak body, to influence government policy and decision making and funnel the end consumer to use their services.
Marketing is another key CEO skill: Just as important, from a marketing point of view, is the ability to put the right architecture around the business, to attract the funding from the end consumer. It may be to attract a person in their 60s looking to transition out of their home, and buy into age care, or it may be a parent who’s looking to buy into child care – the ability of an organisation to attract the end user to a tiered service offering is vital and the CEO will always be chief salesman and marketer for their organisation and the brand.
Executives also have to be experienced in dealing in a regulated environment, used to working effectively with government, understand government policy issues, and have a deep appreciation of how government formulates policy, particularly social policy; those qualities allow the CEO to more effectively influence the debate.
Naturally, they require all of the other leadership characteristics of a successful CEO, including the capacity to inspire and energise their enterprise.
Is it difficult to attract those top flyers?
Of course it is! You are looking for commercially engaged people at the top of their game: It’s not a role where you can consider stepping back from corporate pressure. What you really need is an astute leader that understands government imperatives and the direction their sector is heading in. It’s harder in the NGO sector than in the commercial sector, because you’re dealing with policy as well.
The lack of bonuses can create a major issue for recruitment, despite competitive salaries. However, people who are attracted to this sector are usually those with a personal desire rather than financial reasons. There’s got to be a belief in wanting to give back, or a sense of engagement with the mission of the organisation. The outcomes within these organisations are not driven by the best commercial result, rather the best social outcome, which means sometimes taking the least commercial choice, or the less economically rewarding path.
The roles over the last ten years, have attracted people in their mid 30s to mid 50s – often from a successful background in financial or professional services who have arrived at a point in their career where they have decided that financial stability and security allows them to ‘give back’. They’re happy to take the CEO role and contribute back, he says. They’re driven by social conscience but still want the challenge that large complex enterprises provide.
Managing and leading NGOs is a growing challenge, which necessitates explaining and educating the right candidates about the benefits, the challenges and the career options of this increasingly significant sector.
1 International Review of Business Research Papers
Vol.5 No.2 March 2009 Pp. 52-61
Issues of Economic Efficiency of Human Service Delivery in Australia
Khorshed Alam and Walter Robb