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Cover Story Jan/Dec/12/13: Follow the Leader

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December/January 2013

The Cabinet Office review into leadership skills in the third sector was announced in October and will be completed by the spring. Dame Mary Marsh, who leads the review, believes such haste is entirely justified. “The purpose of the review is to identify gaps in skills and find out where priorities are,” says Dame Mary. “Not just any gaps in leadership skills, it’s about identifying the critical gaps. We want to know what we can be doing to help organisations now.”

The review’s purpose and timing are no surprise. Economic circumstances are forcing the sector to do more with less. The funding environment is showing no signs of improvement. Charities are increasingly expected to make up for shortfalls created by Government cuts. In these circumstances, charity leaders need all the help they can get, and they need it soon.

“Our leaders are operating in a tough environment,” says Richard Doughty, deputy leader of the National Council for Voluntary Organisation’s (NCVO) Leadership 20:20 panel. He points out that 12% fewer CEOs highly recommend working in the sector compared to 2010, according to the latest ACEVO Pay Survey, and many expect the situation to get worse.

Thrive to survive
But Doughty provides a more optimistic caveat. The sector remains an attractive destination for leaders who want to make a difference. And while he admits that many charity chief executives have had to change their focus from “thriving to surviving”, he agrees that the response to adversity by CEOs and their boards has been impressive.

In turn, those CEOs say their lives have changed immeasurably in the last few years. Even in those charities that are not struggling for mere survival, the day-to-day demands of the job are intense.

“I am not sure if the role has changed but the focus has,” says Campbell Robb, chief executive of Shelter. “The level and depth of cuts to our public sector income and the increasing desperation of many of those that we help means that there are really difficult decisions to make, almost daily, about how best to use our very limited resources.”

This is a constant theme among charity leaders. How do we help more people with less money? One of the chief assets that CEOs, executives and managers need is the ability to make difficult, sometimes painful decisions.

And that, says Rachel Kirby-Rider, executive director of fundraising and communications for Samaritans, means being tough when needed. Being a charity leader now requires a level of professionalism and a steely focus that has not always been obvious in the sector.

“Ten or 15 years ago you might say the charity sector was more about the ‘nice to haves’. It was almost like nobody wanted to upset anybody. When I first started people did find it hard to make tough decisions. That’s no longer the case. Leadership teams are now much more focused on the ‘must haves’.”

New reality
Like others in the sector, Kirby-Rider admits that charity leaders are running a business, of sorts. “We have a duty to our donors to be as efficient and as productive with their money as possible, and that’s more true at the moment than ever,” she says.

The new reality is creating tensions that CEOs and executives are having to face head on. Prioritising spending inevitably means some miss out. Making tough decisions is not always popular.

“Supporting and motivating staff at the same time as making closures is just one example of the type of tension that, as chief executive, I have to manage,” says Campbell Robb.

Robb says the tensions can be particularly acute when making funding decisions that prioritise long term goals over short term needs. Investing in the long term health of the charity – in Shelter’s case through new IT, for example – can be difficult when set against the very real possibility of having to close down offices.

But Richard Doughty agrees that every decision needs to be taken with a focus on the future of the organisation. Focusing solely on day-to-day fire fighting isn’t an option.

Difficult choices
But how do good leaders keep their staff and volunteers enthused by a vision which can sometimes seem at odds with the day-to-day – and increasingly hand-to-mouth – operations of anorganisation? Robb says communication is key: “Being honest and open about the difficult choices we face, meeting staff, answering their questions, explaining why we are doing what we are doing are absolutely crucial parts of my job and which rightly take up a lot of my time.”

Ciarán Devane, CEO of Macmillan Cancer Support, agrees, and adds that showing a “clarity of purpose” to staff, volunteers, partners and donors is also important. “Doing what is in your control as well as possible, and being seen to respond to the changes around you with realism, goes a long way,” he says.

Making tough decisions while keeping staff and volunteers on side, enthusing fundraisers and donors, helping more people with less and at the same time keeping half an eye on the long-term health of the organisation...you have to admit, it’s a tough ask.

Which is why the sector needs to identify and nurture the best leaders it can get, and needs to support them properly. Dame Mary says that charities have not always been good at mentoring and supporting talent, and that the funding model – particularly for those charities reliant on public sector grants – has traditionally worked against
developing the skills of current and future leaders.

“It is particularly difficult for charities who pitch for a piece of work and when the work is finished the funding stops,” she says. “That doesn’t foster long-term sustainability.”

Nor does it foster time for reflective review, one of the early weaknesses – along with a large generational gap in digital media and communications – her review has uncovered.

Training & recruitment
Training and skill development are also areas that suffer as a result, though Ciarán Devane, for one, thinks it is a lot better than it was. “When I first started, I remember
we never talked about our people,” he says. “We spent less on training than on recruitment. It would have made more sense to do it the other way and spend more on our staff than on recruiting their replacements. But we and the sector are a lot better now.”

The sector might be better, but it’s a long way from being perfect when it comes to developing leaders. For evidence of that, Richard Doughty points to ACEVO statistics which show that 69.2% of CEOs are recruited outside their own organisation and just half are recruited from within the sector.

“In a sector where more than a third of CEOs are aged over 55 and only 23% of organisations have a succession plan for their chief roles, it’s perhaps unsurprising that we’ve become renowned for parachuting leaders in from outside,” he says.

“I believe our sector is failing to effectively support and equip our own emerging leaders, which is why our work is so important.”

In some ways, recruiting leaders from outside is a good thing, because it brings the skills and focus of the private and public sectors to the heart of charities.

But excessive recruitment from outside is evidence of a sector-wide failure to identify and nurture talent.

There are other issues, such as a lack of diversity in current leadership teams.

Just under 94% of CEOs are white and only 6.1% of trustees of the largest 100
charities are disabled, according to the Trustee Leadership Survey.

Both Doughty and Dame Mary identify another problem. The sector is not good at collaborating and sharing what it knows.

“Emerging leaders told us they felt there weren’t many opportunities for them to talk with one another and share good ideas, which is why NCVO are going to be supporting the creation of foresight networks which will bring together emerging leaders in their communities and in specialist sectors,” says Doughty.

Governance & Boards
But leadership isn’t just about chief executives and their management teams. It’s also about governance, boards and trustees. According to ACEVO, the relationship between a charity CEO and his or her board is crucial, but tensions can quickly mount in challenging times.

“We are hearing that the strongest stress point is in relationships, which always take time to nurture and there is less time for that now,” ACEVO says.

“This can then unravel, especially the relationship between a CEO and their chair which is where it needs to be strong and resilient. ACEVO are dealing with a substantial increase in calls to our helplines for support and guidance in this area.”

CEOs, boards and stakeholder are not always on the same page, something well demonstrated by attitudes towards impact reporting.

Tom Wright, Group chief executive of Age UK, says that measuring outcomes is complex anyway, and that “managing the complexity and the balance of quantifiable and qualified objectives for diverse stakeholders is often a challenge.”

Tris Lumley, head of development at the think-tank New Philanthropy Capital (NPC) and co-author of a recent report on impact reporting, says many boards have yet to grasp that knowing what effect your work has is a core part of charity governance.

“If you compare how many boards have an impact committee and how many have a finance committee, the former will be close to zero and the latter 100%,” he says.

“Boards tend to focus on sustainability and whether the organisation will be bigger next year, and not on delivering on their mission.”

The NPC is hosting an Impact Leadership Conference on January 16th to iron out some of those issues, but clearly impact reporting is both a weakness in many charities and a
cause of tension between boards, stakeholders and CEOs.

But that, says Lumley, is slowly Charity CEO salaries decrease changing. In impact reporting, as in many areas, charities are at least getting better. And though charities have rarely been under such pressure, in most cases their leadership teams have never been so professional and focused.

Tom Wright believes that good leadership can steer charities through tough times, and that there is a cause for optimism: “You now see very diverse leaders in the charity sector from different backgrounds. This diversity, along with the talent that exists (and must be fostered) at different levels within lots of organisations, is driving collective professionalism and innovation across the sector.”

Hugh Wilson is a freelance journalist



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