December 8, 2019
 
In the Impact Era Nonprofits Need to Be Strategic Leaders

Nonprofits are poised to play a more pivotal role in American life, but will need to embrace a high level of strategic leadership if they are to be high-performing organizations, argue the authors of Engine of Impact.

"We are at the dawn of a new era—the Impact Era—in which nonprofits will play an ever more vital role in supporting, safeguarding, and sustaining American civil society," write Will F. Meehan III, formerly a director of McKinsey & Company, and Kim Starkey Jonker, former executive director of the Henry R. Kravis Prize in Nonprofit Leadership, both now with the Stanford Graduate School of Business.

More will be demanded of nonprofits, but so, too, of funding sources. By 2025, philanthropic donors are on track to contribute $500 billion and $600 billion annually (up from $373 billion in 2015), but nonprofits will need between $100 billion and $300 billion annually beyond what they can expect from known revenue sources, Meehan and Jonker predict.

To make a significant, lasting impact, "nonprofit leaders must engage with all of the essential components of strategic leadership in an integrated and comprehensive way," they say.

Meehan and Jonker define strategic leadership as high levels of strategic thinking (encompassing mission, strategy, evaluation impact, and insight and courage) plus strategic management (encompassing funding, talent and organization, and board governance), which together create an "engine of impact."

Based on their research, Meehan and Jonker found that 80% of social sector organizations face significant challenges, not the least of which is deficiency in one or more areas of strategic thinking or management: "We believe that an inability to master even one component can prevent an organization from achieving its goals."

To help, the authors outline a comprehensive set of steps nonprofits should take to fuel their engine.

On the strategic thinking front, everything flows from tying mission to strategy, they write, which requires nonprofits to have a theory of change – a logical hypothesis about how its desired impact will be achieved. And only with such a theory can an organization count the things that should be counted in order to gauge progress. However, they say, only about half of all nonprofits have a theory of change.

On the strategic management side, Meehan and Jonker advocate a "team-of-teams" model that they feel "has the potential to reinvent the way that nonprofits build and develop their organization." Among other things, a team-of-teams model puts people on temporary teams for much of their time, giving potential leaders wide experience while expanding career possibilities.

Succeeding in the impact era has implications for stakeholders across the nonprofit sector. According to Meehan and Jonker:
  • Philanthropists and major donors can help nonprofits make the impact everyone desires by giving at greater levels, perhaps spending down their endowment or giving away 90% of their personal wealth.

  • While not every board member will command the details of strategic leadership, all need to help their organizations "find its fuel" by mastering the essentials of strategic management.

  • Nonprofit executives should embrace strategic leadership and avoid distractions that divert them from their mission.
Engine of Impact: Essentials of Strategic Leadership in the Nonprofit Sector is available from Stanford Business Books.

Reviewed by Peter Lowy
October 2019


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