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Joanna Thornton and Mark Powell: What is the leadership reality for the NfP sector?

19 Nov 2020 Expert insight

Joanna Thornton and Mark Powell from GatenbySanderson share some insights about the leadership challenges facing the charity sector

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Charities in the UK are operating in an increasingly fractured society with stark political, social and economic divisions. The Health Foundation reports that the UK entered the Covid-19 pandemic, and resulting economic shock, from a starting position of stagnant income growth and low levels of financial resilience. With 65% of families in the bottom income quintile having either no savings, or savings below £1,500, the pandemic has inevitably particularly impacted the most vulnerable in our society.  

The Health Foundation’s research shows that the pattern of employment loss and furloughing by income suggests that the future economic consequences may be borne by those on lower incomes. This in turn risks an additional long-run burden on health given that persistent poverty is associated with worse health outcomes. It is clear that the current pandemic threatens our most vulnerable communities and effective leadership of our vital voluntary sector organisations is therefore more essential than ever.

Our conversations with leaders in the sector have shone a spotlight on many challenges. There are, however, three in particular that consistently arise in our interactions with Chief Executives and Board members: financial pressure; a climate of increased scrutiny; and diversity and inclusion. For each challenge we reference the critical leadership behaviours and then use benchmarking data from GatenbySanderson leadership profiling to provide insights into the capacity of leaders in the sector to deliver on these challenges. 

Through this article we will reference the GatenbySanderson leadership model, Altitude, which describes behavioural excellence for leaders working across the Public and Not for Profit Sectors. The model includes 12 behaviours falling into three clusters; Focus on Self, Focus on People and Focus on Outcomes. We have mapped assessment data on over 3,000 leaders to these behaviours allowing us to benchmark and compare leader capability in the Not for Profit sector (n=289) to leaders in the broader Public Sector. We calculate this variance to generate a Net Leadership Capability score that can then be reported as a ‘strength’ or ‘risk’.

While all 12 of these behaviours are key to leadership success, some of these are of particular relevance to the immediate challenges identified for charities, and insight for these is referenced.

Financial Pressure

The Covid-19 crisis has caused significant financial challenges for charities both large and small.  Many smaller community organisations are particularly vulnerable to the ‘black hole’ that has emerged and are struggling for their very survival. At the same time, larger scale charities are facing fundamental questions about how they operate in the future and are equally needing to make difficult decisions about downsizing staff teams and are seeing significant issues with funding. In June 2020, The Chartered Institute of Fundraising (IoF) produced a report, in partnership with NCVO and Charity Finance Group (CFG), outlining research looking at the early impact of the pandemic.  On average, charities reported that they were expecting a 24% reduction in total income for the year which equated to an expected £12.4 billion loss in total. 

For charities relying on public sector funding, the outlook has been equally challenging in recent years, as a result of an accelerating shift from grants to contract funding across the sector. The tremendous pressure that local authority budgets have come under during the long period of austerity had already meant that charities were often being asked to deliver more for less. The current pandemic makes financial pressures even more acute and leaders must therefore be commercially astute and extremely resilient.

‘Outcomes’ behaviours are key to delivering on this challenge with ‘Social Heart, Commercial Head’ and ‘Drive Strategic Clarity’ of particular relevance. The former is about leaders balancing financial acumen and commercial awareness with a drive to keep the quality of services and the service user, or the cause, at the heart of what they do. The latter is about the leader’s ability to navigate ambiguity and complexity to create a meaningful short-term and long-term strategy. Both support the requirement of Not for Profit leaders to consider what is core to their strategy and what is now possible in the circumstances and this requires placing a laser focus on their charity's original purpose.

The Net Leadership Capability score shows that leaders in the Not for Profit sector, when compared to the broader Public Sector, have greater potential to deliver on these behaviours with significant, positive differences shown across all four ‘Outcome’ behaviours. This suggests a real strength and opportunity for leaders in the sector to determine where the focus of services needs to be and successfully navigate the financial complexity.   

A Climate of Scrutiny

Although recent research by the Charity Commission shows that levels of public trust in charities are up on recent years, they are still below pre-2014 levels. The sector has been beset by a number of widely reported allegations of financial mismanagement, bullying, cultural issues and safeguarding failings. The high-profile headlines in recent years have therefore contributed to a climate of intense scrutiny which means that leaders’ behaviours are increasingly under the spotlight. 

Behaviours of seemingly most relevance here are ‘Engender Trust’ and ‘Courage and Tenacity’, the former is about leaders being honest and sensitive in communications and taking accountability for their own actions and those of the organisation, the latter is about resilience; being able to bounce back from setbacks, being optimistic and having the staying power to see things through.  

The Net Leadership Capability score shows that leaders in the Not for Profit sector, when compared to the broader Public Sector, have less potential to deliver on these behaviours with near significant, negative differences shown for these two core behaviours. This should be noted as a risk for leaders in the sector as they grapple with rebuilding trust and maintaining their own resilience through a difficult period and challenging times ahead. Encouraging leaders to reflect on what it means to be ‘trustworthy’ is a useful starting point to addressing the first challenge, along with how others perceive both them and the executive as a collective. Personal resilience is also something we have supported many of our clients with in recent months, where awareness of good and bad stress, and techniques for managing emotional and physical health, will help support staying power.   

Diversity and Inclusion 

Our conversations with Boards and leadership teams frequently reference the need for not for profit organisations and their leadership teams to be representative of the communities they serve. The Black Lives Matter movement has shone a spotlight on issues of systemic racism in our society and contributed to a heightened awareness of diversity issues in the sector. 

Insight from ACEVO who collect diversity data in its annual CEO Pay and Equalities Survey, is particularly telling. In 2008 4.2% of respondents reported being from a Black, Asian or minority ethnic background, in 2018 the figure was 3%, rising slightly to 6% in their 2020 survey.  

The Behaviour of focus here is ‘Futureproof Talent’ which is about harnessing the value of a diverse workforce and working to ensure that the organisation has the people and talent it needs, both now and in the future. In addition to diversity and inclusion it includes themes of succession planning and cultural awareness.

Net Leadership Capability score shows that leaders in the Not for Profit sector, when compared to the broader Public Sector, have greater potential to deliver on this behaviour with a significant, positive difference in their score. Whilst this suggests a potential strength for leaders in the sector, as they look to address diversity and inclusion in their organisations. We also however recommend caution with the need to flag the difference between the ‘potential’ of leaders to demonstrate this behaviour, as provided by our measure, and the actual behaviour of leaders in the workplace. It is also key to consider the lived experience individuals bring to the table, indeed whether we are seeking to increase racial diversity or ensure beneficiaries of services have a voice, in order to fully serve the needs of the community it is vital to understand how the experiences of each individual can help enhance the organisation. 

GatenbySanderson is hosting a panel of expert speakers from the sector: James Blake, Chief Executive of YHA, Vidhya Alakeson, Chief Executive of Power to Change and Karen Boucher, Head of Talent and Resourcing at Blue Cross, to share their own journeys and offer practical tips based on its data. For more information about the event and to RSVP click here.

Joanna Thornton and Mark Powell are Partners at GatenbySanderson

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