Is your social venture losing its homegrown talent — often to other social ventures? In the past two years, only 30% of open C-suite positions in the nonprofit sector were filled by an internal candidate (the rate at for-profits is 60% of positions). And almost half their replacements came from other nonprofits. This comes at a significant financial and productivity cost to all organizations, as demonstrated by research in corporate settings: Onboarding an external hire can cost up to twice the departing executive’s salary, and the time it takes for an external hire to become productive is twice as long as for someone hired from within.
A new study by The Bridgespan Group, based on a survey of more than 400 nonprofit C-suite executives and dozens of interviews, surfaced this surprising finding and discussed how to address this leadership development deficit. The survey also found that in the past two years, one in four C-suite leaders left her position, and nearly as many told us that they planned to do so in the next two years. Meanwhile 44% of their replacements came from other nonprofits. Projecting those findings out over the next eight years, the nonprofit sector could need to replace the equivalent of every existing C-suite position, creating, if patterns hold, a case of leadership musical chairs.
The leaders we surveyed identified several factors contributing to high turnover. While the top reason for leaving was low compensation (57% reported it), nearly as important was frustration with a lack of professional development opportunities, which half of respondents cited as their reason for departure. “I haven’t even had the right experiences to move to the next level if I wanted to,” says a C-suite executive at a Jewish federation. Many of the executives we interviewed said their organizations were too small and flat to provide opportunities for promotions, even for the most promising staff. Other rising leaders found a lack of mentoring and support to be most discouraging: “My plans to stay or leave change relatively frequently,” says the executive director of a youth development organization in Pennsylvania, “and relationships with the board are the primary factor.”
One solution to the turnover problem is to provide both stretch opportunities and mentorship to employees, as several of the organizations in our study do.
First Published on Harvard Business Review by Libbie Landles-Cobb, Kirk Kramer & Katie Smith Milway