Can Leaders Learn? Especially Inept Ones?

The literature on leadership competence, at least in the nonprofit world (and one military paper I’ve read), estimates that between only 25% to 50% of current leaders of ministries and nonprofits are sufficiently competent to run their organization. Flaws run from not having financial acumen to serious and debilitating interpersonal leadership characteristics. Al Lopus of Best Christian Workplaces survey services once told me that a significant percentage, upwards of 50%, of the Christian ministries they survey have significant trust issues in their cultures! Lack of trust almost always derives from the latter class—interpersonal ineptness in leadership.

The question, then, is, can these executives be helped to become effective leaders that people want to work for? The answer is, “not easily and not usually.” They can be helped more easily with technical deficiencies. There is a saying in the personnel world that people are hired for their technical competence and fired for their interpersonal incompetence. In my experience that is certainly true.

In order for a leader to change or improve his or her interpersonal habits, he must admit and own often serious behavioral flaws that make him a jerk in the eyes of others. Marshall Goldsmith in his book, What Got You Here Won’t Get You There addresses 20 of these behaviors. He also explains what it takes to effect a change, including a meaningful apology to the staff! —And then a request for help from those same people. Most of his clients are at least motivated because they are under the gun of receiving no further promotion unless the behavior is fixed. Directors of nonprofits are not under such pressure, and are usually oblivious to their damaging behavior, and usually their boards are only vaguely aware of the serious cultural deterioration going on in the organization.

The Danger of the Term “Risk Appetite” When Discussing Governance

The governance literature, including Policy Governance® writers, commonly use the term risk appetite when referring to designing board policies dealing with risk—the limitations or values-based no-nos the organization must avoid. Do we really mean we are adjusting, by policy, how risky to permit the organization to be?!

The concept of “risk appetite” comes from the investment world where it represents the willingness to trade increased risk for a higher probability of greater gain. We understand that, in the investment world, there is a putative tradeoff between risk and gain. That principle seems true in other areas of living as well. To do great things, we are told, we must step out of our comfort zone, out of the box, and take risk.

The truth is much more complicated. For example, entrepreneurs are usually thought of as risk takers. But this is not an accurate characterization. Research finds that entrepreneurs are, in fact, risk averse; they obsess about minimizing risk to accomplish their objective of creating a product and a company. They do not want greater risk so they take great pains to reduce it while proceeding. Inventors commonly see little risk (except their time and possibility of attendant cost,) but can achieve great gains. The Wright Brothers were very careful as they iterated their way to finding what design principles would permit their invention to actually fly. That care and minimization of risk paid great dividends.

More soberly however, there are risks we do not want at all, if possible. Board policies, for the most part, actually address these, and “risk appetite” does not apply. The answer is "as little as possible, even none, please." In the world of organizational risks we should try diligently to minimize risk associated with organizational efforts (operations, HR, customers, assets, environment, etc). The domain we are in often is the greatest determiner of risk—working with kids, camping, health care, carnival rides as part of a fundraiser, etc. What would a high risk appetite look like in terms of assets? Loose controls because we don’t want to bother?! What about operations? No attention to safety for the same reason? We need to think carefully about the way we use terms, their origins and implications when imported into another part of life.

On the Importance of an Organizational Financial “Conscience”

Over the years watching nonprofits, ministries, and churches financially crash, I have become convinced, that even the smallest of organizations MUST have someone competent to serve as a "financial oversight officer" or a financial leader (under the pastor, ED, or CEO) who is the financial strategist and financial conscience for the organization, (a term that came from a friend who fixes organizational messes). This person, he or she, may be the Executive Director, but if the ED has no financial sense, the organization must have a person who thinks in terms of financial strategy and risks and who can even push back against his boss, the ED, and even educate the leader. 

This person may be a volunteer or part time. He or she does not need to be the financial processor (bookkeeping and accounting—that can even be farmed out, including the generating of the reports), but there must a person reporting to the CEO (or the CEO himself) who has the savvy and the interests of the financial strategy and well-being of the organization on board in some manner. 

I do not recommend a separate board member because then the board has two people reporting to it, introducing authority and accountability confusion.