Leadership and Financial Sustainability
This chapter examines leadership from various perspectives with an emphasis on the influence of particular leadership styles on the financial sustainability of a nonprofit organization. The chapter integrates theory-based and practice-based approaches, and thus provides tools to better understand and influence the leader-follower dynamic in the nonprofit setting.
Most scholars agree that leadership is a key component of organizational effectiveness (Borman & Brush, 1993; Chemers, 1993). For a long time, management was synonymous with leadership, until Zaleznick (1986) clarified the systematic difference between leadership (leader) and management (manager) in organizations. In fact, employers tend more and more to look for leadership skills or leadership potential in the hiring process of applicants (Hollenbeck, 1994). However, the hiring of a manager is not necessarily the hiring of a leader. The inverse is not necessarily true. The leader at least "manages" people or human behavior.
Studies tend to agree that a leader has followers, whereas a manager has subordinates (Blank, 2001; Martin, 1997). In both cases, the term used suggests implicitly that the manager or the leader holds the power while the subordinate or the follower is the "influenced subject." It seems obvious, then, that the leader or the manager influences, motivates, empowers, inspires, serves, or transforms the subordinate or the follower. Although this sounds like a one-way process, there is evidence of the existence of at least two parties in the process. Although the subordinate or the follower seems to play a rather passive role in the process through which the leadership influence occurs. However, the followers can also influence the leader in specific contexts. As the negotiational leadership approach argues, there is a likely interaction between the leader and the follower that takes the form of an implicit negotiation of interest and commitment between the leader and the follower (Jean Francois, 2005).
The very range of definitions of leadership and the absence of consensual agreement between the definitions make the concept of leadership an issue in itself. However, most definitions involve a process of social influence over the cognition, affect, and behavior of others to structure the activities and relationships within a group or an organization (Bass, 1990; Rauch & Behling, 1984).
"Leadership" had been considered a synonym for "management" until scholars from the Harvard Business School addressed systematic arguments about the differences between the two concepts (Kotter, 1990; Zaleznick, 1986). Variables, such as personal thinking, personal history, and motivation, distinguish leadership from management. Zalenick (1986) argues that contrary to management, which implies impersonal and even passive attitudes toward goals, leadership involves an environment of personal and active attitudes to accomplish goals. He noted also that management is a combination, an interaction between people and ideas to establish strategies and make decisions. Leadership is a process of influence through high risk and even danger. Similarly, Kotter (1990) sees management in terms of its complexity, which means plans, rigid organizational design and structures, and outcome monitoring. However, leadership is coping with change through vision, direction, and inspiration. Other variables may be embodied when talking about leadership. For example, McGregor (1966, p. 73) noted that:
There are at least four major variables now known to be involved in leadership:
- the characteristics of the leader
- the attitudes, needs, and other characteristics of the follower
- the characteristics of the organization, such as its purpose, its structure, the nature of the task to be performed
- the social, economic, and political milieu
Leadership is sometimes also confused with power. Yet people in all positions of authority exert some type of power and authority on followers. However, as Etzioni (1965) explained, leadership is not just a matter of influencing people's behavior, but also a matter of enhancing the voluntary compliance of followers. Thus, influence in a leadership context is different from influence in power (Gibb, 1969; Kochan, Schmidt, & De Cotiis, 1975). Power and authority are most likely related to a position or a status in a formal organizational structure, but leadership is an influence process that goes farther than simply the exercise of power and authority. Leadership exerts power and authority through motivation, not merely through status or position.