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The challenges of leadership in the third sector
Article in European Management Journal · January 2017
DOI: 10.1016/j.emj.2016.12.006
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The challenges of leadership in the third sector
Julie Hodges a, *, Brian Howieson b
a Durham University Business School, United Kingdom
b University of Dundee, United Kingdom
a r t i c l e i n f o
Article history:
Received 26 October 2015
Received in revised form
2 November 2016
Accepted 27 December 2016
Available online 10 January 2017
Keywords:
Leadership
Third sector
Community and social enterprises
a b s t r a c t
The third sector is experiencing a radical shift due to social, political and economic changes in Europe.
Due to these shifts and their implications, the question of leadership has become significant and needs to
be explored. This article contributes to the literature on the challenges of leadership in the sector. It does
so by drawing on the personal narratives provided by leaders across the sector. The views expressed by
the narratives provide a deeper insight into leadership in the third sector, than has previously existed.
The narratives are valuable for a number of reasons including: they help to extend the knowledge and
perspectives of leadership in a way that acknowledges the uniqueness of the sector; they contribute to a
better understanding of the challenges faced by leaders in the sector; and they serve as an illustration of
the benefit of approaching leadership through the eyes of those practising leadership. The article concludes by identifying the impact for leadership across the sector and the implications.
© 2017 Elsevier Ltd. All rights reserved.
1. Introduction
The third sector d which we understand to be the vast array of
charities, voluntary organizations, community groups, cooperatives, mutuals, and social enterprises d is undergoing radical
change due to the social, political and economic environmental
changes in Europe. Since 2008, the sector has been operating under
the shadow of austerity, with an increased demand for services
against reduced resources (Wilding, 2010). As a result, much of the
sector’s activity has shifted towards an emphasis on survival and
resilience, along with an intensified focus on collaboration and
increasingly desperate attempts to demonstrate impact and value
for money (Macmillan & McLaren, 2012). At the same time, however, expectations of organizations in this sector have increased
markedly. Accountability requirements have increased and organizations are expected to be more transparent in reporting what
they do, how they spend their money, and what they achieve
(Salamon, 2010, pp. 77e101). There have also been changes in how
performance is managed across the sector and organizations have
been under pressure to get a ‘better grip’ on measuring and understanding the differences that they make to people’s lives
(Hudson, 2009). There has also been a change in how governments
perceive the sector with an increasing recognition that third sector
organizations are best placed to address some of the intractable
social problems which society faces, such as poverty. As a result, the
growing diversity of the sector in terms of size, purpose, legal form,
and scale of reach is transforming (Hunter, 2009).
Such changes have raised questions over whether we can
actually describe the third sector as a coherent, single sector
(Alcock, 2010). Moreover, there are calls to address the deeper
question of what the sector is in the process of becoming and what
role it should play, through and beyond the contemporary politics
of austerity (Macmillan & McLaren, 2012). Consequently, questions
have been asked about what to call the sector and what gets
included, as well as how ‘fuzzy’ or permeable the boundaries might
be to influences from the market and the state (Billis, 2010). In the
absence of a sector-wide dialogue to address such questions, it is
possible that the major ‘shake up’ being experienced by third sector
organizations is accompanied only by a rather defensive, narrow
and increasingly noisy pursuit of sectional claims and interests
which merely perpetuates the issues faced by the sector (Cook,
2012).
After lack of funding, government policy and regulation, insecurity of funds, and lack of volunteers, the ‘lack of leadership’ has
been identified as one of the top five constraints facing the third
sector (Green, 2009). Indeed, leadership skills and strategic and
forward planning have been found to be among the top ten skills
gaps in voluntary sector organizations (Clark, 2007). Such findings
have opened up major debates on the leadership of the sector.
* Corresponding author.
E-mail addresses: [email protected] (J. Hodges), w.b.howieson@
dundee.ac.uk (B. Howieson).
Contents lists available at ScienceDirect
European Management Journal
journal homepage: www.elsevier.com/locate/emj
http://dx.doi.org/10.1016/j.emj.2016.12.006
0263-2373/© 2017 Elsevier Ltd. All rights reserved.
European Management Journal 35 (2017) 69e77
Macmillan and McLaren (2012) point out, for example, that due to
the shifts in the sector, and their implications, the question of
leadership has become significant and needs to be examined.
Similarly, Kearns, Livingston, Scherer, and McShane (2015) argue
that there needs to be an exploration of what leadership means
within the sector. The justification for this (argues Taylor, 2014, pp.
27e29) is that the quality of third sector leadership will shape the
life chances and experience of all citizens.
In order to address this need, our purpose in this article is to
explore leadership in, and of, the third sector. We do this by first
providing a brief overview of the existing research on leadership in
the sector, aiming to identify any common perceptions or themes.
We then draw on twenty written narratives of leaders in the sector
who reflect on their experience and perceptions of leadership. This
is followed by a discussion of the challenges in the sector based on
those narratives. We conclude by identifying the impact of our
findings for leadership across the third sector. This paper seeks to
contribute to the emerging literature on leadership in the third
sector by exploring the leadership in practice. We do this through a
practical focus on the experience of individuals in positions of
leadership in the sector.
1.1. Leadership in the third sector
In the existing academic and practitioner literature on leadership in the third sector, there is extensive research on what those in
leadership positions actually do, for example: governance (Jegers,
2009; Taylor, 2015); strategising (Hopkins, Meyer, Shera, & Peters,
2014; Never, 2010); and managing human resource (Kreutzer &
Jager, 2010 € ). In addition, there is research into: leadership models
(Dwyer, Bobo, Snyder, Nov, & Berson, 2013; Boerner & Gebert, 2012;
and Mahalinga Shiva and Suar, 2012); team member exchange
(Willems, 2015); leadership philosophies (De Vita, 2008; Parris &
Peachey, 2012; and; Ebener & O’Connell, 2010); and distributed
leadership (Duncan & Schoor, 2015). Howieson and Hodges (2014)
suggest that a way to understand, and make sense of, these
different approaches is by exploring leadership thinking and theories using three conceptual viewpoints: i) Leadership model d a
leadership model contains theories or ideas on how to lead effectively and/or become a better leader (for example, transformational
leadership); ii) Leadership philosophy d a leadership philosophy
contains values-based ideas of how a leader should be and act and
the sources of a leader’s power (for example, servant leadership);
and iii) Leadership style d a leadership style is a classification or
description of the main ways in which real-life leaders behave (for
example, autocratic leadership).
Much of the available literature is US-centric and refers to the
‘Nonprofit’ rather than the third sector; for example, a frequentlycited book in the literature is that of Perry (2010). In this text,
there are dedicated chapters on the tasks, perspectives, and skills
(conceptual, human, and technical) of leadership. Perry (2010) reviews leadership theories in the Nonprofit sector and explains, in
some detail, grassroots leadership, shared, and servant leadership
but makes the important point that if the unit of analysis changed
from the ‘individual’ to ‘social collectives’ (groups, organizations,
and communities), this would radically change leadership theory
and research. In this regard, Dobbs (2004) offers an extensive
critique on the problems with the traits approach to individual
leadership in Nonprofit leadership and suggests that relationship
building is very important (i.e. the ‘social collective’). Sohmen
(2004) offers ‘A Model of Nonprofit Project Leadership’ that is
based on transformational, visionary, and servant leadership d
again, theories that have their origin in US literature.
This is not to say that models and philosophies such as transformation or servant leadership d and North American theory in
general d are not important or relevant; however, we argue that
many of the current theories of leadership are derived from an
individual level of analysis and follow the psychological approach
to leadership (Schedlitzli & Edwards, 2014), which we are not sure
has relevance to the third sector in Europe. For example, in the
psychological perspective d which is the dominant or mainstream
paradigm d the focus is “primarily on individuals and on their
internal dynamics” (Collinson, 2011, p. 183), which tends to dominate the US approach to leadership writing and research. In this
(psychological) perspective, the focus is on what makes an effective
leader d in this approach, followers are passive recipients or mere
‘moderators’ in the predictive, effective leadership equation. The
success and nature of leadership has therefore been treated as a
‘top down’ influence process where leaders change followers’
vision and values to attain a pre-defined goal. Conversely, in the
sociological perspective d notably in the writings of (for example)
Fairhurst (2007) and Grint (1997) d and drawing on predominantly
qualitative interpretive methods of enquiry, the aim is to explore
the shifting possible constructions of leadership located within
their complex conditions, processes and consequences (Collinson,
2011, p. 183).
Therefore, and at present, it is difficult to establish leadership
theory that is actually grounded in a European context and from
within the sector d including its diversity. Although we see evidence in the literature of distributed leadership (Grint, 2005;
Gronn, 2000, 2002) and shared leadership (Bergman, Rentsch,
Small, & Davenport, 2012; Carson, Tesluk, & Marrone, 2007) as
applied to the sector, we do consider that theory needs to be
developed further from within the sector context and its culture,
particularly from a sociological perspective.
Contemporary approaches to leadership, however, are changing
d some writers (for example, Bligh, 2016) now question the utility
and applicability of hierarchical leadership, with the all-seeing, allknowing ‘heroic’ chief executive at the top. In an environment
increasingly characterized by change, the question for this sector
may be: where does leadership go next? (Jackson, 2012). In this
regard, leadership d in the context of organizational improvement
and change d becomes a collective rather than an individual responsibility (Hodges, 2016; Raelin, 2015). It is the interactions between the leaders and their followers that matter as opposed to
what each individual does (Howieson & Hodges, 2014).
Several studies do discuss the question of whether theories of
leadership from the for-profit literature would apply to third sector
organizations (for example, Phipps & Burbach, 2010). Elsewhere,
Taliento and Silverman (2005) identify several areas in which third
sector leadership may adapt the practices of for-profit leadership
including: dealing with a wider range of stakeholders who expect
consensus; the need for innovative metrics to monitor performance; and the challenge of building an effective organization with
limited resources and training. Such an approach, however, merely
highlights the dangers of ‘cutting and pasting’ from one sector to
another rather than positioning leadership within the context of
the sector within which it is operating. For as Hopkins (2010: 26)
says: Good leadership is vital given the complex and dynamic third
sector environment. While many of the qualities required of leaders in
the third sector are similar to those leading in other sectors, there are
distinct skills and behaviours needed to be successful in the sector as a
result of its multiple stakeholder relationships and challenges that are
qualitatively different from the public and private sectors.
In respect of the ‘complexity’ highlighted by Hopkins (2010),
Grint (2010) suggests that conventional thinking which demands
of leaders the ability to solve problems, act decisively and to ‘know
what to do’ may be exactly the wrong approach to tackling what he
terms ‘wicked problems’ d that is to say highly complex situations
for which reflective and deliberative responses are required. But, as
70 J. Hodges, B. Howieson / European Management Journal 35 (2017) 69e77
Grint (2010) readily acknowledges, pressure to act decisively often
leads organizational chiefs to try to apply ‘tame’ (predictable,
managerial) solutions to ‘wicked’ (hugely complex, unpredictable)
problems. Leadership, then, may involve providing and interpreting
relevant information and posing challenging questions than
seeking to provide decisive answers.
More generally, the focus of much of the research that has
already taken place within the context of the third sector tends to
be on the typical attributes and characteristics of Chief Executives,
which is very similar to the early leadership traits theories. Kirchner
(2007), for example, has developed a leadership model for third
sector organizations d in this model, the Chief Executive is seen as
leading upwards (managing governance), downwards (harnessing
resources and running an organization effectively) and outwards
(representing the organization). Similarly, Paton and Brewster
(2008) draw a conceptual framework for ‘what is it like being a
Chief Executive’. The framework includes: system and field
awareness, or the ‘helicopter view’ of seeing the bigger picture;
emotional awareness; and intuition.
The exceptions to these studies of Chief Executives are those
that focus on the leadership characteristics required within the
sub-sectors of the third sector. Ockenden and Hutin (2008), for
example, provide an analysis of more informal and less hierarchical
leadership in small, volunteer-only organizations. Chambers and
Edwards-Stuart (2007) identify a list of characteristics of successful leaders in the social enterprise sector, which include: integrative
and speculative thinking; drive and persistence; a strong valuebase; focus; and networking. A much longer list of characteristics
is provided by Cormack and Stanton (2003) which includes: passion, a strategic perspective; networking and influencing; personal
humility; motivating a team; resilience; self-confidence; being a
visionary and inspirational communicator; and involving others in
decision-making. A common theme across these studies appears to
be the importance of a communicative ‘ambassadorial’ dimension
in leadership, alongside references to networking, representation,
articulating a vision both within and beyond the organization, and
conversation. For instance, Peck, Freeman, and Dickinson (2009)
draw attention to the significance of story-telling and narrative.
This ‘communicative’ dimension of leadership in the sector was
explored by Kay (1996) who conceptualised leadership as a process
of creating and sustaining meanings in negotiation with, and
influenced by, others. Kay (1996:131) depicts the concept of leadership as a ‘sense making’ process involving: “… a multidimensional process of social interaction, creating and sustaining
acceptable meanings of issues, events and actions.” This process of
‘sense-making’ around shared understandings and meanings, involves: vision setting; interpretation and take-up; and influence
and credibility. This approach is supported by Schwabenland
(2006) in her creative discussion of story-telling and leadership
in the foundation and development of organizations to achieve
social change. Such studies of the sub-sectors are, however, limited
in examining leadership across the context of the wider sector,
which as Hartley and Fletcher (2008) argue would require a style of
leadership which demands highly sophisticated political skills.
We consider, then, that the majority of studies fail to focus on
the uniqueness of leadership in the third sector with particular
reference to national institutions and culture. Instead, there tends
to be a ‘scattergun’ approach to leadership in the sector that lacks
coherence (Clore, 2007). This has led to calls for leadership within
the sector to be given special attention (Macmillan & McLaren,
2012) and for it to be reconceptualised (Kirchner, 2006).
The aim of our research is to contribute to the understanding of
leadership in the third sector and the particular challenges of this
sector. Thus, our research questions are twofold: what does leadership mean within the third sector, and d given the radical
changes happening in the environment within which the sector
operates d what are the leadership challenges in and across the
third sector? We have attempted to answer these questions
through the examination of written narratives produced by senior
people in leadership positions across the sector using a narrative
inquiry.
2. Method
Narrative inquiry is set in human stories of experience
(Clandinin & Connelly, 2000). This method was selected in order to
provide a framework through which to investigate the ways that
individuals in the third sector experience leadership depicted
through their own reflections. It was seen as the most appropriate
approach as narratives can help to make sense of, evaluate, and
transform the present and shape the future so that it will be richer
or better than the past (Clandinin & Connelly, 2000). This notion
can be expressed as “life as led is unseparable from a life as told … life
is not ‘how it was’ but how it is interpreted and reinterpreted, told and
retold” (Dyson & Genishi, 1994, p. 36).
Narratives function in opposition to elitist scholarly discourses
and their use in research offers an opportunity for groups to
participate in knowledge construction (Canagarajah, 1996). Moreover, narrative is well-suited to addressing the complexities and
subtleties of individuals’ experience of leadership in organizations
(Webster & Mertova, 2007). Of note, narratives can help us to understand experience, which is important because people’s lives
matter, whereas other forms of research often look at outcomes and
disregard the impact of the experience itself (Bell, 2002). In this
way, we consider that narratives are powerful for exploring the
experience of leadership in the third sector.
The narrative approach used in this study allowed us to set the
criteria for participants to formulate their conceptualizations of
leadership in their own words, to attach meaning to the construct,
and to express how they value certain aspects of it (Heres &
Lasthuizen, 2012). This method allowed the focus to be on an individual’s experience of leadership, what they thought leadership
should look like, and the subjective meaning they attached to the
concept, rather than evaluating the individual’s own leadership or
lack of it. The participants, in the study, largely based their views of
leadership on their daily experiences and realities. Their conceptions of leadership were informed by practice and situated in the
context in which they were operating.
The research was conducted during 2012e14. A total of 20
participants took part in the study d 6 females and 14 males d and
were drawn from organizations across the third sector in the UK
from England, Scotland, Wales and Northern Ireland. As the sector
is broad in context, it was outside the scope of the research to
include all the different types of organizations within it, hence a
sample approach was used.
The sampling approach taken can be described as ‘non-probability’ d the purpose of which was not to “establish a random or
representative sample but rather to identify those people who have
information about the process” (Hornby & Symon, 1994, p. 169).
Thus, the sample was constructed through key informant sampling
(Tremblay, 1957). A snowball sampling technique was used so that
individuals who agreed to participate recommended other potential respondents (Atkinson & Flint, 2001). One danger of ‘snowballing’ is the potential for cloned respondents with each person at
risk of being much like the next in terms of traits, interests or
patterns. To prevent this, 10 separate ‘snowballing’ chains were
launched, each starting from a different networking source. The
sample of participants (see Table 1) included leaders from third
sector organizations such voluntary, community, charities, mutual
and cooperatives, and social enterprises. Participants were asked to
J. Hodges, B. Howieson / European Management Journal 35 (2017) 69e77 71
provide, in their own words, commentary on the following: their
experience and perceptions of leadership; what leadership means
to them; and the challenges that they face. As the sector is in a state
of flux, we were most interested in the leadership ‘in and out of’ this
flux rather than the day-to-day management of the participants’
organizations.
From these personal and very individual narratives, the researchers identified the main themes. NVivo was also used to aid
thematic analyses (King, 1998) and as a means of mapping evolving
relationships between themes. Several iterations of thematic
analysis were carried out. A key aspect of the analysis was a reflexive approach to the analytical process itself, particularly
focusing on the way in which understandings emerged, were
clarified, and became constructed in the process of writing this
article. From this general analysis, there emerged the experience,
the perceptions, their understanding of leadership, and the challenges faced by the participants.
2.1. Findings
The findings are based on the analysis of the participants’ responses to the two key research questions which we set out to
address: i) What does leadership mean within the third sector and;
ii) What are the leadership challenges in, and across, the third
sector. For the first question, two themes were identified and for
the second question, six key challenges were raised by the majority
of participants. We discuss key findings next.
What does leadership mean within the third sector?
With regard to this first research question, ‘What does leadership mean within the third sector?’, our analysis highlighted two
themes about the meaning of leadership which were: ‘leadership is
an approach’; and ‘leadership is personal qualities’.
‘Leadership is an Approach’
Findings from the study show that the participants defined
leadership as a specific approach. For example, one participant (N)
expressed the opinion that, “Leadership is not a qualification, but a
set of values and approaches, inherent and/or trained. It creates values
and communities.”
The overall approach required by leadership was identified
through the various narratives as maintaining the reputation of the
organization, ensuring that ethical obligations are adhered to,
motivating people, and creating a positive environment. Each of
these is discussed briefly next.
2.1.1. Maintaining the reputation of the organization
Participants described this as leaders ‘standing’ by their vision
and even when times are tough making sure that the reputation of
the organization is not compromised. The benefits of this approach
were described as:
“If you are certain that your principles are sound and that a
compromise or a purely financial decision may result in a poorer
service being delivered, you will emerge with your company
reputation intact when others fail to survive.” (Participant L).
2.1.2. Ensuring that ethical obligations are adhered to
This refers to leaders needing to find ways to leverage their ideas
and their intellectual property into financial returns, while staying
true to ethical values, in order to retain the foundations on which
the sector is built. One respondent (T) reflected that:
“We need a combination of ethical, clear-sighted leaders
together with new thinking on how to practically sustain the
material and health benefits derived from capitalism, without
the destructive effects on mental health, a sense of community
and our natural environments.”
2.1.3. Ensuring that people are motivated
For the majority of participants (n ¼ 16), leadership is about
motivating people. This view was explained by one respondent (M)
as:
“The best leaders are those who consciously take the time and
effort to understand the motivation and behavioural drivers of
those they lead and who ensure that they provide them with the
opportunities, resources, and the support they need in order to
enable them to do the best they can.”
Similarly, another participant (N) offered that:
“Leadership is not task-orientated, but about the understanding
of what needs to be done to drive an organization or a business
forward. It is about gaining buy-in from staff to a shared vision.
It is about providing staff with the opportunity to grow within
their own role and feel that they are able to contribute to the
business. It is about gaining the respect of peers and staff and
creating a vision and getting buy-in to the vision from the staff
to take it forward. It is about creating a desire to succeed among
all colleagues by ensuring they can see where they fit in and
contribute to the wider picture.”
2.1.4. Leadership is about creating a positive environment
This is where staff believe in what leaders are striving to achieve, while motivating them and giving them the opportunity to
grow and flourish in their own careers. As one participant (D)
stressed: “leading with courage, conviction and transparency will
instil confidence and provide a positive climate for staff.”
These comments show that leaders in the sector believe in the
creation of a fairer, more caring, better educated, and healthier
world. How they lead is influenced by the mission and values which
pervade all aspects of the organizations in which they work.
Table 1
Sample of participants.
ID Description Function Sex
A Voluntary 1 Managing Director Male
B Voluntary 2 Trustee Female
C Voluntary 3 CEO Male
D Voluntary 4 Depute Directory Male
E Voluntary 4 Executive Director Male
F Community 1 Chief Executive Female
G Community 2 Chief Executive Male
H Community 3 Executive Chairman Male
I Community 4 Community Leader and Facilitator Female
J Community 5 Chief Executive Female
K Charity 1 Chief Executive Male
L Charity 2 Chief Executive Female
M Charity 3 Chief Executive Male
N Charity 4 Chief Executive Male
O Charity 5 Chief Executive Female
P Mutual and Cooperative 1 Director Male
Q Mutual and Cooperative 2 Chief Executive Male
R Social Enterprise 1 Chief Executive Male
S Social Enterprise 2 Chief Executive Male
T Social Enterprise 3 Co-Founder and Director Male
72 J. Hodges, B. Howieson / European Management Journal 35 (2017) 69e77
In summary, findings from the study suggest that ‘leadership is
an approach’, which is built on the reputation, ethics, people, and
environment within the organization.
‘Leadership is Personal Qualities’
The importance of the personal qualities of leadership was
emphasized throughout the narratives. The qualities which make a
significant contribution to how leaders are perceived were summed up as: “the consideration of values, self-awareness, and selfregulation” (Participant D). This was supported by another participant (H) who reflected that;
“Good leaders have strong values and have thought about those
values deeply. They know how their values apply in all sorts of
contexts such as making decisions about money, assessing
strategic business opportunities, deciding whom their organization should partner with, and dealing with challenging people
problems.”
Numerous personal qualities were cited by the participants
including: influencing, motivating, inspiring, being visible,
listening, observing, empowering others, having conversations
with people, being authentic, resilient, empathetic, courageous,
gaining respect, trust and credibility, and having a strong set of
values. Respondents in the study also referred to the importance of
emotional traits such as empathy and resilience d it was described
as the critical mental and emotional intellect of leadership being
linked to ‘mindfulness’, which was defined as clarity of mind, core
ethics, and openness to new thinking, which in turn creates
authenticity. Such qualities need to be developed and honed. As
one participant (H) explained, “developing and honing the personal
qualities of leadership is where the difference between success and
failure will always reside”.
The findings also indicated the significance of leadership qualities which were relevant for influencing policy. This was defined in
terms of leadership being about social skills to impact on policy
decisions. It was also described as:
“how you make things happen successfully on a sustainable and
repeatable basis. It needs to be delivered authentically and with
skill. An essential element is to act as a sense-maker for others,
gaining trust and engagement through shaping and sharing
context, explaining why actions are required, and motivating
through demonstrating progress against the bigger picture.”
(Participant Q).
Some respondents did, however, question whether leaders in
the sector had the social skills required to engage effectively with
the opportunities that existed to influence policy and whether they
were able to adapt and make the best use of all the policy levers
available to them. A question was raised, for example, as to the
ability to unite and gain support and cooperation across different
parts of the sector. So the ability of leaders to use their social skills
in order to unite the sector or certain parts of it, to build coalitions,
and to rise above vested interests and create a common collective
identity were identified as characteristics of good leadership, but
also, and of note, a significant challenge facing the sector.
Findings from the research indicate that although leadership
reflects the personal qualities which individuals bring to their role,
these qualities need to be developed and continually improved
upon across the third sector.
What are the leadership challenges in and across the third
sector?.
In terms of the second research question, namely ‘What are the
leadership challenges in and across the third sector?’, findings
indicated that leadership in the third sector faces multiple challenges. The main ones identified from the research are: recovering
from recession; building collaborative relationships; remaining
innovative and distinctive; building and developing capability; and
reinforcing the legitimacy of the sector.
‘Recovering from Recession’
The impact of the economic recession and the ensuing years of
austerity are key challenges for leaders. The financial crisis requires
leadership which focuses on several specific actions including
making decisions, taking action under pressure and clarifying and
communicating decisions to internal and external stakeholders, as
well as the media. The danger is that this can result in shorttermism. As one participant pointed out, “the economic pressures
created by recession require leaders to focus on efficiency and costmanagement, and can result in short term decision-making.”
(Participant K).
The challenge of dealing with the financial crisis is not about
returning to the so-called glory days; rather, as one respondent
wrote, “what is needed is fresh thinking which learns from the success
and failures of the past and creates a new future”. To do this, participants pointed out that there needs to be a vision and business
values which are not compromised even when times are tough. As
one participant (A) advised, “Leaders will need to find a balance
between supporting those disadvantaged by the financial depression,
while investing in the infrastructure for innovation to flourish”.
Due to rising public expectations, the third sector is faced with
delivering more services to more people who have greater needs,
but with less resources and without compromising on quality. This
was supported with comments such as, “the sector has to adopt a
consumer-centric mindset, without the necessary skills and experience” (Participant I).
The financial challenges are forcing the sector to consider
working in partnership with other sectors. The increasing promotion of partnership working, however, appears to be presenting,
what one participant defined as, a ‘conundrum’. This was described
as “the competition for a reducing pot of money [which] can lead to
organizations moving beyond their area of expertise in order to
diversify and secure other sources of funding” (Participant R). The
challenge for the sector is to move from a reliance on grant funding
to one of a focus on contracts. This involves looking for opportunities for collaboration with other organizations across the sector,
and in other sectors, to deliver savings, create additional value, and
attract new funding.
‘Building Collaborative Relationships’
Participants described how organizations in the third sector are
being driven to find a balance of preserving their own place in the
sector while being confident enough to share knowledge and information for wider benefit. They are having to identify who they
should align themselves with in collaboration and what form the
collaborations should take. According to one participant (T), “funders are now requiring third sector organizations to collaborate with
each other and with organizations from other sectors to deliver savings
and create additional value”.
The challenge is, on the one hand, to look for opportunities for
collaboration with other organizations across the sector and in
other sectors to deliver savings, create additional value, and attract
new funding; while, on the other hand, competing for contracts and
commissions with the very organizations that they are required to
J. Hodges, B. Howieson / European Management Journal 35 (2017) 69e77 73
collaborate with. One participant (M) described it as having “to find
a balance of preserving their own place in the sector while being
confident enough to share knowledge and information for wider
benefit”. This is driving a need to identify what form collaborations
should take. Participants question whether it should be an alliance
based on shared risk and reward or a partnership using prime and
sub-contractors. There is recognition that it should be possible to
benefit from collaborative working as long as the time is taken to
develop high levels of trust. Leaders need to identify who they
should align themselves with in collaboration and what form the
collaborations should take.
‘Remaining Innovative and Distinctive’
Delivering and implementing innovation is a further challenge
for the sector. Given that for the vast majority of the sector there are
not enough resources to fund services, leaders need to find new
ways of providing services. This was highlighted by one participant
who pointed out that they will need to find new organizational
models, which use technology and utilise volunteers more in a way
that enables them to support beneficiaries. Another participant
noted that there is the opportunity to create, to innovate, to develop
and ultimately to make changes:
“Leaders need to think about and understand what is happening in
the wider society, how it may affect them, and what they can do to
shape the future. They should think beyond their immediate sphere
of influence, beyond today and over the horizon.” (Participant D)
This will involve, “changing or moulding the culture so that it is
positive and creative” (Participant S). There is, however, a note of
caution as one respondent (R) was mindful that, “dynamic, socially
impactful entrepreneurship in the sector is hampered” and to make it
happen, he went on to suggest that there is a need to “liberate innovators” as currently there is a lack of innovative ideas evident
across the sector.
The leadership of the sector appears to have simply run out of
ideas about how to take the sector forward, yet in a time of constrained financial resources, innovative ideas are seen as increasingly important. For as one participant (A) said, leadership is failing
to grasp:
“The opportunity to create, to innovate, to develop and ultimately to change something, be that addressing a social problem with community innovation, becoming more community
orientated or coaching leaders through challenges and seeing
them thrive and grow in the process.”
It would appear that a key challenge is the need to drive
distinctiveness and innovation across the sector, for the capacity to
innovate and remain distinctive is a critical determinant of longterm survival in the third sector.
‘Building and Developing Capability’
A key challenge is that leadership remains in scarce supply
despite increased demand. This issue was described by one
participant (I) as,“many people believe they possess the skills but do
not know what leadership is.” This lack of leadership is being exacerbated by the shift away from traditional technical or operational
roles to more collaborative, networked leadership roles. These roles
imply the need for greater political awareness, more collaborative
and engaging behaviour, and exceptional influencing skills. However, in their role as leaders in the sector, individuals are often
confronted with challenges that few are fully equipped for, either
organizationally or individually. This dearth of leadership was
summed up by one participant (Q) who commented that:
“Whilst anchoring our leadership role in an intention to serve
the community and care for the whole is important, it is often
not enough. Because the task at hand is to transform deeply
engrained and destructive power dynamics, it is critical that we
learn the skills of collaborative leadership and nurture cultures
of trust wherever we are.”
Another participant (J) stressed that: “the kind of leadership we
are familiar with is not working anymore” and emphasized that, ‘the
leader’s role is to create space (or social containers) for the community
to articulate its concerns and set its own agenda.” They went on to
conclude that the kind of leadership that is required involves:
“openness to change and being changed … qualities of authenticity;
courage and care … and to nurture a quality of connection with self
and others that can lead to genuine organizational and community
renewal.” In the words of one participant (T), the challenge is that
there is a need:
“For a combination of ethical, clear-sighted leaders together
with new thinking on how to practically sustain the material
and health benefits derived from capitalism … a sense of community and our natural environments. To achieve this requires a
major paradigm shift, a cultural evolution, which can only be
achieved by visionary leadership.”
The lack of investment in leadership skills means that there is a
small pool of appropriately skilled leaders, a continued drain of
talent to the public and private sector, and a restricted pipeline of
future leadership across the sector.
‘Reinforcing the Legitimacy of the Sector’
Leadership in the sector faces the challenge of reinforcing the
legitimacy of the sector while maintaining the belief in the special
nature of ‘voluntary association.’ As a result, the sector is having to
reach out to a discerning public that understands where value resides and what is ‘worth backing.’ Yet as the social consequences of
government policy become more apparent, the space in which the
sector operates will become more contested. Politicians and commentators have already started questioning the legitimacy of
charities campaigning on social issues, especially if they are in
receipt of government funding. This questioning of the legitimacy
of the sector will intensify, and its voice will come under greater
scrutiny. The sector’s role is being held up to scrutiny by the wider
community and particularly by the people that it serves. This was
summed up by one participant (F) who wrote that:
“As government policy impacts on people’s lives, the sector will
be expected to stand up for the less well-off. It will lose credibility if found wanting. The leadership challenge will be to stay
relevant whilst not overstepping the legitimacy question raised
by politicians.”
The challenge is in maintaining the core purpose of the sector
which was described as follows by a participant (O):
“The idea of scaling up successful models has a certain allure to a
social entrepreneur but we need to ensure that the drive for size
does not replace a drive for quality, authenticity and social
impact. Equally, in an era when local authorities look to become
commissioners of service rather than providers of services, the
74 J. Hodges, B. Howieson / European Management Journal 35 (2017) 69e77
voluntary sector should approach large contracts with a degree
of caution especially where public sector partnerships risk
compromising the independence of the community or voluntary sector organisation by overbearing governance or local
authority intrusion.”
Leadership across the sector, in order to retain legitimacy, has to
reinforce what the purpose of the sector is, why it is needed and
what its special contribution.
In summary, evidence from the study suggests that leadership in
the third sector is operating in a sector that is sensitive to social,
economic, and political change and is in a state of flux as its
workforce and services respond to the drivers for change. Such
challenges are placing significant pressure on leadership across the
sector.
3. Discussion
The findings in this study indicate several significant areas of
discussion.
First, the research results point to an underlying sense that
leadership in the third sector is at a crossroads. Evidence from the
research suggests that leaders appear to be confronted with challenges which they are not yet fully equipped for, either organizationally or individually. Participant (S) points out the dilemma that
this is creating: “businesses putting on the sheep’s clothing of the third
sector and the third sector putting on the wolf’s clothing of the private
sector, while the public sector seems undecided about what to wear
and is trying on both.” This recognition of the value of leaders
moving between different sectors supports what Buckingham,
Paine, Alcock, Kendall, and Macmillan (2014) calls boundary
crossing d bringing the experience of working in the private and/
or public sector to the third sector. This ‘blurring of sector boundaries’ requires leaders to be more externally focused and aware of
what is happening in the external environment and to adopt a more
collaborative way of working across sectors.
Findings also indicate that leadership across the sector has to
prove its effectiveness. According to George (2010), the ultimate
measure of effectiveness for leadership is the ability to sustain
superior results over an extended period of time. Leadership is,
however, a more widely pervasive phenomenon than this. Some
researchers believe that the role of leadership is best seen not in
terms of its economic impact, but in how it shapes the organizational context, such as goals, members, incentives, and culture
(Oldham & Hackman, 2010). As is evident from this study, the scope
and importance of leadership in the third sector needs to be
addressed, not only in terms of its impact on performance effectiveness but, and more importantly, in terms of its influence on the
life of an organization, which Nohria and Khurana (2010, pp. 3e25)
refer to as meaning, morality and culture.
Second, leadership theories and frameworks cannot be imported from the corporate world and imposed on third sector organizations. It will require subtle and critical adjustments to be
made in order to reflect the different ethos and culture of this most
sophisticated sector. Leadership theories and frameworks, which
abound in private and public organizations, may bring great benefits; however, they may be of limited value unless they are tailored
to address the different context of third sector organizations.
Third, it is clear from the narratives that the third sector’s
challenges will not be met by identifying a few innate leadership
attributes nor by recruiting and developing more people into
leadership roles. It is not more leaders that are needed but instead it
is leadership at all levels that is needed. As Leslie and Canwell
(2010) point out, leadership is tied to multiple actors across an
organization or system and is, therefore, not about a single man or
woman in a senior position. It is about people working and
collaborating across an organization being involved in leadership
activities for which core capabilities are required. Such capabilities,
as is evident from the findings of the current study, include acting
ethically and collaborating not only across the third sector but also
across the public and private sectors. For in all sectors, organizational boundaries are beginning to blur, because of partnerships,
collaborative working and commissioning.
Fourth, one specific area which the findings from the study
evidence is the lack of innovation in the sector. These findings
support research by Osborne, Chew, and McLaughlin (2008) which
found that innovation in the sector has reduced dramatically. On
the basis of a mixed-method comparison of third sector organizations in 1994 and 2006, they found that innovative capacity is not a
constant or inherent organizational characteristic, but varies according to the cues and incentives of the public policy context. This
is similar to the findings of Mulgan (2007) who concluded that
most of the literature on social innovation in the third sector points
to a sector that is better at believing they are innovative than
actually being innovative. Leadership in the third sector, therefore,
needs to provide the mechanisms to encourage, to support, and to
sustain innovation. Leadership can have a strong influence on
innovation in the sector and can influence new ideas and concepts
for service delivery which are critical to the improvement of
organizational performance in the sector. The ability to ‘innovate’ is,
therefore, one of the key capabilities which the third sector leadership needs to develop.
Fifth, due to the challenges within which leadership operates in
the third sector, there is a need to ensure that leadership is enacted
in an ethical way. As Trevino and Brown (2004:77) say: “The environment has become quite complex and is rapidly changing, providing
all sorts of ethical challenges, and opportunities to express greed”. In
order to address such challenges, leaders in the third sector need to
understand the ethical boundaries within which they are called to
operate. It is, therefore, important that leaders in the third sector
focus on how they behave and how they treat others. They should
ensure that they use their positional power in an ethical manner,
act in a timely manner to new situations and challenges, engage in
active stakeholder dialogue, implement solutions, and take responsibility to improve their reputational conduct (Patzer &
Voegtlin, 2013). This involves identifying and collaborating with
an increasing set of external stakeholders across the public and
private sector. So, not only is the leadership in the sector being
driven to be more ethical, there is also a growing need for this to be
done in a collaborative manner.
Six, while some participants suggested that the third sector had
got better at ‘growing our own’ leaders, others felt that the sector
was still not producing enough of its own leaders and that those
moving in from the outside lacked ‘grounding’ in the sector. To
address these challenges, participants were vocal on the need to
develop a framework of leadership specifically for the sector. The
pressing need for such a framework is summed up by one participant (T) who wrote: “tinkering with old models must cease, redesigning is not only the way ahead, it is critical.”
3.1. Limitations and directions for future research
In this study, an attempt was made to identify what leadership
means within the third sector and, given the changes happening in
the environment within which the sector operates, what are the
leadership challenges in and across this sector. We do accept that
the contribution is limited by the context; that is, the data is from
the third sector in the UK. However, the views expressed by the
narratives provide a deeper insight into leadership in the third
J. Hodges, B. Howieson / European Management Journal 35 (2017) 69e77 75
sector than has previously existed. The narratives are valuable for a
number of reasons including: they help to extend the knowledge
and perspectives of leadership in a way that acknowledges the
uniqueness of the sector; they are a starting point to understand
better the challenges faced by leaders in the sector; and they serve
as an illustration of the benefit of approaching leadership through
the eyes of those practicing leadership.
We consider, therefore, that this study opens the way for more
specific research across the sector of both a quantitative and
qualitative nature, deductive and inductive. Future research should
focus on providing further empirical evidence on leadership in and
across the third sector; for example, studies using longitudinal and
multivariate methods are needed to provide a richer and more indepth exploration of the role and style of leadership needed in third
sector organizations in different countries.
Moreover, since the third sector as a whole is undergoing a
significant transformation in its shape, its role and its relationship
with the state, the patterns and processes involved in these developments need to be charted. It will be through understanding of
this transformation that the question of leadership both in and of
the third sector becomes significant. Research is, therefore,
required which addresses the relative paucity of reflection about
leadership of the diverse sub-sectors in responding and coping
with the change that they face. Such research will help to address
what should be the content of the third sector leadership narrative.
Finally, based on the findings, it is evident that a leadership
framework is required for the sector; therefore, we suggest that
research should investigate what such a framework should be
within the changing context of the sector.
4. Conclusion
In summary, this article provides an overview of the shape of
leadership in the third sector, and the challenges it faces. Leadership is operating in a sector that is sensitive to social, economic, and
political change and is still in a state of flux as its workforce and
services respond to the drivers for change. This is placing significant
pressure on traditional approaches to leadership which have to
navigate the external environment, while attending to internal
organizational issues including ensuring a consistent pipeline of
funding, retaining independence, and the core mission of the
sector.
Organizations within the sector need to develop their leadership
to enable them to deal with the challenges that they face in addition to responding to opportunities. Yet spending on leadership
development in the third sector still lags significantly behind that
in other sectors (Hudson, 2009). Without investment in leadership
development, there will continue to be too few appropriately
skilled leaders, a continued drain of talent to the public and private
sector, and a restricted pipeline of future leaders (Venter & Sung,
2009). The key questions which need to be addressed are: how
does the sector develop future leadership; how does it utilise individuals who have gained skills in other sectors; and how does the
sector demonstrate the many ways those skills that make good
leadership can be developed?
To address these questions, organizations in the third sector
need both financial and human capital. But whereas financial
shortfalls are easily measured, communicated and impossible to
avoid, leadership shortfalls can be hard to calibrate, awkward to
discuss, and tempting to avoid. This is what makes the emerging
leadership deficit so critical and raises a number of imperatives. The
first imperative is to acknowledge and understand the enormity of
the challenge. The second imperative is to make it a top priority, in
governance, in planning, and in day-to-day decision-making. If this
is ignored, it has the potential to exacerbate the depth and breadth
of the challenges being faced.
Closing the gap will require action, as well as a willingness to
innovate, to experiment and to take risks at both an organizational
and sector level. In individual organizations, board members and
senior managers must commit to build strong leadership teams. At
a sector-wide level, there is a need to collaborate to nurture the
flow and development of a cadre of leadership talent. In this
context, two imperatives are salient: development of leadership
capability; and investment in attracting and retaining talent. To
address the leadership challenges, much greater attention needs to
be paid to building leadership capability and that will require a shift
in investment.
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