Rediscovering the Social Impact Sector: What Makes It Unique
Years ago, as a university student, I volunteered with an adult learning program that left a lasting impression. The initiative was a partnership between a local social‑profit agency and a university, designed to help non-traditional learners—adults from various backgrounds facing socio‑economic barriers—access university education through tailored support. I didn’t know it at the time, but this experience would later contribute to my understanding of how social-profit leaders create meaningful impact while navigating the sector’s distinct demands.
I use the term social‑profit, introduced by David Grant (2015), to highlight the positive contributions of organizations often referred to as nonprofits. Both terms are used interchangeably here, though social‑profit is intended to serve as a reminder of the value these organizations bring to the communities they support.
In this education initiative, we facilitated weekly study sessions that further developed writing skills, supported assignment preparation, and offered one‑to‑one peer mentoring. Along the way, participants shared their wisdom, insight, and stories. I remember when one learner confided, “I never thought I could do this,” not long before successfully completing the year’s program.
In truth, every one of us was a learner. What unfolded went beyond classroom instruction to a shared transformation. Yes, we read George Orwell, practiced annotating assigned readings on Adobe, and staged a formal debate on the merits of an imperial monarchy. Most importantly, across generations, we studied side by side in a space that valued lived experience as deeply as academic knowledge.
Inclusion, storytelling, and community‑building are familiar pillars in the nonprofit sector. What made this experience remarkable was how the community formed, not only through institutional design but through the strengths, talents, and presence of those who showed up. Again, familiar themes in this sector.
And yet, like so many promising efforts in the nonprofit world, the program’s future was tied to unstable external funding. Relying on a time-limited grant and lacking ongoing institutional resources, the program could not be sustained beyond its initial three-year period. Despite its impact on participants, volunteers, and the wider community, the program ended. That, too, is a familiar story. Even effective programs often end not because they fail, but because the funding does. The proud faces of learners crossing the stage with certificates in hand remain a powerful memory, one that ended far too soon.
What Practice Teaches, What Research Reveals
This reality may sound familiar, and it reflects a broader pattern that surfaced repeatedly in our research at Lake and Associates.The program’s funding constraints are an example of Conditional Power, one of four unique characteristics of the social‑profit sector that shape how leaders operate and the shifting requirements they must balance.
We approached the research with guiding questions: What forces define the nonprofit sector? How do they lift or limit its leaders? And what do these forces mean for the future of mission‑driven work? In other words, we wanted to understand whether leadership in the nonprofit sector is truly distinct, what defines that distinctiveness, and what leaders need to succeed. While nonprofit work is consistently rooted in purpose, the exploration revealed just how structurally and culturally distinct this sector truly is.
Through a literature review, qualitative exploration involving semi-structured interviews, and decades of practice at Lake and Associates, four unique characteristics emerged:
- Clients of Circumstance – serving populations with complex needs.
- Voluntary Governance – steered by a Board of Directors.
- Conditional Power – operating with funding models that create precarious financial dependence.
- Values-Based Culture – providing services that may be politically divisive.
Let’s look at these a little more deeply:
Four Unique Characteristics of the Social-Profit Sector
Clients of Circumstance
Often, individuals turn to nonprofit services out of necessity rather than choice. A client seeking shelter from domestic abuse or accessing an education program in the hope of pursuing a university degree may also require food bank support or legal aid, illustrating the deep interdependency of nonprofit services.
Voluntary Governance
Boards bring passion and commitment, and their effectiveness depends on the mix of experiences and perspectives directors bring. Some organizations benefit from sector expertise, others from community ties or professional skills. But the availability of Board talent is unpredictable. This variation reflects the voluntary nature of governance, with the relationship between the board chair and executive director often proving pivotal to stability and direction.
Conditional Power
Program provision is often subject to external forces. In the United States, close to a third of nonprofit leaders report that the compensation they offer is not competitive with similar roles at other organizations (Smith Arrillaga, Yang, & Im, 2025). In Canada, nearly one‑fourth of leaders report the same, despite the sector contributing 8.3% to national GDP—more than the retail trade industry (Imagine Canada, 2025). This imbalance makes it difficult to attract and retain talent, as prospective employees are lured by more lucrative offers elsewhere.
Meanwhile, there are other layers of instability. Community support is shaped by public perception, volunteers, donors, and funders, and relationships with government, funders, and employees vary greatly depending on the size and influence of the agency. The imbalance widens further when we look at representation. The nonprofit sector is heavily female‑dominated, yet women and people of colour remain underrepresented in leadership and continue to face persistent pay gaps (Biu, 2019). This dynamic contributes to the perception of the sector as “women’s work,” a framing historically used to justify lower pay compared to other industries (Smith Arrillaga, Yang, & Im, 2025).
Together, these dynamics reflect the sector’s conditional power: its contributions are essential, but its workforce and public service remain undervalued.
Values‑Based Culture
At its core, the social‑profit sector is marked by values. It is often held to a higher standard than the for‑profit arena. Fundraising appeals frequently emphasize efficiency and frontline service: “donate to us because look how much of your dollar goes to programs, not overhead.” Yet measuring impact is challenging. Limited resources and capacity constraints—combined with inconsistent data collection—make reporting difficult. Political support can also be withdrawn suddenly, as seen in drastic cuts to USAID funding that halted many operations. Cultural tensions add further complexity, with Western norms of individualism often clashing against the collective ethos of social impact work. And while staff are typically emotionally invested and deeply aligned with the mission, many may lack the leadership skills required for senior roles.
Where We Go From Here
This research has helped us name what many intuitively feel: nonprofit leadership is defined neither by passion nor by business acumen alone. It is shaped by a distinct set of structural and cultural forces that demand a different kind of leadership—one that calls for a specialized approach. Leading with the tension between purpose and performance in the nonprofit sector, not despite it, requires models that move beyond traditional assumptions.
Through my experiences as a student, staff member, and volunteer in the social‑profit sector, I gained glimpses into its complexity and underrepresentation in leadership literature, but these were only fragments of a much larger picture. It wasn’t until our research initiative at Lake and Associates Canada—time spent looking in from the outside—that I began to see the deeper patterns shaping the sector and its nuanced leadership.
Recognizing these unique characteristics and sector‑wide dynamics is only the beginning. If we want to lead well in this space and prepare the social-profit leaders of tomorrow, we need tools that reflect its complexity and build on the strong foundations of leadership practice. Leaders need approaches that match the realities they face every day. Without models that evolve alongside these conditions, we risk asking leaders to meet the challenges of today and tomorrow with frameworks designed for a different era.
Links:
Biu, O. (2019). Race to lead: Women of color in the nonprofit sector. Building Movement Project. https://buildingmovement.org/our-work/race-to-lead/
Grant, D. (2015). The social profit handbook: The essential guide to setting goals, assessing outcomes, and achieving success for mission‑driven organizations. Chelsea Green Publishing.
Imagine Canada. (2025, April 16). Budget 2025: Progress on some, no plan on others – Nonprofit sector holds Canada together. Imagine Canada. https://imaginecanada.ca/en/news/budget-2025-progress-some-no-plan-nonprofit-sector-holds-canada-together
Smith Arrillaga, E., Yang, E., & Im, C. (2025). State of Nonprofits 2025. Center for Effective Philanthropy. https://cep.org/wp-content/uploads/2025/05/NVP_State-of-Nonprofits_2025.pdf
To explore further…
The Performance Pendulum™: https://www.performancependulum.com/
Visit us at Lake and Associates: https://lakeandassociates.ca/
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Perri Termine is Director of Research with Lake and Associates Canada, where she helped lead research on social-profit leadership and contributed to the development of the sector-specific leadership framework, the Performance Pendulum™. She designs research and delivers programs that advance innovative initiatives and strengthen international collaboration.
Drawing on a multidisciplinary background in adult learning, community engagement, and global development, her work spans nonprofit leadership, civic engagement, conflict resolution, public health, and equity-focused initiatives. Perri holds a Master of Education from the University of Toronto and previously served as a Researcher at the Reach Alliance, publishing a co-authored chapter in the book “Experiential Learning and Community.”