The Best of Both Worlds

The Best of Both Worlds

Why do some nonprofits endure and grow despite downturns in the economy? What do large, "corporate" nonprofits have that smaller organizations do not? Why, with all the business books on the best-seller lists, aren't more people using that knowledge to help nonprofits — which are themselves businesses in the sense that they hire people, recruit boards, provide products and services, operate facilities, and worry about revenues? And how can nonprofits reasonably expect to do what they've always done when nothing about the environment they're operating in is the same as it was ten, or even five, years ago?

Still popular in the for-profit world, Jim Collins' Built to Last: Successful Habits of Visionary Companies and Good to Great: Why Some Companies Make the Leap...and Others Don't are empirical studies of American businesses that have endured and grown dynamically when compared to their competitors and the overall economy. Collins' studies are important because they dispel some longstanding myths, including the widely held belief that only businesses headed by a charismatic leader can be successful.

Reduced to a single concept, Built to Last argues that "building the clock" — the solid, self-rejuvenating structure of the organization itself — is the key to organizational sustainability. The examples Collins cites include some of the original "learning" organizations — companies striving to beat their competitors with cultures that institutionalize risk-taking and high expectations. Their leaders are willing to explore a range of options, understanding up front that not all will pan out but ready to move forward with those that do. They are never satisfied with their results, no matter how good, and constantly challenge themselves to improve. The organizations examined in Built to Last tolerate and reward "smart" mistakes — well-thought-through ideas that, for whatever reason, didn't produce the desired results.

In what started as a completely separate study, Collins' Good to Great demonstrates that organizations with passion, that understand and stay committed to their products and services, and that proactively manage their economic engine (i.e., keep a watchful eye on their sources of revenue) almost always grow faster than their peers. In the process, Collins shows that there are different levels of leadership and makes the case that enduring companies are characterized by leaders that model excellence in terms of business ethics, personal accountability, and commitment to the organization and its stakeholders. Likening the infrastructure of success to building and maintaining a flywheel, Good to Great depicts dynamically successful companies as organizations that nurture people who understand and embrace the concept of team ball, that establish internal management tools to identify problems before they get out of hand, and that willingly prioritize decisions for the greater organizational good.

Like many successful for-profit management approaches, Built to Last and Good to Great offer lessons that, slightly modified, can be applied to the nonprofit world. To do so, however, requires nonprofit practitioners to overcome their historical distrust of terms and concepts such as "customer," "stakeholder," and "marginal profit."

Having sat for more than twenty-five years at both nonprofit and for-profit planning tables, my experience is that success for any organization comes down to focus. Whether the vision and mission of the organization are front and center in the annual report or just a firmly held set of beliefs in the founder's mind, clear focus acts as a prioritizing mechanism. While in the for-profit world this mechanism generally takes the form of providing a competitive product or service to a group of customers with an interest in and the wherewithal to buy it, in nonprofit organizations it typically involves the cause or unmet need a nonprofit was created to address.

...A sustainable nonprofit is one that learns to structure everything it does...around a single cause or unmet need....

As Collins suggests in Built to Last, a sustainable nonprofit is one that learns to structure everything it does — from service delivery, to development, to volunteer coordination and client outreach — around that single cause or unmet need. By not allocating resources to unrelated or non-core activities and by not having to ask staff and volunteers to do more than is reasonable on a regular basis, it avoids the overextension that leads to burnout and chronic turnover. Nor do Built to Last nonprofits do things just because that's the way they've always been done, or because that's what the founder likes to see; they do things because they have been validated as the right thing to do for their customers (i.e., constituents). In the process, they also learn to do things like leverage primary and secondary research, conduct focus testing, and package programs for delivery using new distribution channels such as the Internet.

Even more important, Built to Last nonprofits routinely step back and revalidate their vision and mission, evaluating their strategies against changing customer needs and technologies. At for-profit dynasties like GE, strategic planning is a constant process, an ongoing endeavor designed to ensure organizational cohesion and exceptional performance. Linking changes in the environment and economy to decisions about strategy, Built to Last nonprofits become adept at training their staff to understand how customer needs change over time and take pains to emphasize the importance of addressing those needs in the proper sequence.

As an example, let's take an agency that helps recovering alcoholics. Its public funding has been slashed, forcing it to cut its budget to the bone. In such a situation, delivering support for individuals seeking help, whether self-sought or through intervention, is the one thing the agency knows how to do that is most likely to lead to sobriety and lasting recovery for its clients. If the agency succeeds in attracting additional funds, it then must decide whether it should add family counseling or teach its clients the life skills they forgot or failed to develop when they were drinking. Put in these terms, it's easy to see that staying sober is more central to the organization's mission than helping clients' families understand the disease of alcoholism. Or is it? Built to Last organizations invariably make the right decision in such situations because they have mechanisms for understanding how to make tough choices based on their clients' needs.

Similarly, a Good to Great organization serving the same client base does what is necessary to motivate everyone in the organization in such a way that their passion for helping early recovery alcoholics achieve sobriety is renewed on a regular basis. Employing a combination of monetary and non-monetary incentives, it takes steps to ensure that its employees and volunteers retain and enhance their skills, keep up to date with the latest research and methods of treatment, and generally stay on top of changes in its client base. Finally, it proactively seeks out and develops additional funding sources to enable it to remain true to its mission while carefully weighing the need to make changes in its mission as circumstances demand.

And foundations? Built to Last foundations stay in touch with the needs not only of their grantees, but of their grantees' constituents. They are willing to adapt their own longstanding funding areas and giving cycles to the cyclical demand for their grantees' services. Built to Last foundations recognize that in today's changed environment, one of the most important things they can do is to offer technical assistance and/or capacity-building grants to ensure that their grantees have the strategic planning resources and know-how they need to be successful over the long haul. And they understand that most nonprofits will never manage to create a viable business plan if they don't have the internal skills needed to do so.

In Chicago, the Sara Lee Foundation has taken a leadership role in this regard by supplementing its traditional grantmaking with a series of intensive "Built to Last" management workshops for nonprofits offered through the Donors Forum of Chicago. "Many agencies have been forced to enter a new kind of strategic planning cycle," explains Barbara Kemmis, vice president of library services at the Donors Forum. "There is a gap between what agencies need and the supply of funding to access it. There are no silver bullets; just hard work."

...Foundations need to recognize that by strategically partnering with businesses and nonprofits, they can generate new synergies that improve desired results for all three....

Foundations also need to recognize that by strategically partnering with businesses and nonprofits, they can generate new synergies that improve desired results for all three. Several years ago, when I was with the Ameritech Corporation, I created a national stakeholder team that served the collective needs of industry groups as well as consumers and businesses. In the process, we proved that, with forethought and planning, we could improve revenues for the company, provide new services for customers, and leverage foundation grants to help nonprofits improve the delivery of services to their constituents.

An example of this was a project our team undertook in the Hispanic community. Working with a nonprofit research group, we conducted a study to learn more about why Hispanics were underrepresented among Internet users. The study showed that not only was there a lack of knowledge about the Internet among young Hispanics, there was also a lack of access, even though Internet-enabled computers were available in most schools. We also learned that Hispanic families tended to gather in community centers. So we partnered with a PC provider that was willing to put computers in these centers and arranged to have Internet access donated; we also included introductory PC training in the package. The results were a pleasant surprise. Our sales to Hispanics — not just in Internet offerings, but in other areas as well — increased, while our public perception in the Hispanic community improved noticeably. More importantly, through the effort we were actually able to contribute something of value.

When modified to address the realities of the nonprofit sector, for-profit tools like those defined in Collins' two books, as well as other successful management practices such as Six Sigma, Management by Objective, and executive and leadership development training, can offer smart lessons to mission-driven organizations at a fraction of the ultimate cost of sticking to business as usual.

Particularly when the demand for nonprofit services is likely to grow for the foreseeable future, it's time to visualize and act on a value exchange involving the best of the business and nonprofit worlds. Nonprofits, passionate and entrepreneurial by nature, fully understand how to get by on less. For-profits, crunched as never before by global competition, fully understand how to cut waste through the application of technology and cutting-edge customer-relationship practices.

...The potential for a new, hybrid business model exists....

The potential for a new, hybrid business model exists. Like the revolution that eBay unleashed on the consumer-to-consumer marketplace, combining the best of both sectors, for-profit and nonprofit, could be just what society needs, feeding for-profit employee needs for more altruism in their lives, while giving nonprofits greater access to in-kind services from businesses and placing strategic partnerships in a whole new light.

Imagine a world where corporations and corporate foundations go a step further, becoming strategic partners with nonprofit organizations in funded value exchanges. A world in which they teach nonprofits how to create measurable performance objectives, or proactively match the skill sets of their employees with the specific management needs of a partner agency. In the process, they perform a valuable service, and the agency benefits by getting the skills transfer it needs but can't afford.

Such exchanges have the potential to leverage the best of both worlds to accomplish more than either could achieve on its own. It's a simple idea, but one whose time has come.