Nonprofit Learnings From For-Profits

Nonprofit Learnings From For-Profits

Even in these economically uncertain times, nonprofits can learn much from the business community. There are simple ways to apply beneficial for-profit principles while maintaining a nonprofit culture.

Develop a bottom-line mentality. Many organizations were formed with noble aspirations and good intentions. But good intentions are not good enough. In today's competitive funding environment, donors are demanding more. They want to know that you are actually accomplishing something with their donor dollars.

The nonprofit sector as a whole has done a miserable job in defining exactly what success is, and shame on us for not doing so. As a consequence we have let others define it for us. The most common criteria hold organizations accountable for spending no more than 25 percent on fundraising and management. Most of the sector's watchdogs focus on this oversimplified mathematical formula. The sole exception is the BBB Wise Giving Alliance, which has a comprehensive set of twenty standards, but even this may not go far enough. Put simply, an organization that spends 30 percent of its revenue on fundraising and management can demonstrate strong outcomes while an organization that has costs of 15 percent to program spins its wheels.

Let's take a job-training program as an example. Here we define "input" as dollars raised and staff/volunteers available to help. If we measure activities, we might include how many job-training classes are conducted and define "output" as the attendance at these classes. Next, let's assume that our trend lines are going up in all three of these areas. Are we producing results? We really don't know unless we focus on outcomes, which are the number of people actually getting jobs. If those numbers aren't going up, we are not producing results.

Donors and volunteers as well as state and local governments are holding nonprofits to a higher standard before committing their time or treasure. Only the nonprofits that can demonstrate results will survive in this highly competitive environment.

Compete for mindshare. Each day, every person in this country is bombarded with thousands of messages. How do you get through the clutter to get your message out to the people you want to serve, the funders you want to attract, and to build your brand and reputation? What makes your message stand out? How do you ensure that the message resonates with your intended audience and gets the desired results? If your organization is not effective in these areas, you will cease to be relevant.

There are several things that even small organizations can do to ensure that their message is heard. First, you need to be data-driven in all that you do. A staff member or volunteer can propose a good idea, but without data, there is nothing to show that one idea is better than another. Is there a return on investment (ROI) that can be measured in terms of the results you want? While a for-profit entity is driven by showing a profitable bottom line, a nonprofit's success may have less to do with money and more to do with mission. But you need some form of disciplined, rational decision-making process in order to evaluate projects competing for limited resources. The decision cannot be made based only on who is the most persuasive speaker or who can shout the loudest.

Now we can get down to mindshare. Once you know you are moving forward, how do you target your messaging to get your desired results? You will need to segment your target audience and then look for secondary research about what appeals to them. For example, a "stop smoking" message directed toward a teenager should be very different than one directed at an adult who is a heavy smoker or even an adult who occasionally smokes. The appeal is different for all three segments; how you reach them is apt to be different, too.

Look for secondary research that already exists to guide you. If secondary research isn't available, you may have to turn to primary research. If you don't have a budget for primary research, you can form small volunteer focus groups and collect additional insights. These focus groups can be brought together after you have developed three or four different messages to see which they prefer. Now you are prepared to launch with greater certainty.

While I hope the above makes a strong case for the need to hone your message to a sharp point, let's look at an example of the law of unintended consequences and how these strategies can help minimize that law. Telling a teenager not to smoke because it is unhealthy, high-risk behavior can actually have the opposite effect. Such an approach can even cause a teen to look at smoking as a right of passage and actually result in more teen smokers. On the other hand, approaching the issue from the standpoint that Big Tobacco is manipulating them has proven to be an effective strategy. Doing your homework and collecting the data as to what works and doesn't work reduces adverse implications. Good intentions are no longer enough, if they ever were.

Form strategic partnerships. Chances are, you won't accomplish all you hope to on your own, so you need to find other nonprofits, for-profits, and government entities that have some overlap with your mission and begin to engage in exploratory talks. Partnerships are not easy to create or manage, but to succeed you need to approach these discussions with an abundance mentality, not a scarcity mentality. If you focus on what you might lose or who is going to get the credit, you minimize your chances of success.

As you forge partnerships, you will need to make sure that your organization under-promises and over-delivers. Your reputation is at stake. You will also need to define how the initiative will be managed, the resources required from each organization, and how decisions will be made. If successful, you will accomplish more than you could have alone and will do so at reduced costs. That was certainly the case when the American Heart Association formed the alliance with the William Jefferson Clinton Foundation to fight childhood obesity.

So, how will your organization survive in these uncertain and hyper-competitive times? Simple. You actually accomplish results that make a difference, you work strategically and smarter, and you extend your assets and resources by forming partnerships. What are you waiting for? Get to work.

Cass Wheeler was chief executive officer of the American Heart Association from 1997 to 2008. He began his career with the association in 1973, after working for the American Cancer Society and as a stockbroker. He has been honored with the Award Excellence in National Executive Leadership, been a guest lecturer at the Harvard Graduate Schools of Business, chaired  the board of directors for the National Health Council, and served on the boards of the Partnership for Prevention, the National Center for Tobacco-Free Kids, Research! America, and the American Legacy Foundation.