Pacific Business News

March 24, 2006

Nonprofits need to think in terms of greatness

by Sally Little

When defining how best to manage a nonprofit, boards of directors, senior executives and our counterparts in the business world are engaged in a war of words.

Those from the business world insist nonprofits should be operated more like businesses, and those from nonprofits insist that nonprofits are different and should be operated differently. Some business and nonprofit managers state that nonprofits are really small businesses, and another dimension is added to the entanglement.

ìWe need a new language, says Jim Collins in his monograph Good to Great and the Social Sectors, Why Business Thinking Is Not the Answer: ìThe critical distinction is not between business and social, but between great and good. We need to reject the naÔve imposition of the ëlanguage of businessí on the social sectors, and instead jointly embrace a language of greatness.î

The following tips, taken from this monograph, will help nonprofits and businesses achieve greatness.

* Define what great results mean for your nonprofit. In the business world great results are tied directly to monetary success. On the other hand, great results for nonprofits may tie directly to the fulfillment of its mission. For example, a great result for The Honolulu Symphony may be a Grammy nomination. Attracting the exhibit, ìLife in the Pacific of the 1700ís, a little known exhibit from the second and third Pacific Ocean voyages of Captain James Cook, is a great result for the Honolulu Academy of Arts.

* Focus on a legislative rather than an executive leadership style. Few nonprofit leaders have sufficient concentrated power that their business counterparts have to simply make executive decisions. Nonprofit managers have their power diffused by elected memberships, governmental oversight, unions, tenured faculty, volunteers and boards of directors. As a result, nonprofit leaders must be legislative in their approach and rely on persuasion, political strategies and shared interests to set the stage for the right decisions to happen.

* Hire the right people in the first place. Great businesses never hire mediocre employees and neither should nonprofits. Hiring an employee based on their dedication to the mission is not enough. You need self-motivated and self-disciplined workers who are driven to do their very best everyday. In addition, the hiring process should extend into rigorous early assessments of newly hired staff. The longer less-than-satisfactory staff stay, the more difficult it becomes to terminate them from your organization.

* Select leaders capable of fueling your resource engine. A great corporate executive must be able to secure a return on invested capital. This is the economic engine that drives business. On the other hand, resources such as donors, volunteers and grants are the economic engines of nonprofits. Sustaining these resources requires a different skill set for great nonprofit leaders. For example, the resource engine of a nonprofit dependent on charitable support by major donors requires an executive director with excellent people and fundraising skills. For those nonprofits that rely on both charitable donations and product sales, their leaders must have both business and fundraising skills.

* Learn to say no. Great businesses and nonprofits have developed a culture of discipline. Unfortunately, arrogance and greed in the for-profit sector and the desire to ìdo goodî by nonprofits, drives both outside their core competencies. For businesses, the results are primarily a reduced financial return on investment. On the other hand, a nonprofit may show an increase in its financial bottom line by securing a foundation grant for a new unrelated program. However, if the nonprofit continues in this direction, they may dilute its capacity to support their core projects.

* Build momentum consistently. Great businesses are cognizant of the competitive forces in their environment and with a secure grounding in their core values continue to make progress. Great nonprofits are also aware of the many systemic challenges they face in trying to solve the seemingly insurmountable problems in our communities. Yet, great organizations do not allow themselves to be mired in these problems. They find creative solutions and move forward inch by inch.

* Base your reputation on excellent goods and services. Both bu sinesses and nonprofits frequently base their reputations on charismatic CEOís and executive directors or a great idea. Greatness is based on consistently excellent products and prospers through many generations of leaders. If you have developed your brand carefully, the loss of a leader should not affect your financial bottom line or your ability to meet the needs of your customers and clients.

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