The Business of Nonprofits

If I gave a before-and- after test to the students in my MBA class on nonprofit management, and grades were based on how much was learned, as opposed to how much was learned how well (which is really what grades should reflect), every student in that class would have to get an A.  Why?  Because sadly, the state of real knowledge (as opposed to myth and the nonsense people spout when then know nothing about a subject but pretend they do) about the nonprofit sector held by those outside of the sector is slim to none.   And to be very clear and very fair, this is not a state of (lack of) awareness that only is found in MBA students, or Philadelphia or even Pennsylvania.  This is a condition that affects the nation.

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This exists within the sector, too.  To wit, a reporter for a publication all about nonprofits wrote the following statement:  “[the Organization] operated like many small nonprofits: It specialized in its programming, not fundraising or administration.  Its time, energy and money went into [Program A] and [Programs B and C.] [The Executive Director] and her small staff squeezed administrative tasks into the narrow margins of time leftover between doing what they did best.”

What hogwash! There are no small – or any size, for that matter – nonprofits that can operate like that—that is, if they want to survive beyond year one.  Irresponsible statements – and thinking – like this reinforce the myths and awful practices.  Squeezing running the business into the pittance of time left over after doing mission work is a path to organizational suicide, not organizational sustainability.

I thought by now that at least everyone working inside the nonprofit sector understood that nonprofits were mission driven businesses.  But apparently, too many missed that lesson.  So, let’s get it straight please, once and nonprofits are businesses, they must take some basic for-profit business principles and use them in operating their mission-driven businesses.  We cannot put mission over money; we cannot put mission over keeping records and having systems; we cannot put mission over evaluating our impact or building relationships or marketing our brand.  At least we can’t do that if we want to be able to continue doing our mission.  If we think of mission as the end all and be all, then we aren’t thinking about the infrastructure necessary to sustain the ability to continue to deliver on those mission promises.  Running the business and doing the mission must go hand in hand, and anyone who thinks otherwise is thinking—well, isn’t thinking clearly or correctly.

Let’s take one example:  think about the size of your organization’s marketing budget.   “What marketing budget,” you ask?  That says it all.  Go ask any for-profit organization—large, small, old, just starting out—what they spend on marketing.  I can guarantee you the answer won’t be nothing, which is the answer I get from nonprofits at least 75% of the time when I ask that question.  And, please, don’t tell me that you are different from a for-profit because you don’t have a product to sell!  You do have something to sell:  your services, your contribution to the betterment of the community, your social impact, etc.  Think about why for-profits advertise?  They have products to sell and they want to stay competitive.

Why do nonprofits advertise—oh, wait, they rarely do.  But think about the ones that do—schools, universities, hospitals.  Why are they doing it?  Because they have products—or, if you prefer, services—to sell and they want to stay competitive.  Well, in this arena, how are Meds and Eds any different than the other 1.5 million nonprofits out there?  We all have products/services that need “buying” and we all need to stay competitive in this market that has grown 17%-24% in the last 12 years.  Who cares how well we do our mission, if no one knows what our mission is?   Would you care about General Mills if you didn’t like Cheerios or Betty Crocker? or Unilever if you didn’t like Hellmans or Dove?

This brings us to another example:  how will we even know how well we are, or are not, doing our mission if we don’t take the time, money, energy, human resources to do the evaluation that clues us in.  Yes, evaluating our impact—how well we are keeping those all-important mission promises—is another aspect of tending to the mission driven business that cannot be wedged into the nanoseconds of free time poor thinking nonprofit volunteers and employees have when not delivering on mission.  For profits love to tell us how much whiter your clothes will be with Product A or how much better our investment advisors do or how much safer our automobile is, and so on.  And they give us data to back up their claims, data that, theoretically, comes from research we could demand to see.  Saying, “We are a nonprofit; therefore we do good work, so give us money,” may have worked at some point, but it certainly doesn’t cut it in the 21^st century—nor should it.  We need to have that same data that comes from well-developed evaluations that show the value of our product to our stakeholders.

And, of course, neither marketing nor evaluation nor any of the other things needed to be able to deliver on our mission can happen without money.  So how or why would you ever leave raising or earning money as an afterthought to doing mission?  The answer is you can’t.  And those that think otherwise won’t be bothered by it for too long because they simply won’t be around.

So, staff, board members, journalists, donors—everyone—wake up:  nonprofits are businesses, not pet projects.  Run it like one or get out of the way for the others that do.