June 8, 2014

The Business of Non-Profit Organisations

Posted in A Bigger Picture, Civil Society, Community Development, Funding and Finance, Marketing, Politics of volunteering tagged , , , at 2:56 am by Sue Hine

People-first-300x300[1]I nearly bought myself into an argument recently, wanting to defend the claim “Charity organisations are different from a business”.  Now I have done some reflecting and marshalled the points I could have made at the time, as a kind of dialogue with myself.

Of course they are different, given the ‘for-profit’ and ‘non-profit’ labels.  But I have never liked the use of ‘charity’ in reference to non-profit organisations and NGOs.  The word has got too many connotations of ‘doing-to’ consumers/users/clients, as many a for-profit business operates.  I prefer the concept of ‘doing-with’ people – groups and individuals in the community.  When I hear concerns expressed about large nonprofits operating like corporate businesses I have to concede my opponents might have a point.

On the other hand it is not an unreasonable expectation that non-profits operate in a businesslike manner, especially in a contracting environment.  Of course non-profits need to be accountable for their financial management.   They also need to prove their value, to demonstrate outcomes and impact, or in current business-speak, to show a social return on investment.  And yes, they need to establish a strategic plan, set policy, outline the programmes and services they will deliver.

But still I cry: they are different from a business.  They do not exist to make a profit.   They deliver services, they fill a gap, provide for a need, or they offer opportunities for healthy lifestyles and leisure interests.  These organisations bring communities together, engage people in activities and actions outside the market-place.  Collectively the non-profit sector and its associations represent Civil Society, acting as a counter-balance to the weight of the private and public sectors.  Otherwise non-profits get swallowed up in politics and the economics of consumerism.

  • That does not excuse them from governance responsibilities and ensuring practice standards are maintained.

Of course not.  If they are not meeting expectations, if they are not offering an environment for member or volunteer satisfaction then the organisation will fold.  Non-profit organisations are different from businesses in their aims and obligations.  They began with a specific mission, and they hold particular values.

  • But so do business organisations. They are no different in holding statements on their vision, mission and values.

Yes, I am reminded of the snappy mission held by Canon: Beat Xerox!  That competition element is a big driver in business, always looking for that niche in the market, and to improve market share.   That is not the business of nonprofits!  Non-profit organisations tend to live by their vision and values.  In business these can be just words and not treated seriously, as the Enron history shows.  Not to mention the shady dealings of finance companies exposed in the Global Financial Crisis.

Non-profit organisations do not compete, they complement each other.  They are fulfilling particular needs for a specific community, at a particular time and place.  And there is much more focus on collaboration, working together and sharing information.  Businesses work to protect their intellectual property and ensure their bottom line is always a good one.

  • And so we should! If it wasn’t for business and our ability to create profits and pay taxes non-profit organisations would not be ‘in business’.

Now you are getting narky.  And also highlighting the fundamental difference between business and non-profit organisations.  Put it this way: business is about making monetary profits which go to shareholders, the investors.  The profit for a non-profit organisation is the benefits and gains seen in community and individual well-being, and in the contributions of a well-run volunteer programme.  That’s why it’s important that we stay different.

You are still not convinced?  Yes, there is plenty more ground to cover in this debate.  What would you have to say?

 

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4 Comments »

  1. Rob Jackson said,

    Hi Sue.

    As always, an excellent blog.

    What worries me here in the UK is (predominantly large) non-profits behaviour post-financial crisis. Many of them seem to have developed a culture that sees the only way of delivering the mission being via things that can be paid for. So they look at their plans, look at their budget and cut their cloth accordingly.

    I think this results in ‘charities’ that are fundamentally no different from private businesses. So we get agencies closing the doors because they can’t afford to pay staff to deliver the work anymore when they have more of a legal, ethical and moral obligation to try and find other ways to deliver that service than simply stop because paid staff may be unhappy if the work is done in a different way without some of them.

    A much better approach would be to look at the vision, then examine all the resources available (money, paid staff, volunteers, in-kind support etc.) and determine how best you deploy all of these to achieve the goal of the agency. That’s what Susan Ellis advocates in her latest hot topic (albeit she is looking at the issue from a slightly different angle):

    “Most of the time funding is sought by organizations for program ideas generated by paid staff, often to hire more paid staff. Only after money has been obtained does someone say, “let’s get volunteers to help.” Waiting until the end of the process to “add in” volunteers is a huge missed opportunity because it does not maximize the contribution of volunteers to the brains of an organization! Instead, involve volunteers from the beginning of planning a new initiative, to generate more ideas and add their perspectives and knowledge. Next, strategize what volunteers will be asked to do in implementing the initiative if funded, and explain that in the actual proposal – including budgeting funds to support their efforts. This sequence of events considers volunteers as essential team members, not as an afterthought.”

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    • Sue Hine said,

      Thanks Rob, especially for the reminder about Susan Ellis’ Hot Topic. It seems the more formalised big organisations become the more the ‘power’ of volunteers is ignored (and by default, the role of the manager of volunteers). I am still seeing references to ‘using’ volunteers, to volunteers ‘saving money’, and similar platitudes supposedly acknowledging volunteer work. Which is a good enough excuse to keep on writing about volunteering and programme management!

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  2. What a great topic, Sue! Non-profits are now in competition with each other, for grant money, insurance reimbursement, growth, and community voice. So they hire marketers and people with business chops while reiterating that it is for the “good.” After all, we can’t help people if we close our doors, right? So you end up with this mix of oil(business) and water(charity). Now, if you throw in the fresh herbs(volunteers), you get a great salad dressing. Instead, most organizations end up a mess of oily water. with chaotic messaging and sadly, mission lost in the mix. It’s a tough position to be in for volunteer managers. We send volunteers out to do great things and their human capital is not viewed as critical to sustaining the fundamental goal of providing service. When do non-profits cease to be different from a business? When they abandon their bottom line in order to “succeed”.

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