Why We Should Avoid A Business Model

All of us in the nonprofit world have heard the mantra that we must run like a business. At lunch the other day, a colleague questioned if that was anything we should even aspire to.

Not that we shouldn’t seek to be efficient, effective, productive.  But truthfully, many businesses, think that their only purpose is to make money for shareholders or stakeholders if they are not public.  That too often means they will do ANYTHING to increase their bottom line:  lie, cheat—throw ethics out the window.  USC, my colleague Usaid, personifies this.  All the scandals that are erupting now are happening because what matters to the powers that be is bringing in money.

I don’t want to make money the villain here.  There is nothing inherently evil about raising money.  In fact, for the most part, it is a good and honorable thing.  But like all things, it can become both more and less than it is.

Zagging here—but with a purpose—I was recently at a gathering of nonprofit consultants.  While talking about one thing, we got on the tangent of what is success.  We were divided:  some felt that it was doing a good job for your client (and here I will admit my bias: to me that is satisfaction).  The rest of us thought it was seeing your client move in the direction they need to go.  Interestingly, no one mentioned money as a measure of success.

Whether that makes us better than USC is up for grabs.  What it does show me is that all of us are clear about what matters:  our clients.  USC has forgotten that it should be about their students.

Which brings us back to the business model.  There are businesses that focus on making excellent products and providing their workforce wonderful working conditions.  These are models to emulate.

The excellent product—the services we provide our clients—is something most nonprofits do well.  We don’t do as well in providing our workforce those wonderful working conditions.

Salaries at nonprofits are notoriously low.  Benefits, if they exist, are on par with the salaries.  The amount of work needed, however, is very high.  Many people are doing many different jobs, with no support—and often no training.

We need to copy those businesses that invest in staff—from salaries to training. Clearly we should follow those whose efficiencies and effectiveness are high.  But we also need to be proud that money is not at the core of what we do.  Mission is.  And mission is much harder to quantify.

USC can brag about how much money they’ve raised in the past five years.  However, one has to wonder at what cost?

Janet Levine Consulting works with nonprofits helping to increase fundraising capacity and build stronger boards. Learn more at www.janetlevineconsulting.com.  While there, subscribe to the newsletter and do contact Janet for a free, 30-minute consultation.