The Nonprofit – Business Dilemma

It seems like the question “Should nonprofits behave more like businesses?” is constantly at the edges of any conversation around the nonprofit sector.  (See recent posts by Carlo Cuesta and Allison Fine about this topic.)  Having had several years of experience in the nonprofit sector, and then taking a hiatus from this work to pursue my MBA, you might think it would be pretty obvious where I stand.  You’d be mistaken, though.  This question (often phrased as a statement) makes my skin crawl.  It demonstrates a lack of understanding of the complexity of the nonprofit sector, and carries with it an arrogance that is often undeserved.

Imagine a young man who goes off to work for a large corporation.  After several weeks of employment, he finds his manager to be incompetent, money wasted on projects that are going nowhere, and feels himself under-utilized.  Would you point to the faults of the private sector?  Or would you argue to that young man that this experience does not define the sector; that there are a diverse range of companies and industries within the sector, and that he should refrain from such blanket judgment?  I’d imagine almost anyone would recognize the difference between a GM and a Google, an AIG and an Apple.  And yet, people make such statements about the nonprofit sector and no one challenges them.  Seriously?  Your neighborhood association is going to run quite differently than the American Red Cross, and likely much different than those within a 30-mile radius.

So what is it that allows such conversation to continue?  Realistically, there is a lot of overlap between the day-to-day operations of nonprofit and corporate organizations.  Human resources, marketing, finance and accounting all cross both sectors.  However, while the nonprofit sector often celebrates more humble behavior, the private sector traditionally does not.  This makes it easy for such statements to be made and accepted, whether or not they deserve such merit.  Additionally, there is an imbalance of power between the two sectors (as determined by the availability of resources), and so there may be a reticence to speak out on behalf of the nonprofit sector.  All this does, however, is reinforce the concept, which further damages the perception of the nonprofit sector.

What we really need is to change the vocabulary we use when approaching this conversation.  It is not a matter of the nonprofit sector versus the corporate sector; it is a matter of good organizational practices versus bad organizational practices, or efficiency versus inefficiency.  Are there are things that are taught in business that can be useful for nonprofit professionals?  Absolutely; I’ve spent my last two years exploring just that.  However, I would argue that businesses can learn a great deal from the nonprofit sector as well.  Collaboration (with community stakeholders, clients, donors, and other agencies) has long been key to the nonprofit sector, and as more customers demand participation in the development of their products and services (think mystarbucksidea.com), an understanding of how to leverage these relationships can have a major pay-off to corporations. 

While there is undoubtedly much more to say about this topic, I’ll pause now to hear what you all have to say.  I would just add that Dan Pallotta has a blog (via Harvard Business School) called “Free the Nonprofits” which speaks to the challenges facing nonprofits due to the unreasonable expectations placed on the sector.  Whether or not you agree with all of his points, it is certainly worth reading.