Is it good that you’re running your non-profit like a for-profit business?


Running your Non-profit like a Business?

By Dani Robbins
Re-published with permission from nonprofit evolution blog

successI cannot tell you the number of people over the course of my 20 years in non-profits that either congratulated me for running my non-profit like a business and went on to tell me non-profits should be run like a business. I never knew what to say. Thank you?

It seems to be one of the true disconnects that proves my often repeated phrase “where you sit always determines where you stand.”

For those of us who have spent our careers in non-profits, we hear it as an insult that implies businesses are better run, even though there is ample evidence to the contrary. For those who were raised in the for profit sector, the comment acknowledges that some non-profits are run by well-intentioned but poorly trained leaders, and it is meant as a compliment. The compliment being that the Exec watches the bottom line and is accountable, professional and transparent.

We want, need and demand that our non-profits be accountable, appropriate and transparent. However, we also want them to meet mission. Perhaps, that’s the disconnect. Businesses have no mission.

missionNon-profits have to manage the budget AND meet the mission.

  • We expect them to meet the needs of clients in an equitable manner.
  • We insist they spend money the way it was awarded and budgeted. When that isn’t possible, the Board or the funder approves the change.
  • We expect staff to be held to the same standards, and paid similar salaries for similar work.
  • We count on our Executive Directors to be responsible to the Board, and the Board to be responsible to the community.

Now that I own my own business, I can tell you that the checks and balances inherent in running a non-profit are much more stringent than those needed to run a small business. As a business owner, I can pretty much, within the bounds of the law, do whatever I want. I have no Board to report to, or to hold me accountable. It’s my company. I started it. I make the decisions and it lives or dies with me. That is the structure of a small business. That is not the structure of a non-profit.

board5Non-profits are not run by one person for a reason. The Board represents the community as the owners of the organization. The organization exists to meet a need. Businesses, which also address needs, exist to make money.

This is the real crux of my beef with non-profits being run like a business. When they are, the Exec leads and the Board is an after-thought; often because the Board was built that way by an Exec that wants to run the non-profit like a business. The Exec sets the direction, and tells that Board what she or he feels they need to know, and the Board accepts that. There is a lot of rubber stamping and very little governance. In such cases, the Board only becomes engaged when there is a crisis. That was not the leader I aspired to be, and not the Board I built.

I want more from our non-profits. I want them to meet the level of accountability our communities expect and deserve. I want them to meet their missions. I want them to have an engage Board and innovative leadership and to move the needle of change in their community.

As always, I welcome your feedback and your experience.
dani sig

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About DonorDreams

Erik got his start working in the non-profit field immediately upon graduation with his masters degree in 1994. His non-profit management and fundraising experience numbers nearly 20 years. His teachable point of view around resource development is influenced by the work of Penelope Burk and those professionals subscribing to a "donor centered" paradigm. Donors have dreams and it is our responsibility to be dream-makers because donors are not ATMs.

Posted on January 8, 2014, in Board governance, leadership, nonprofit and tagged , , . Bookmark the permalink. 5 Comments.

  1. This is a wonderful article and I agree with you wholeheartedly, having worked for a non-profit that devolved from it’s mission to it’s mission being meeting it’s bottom line, keeping a surplus in the fund balance and using numbers to drive it’s mission. Why I am now a consultant.

  2. Hi Kate,

    You’re absolutely right; we have to be mission driven not money driven. You can’t change the world if you’re only focused on the bottom line. We need watch the bottom line, but it can’t be the only thing we watch.

    Thanks so much for your kind words!

    Dani

  3. From a pure financial standpoint, running financial reports as if the organization is a for-profit business can help to identify cash flow issues and where the organization can save. For example a balance sheet is equivalent to a non-profit’s statement of financial position. Crunching the numbers and looking at areas of where you can streamline business processes can help to save on money – which is money that can be used to further your organization’s mission.

    • Thanks for weighing in, Kelly. I don’t think anyone is arguing your point when it comes to this issue. Non-profits need to be financially prudent because without revenue, everything else goes away. However, everything else that comes with that “for-profit mindset” is where the disconnect occurs.

  4. Hi Kelly,

    You are absolutely right that the financial aspect must be managed appropriately, with the agency following GAAP standards, the board approving the financials and the organization being a good steward of the community’s resources, including having internal controls and also streamlining where appropriate. However we can’t manage our money as if we were a for profit business because that would take us down the path of being money driven not mission driven. Our missions must always be paramount.

    Thanks for weighing in,
    Dani

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