Building Stronger, High Performing Boards
Written by: Gregory C. Scott
Partner, Executive Coach & Leadership Strategist
InVista Associates, Inc.
The Scott Group
AABLI alumnus, Class #4
The nonprofit business model needs a transformation. It needs an advantage as a strong force in the business world. The label “nonprofit” is the first disadvantage; it implies an organization is not a business at all. Substantial and sustainable revenue is a must for any nonprofit’s survival and a high performing approach is the only way we get there.
When people ask where I work or what I do, I tell them I’m the CEO of a nonprofit organization. Immediately, the temperament of the conversation changes, as though our organization is merely a charity instead of a business. Yes, we are mission-driven, but our mission is very serious and our approach to the work we do is transforming. In fact, we nonprofits are creating the highest level of social impact, more than any other business sector in our economy.
To be viable, every business must do the following. This applies to for-profits but also to any thriving organizations, including nonprofits.
- Be Value Added.Every successful business provides something of value –services, products, ideas — to others. Value is in the eye of the beholder.
- Tell people about this value.Every successful business tells people about the value they offer. This is also called m
- Sell this value.Every successful business gets money in exchange for the value it provides. In for-profits, this is called sales. In nonprofits, it’s called
- Deliver this value.Now that you “told me and sold me,” you have to deliver. Every successful business does what it says it will do to keep customers and donors happy.
- Follow the money and ROI! Money is not an end in itself but it is a means to an end.If you want to be able to improve your products and services, enter new markets, raise more money for your programs, capitalize your grantees, and pay your employees, you need cash. Every successful business figures out how to manage money and bring in more cash than goes out. Along with its investors, that business also needs a clear understanding of its ROI, or return on
To be successful in the business of nonprofits, I have learned that you have to think and act like a for-profit business. Just as private sector companies focus on their goals to increase monetary profits, we must position ourselves in the marketplace to generate increased dollars beyond traditional fundraising. Our success lies in the resources and opportunities those dollars provide for the people we serve.
The most successful organizations evaluate short- and long-term opportunities to integrate, reapply, and scale in order to perform at the highest level. This takes a comprehensive evaluation of the market and the ROI without burning a hole in your overhead. I believe that responsible and high-level innovation could actually lead to greater impact and scale if the way we are perceived by investors and consumers changes.
If nonprofits were evaluated not on our overhead, but on our ability to deliver results for social impact, just imagine the potential for sending more first generation young boys to college, investing in the next cohort of girls who code, and solving the homeless epidemic in our country. Often, nonprofits are expected to be lean and simply to hustle hard. But as the sector evolves, so does the sophistication of the business model. Successful businesses thrive on business systems that are designed for results. Thus, the business of nonprofits needs a change in mindset.
Competition among nonprofits has become fiercer and the market has become more saturated as we all interact with potential donors and consumers of the services we provide. Trends are changing, partnerships are more sophisticated, funding requirements are focused on results, and staffs are more professional and savvy. To remain relevant and competitive in the marketplace, nonprofits must impose for-profit business standards.
Like any other business, a nonprofit has a board of directors, marketing, accounting, professional training, human resources, and high level professional executives who together must make tough choices that ultimately lead to a competitive edge and greater success for the organization. CEOs and executive leaders are developing strategic business plans, impact studies and financial records, preparing for audits, and ensuring compliance on all levels.
In today’s climate, the challenge is to invest in key aspects of the organization, just as any business must do to order to grow, prosper, and have long-lasting impact. The business of nonprofits does well when the services we provide to consumers are well known, and donors invest in the quality of our work. This means effective, competitive edge strategies are needed to guarantee the greatest impact. We do this by using key performance indicators that provide data for deeper and expanded focus.
Conclusion
There is no doubt that nonprofits have to do more with less, but that’s the magic of working in this sector. We get to be innovative, creative, resourceful, strategic, and highly competitive. It’s the “less is more” philosophy that allows us to continue the amazing work of changing lives. But it also is a sector that requires quality financial investment in order to promote goals and values that are sustainable. This mandates a different set of standards that include transparency, exceptional leadership, and impactful results.
Nonprofits must continue thinking of ways to create a competitive edge, to grow and become the very best in our industry. That, in fact, is our solemn responsibility. However, real change can only be achieved if our boards and CEOs create the type of culture that allows them to invest their resources while building legacies for their agencies. This is the business of nonprofits.
This blog is not written by aabli.org or The African American Board Leadership Institute. The author is solely responsible for the content.
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