November 28, 2006 Not-for-Profit News
Brief Reflection on Nonprofit vs. Business Decision Making
What Do You Think?
by Bryan Orander
Over the past few weeks I have been in several similar conversations with nonprofit professionals or business people who are involved with nonprofits. We have wandered into sharing observations about decision making and implementation of important decisions and come to very similar conclusions. I would like to extend that conversation to our readers and get your input on it.
To briefly share or remind you of my background, after 12 years in various roles with a Fortune 50 computer company, I joined a local nonprofit as a Director for 6 years, then a large local consulting firm for 3 years, before founding Charitable Advisors almost 7 years ago. So I have been in the nonprofit sector for the past 15-16 years, but feel that I still can put on a business lens when desired - though my MBA is 20 years old :-).
Here is the statement I have developed that I want to get your feedback on:
"Nonprofits spend 90% of their available energy, motivation, and resources making key decisions and assembling a plan - leaving little energy to implement it. Businesses spend 10% of their energy, motivation, and resources making key decisions and assembling a plan - leaving 90% to implement. "
What rings true in your experience?
How might this be way off base?
How is it different in small versus large nonprofits or organizations that rely on different sources of income or in different fields?
If there is some truth in it, how might we focus more resources on implementation?
Share your thoughts...
Brief Reflection on Nonprofit vs. Business Decision Making
What Do You Think?
by Bryan Orander
Over the past few weeks I have been in several similar conversations with nonprofit professionals or business people who are involved with nonprofits. We have wandered into sharing observations about decision making and implementation of important decisions and come to very similar conclusions. I would like to extend that conversation to our readers and get your input on it.
To briefly share or remind you of my background, after 12 years in various roles with a Fortune 50 computer company, I joined a local nonprofit as a Director for 6 years, then a large local consulting firm for 3 years, before founding Charitable Advisors almost 7 years ago. So I have been in the nonprofit sector for the past 15-16 years, but feel that I still can put on a business lens when desired - though my MBA is 20 years old :-).
Here is the statement I have developed that I want to get your feedback on:
"Nonprofits spend 90% of their available energy, motivation, and resources making key decisions and assembling a plan - leaving little energy to implement it. Businesses spend 10% of their energy, motivation, and resources making key decisions and assembling a plan - leaving 90% to implement. "
What rings true in your experience?
How might this be way off base?
How is it different in small versus large nonprofits or organizations that rely on different sources of income or in different fields?
If there is some truth in it, how might we focus more resources on implementation?
Share your thoughts...
posted by Board Blogger at 11:24 AM
14 Comments:
Interesting question. A couple quick comments.
1) To categorize all nonprofits in one group is faulty. Many NPs are able to operate more like business because there is a "nearly true" market with sustainable funding stream for their services (i.e. higher education, healthcare, etc.). Other NP charities exist because there is no "true" market and thus rely primarily on the generosity of donors/volunteers to provide the services (i.e. food pantries, shelters, etc.) . While both types are responsive to their funding streams (changes in Medicare or Pell grants, for example), I might argue that the latter group perceives greater sensitivity to the "whims" of donors/volunteers.
2) I would argue that it is not so much that NPs spend less energy in implementation, but that there is less flexibility to respond to learnings or emerging trends. In drafting a grant proposal or seeking government contracts, the NP must invest in the planning in advance. If the funding is tied to the originally proposed processes and outcomes, the NP is left little flexibility to alter the implementation strategy. Herein lies the problem in my mind. Businesses--because of the emphasis on a different kind of return--are allowed or required to be more nimble and pragmatic in their approach.
3) Governance structure affects implementation. NP boards that meet only periodically have little opportunity/desire to "change direction" in implementation more frequently.
How to focus more on implemention: Convince funders to allow greater flexibility over period of grants/contracts. Convince boards to focus on mission and big picture outcomes, recognizing that processes may change. Convince NPs to change/abandon programs/projects earlier when they recognize they aren't working. Incorporate ongoing evaluation and ways to incorporate learnings during the implementation.
For what it is worth...
Bryan:
I have struggled with this since I was an MSW student in 1990. I noticed at my internship with a battered women's center, that the "business operation" was chaotic to say the least. The director's office always looked like a tornado had just hit. I remember several suggestions of mine to improve the operations were replied to with, "well, maybe you need to go get your MBA." This was intended as an insult. However, they did help a LOT of battered women.
Businesses on the other hand, are much more efficient at "operations" and making money, but help very few people, if any. (Knowing my thoughts on the layoffs of the last 20 years, you will understand my view that many business actually HURT a lot of people by their operations.)
I remember after Hurricane Katrina, I heard a news report that the American Red Cross was sending out "bills" to victims who had received financial assistance, asking them to re-pay it. (These were not people who had received assistance fraudulently.) I immediately thought, "That's what you get when you have MBAs running nonprofits."
There has to be some way to marry the business skills with the people skills, but not many organizations have a good "marriage", whether they are a business, a government agency or a nonprofit. Nonprofits continue to struggle through with little business management, and many businesses carry on with little emphasis on the needs of its employees or the community in which it operates. I think most people see business needs and people needs as 2 opposing forces, and they tend to fall into one of the camps or the other, but few focus on blending the two.
At IU during my undergraduate work, I attended a weekend leadership seminar sponsored by the Business school. At the beginning of the seminar, we took a quiz, which was some type of personality assessment. Later, we were divided into two groups, but we did not know how we were divided. Both groups were given a problem to solve. Everyone in the groups got a slip of paper with a clue on it. Then we were given 15 minutes to solve the problem. The other group solved theirs within 10 minutes. My group was still going at 25, and still did not have a solution.
They explained to us that they divided us into groups based on people who were more focused on results or process. The results group got the answer right away. The process group was more interested in making sure everyone had time to speak about their clue and their ideas, etc. They then stated that it is most important to have a results person team with a process person to handle operations in the best way. I was completely humiliated, and in my seminar evaluation I let them know I did not appreciate the "process" of that exercise. The exercise did NOTHING to demonstrate the importance of people/process skills, in fact, it only showed us to be useless and a hindrance to "getting things done".
In my current position, I try to walk the line between these groups by serving on the Labor/Management partnership council and trying to blend mission/employee needs whenever I can.
I hope this helps somewhat.
Much like you I have owned businesses for 14 years and run non-profits for 14 years. I am a firm believer that the decision process is the same in both with the exception of the fact that a NFP has to report to a board and funders. The major difference to me is the distinction between sales and fund raising. McDonalds hires the staff they need based on sales, we have "customers" (homeless, hungry, etc) coming in the door whether we raise the necessary revenue or not.
OH MY GOSH!!!!!!! Just last night I was talking to our chair-elect about what's ahead for us and saying, "There's a balance between researching and making thoughtful decisions ad infinitum and being paralyzed in this stage vs. making decisions and taking actions impulsively and without the right level of thought. I feel, however, that we tend to be on the extreme of the former and we need to push ourselves more to take action because there's too much to do and too much at stake to get stuck in "thinking about it" mode. We are too reluctant to make a decision and move forward."
An example: We have talked about an advisory council for two years. Everyone seems to be in agreement that it's good to do. But no one will do it!
We really struggle with this and I find it very difficult to find a balance. I'm VERY interested to hear what others have to say regarding why this culture exists and strategies to help find balance.
Thanks for bringing up the topic!!
I read your note near the bottom of your last electronic newsletter. I too spent time in a large coporation and then went to a non profit. While I agree the non profit probably spends more time laboring over the plans minor details, I would counter that many large coprorations can waste inordinate amounts of time in planning, particularly in budget planning.
The one thing I found the same in non profits and for profits was their inability to see a longer timeline in a reasonable fashion. We used to say the X Corp and its wholly owned subs made money year over year in spite of the foolish short term meddling of some managers. In the for profit world, it was quarterly earnings driven and for the nonprofit it was services provided last year and percent of overhead verses mission related costs that drove many donors. No one seemed to be looking 3-7 years out.....
I do believe that more nimble (read more time executing and less time planning) non profits and for profits will be the ones that survive the longest.
Keep up the good work. I enjoy the newsletter more than you can imagine.
My experience in the non-profit world would indicate that strategic planning is often done by the Board of Directors with heavy input from the staff. Usually the Board does not spend enough time going through the current programs being conducted by the organization to insure the new goals take into account where the organization stands at that time.
I would agree that little time is given to the strategic planning process, but also little effort is given to insuring that the new goals are implemented successfully. Since most non-profits are short on staff, I have found that one usually adapts a current program to meet the new goal. I believe this effort would be more useful if the staff and Board spend more time talking about current programs and how they tie to the goals established by the Board.
I cannot address the question concerning for profit business, but my impression from reading the Wall Street Journal, and like publications, is that only the well run businesses actually do a thorough planning process. To my mind the difference in planning between the profit business and non-profit agency is that a profit oriented business has the staff to do a thorough planning process should the CEO and Board expect it to be done. I hope this helps since it is based on my experience as a staff and Board member in the non-profit world.
I disagree that nonprofits spend 90% of their time planning and 10% implementing. In fact, in many cases, nonprofits don?t spend enough time planning and reflecting on what they are doing. They are simply meeting the day-to-day needs of the organization and clients and scrambling to get things done. They aren't thinking about next year or 5 years out. I think MORE planning and thoughtful discussion might help organizations develop and implement their decisions in a more efficient manner.
Businesses may have more capacity to implement quickly with less planning because (depending on the size of the organization) they can make mid-course changes in the way they do business. Nonprofits, with their volunteer-driven decision making on key policy items, are often unable to made mid-course changes quickly and often don't have flexible enough funding to make these changes.
If funders would provide more flexible operational support, this would increase nonprofit's ability to respond more quickly to changes in needs and the environment. It would also allow organizations to plan more effectively.
Just my thoughts. Thanks for the newsletter, it is very useful.
I agree that nonprofits benefit from, and could use more of, the kind of business-think that private industry experience can provide. (My MBA is also 20 years old, and I'm in non-profits. Does this say something about late 80's biz grads?) But I'm not sure what the stats you quoted say, or whether they are measuring what they seem to be measuring. Here are my thoughts:
Customers are those who provide money.
In a private business, strategic planning and implementation focus on how to sell goods or services to those who will give money in return. The exchange is direct. Thus, "implementation" is the same as In a non-profit, strategic planning and implementation focuses on delivering services, but not to customers. Their clients don't bring money. Funders do. So non-profits have to focus on their funding sources as well. How do we define "implementation" in that case? Is it the time spent on programs, or fundraising, or both?
I think nonprofits, especially large ones, do spend so much time on strategic planning because they have to deal with these two areas simultaneously and too often don't figure out who's the "customer" and who (not what) is the "product" being "sold" to the customer. Plus, to get real, larger non-profits, like government agencies, turn over executives a lot. Every time they do, the new leadership team has to put its stamp on the organization by re-planning. It is a rare executive who can, or will, spend all his or her personal capital implementing a plan they either didn't create or don't fully
subscribe to.
I think small non-profits actually spend almost no time on strategic planning. They tend to have more work than they can do so implementation devolves into reacting. Some do it really well for a really long time, but the essential process changes very little. Planning and doing become the same thing.
I'm looking forward to what results from your request for thoughts on this subject.
Dear Bryan,
I found your question/statement very interesting. I have been involved in both the for profit world and as a volunteer in area not for profits; I do have some opinions on your statement. This letter is 2-fold. One, to give you my opinion (you did ask!) and two, you may be able to help me after you read my opinion.
Years ago, I figured out with my personality (having had several of those -personality tests- over the years because I am in sales)- I try to "take over" in many volunteers meetings/ positions and then end up "running" that not for profit or that committee. I have had to learn to sit on my mouth or not attend certain meetings because my ideas might be accepten and then I would be on volunteer overload because the best person to do the task is the person with the idea/concept?
Example 1: I quit attending the PTA/PTO types of meetings because the time the women at those monthly meetings spent deciding the most minute things possible; like -on what color flower was appropriate for the middle school Valentine's dance. They would have to discuss whether red was too provocative a color for a middle school boy/girl to give to another middle school girl/boy. But was 'pink" too pink because it appeals only to girls and white not enough emotion attached. How about yellow then for middle schoolers? It was far too painful for me to sit and listen for 10-15 min. about flower colors or things like that. Or they only wanted to have one color (too many colors might mean some child would get hurt if they got white instead of red etc). I would want to blow a gasket about the amount of time spent on one topic. I found it best -I would just send in my name on the forms and ask that I do "such and such" and do my work. I found the many meetings a giant waste of my time, talent and treasures. Let the ladies fuss over for hours what needs to be done, then give me the task (find best flower supplier/pricing etc/delivery and I'll do the "actual" work).
Example 2: I recently just helped a very small not for profit- designing and getting printed a tri-fold brochure. The time it took the Executive Director to answer me and get back to me was almost criminal. She would send an email that had to have taken 15 min. to write about how she hadn't had time to do "such and such". She wanted to discuss over and over the same small details which we would already have discussed and resolved.
I think there is the Peter's Principle at work for these small not for profits- some of these people just really like to hear themselves talk. Or, they think they are more important than the actual work they are supposed to be doing.
I am action oriented. I would like to see more not for profits have that mind set. I do believe that is more the business (for profit) mind set. It is a fine line on the dance floor when you are mixing up volunteers, paid staff, and priorities/deadline. I have found that just like in anything- you will find time if it matters to you (whether you are the volunteer or the paid staff). Your 90/10 10/90 is probably too rigid- some are better than others-but generally-yes- the smaller the not for profit, the more people are invested to digress (because probably their child is involved). The larger not for profits/for profits of course have more experience and don't need to get worked up over those things (they may have committees that have do the little decisions). Of course, the less personal it is the less people need to get in their 2 cents? I would like to see not for profits more action oriented (doing) vs talking about the task at hand.
Good Luck with your questions and thanks for your excellent weekly news.
In my experience, I?ve seen this work both ways in non-profit. If the agency is able to pay sufficient dollars to have enough staff, then the top executive can focus on planning. However, in my experience, we're barely at the point where I am able to spend some time on planning. Getting a new non-profit up and running has taken every available human resource. It is still a challenge to get board members to take responsibility in helping the staff pull their head out of the weeds, connect with the community, and assist in formulating a vision and strategies. To date, this has been very much staff driven.
Bryan,
I always enjoy your articles and thanks for sending them to me.
Faith, Hope and Love Community, Inc. has been in “READY, FIRE, AIM” mode in the past year and half. This is why FHL is more on implementation than planning. However, this distinct attribute provided FHL more than 1200 volunteers and 50+ churches and 50+ ministry partners in 15 months of its existence. I believe that the exponential growth of FHL is due to Bottom-Up approach rather than Top-Down. Although the original vision is casting comes from the top, the volunteers become vision casters themselves. The volunteers are empowered with autonomy to work together toward common good in their own communities. They become part of the vision which propels the growth of the organization. The volunteers are encouraged to come up with projects and resources to accomplish the tasks.
The result is involvement, empowered, and energized volunteers. Although everyone is encourage to be part of the planning, the implementation yield more results.
Let me know if you may need more info.
Merlin Gonzales
Founder, Executive Director
Bryan,
I have been taking Project Management training over the last few months. Upon reflection, I realize that PM training is actually an effort to force a standardized "process" on people who are responsible for very large projects (results).
Wouldn't it be great to develop a short-term Business Management certification program for nonprofits? Once an agency head was certified--they could get "extra points" on grant applications, etc.
After directing a NFP for 32 years I realize we spend our time building consensus because as ED I do not have the ultimate authority to decree certain decisions. In a business one, or a small number of persons, says this is the way thimgs should be done and the directive gets passed down the food chain.
In a NFP we develop a new idea, complete planning, find collaborators, sell the board and then begin looking for funding. Then the long wait for a funding decision begins. By the time we're finished there is precious little energy for "doing" because you have had to manage to survive throughout this lengthy porcess. Many great grassroots ideas never get off the ground.
Interesting reading the responses of everyone to date. I have worked in the nonprofit field for the past 15 years. Approximately 1 year ago I decided to pursue my master degree and specifically choose to get my Masters in Business Administration. Many times throughout my career I have heard individuals state they work for a nonprofit for the cause rather than any other reason. I have a hard time truly believing that. I feel many times (not always) that nonprofits are run differently than a for profit business because there is a lack of skill and understanding of business by the Executive Director. I have felt a love for each nonprofit that I have been a part of, and I still give financially to most of them, but to say one works for a nonprofit for the cause, is just not acceptable in the minds of the board of directors, the donors nor the institutions that provide grants.
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