A New View on Non-Profits
Patrick Lencioni is one of the authors that I consistently find most helpful. His latest article [not yet online, but copied below] does an excellent job pointing out the false dichotomy that we often make between non-profits and for-profits.
We often think of non-profits as accepting “lower levels of accountability and productivity and rigor” than for-profits. On the other hand, we often see work at for-profits as failing to give people a sense of mission and failing to tap into their passion and idealism.
We need to reject this false dichotomy. Although it may often be this way, it doesn’t have to be.
I think that a new era has begun for non-profits. More and more people are realizing that a non-profit can be a place driven by an incredible mission while at the same time accomplishing that mission with excellence, discipline, and remarkable innovation. As a result, more and more talented people are realizing that they can go into the non-profit sector to make an impact on the world without sacrificing excellence in their work. And as a result of that, the work of non-profits is becoming even more innovative and excellent — thus resulting in an even greater impact for good.
In fact, Jim Collins writes in his monograph Good to Great and the Social Sectors, “Social sector organizations increasingly look to business for leadership models and talent, yet I suspect we will find more true leadership in the social sectors than the business sector” (p. 12). Why? Because “the practice of leadership is not the same as the exercise of power.” Social sector executives have to rely more on influence than power to get things done, and therefore the social sector environment provides a significant catalyst to the development of leadership.
So a new day has dawned for non-profits — an era where they are seen as a place that satisfies a person’s desire for both mission and excellence. And the result is that great things are being done and will be done.
When it comes to for-profits, we also need to reject the idea that their work is productive but not meaningful. For-profits, also, need to affirm and tap into their employee’s sense of purpose and mission.
This is happening more and more — and, interestingly, can happen in part through partnerships with innovative non-profit initiatives. But that’s not the only way it can happen. It is possible to see the work itself as meaningful and purposeful in its own right, and then also as connected to wider purposes for the good of the world.
As a result, whether in the for-profit sector or the social sector, we can and should have both a sense of mission and an outcome of excellence in our work.
Well, time to get to Lencioni’s article. Since it doesn’t look like it’s on his website yet, I’m copying it here in full:
Mission or Performance: The False Dilemma
During a recent plane ride, I found myself sitting next to a former colleague from my first job as a management consultant. Actually, he was the leader of the consulting firm where I worked, but he’s now running a different consulting firm that focuses on non-profits.
After having the inevitable conversation about the differences between consulting to for-profits and not-for-profits (I’ll call them FPs and NFPs), a question occurred to me: why do we make such a distinction between the two? The only real distinction between them is a financial/legal one. Why is one of our primary delineations between organizations based on whether or not they pay taxes and are allowed to distribute excess capital to employees and shareholders?
Of course, anyone who has worked in or consulted to NFPs will tell you that the differences between FPs and NFPs is much greater than taxes and capital distribution — and that it involves culture, attitude, accountability, strategy and a host of other things.
And that’s the thing; I don’t know that it should. Perhaps we’ve just allowed organizations on both sides of the profit aisle to choose their own areas of mediocrity and lower standards.
So many NFPs (but not all of them) are allowed to accept lower levels of accountability and productivity and rigor around ROI than their FP counterparts. What is the rationale? Since they rely on volunteers and don’t pay as much to their staff members, they can’t expect us much.
And so many FPs (but again, not all of them) feel no need to tap into the passions and idealism of their employees, and give them a sense of mission. Why? Because their purpose is to maximize compensation for investors, and everything else is just window dressing.
Of course, this is ridiculous, and only makes sense if we see employees as either puppies or robots, incapable of simultaneously embracing two distinct motivations and outlooks. The fact is, all of us are part puppy and part robot. We want to be motivated by something meaningful, and we want ourselves, and others, to be held accountable for their performance and the value they produce.
So perhaps leaders need to stop thinking of their organizations as FPs and NFPs and start using a more meaningful and actionable criteria for categorization.
Is your organization going to be a mission-driven one (an MD), or a performance-driven one (a PD)?
Of course, the greatest leaders will choose both. They will inspire their employees around something more meaningful than simply profit, and they’ll drive them to standards of measurable performance regardless of whether or not the CFO has to pay taxes at the end of the year or how they distribute excess capital. They’ll choose to make their organizations MDPDs. Now there’s a catchy four letter acronym.