A challenge to nonprofit executives and boards
I recently recalled a memory of time spent in-house as a nonprofit executive. During a meeting to discuss options regarding an anticipated operating deficit at year’s end, the leader of the team asked us to contribute our ideas about how to lessen the loss over the next several months. At that point in my career, I was comfortable leading in challenging times. Wyatt and I founded and led our company, and that experience informed my ideas on how to solve the problem. I floated several concepts, one of which that was that the executive team could offer back some of our compensation. In doing so we would protect and preserve the livelihood of the front-line workers and ensure business continuity.
My colleagues at the time did not respond to this idea with enthusiasm. Why? Apart from the obvious, nonprofit executives and boards are often trained to avoid and discourage management vocabulary and approaches that evoke for-profit practices. Yet these practices might be essential tools in the leadership of any company, regardless of its tax status. Imagine the results if these leaders embraced an ownership perspective in their decision-making!
Thinking like a shareholder could inform better decision making
What if board members and executives regularly discussed the following question. “If you were an owner of this company, how would you feel about its entire performance – mission related as well as financial and and administrative?” My experience with nonprofits of various industry verticals and sizes is that many leaders would hesitate to fully explore the topic.
It is possible that these nonprofit executives and boards are not deeply engaged in the company’s administrative performance indicators. Leaders often pursue positions as executives and governors of nonprofits because of their their passion for the mission. Therefore they tend to have high expectations in terms of setting and monitoring mission performance, but are not as demanding regarding operating performance until a crisis occurs, nor are they as prepared for growth when the organization receives a windfall. And many executive team members maintain a myopic focus on their individual departments’ goals, or lack training and experience.
I do not suggest that these leaders are not talented, committed, or competent. Nor do I suggest that nonprofit leaders focus exclusively on positive financial margin as a primary goal. I do suggest that encouraging leaders to view their roles (especially when related to both the risks presented by opportunities in times of abundance and the risks presented by challenges in times of scarcity) through an ownership lens might have good results. These results could include earlier identification and prevention of threats, improved employee retention, healthier communications and relationships, and more efficient problem solving to name a few.
As an example, nonprofit executives often ask me about under-performing employees. My question to them is, “If you were paying their salaries out of your own pocket, would you feel happy about the work they are doing?” The framing of the problem from this perspective allows the leaders to determine which employees could thrive with improved training or management versus which employees might be supported in pursuing a different direction.
“While business advertises, charity is taught to beg. While business motivates with a dollar, charity is told to motivate with guilt. While business takes chances, charity is expected to be cautious. We measure the success of businesses over the long term, but we want our gratification in charity immediately. We are taught that a return on investment should be offered for making consumer goods, but not for making a better world.” – Dan Pallotta
Check out these tools that are bedrock to corporate leaders:
- During strategic and operational planning embrace the framework, including the role of the founder, of the Harvard Business Review’s model for the Five Stages of Small Business Growth.
- Consider investment in and expectations for administrative excellence from the perspective of an “owner”.
- Encourage team members to re-examine their evaluation of performance and opportunities from an owner-inspired perspective.
Let’s make a better world by offering our nonprofits the same type of attention that we offer companies we own. Check out our blog at Clarkson Davis Arts to learn more.