Non-profit Leadership – Three Lessons to Learn from Businesses©

Results in non-profits organisations have always been vague. Traditionally, to be seen as legitimate and worthy of our support, all that a non-profit had to demonstrate was its commitment to a cause. It would get rewarded (support, donations, funding from donors and governments) for what it represented, and that support was based on what it promised, rather than performance or results.

In the business sector, an organisation is rewarded based only on its performance or results it delivers in terms of profits, market share, stock prices, employment created, and similar measurable indicators which underpin the core purpose of the business. The core purpose of non-profits is often defined in terms which do not make them amenable to be broken down into success criteria. How do you measure the success of an organisation which defines its core purpose as removing poverty, or meeting the healthcare needs of the vulnerable population?

The core purpose of an organisation is to answer the question -- why does the organisation exist at all? This is different from defining goals or objectives at a particular point in time. In the non-profits, the core purpose is taken for granted by successive generation of leaders. This is partly due to the reason that the core purpose is often defined so broadly that it becomes axiomatic that the core purpose makes absolute sense, no matter what changes may have happened in the external environment. Who can question the fact that poor exist, and that they need help, or that poor people’s healthcare needs are not being met, and hence there is a need to address these?

So goes the thinking.

However, if you pause for a moment, and ask the question: what is the best way to help the poor? As the noted Economist, Milton Friedman, argued over three decades ago, the best way to help the poor is to help them become richer. If the core purpose of a non-profit was defined in this language, you could measure the performance in terms of wealth created, income raised, assets increased etc. This would also enable the organisation to define a clear and compelling vision, while simultaneously enabling it to measure and track its performance.

However, non-profits have historically shied away from such specifics, and donor and supporters (customers) are expected to take the organisations for who they are, what they represent, and what they promise, not what they deliver.

This paradigm is slowly shifting. There is increasing pressure now on non-profits to deliver and demonstrate results. Many donors have now been supporting businesses to undertake activities which were normally delivered in the past by the non-profit sector. Corporate social responsibility is breaking new ground in terms of how companies engage with society. Caring for the society and the vulnerable is no longer the preserve of the governments and the non-profits.

It is heartening to see that some of the corporate giants have moved beyond their corporate social responsibility, and started redefining the core purpose of their businesses. PepsiCo is reshaping relationships between business and society. PepsiCo is examining the health implications of its products, it’s partnership with governments and NGOs, and initiating approaches to empower the younger generation to take responsibility early in their careers. It has launched a partnership with Waste Management Inc. to create innovative public recycling kiosks offering incentives for consumers to deposit empty bottles and cans. The company has been running a competition to find the best not-for-profit organisations whose social innovations can solve significant world problems.

Procter & Gamble is another company which now defines its stated purpose as improving “the lives of the world's consumers, now and for generations to come." In 2009, the company launched a new business strategy, called "purpose-inspired growth" to "improve more lives in more places more completely." In smaller organisations, too, entrepreneurs are creating businesses that reflect their social and environmental values shaping the core purpose. Anita Roddick’s Body Shop’s involvement in activism and campaigning for environmental and social issues including involvement with Greenpeace and The Big Issue are well known. In 1990, Roddick founded Children On the Edge, a charitable organisation which helps disadvantaged children in Eastern Europe and Asia. These are a few examples. There are thousands others. As espoused by C. K. Prahalad in his widely acclaimed book ‘The Fortune at The Bottom of The Pyramid’, the business case for making poverty eradication a core business of businesses is immense.

Non-profit leaders need to demonstrate a stronger appreciation of these changes happening globally, and realise that they can not take their donors and public support for granted – mere good intentions and promises which sustained them in the past are not enough any longer. One of the reasons why the non-profit sector globally has been steeped in a static mode of thinking is the (perceived) success non-profits have had in the past. Despite not having clear measures and benchmarks to achieve, there is no denying that some of the work done by non-profits have made immense impacts on the lives of millions of people all over the world. However, future cannot be seen as an extrapolated extension of the past.

There are three critical issues non-profit leaders of today and future generations ought to grapple with, drawing lessons from the business sector:

1. Redefine the Core Purpose: Although the needs of the poor and vulnerable remain as they were in the past, organisations still need to examine the rationale for their existence and the special and specific contributions it makes. Core purpose needs re-visiting continually to make sure the organisation remains at the cutting edge of delivering what it intends to deliver.

2. Define Performance Measures and Tangible Success Indicators: It is important to realise that if your core purpose remains fudgy and vague (‘helping the poor’), the organisation will never know if and when it achieves its purpose. Clearer the core purpose, clearer the goals and objectives the organisation delivers, and the organisation knows when and how it is delivering these.

3. Know Your New Competitors: Non-profits need to know that they are no longer competing with themselves. The new businesses and enterprises are setting new benchmarks which have potential to transform the entire non-profit sector landscape for the better. These offer new opportunities for collaboration.