Acting Like A Business

It was another thought-provoking day at Good Shepherd Housing. Being home from the office, having eaten dinner and pedaled around the neighborhood for a while my head is still processing.  And so, I write. 

“Nonprofits need to act like a business,” is the phrase I keep hearing in my head.  What does that mean when it’s said?  And, when we do employ principles and practices familiar to the business community, why does it not seem to earn very much credit or respect. 

Earlier today I attended a conference where a panelist from a major corporation voiced a candid thought that he’s heard among some in the business community.  It went something like, “if the business community has done its fair share of feeling pain and downsizing, why hasn’t the nonprofit community?”  Maybe I heard him wrong, but it was decidedly along the lines that because the business community was shrinking, so should the nonprofit community.  And, the man was great to admit that maybe we had done so and it was just an issue of nonprofit not adequately conveying to the corporate sector that we had cut and downsized.  If so, he hasn’t really seen it.

Wow.  The thought never occurred to me that we should mirror the corporate community step by step. 

Here’s why:

- as a sector, we take on market failures.  By definition we do things that a market-based approach can’t do.  If the markets could do it and turn a profit, they would.  That’s why we only see the nonprofit and governmental sectors tackling issues like homelessness, hunger and the like.  There isn’t a profit to be made there.  So, to assume that what corporations are doing is the right thing for nonprofits immediately raises my suspicion.  The things that we focus on are very different.  Don’t get me wrong, I have HUGE respect for people running private companies, but they have a clear definition of success and it is measured in financial terms - - profit.  That is decidedly tough work, but different than nonprofit work, for sure. 

- and, acting like a business includes expanding when your potential market expands, and contracting only when there isn’t the ability to raise the capital needed to operate at the same or expanded levels.  When for-profit companies want to expand, they seek capital and grown when they can get it.  This sounds familiar to nonprofits.  Conversely, as corporations are shedding jobs and downsizing, it is likely a product of slower business and less revenue.  Contrast this with human service nonprofits in the last few years.  Yes, we struggled to raise the needed capital to operate, but we also saw an explosion of people needing the service or product we produce.  To me, it seems like we should get credit for trying to operate like a business in this environment.  We are responding to the “opportunity” to housing, feed and care for more people than we’ve had as potential customers before. 

For both of these reasons, I’m thinking that we nonprofits need to do more to message what we are doing and why. We need to partner effectively with the corporate sector. They have the ability to have pronounced positive impact on our work. 

Based on what little you’ve heard so far, what am I missing?