Mixing Business with Non-Profits?

By Martha Shenkenberg, BSN, MBA

Win Win Workplace Solutions Consultant

Mixing business with non-profits seems like a contradiction in terms. But is it?

Many people are drawn to non-profit organizations because they have a vision for service that goes beyond making money. Non-profits have a heart and compassion for people. They contribute to good and noble causes. They provide clear benefits to the people they serve and society in general. The question is, could they "do better?"

Funders and donors ask similar questions: "Is the non-profit optimizing the funds we provide? Could they be more effective with the money we give them?" The answer is almost always yes, there is room for improvement. But how can they "do better?"

The answer is non-profits can increase their donors' "bang for the buck" by integrating four sound business practices.

When non-profit organizations incorporate these practices, their services are improved, their staff is motivated, and their finances are made more secure.

Let's see what typically happens in non-profits now, and what happens when they incorporate these business practices.

Strategic Planning Provides Focus.

Many times organizations are driven by who will give them money. An opportunity for funding presents itself and the grant writer or staff goes to work. The organization chases after available dollars.

By contrast, when an organization engages in strategic planning the focus shifts to pursing the mission and vision of the organization. The strategic plan provides the roadmap for the organization. Significantly, the role of money moves from a goal to a tool. Funding opportunities are evaluated in context of the strategic plan. Only those opportunities that provide a real step towards supporting the mission are pursued. 

With appropriate strategic planning, the focus shifts from chasing available money to thoughtful planning about which funding sources to pursue.

When strategic planning is done well, it unites everyone on the mission and vision. It eliminates distractions and improves focus.

Quality Principles are Used to Improve Services and Operations.

Although non-profits have noble intentions, they often do not know how well they are serving their clients. Stories are told and evidence is anecdotal. The prevailing attitude is, "Trust me; I know I'm providing good service."

While that is true for most non-profits, questions do remain: Exactly how good are the services? Can they be improved? Incorporating quality principles is a way to measure and improve services. Quality includes setting measurable goals that are consistent with the strategic plan.

Quality involves using data to measure service performance so it can be improved. Examples include such metrics as client satisfaction rates, wait times, response times, attendance, program evaluations, and success rates. This data is shared with staff and the board.

When quality principles are incorporated, everyone knows the goals and the ongoing progress towards those goals.

Proven Marketing Techniques Promote the Organization.

Even with a good strategic plan and excellent operations, an area for improvement is often marketing. Many non-profits rely on word of mouth to bring in clients and donors. The prevailing attitude is, "Our services are great, our clients are satisfied, therefore people will come"; or "People will hear about us through word of mouth"; and last but not least, "We don't need to sell our services -- we're not a business."

Marketing is not synonymous with selling; fundamentally, marketing is intentional effort targeted to a specific group of people. With the implementation of a comprehensive marketing plan, an organization can ensure that the people who need a service, know about the service.

Such marketing is multi-faceted and can include interagency promotion, outreach, advertising, and special events.

Financial Reports are Planning Tools.

In many non-profit organizations, the executive director and CFO are the only persons concerned with finance. They always understand that having no money coming in means "going out of business."

Frequently, financial reporting is limited to the monthly overall profit and loss statements, which are duly reported to the board. There is often the feeling that next week, next month, or next year will be better and revenue projections will be realized. What's more, the staff is often completely unaware of the financial picture.

Financial reporting goes beyond the monthly P&L. It includes cash flow forecasting, service line financial analysis, direct and indirect costs, and a procedure for overhead allocations. More robust reporting provides the executive director, CFO, board, and staff a more complete understanding of how revenue and expenses are related. Decisions about what services to expand or contract can be made with full knowledge of the financial implications. Forecast reports allow for realistic planning for the future.

When financial reports are comprehensive, the current and future financial situation is well known. This allows the management team to balance current and future financial needs.

In Conclusion

By incorporating these four business principles, non-profit organizations can prove to their funders and donors that they are maximizing their "bang for the buck" while simultaneously improving services to their clients: There's a clear path to realizing the mission and vision; operations are optimized so people obtain services effectively; the people who need the service know about it; and all the financial implications, both current and future, are well understood.

To find out how to make your organization "do better," contact us at Win Win Workplace Solutions.

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