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Everyone makes plans, whether for vacations, parties or selling iPods. In each situation, the same steps are taken. Decide exactly where you want to go; detail what it will take to get there; and decide what success should look like, so you know it when you arrive. When stripped to its essentials, the planning process is about the bottom line.
If you ask a commercial business manager the bottom line question, you might like get answers like:
- Sales are up the last three quarters
- All cost centers are meeting projections, or
- Margins are thickening
All are different ways of expressing the same thing. The bottom line relates to shareholder quality of life. Has the company's management team done everything possible, prudent and legal to increase the price of a share of stock, thereby increasing shareholder wealth? All else is supportive but secondary.
Can there be a similar bottom line mindset in the nonprofit business world? To test, ask yourself these questions for your latest fiscal year:
- Who are my shareholders
- Was shareholder quality of life increased
- What was the impact of my nonprofit business
Typically, nonprofit business managers would say there is nothing comparable to a shareholder in the nonprofit world, in that there is not one category of beneficiary. There are several and all must be satisfied. That is why the term stakeholder is prevalently used instead. In addition to the client, stakeholders include volunteers, board members, donors and even staff.
Many managers would say nonprofit business is just too intangible to be quantified. While performance cannot be demonstrated with numbers, surely client qualify of life improves, given the amount of service provided. Here, the causal link between performance and effectiveness is usually just assumed. Other managers might indicate that impact is quantifiable, having increased services from 1,000 meals a day (patient visits, hours of care, average daily census, or any process variable) to 1,800, a whopping 80 percent increase.
While both of these statements may be true, neither answers the question, "How is your bottom line?" No management team can say it has done everything possible, prudent and legal to increase stakeholder wealth.
When nonprofit agencies discuss results, as in these two imaginary conversations, no one is able to answer the question, "So what?" The marketplace does not offer an answer because it does not reward nonprofit performance to the degree necessary to sustain operations. Instead, nonprofit managers depend on independent investors. These investors deserve a decent answer to that question. Process variables such as the number of service units do not answer the "so what" question. Nonprofit managers know they offer value, but are unable to express it to others. Until the industry can communicate its true value to society, is it any wonder why the sector is under attack?
Next: What Society Really Thinks About the Nonprofit Sector
While both of these statements may be true, neither answers the question, "How is your bottom line?" No management team can say it has done everything possible, prudent and legal to increase stakeholder wealth.
When nonprofit agencies discuss results, as in these two imaginary conversations, no one is able to answer the question, "So what?" The marketplace does not offer an answer because it does not reward nonprofit performance to the degree necessary to sustain operations. Instead, nonprofit managers depend on independent investors. These investors deserve a decent answer to that question. Process variables such as the number of service units do not answer the "so what" question. Nonprofit managers know they offer value, but are unable to express it to others. Until the industry can communicate its true value to society, is it any wonder why the sector is under attack?
Next: What Society Really Thinks About the Nonprofit Sector
4 comments:
I like the point you're making here.
I think part of the challenge of comparing commercial industry to the non-profit world is that in the non-profit world you have to "prove a negative" in measuring that bottom line.
But it's much more difficult to put a value on the lack of something -- like lack of disease, lack of hunger, or lack of homelessness. Production is easy to measure and conceptually understand because you always start from a baseline of zero, but you never know what the "untreated" baseline would have been when you're trying to eliminate a condition.
When you look at for-profit industries that are focused around eliminating conditions or fixing things you find that, while the services are clearly appreciated, society does a fairly poor job of placing a dollar value on those services as well. People will go out of their way to utilize the services plumbers, exterminators and mechanics provide when they need them. But proprietors in all of those professions are often stereotyped as being opportunistic.
Maybe it's just a flaw in the human thought process that we're not very good at calculating personal risk or negative values.
Mike, I found you! Thanks for the texts this week. And, for all you and Steph are doing for Mom and Dad.
Love you!
Bo,
Another part of the problem involves just how little charitable work is valued by everyone. I've noticed that even those doing nonprofit work often are a bit hangdog when they talk about their work. They use the word "just" when they describe what they do for a living as in, "I'm just a social worker, or I just work in the nonprofit sector".
After all, it is a female dominated industry and the pay and respect this culture affords women at work are not great. Your rate of pay often speaks volumes about how well you are valued. People in business are working in the "real world" and therefore should be paid boatloads. People in the nonprofit sector aren't in the real world and shouldn't be paid that much. If they want recognition, well then, get a real job.
I believe too many people believe it is more difficult and therefore more important to build something like an iPod than it is to help a child overcome a developmental delay. This culture values the nonprofit sector only as it is able to hide the ugliness of life from the rest of us so that we can get to the real work of commerce.
More on this theme as the piece develops. More also on the spirituality of the nonprofit business, too.
Thanks for stopping by, reading, and leaving a comment. I've always benefited greatly from your wisdom.
That's a good point, and I think it goes hand in hand with how we value volunteer labor, as well. Perhaps if we put a dollar value on the opportunity cost of that labor and subtracted it from the expense side of the ledger we would come away with a strikingly different opinion of the "profit" of a non-profit business.
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