So I started this LinkedIn discussion in a philanthropy group a week or so back and posed this simple question:
“Corporate and nonprofit management are very different. There are lessons to share. Wanna share?”
Well, share they did. 47 comments and counting. Evolving into a discussion of how nonprofits and for-profits differ. Or don’t.
The comments were smart and thoughtful. Very much so.
But amazingly to me, the general feeling was that there really isn’t much difference at all!
“Similarities outweigh the differences.”
“They are so much alike that it’s easier to just list the few areas where they’re different.”
A good many were focused on metrics and “the bottom line.” I think the one that really stood out for me was, “For nonprofits, the purpose is to efficiently distribute the profits that others have generated and entrusted to the nonprofit.”
I ran a nonprofit for eight years and not once would I have described the purpose of my endeavor in this way.
Clearly we’re looking at this differently. And Mark Zuckerberg (the founder of Facebook) has something to teach us here as well.
WHAT MATTERS TO BOTH
- They are well managed and fiscally healthy
- Each department has clear plans and goals and is held accountable to them
- They can articulate clear results to donors / investors
- They are willing to take some risks, try something new
- It’s a clear priority to make the very best hires and not hire the best of a mediocre lot in the interest of expediency
- Employees are treated with real respect
- Performance (# of meals served, # of clients who utilize services) grows as the revenue does
So this is what I brought from corporate America to the nonprofit sector when I made the leap. It served my organization well.
But I learned quickly that there were also substantive differences. And these differences are critical and were largely missed in the LinkedIn group.
WHERE NONPROFIT MANAGEMENT IS DIFFERENT
- Nonprofits are messy: By design
- Mission Passion: If the Executive Director or a critical mass of your staff do not have an overwhelming personal drive to fulfill your organization’s mission, you can’t succeed. Unlike, say, my career at Showtime. I loved working there but I had no passion for either boxing or Don King Productions (note: Mr. King appears in paragraph 3.)
- Urgency: In the for-profit world, of course decisions matter. In the nonprofit sector, on a scale of 1 to 10, every decision feels like a 10 on the urgency scale. This leads to a different pace, a different energy, and demands different management skills.
- 3 dimensional management: I wrote about this before, but the bottom line? If people come to work for something other than a paycheck, you better ask them how their weekend was. And you should know the names of their spouses and kids. It matters.]
- Some difficulty in measuring results: This is especially true with policy and advocacy organizations. Less so with direct service. This business of metrics can be a tricky one for some nonprofits. Doesn’t let you off the hook but demands thought, attention, and five star storytelling.
- Value of Volunteers: Sometimes you can’t live with them but you sure can’t live without them. Corporate interns have different incentives than nonprofit volunteers.
- Value of leadership: You can still hit your projected EBITDA (I learned this big girl word in corporate America) and have a CEO who is not a good public speaker, who is not someone people are inclined to “follow.” But as a wise woman commented on LinkedIn, in the nonprofit world, “management is ministry.” Has a nice ring to it.
WHAT DOES MARK ZUCKERBERG HAVE TO DO WITH ANY OF THIS?
There’s a for-profit environment that closely mirrors nonprofit work.
Have a look at my list above and you’ll see how easily those attributes apply to start-ups. A compelling vision, typically of a charismatic entrepreneur. Funding, but not enough. Urgency to make headway so that more funds can be raised and that your product can get to market ahead of any competition. Staff working crazy hours.
So Mark Zuckerberg. Sure he’s made billions. But he has a vision. “To make the world more open and connected.” Now that is a mission to rally behind, to feel passionate about, to work until all hours to fulfill.
So, last piece of advice. If you are considering a move from for-profit to nonprofit management, some start-up experience on your resume will help to ensure a smoother transition.
You will bring both badly needed management skills and you will have had the experience of living in a similar professional land. Could be mighty useful. For the organization and for you.
NOW DON’T FORGET…
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35 thoughts on “The Difference Between Corporate and Nonprofit Management”
Wow! I don’t even know you, but I liked you from the moment I read, “Nonprofits are messy.” Man, I wish more people would acknowledge that. I write for a rescue mission, and I hate trying to boil down “life transformation” into a few pertinent metrics. I also hate pretending that the metrics always trend in an upward direction. These are people’s lives – people who have been damaged, damaged others and damaged themselves. Change is messy, and only so much can be measured. Not that we shouldn’t try, but we’ve got to acknowledge that the whole business is a process – a messy, messy process.
Thanks for the kind words Barbara and for stumbling onto my blog. Hope you will subscribe – I write weekly — you might find other pieces I write that resonate for you. I guess the one caveat is that we can let the messy design of nonprofits let us off the hook. We need to strive to hold our staff accountable to deliver results that continue to sustain donor engagement. Keep up the good and messy work you do at the rescue mission.
Joan, you have hit upon what may possibly be the crux of my doctoral research. I have a passion for groups, leadership, and nonprofits and my PhD where I have chosen to ask about the nexus of all these things is in a marvelous field of Sustainability Education. In my research I am asking, can our internal organizational culture reflect the same sort of values our mission and vision statements reveal? To me, this is key to organizational sustainability, which goes far beyond either the fiscal- or environmental-impact understandings of sustainability.
I really appreciate the comparison and acknowledgement of difference between for-profit and nonprofit. I wonder how you think this topic affects board leadership and governance issues. How well do boards, who have the very valuable for-profit perspective represented, understand these similarities and differences? How can we develop in our nonprofit management an early understanding that running nonprofits is not just “business as usual”? And to develop a leadership culture in the nonprofit field that is respected for its ability to manage-by-design amidst these wonderfully messy places?
Thank you for carrying over this discussion.
Kierstyn. I’m fascinated about this idea called sustainability education. I have a client working on something that sounds like it could be similar. These similarities and differences are very much (to use your phrase) at the crux of the relationships between boards and staffs. Would love to talk more.
Sustainability education: a bit of what are we learning and a lot more about how are we learning; relevant in public education, higher ed, outdoor ed, professional development, workshops, on and on – anywhere people are learning (which is everywhere, of course); and very intentional in ingraining a systemic understanding in just about everything. That’s my nutshell!
It is refreshing to read this perspective and the thoughtful comments left in response. There are parallels for both nonprofit and for profit, and being able to successfully deliver the mission and change that everyone wants requires some basic business-sustainability fundamentals and practices.
Just how that can be done is the challenge. Metrics alone are not the answer and if one more person describes their organization to me as ‘mission-driven’ I might lose my mind.When I ask what that actually means, more often than not I get the blank stare.
I definitely agree with your comment on “mission driven.” I just heard a staff member tell someone: “yes, they are a for-profit, but they are mission driven.” Most for-profits have a mission as well, so that is why it is so important to let constituents know what we do, and not just say this program is “mission driven” everyone has a mission. We need to show a need, which brings me to a question I have been struggling with lately on this subject… For-Profits have stakeholders, but would they necessarily be as invested as a major gift donor? This is something that I keep bringing up to a board member who believes there is no difference between for-profit and non-profit. I tried to explain just how much thought goes into change, around what the community thinks, where as a For-Profit, can just make those decisions based on revenue brought in… Non-profits could make more revenue on one project that one person has an idea for, but if the other 99% percent don’t agree it aligns with the vision and (sorry to say) the mission of the organization, then what happens? I have worked in both sectors and definitely feel that it is way more “messy.” Thank you for your blog, I stumbled upon it last week and subscribed to the email immediately, I feel everything I have read from you thus far is spot on!
You’ve given me yet another interesting topic to learn more about. Thanks again for your comments!
Clauren. Please don’t lose your mind. I’m sure you are doing good work and your organization needs you to be in your right mind 🙂 What you have described is this wonderful “mess” that is nonprofit. Balancing drive and passion with tangible results is tough stuff.
Renee. Very glad that you have stumbled upon my writing. And it is these very issues that propel me to write. And that propelled me to target INSTITUTIONAL leadership as my audience — both board and staff leadership. There needs to be a greater connection and understanding between the two and the experiences brought to the table. Hope you’ll keep reading and keep commenting.
I appreciate what you have written about the similarities and differences between for-profits and non-profits and was shocked to think that some do not see these differences. However, your last comment “you will bring badly needed management skills” made me pause. This would leave a reader to assume that all non-profits are badly managed, which is not the case at all. Some are, some aren’t, just like businesses. Can you clarify the intent of your comment?
I do think that another way non-profits and businesses differ is the execution of a business plan or strategic plan. I should clarify to say that many non-profits don’t have a strategic plan, let alone a strategic fund development plan. As far as I can tell, for-profits must have a business plan to make the case for angel investing, to show profits to board members, and to better predict gains and losses for the future. Non-profits can learn something from this.
I’ve worked for non-profits for over 20 years – nearly all advocacy groups. The first thing I ask when I come on board is “where is your strategic plan?” Many answer with “well we wrote one five years ago” or “we don’t know what the legislature has in store for the next year/2 years/3 years, so we don’t have one. We like to be able to respond quickly.”
Pshaw I say. As the Cheshire Cat said to Alice: “If you don’t know where you are going, any road will do.”
Non-profits can do well to imitate for-profits by not only writing a 3 – 5 year strategic plan, but understanding that plan is a living, breathing document. Once written, that is your road map to achieve the mission/vision of the organization and should be re-evaluated at the end of each year to ensure there is no need for modifications of the long term plan (that would require evaluation by the way).
And, once written, it is then far easier to write a annual operations plan that is built on that long-term vision. The long-term strategy is fundamental to a development department because it allows us to do the best possible job we can. We don’t ever want to be in the position of raising money in the same year we spend it (although we’ve all done that), and if we don’t know what the long term programmatic goals are, we’ve got nothing to “sell” to potential donors.
Thanks for opening up this dialogue! It’s a good one!
One of the biggest differences I’ve experienced between nonprofit management and for profit, corporate management revolves around risk. Some of my board that work in the corporate world are very aggressive about taking risks and pushing me to take more risks in how I manage my organization. The problem is, if the risks I take don’t pan out, I don’t have the resources or staff capacity to absorb the potential failure associated with those risks. My board members, on the other hand, work in corporate contexts where there are resources available to absorb the failure, or at the very least, mitigate them.
In graduate school (majoring in social work admin/similar to nonprofit admin) we studied a lot of business admin books and theory. I use a lot of it today as an Executive Director at a nonprofit. I have also used a lot of business strategies from the business sector and adapted them to the nonprofit world.
We have so much to learn from each other.
Douglas. Such a good point. Nonprofit staff leaders need to be given the chance to innovate on behalf of their clients. This comes with a certain amount of risk. And the corporate board members’ risk tolerance needs to be balanced with other board members with life experience and prior nonprofit experience.
Jennifer. I am not sure how I missed responding to such a smart and insightful set of comments. I am a firm believer in strategic planning – this is what I did in the corporate world and so I understand how critical it is. As for management skills in nonprofit, I hope it was not read that I feel that all nonprofits are badly managed. I said that corporate folks bring badly needed management skills to increase the effectiveness of how nonprofits operate. And I see in the hundreds of clients I’ve had through the years that basic management techniques are often not as strong as they could be.
I have been leading non-profits for years and I try to tell people that in the profit world if the pink widget isn’t selling, you change the color or design. For non-profits the guests/clients that come for help can’t be changed – you must help each one no matter of color or design and economy changes how many come.
Is it easier to transition from non-profit management to for-profit or the other way around?
I think that there are two primary differences between a non-profit and for-profit business in the big picture. For the non-profit: 1) the bottom line is service, not money; and 2) any non-profit has responsibilities to the community at large, not just its board or owners. These two things create a much more dispersed source of authority and responsibility; decisions are almost always multifaceted. The institution might responsibly choose not to do something that might be best for the business in the short term, because it is bad for the community (which will be bad for the non-profit in the long-term). Non-profit EDs have been accused of being “squishy,” or “not ambitious enough” when in fact their deliberation reflects the complexity of our environment.
Cathy. I think that is an interesting analogy. Has it worked for you? Do you hire folks from the for-profit sector? When does it work out well?
Dana. I’ll answer your question this way. When I moved from corporate to nonprofit, I assumed I would do it for a while and then return. Maybe 3 months in, I realized there was no going back. To get paid to do something that really made a difference? Regardless of how exasperating it could be. I was not likely to find that in any corporate environment . Would welcome thoughts from other members of the tribe here!
Ruth. Beautifully said. I just gave a keynote speech at a conference of nonprofit staff and board leaders here in NJ and spoke of this very thing. In order to be a great nonprofit leader, you have to drop the image of hierarchy. You must recognize that your power comes from all around you. Doesn’t mean you can’t be a decision maker; I would argue it makes you a more inclusive, well informed decision maker.
I would love to know the answer to this as well…
Douglas. I actually find somewhat the opposite at my organization. My board consists of members from large for profit organizations. There is a ton of time spent planning and having all of the information, data points, and potential outcomes and pitfalls in place before green lighting a project. I find it a challenge as my environment (performing arts) doesn’t have the resources to generate that information nor the time to plan to the extent they are used to with huge teams. We are much more like a start up, having to make some snap decisions on gut trust, limited info, and then to learn, adjust, and adapt. That model makes some on my board uncomfortable about decisions I’m making which can lead to feelings of micromanagement, which we know is never good.
I disagree with most of the premise that For-Profit and Not-For-Profit organizations are fundamentally or organizationally different. There is a fundamental difference in the focus or purpose of different types of organizations, but how they operate is fundamentally the same in regard to success or lack of success. I have been involved with businesses that were organizational messes and non-profits and charities that were very focused, effective and accountable. Businesses are more affected by the competition factor, if they are not effective, they are replaced by a business that is. This does happen in the not-for-profits and charities but to a much lesser degree. The lack of a competition factor can be a not-for-profits undoing though. Competition is a type of accountability, not the best type of accountability, but a harsh law of the jungle type of external accountability.
Internal accountability is much more effective to ensure sustainability. In order to have good internal accountability an organization must define fundamentals to measure performance against. Most non-for-profits do this poorly. Most for-profits do this poorly as well but most of those fail. If you compare failed businesses to the messy governance in many not-for-profits you would find much of the same dysfunctionality. Many not-for-profits are bailed out of the impacts of their dysfunctional governance on an ongoing basis.
You see much of the same poor governance in for-profit organizations that are protected from competition. They are not worried about being replaced, so they can become lazy. If a for-profit organization becomes lazy about focus and accountability, effectiveness deteriorates. Incompetence and corruption will find opportunities to make mistakes and self serve. If any organization, whether for-profit or not-for-profit, is to avoid the incompetence and corruption of lazy governance they must commit to being Focused, Effective & Accountable with all the work that requires.
Kanada2. So here’s my thought. The difference should NOT be so great. If the for-profit section managed folks around job satisaction, professional development and helped build esprit de corps around the ‘mission’ of the work, you would see higher retention rates and higher job satisfaction. My biggest point here is that when $$ can’t be the sole driver, you must look at your employee in a 3 dimensional fashion. For profit managers do not believe they NEED to do that because they often believe that the payoff of work is “cash and prizes.”
For profit managers that believe they can rely on cash and prizes lose key employees, just like not-for-profit organizations do. Some not-for-profit organizations are actually better than many for-profits in optimizing and engaging staff. I know very well paid people in both for-profit and not-for-profit that hate their jobs and employers. I know people who are not as well paid in both for-profit and not-for-profit who are totally loyal to their companies and managers. It is not a difference in organizational type, it is a difference in both competence and understanding by upper management, and usually board of directors as well, of what it takes to engage staff. Staff need to be engaged and feel valued, part of that is pay level, a lot more of that is feeling you are making a difference and you are valued for that difference.
Kanada2. Good points all. One last point. While nonprofits should not engage in the comparison, potential candidates from the for-profit sector WILL as they have no other frame of reference. Thus my interest in covering the topic. Really appreciate your thoughtful feedback.
Great question. Check out Jim Collins’ monograph “Good to Great and the Social Sectors.” He addresses the diffuse power structure within a nonprofit and why that sometimes contributes to a rocky transition from the for-profit/corporate sector. In short, nonprofit leaders are more likely to have to influence people over whom they don’t have direct power in order to achieve results, rather than merely making an executive decision and expecting others to follow. In nonprofits, multiple constituencies, such as boards of directors, staff, volunteers, and the community, all have power to help drive change or to prevent it from happening. To be effective, Collins said, nonprofit leaders need both executive skills, the exercise of direct power, and legislative skills, the ability to influence people through motivation and persuasion—the latter being more nuanced and more difficult to learn.
In my work with many start-up and young/emerging nonprofits, particularly with entrepreneurs looking to make the transition from the for-profit/corporate sectors to the nonprofit sector, this is a real struggle. Doing the business of nonprofit effectively isn’t rocket science, right, but it also isn’t intuitive. It’s a learned skill. I find that leaders with an appreciation for that fact (humility), have a smoother transition than those that do not.
A corporate lawyer once said to me, “When you manage by consensus, you are at the mercy of the person with the least interest in what you’re doing.” In the corporate world, whoever has 50% of the shares + 1 gets their way.
In the nonprofit world, if the split is even 60/40 or 70/30, it’s a disaster because you could lose 30 – 40 percent of your support. It takes longer to build consensus in the nonprofit world, but the advantage is that you move forward together.
This topic comes up from time to time in the organization where I work, which has a history in service to military retirees. On our board there are many retired military officers. As a result military culture is also infused into the organization. It makes for an interesting blend. I agree with how your lay out the differences and similarities of nonprofits and for profits. I have always used the analogy that they are like humans and chimps. They are 98.6% the same, but the differences matter.
There are pros and cons to consensus building to be sure – – just ask any head of a Quaker school 🙂 I see nonprofits as a delicate balance – north of complete consensus and far south of top down decision making.
The differences matter. Laughing at the ‘humans / chimps’ analogy. I’ll be thinking about that all day today. Thanks!
And, if you sell more keyboards, for example, you earn more money.
If you serve more clients, dig deeper, and/or spend more hours with clients, there is most often no increase in funding.
There is a link and similarity between non-profits and a small for-profit business – and that’s passion and advocacy. For both – passion is in the driver’s seat and advocacy is the co-pilot. It takes passion to plant the seed and advocacy to grow.