The Entrepreneurial Nonprofit
Updated: Apr 8, 2019
Most people don’t typically associate “entrepreneurial” with nonprofit. They’re oxymoronic terms - seemingly contradictory and counter-intuitive. As someone who has worked with numerous nonprofits and social sector organizations, I want to challenge the commonly held notion that “entrepreneurial” doesn’t fit the nonprofit and social sector contexts. I am prepared to defend rather vigorously that without entrepreneurial thinking and effective business tools, nonprofits and social sector agencies will find themselves in organizational cardiac arrest. Many currently find themselves in a life and death struggle for survival well on their way to organizational cardiac arrest. Their typical treatment regimen is to do what they’ve always done and tweak it a little bit! But what they’ve always done worked in the world of the past. The world of the present isn’t like the world of the past and the world of tomorrow is going to be different than the world of the present and the past! However, all is not lost! There is hope. But it will require a significant paradigm shift on the part of executive leaders and board members if the approaching apocalypse is to be averted.
Typically nonprofit and social sector organizations hire executive leadership team members who are passionate about the cause. They are in most cases good people. However, they often lack the business acumen required for a similar position in the for profit world. They work hard and do their best with the skill set they possess but the organization is often stunted in terms of its growth and development. They approach their work with an almost militant “we’re not a business!” mentality. Meanwhile hundreds of thousands of dollars flow through the organization’s bank account. And they do what they’ve always done.
In my work with nonprofits I have observed another factor which exacerbates the problem. Typically nonprofit boards are comprised of competent business people who are oftentimes entrepreneurial in their vocational pursuits. What I have found shocking is that most often these competent business leaders fail to bring that component of their leadership skill set to the nonprofit board room. If this was an occasional occurrence it would be shocking enough but in my experience it is the norm not the exception. These board members tolerate and condone practises in the nonprofit that would be completely unacceptable in their for profit vocation. Their failure to bring their business perspective further stunts the organization’s effectiveness and impact.
if they began to think more entrepreneurially? What if they began to recognize that employing solid business principles wasn’t fundamentally opposed to accomplishing their mission to bring about social change and do good in the world? What if they began to measure outcomes, not just expenditures? Measuring expenditures is important and it seems that the acceptable benchmark for expenditures is 10% of revenue. Is that a legitimate benchmark or even the best benchmark? Is that laudable if the organization has no tangible, measurable outcomes or if the organization isn’t even tracking outcomes?
Many nonprofits have not even quantified the desired outcomes for the programs and services they deliver which further complicates the benchmarking process. What if expenditures were 20% of revenue and that doubled the program/service outcomes? What if nonprofits hired the most competent person to lead the organization and paid them a wage more in line with what they could earn in the private sector? And what if that person could help the organization think strategically, develop a plan that was entrepreneurial and forward thinking, build a strong team of paid staff and volunteers that executed on that plan which resulted in significantly increased impact in the community? Might that not be a better approach?
The Call to Entrepreneurial Action
There is another way but it requires proactive, courageous, and entrepreneurial leadership. It requires a paradigm shift on the part of nonprofit boards, executive leadership teams and funding partners. Although some might be offended at the mere suggestion, the old way is broken and in need of significant retooling. Government funding is decreasing, the current donor base is aging, few nonprofits are engaged int the important work of strategic thinking, developing and executing on a plan based on that strategic thinking. Few have a clear, proactive plan to connect with the next generation of volunteers and donors.
Questions for Consideration
If you’re a nonprofit executive leader or board member, here are some questions to consider:
What does your organization need to keep doing, stop doing, start doing?
Beyond doing what you’ve always done, what is your plan for innovating what you do and how you do it?
Do you have the best people in each of the key positions within the organization?
What tangible difference would if make if you did?
Do you track just expenditures or do you have identified, measurable program outcomes that you track and measure?
If nothing changes, where will your organization be at in 3-5 years? Better off? Worse off?
Many nonprofits make a significant impact in doing good in the world. With a healthy dose of entrepreneurial thinking, that impact could be increased exponentially! In subsequent posts I’ll outline more ways entrepreneurial thinking can increase your organization’s impact.