What tips can nonprofit executives take from their for-profit counterparts to better manage their organizations?
I made the transition myself to the nonprofit sector after spending 30 years in the for-profit arena. Based on my recent experiences at the American Management Association, I can say that virtually every aspect of management I’ve had during the previous three decades is applicable to the nonprofit sector.
Both for-profit and nonprofit organizations are established to achieve a goal, and while those goals may differ, the basic tenets of management apply. In terms of tips, I would offer the following:
* Pay attention to leadership
It’s important to pay particular attention to the leadership style of nonprofit organizations – leadership in all its manifestations. For one, there should be a clearly established vision and a constant focus on mission.
There’s a subtle difference between for-profits and nonprofits in that the goal for businesses is clearer and more easily evaluated. Money is the measure of input and it’s the measure of output: It comes down to a money-versus-money evaluation.
In the social sector, money is one of many inputs, but accomplishment of mission is the output. So, special attention needs to be paid to evaluating your success in that output.
Measuring results is often difficult for nonprofits, but one way or another, we’re making implicit evaluations of these results when we have any sort of evaluation of the performance of our organizations.
If you let things go on the way they are, without formal evaluation, in effect you are saying, “All is well.”
Often, even the effort to develop evaluative tools can be valuable in helping people assess the performance of their organization. If you don’t have a method for evaluating results, it’s hard to decide if you’re doing a good job.
Directing some resources toward measuring performance is money well spent.
* Pay attention to non-productive overhead
It’s important to understand how much money is devoted to accomplishing your mission and how much is devoted to institutional infrastructure, which includes accounting, fundraising and other activities that don’t necessarily go straight to programs and services.
I believe that a lot of organizations, when really pressed, can re-express some money out of infrastructure to devote to programs.
* Embrace change and foster innovation
Change can occur as frequently and as rapidly in the nonprofit world as it can in the for-profit world. In the best nonprofit organizations, people embrace change rather than shy away from it.
That requires constant attention and proactive management. Even the best managers need to be soul-searching because there’s very little in nonprofits that stays steady-state for long.
Nonprofits also need to encourage innovation. Business can be somewhat ruthless because competitors are nipping at your heels and customers are demanding new and better products.
In the nonprofit world, the environment is changing just as fast, but I’m not sure the systems are always in place to identify and measure it.
Executives at all levels need to lead and stimulate innovative thinking across the entire organization. They also need to create ways to recognize and reward innovative employees.
Given the rapidly changing world we’re in, organizational and individual skills must be current to handle change and foster innovation.
Ed Reilly is president and CEO of the American Management Association, a New York City-based nonprofit management development organization that works with about 130,000 executives from around the world each year.