The Business of Maximising Philanthropic Impact

It is often said that non-profits should mine the business sector for lessons that can be applied to their work. This is based on a general assumption that the for-profit sector is generally more strategic, efficient and effective at getting things done.

There is some truth to that. Many of the world’s most successful organisations have been ultimately – though not exclusively – driven by profit. However, anybody that’s worked on both sides of the non-profit and for-profit divide will tell you that neither sector has a monopoly on best practice.

So why is this assumption so pervasive? How has the for-profit sector cultivated such a powerful reputation for efficiency? In many cases it comes down to a difference in attitude, rather than aptitude, that is evident in the following four principles:

Goals Must Be Defined and Measurable

In most cases the primary goals of a for-profit business are clearly understood by its board, employees, customers and other stakeholders. There might be disagreement over strategy, but there is rarely any doubt about the importance of profit and sustainability to the business.

The goals of a non-profit entity are often more open to interpretation. Stakeholders might agree on the need to generate impact, but have different definitions of the right kind of impact and the right amount. Non-profits must tackle this issue head on by clearly defining the objectives they are working towards and how they intend to measure their impact.

You Can’t Please Everybody

It is generally accepted that for-profit directors and CEOs have a fiduciary duty to make difficult decisions in the long-term interests of their business. Though not always liked, business leaders prepared to make tough decisions are often respected.

Historically, this has not been the prevailing attitude in the non-profit sector, where in the absence of an immediate crisis, difficult decisions are often deferred. That’s why measurement alone is not enough. Non-profit leaders must be authorised and prepared to make timely, decisive and potentially unpopular calls when they are necessary to improve the long-term impact and sustainability of their organisations.

Collaboration and Competition Can Coexist

There are further lessons for non-profits in the ways that for-profit businesses regularly collaborate with other companies both within and across industry lines. In many sectors, major competitors will sometimes work together to deliver complex projects that require a particular combination of technical capabilities and expertise.

Non-profits should be far more open to working with each other and more transparent about it when they do. Partnering with others and sharing your experiences can amplify the impact of the sector as a whole, and help prevent individual organisations from repeating the mistakes of others.

Frugality Is Not A Strategy

Few for-profit companies would boast to the media and other stakeholders about how little they were spending on management, marketing and R&D. What matters more is how astutely those funds are being invested and how likely they are to produce a return.

Unfortunately, non-profits seem to be held to a different standard. That’s why rather than talking up the investments that they are making in talent and technology, many have become paranoid about appearing to spend too much money on overhead, staff and marketing costs.

This is an understandable emotional reaction, but one that that is not conducive to generating long-term impact as an organisation. Although it is obviously important to keep an eye on costs, non-profits need to be less apologetic when making sensible investments designed to improve their in-house capabilities and expand their overall potential impact on the ground.

Conclusion

Ultimately, there is nothing about for-profit entities that makes them uniquely capable of adopting an attitude of accountability. It just happens to be what is expected of them. What all organisations share – regardless of what drives them – is a fundamental need to determine where they are heading, how they intend to get there, and what signposts they will use to mark their progress along the way.

As published on Philanthropreneurship Forum (14 December 2016)