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The topics discussed here grow out of the bread-and-butter issues that confront my consulting and software clients on a daily basis. We'll talk about prosaic stuff like Membership Management, Meetings and Events Management and Fundraising, broader ideas like security and software project management, and the social, cultural, and organizational issues that impact IT decision-making.

Monday, April 30, 2007

Efficiency in non-profit operations

There's been some discussion on the boards recently about paradigms of non-profit management that gets phrased "Should a non-profit be run like a business?" It's a funny phrasing. There are well-run businesses and poorly run businesses. Honestly run businesses and criminally run businesses. I'm not sure what it means to be run like a business -- but it's clear that question is asking something about to what extent fiscal considerations should govern non-profit operations.

So lets begin by asking, "how high are such considerations currently on the agenda of the non-profit leader?" I'm glad you asked. The answer is, right at the top. In a study I've quoted before, the consulting firm Accenture surveyed more than 200 non-profit executives. When asked what the top five issues were that they confronted in managing their organization, the execs listed:
  • Expanding the current donor base
  • Recruiting high-impact board members
  • Increasing donations from current donors
  • Attracting and retaining skilled staff
  • Increasing donor loyalty and retention
In other words, increasing revenue and retaining staff - issues that would certainly be high on the on the agenda of any small business owner as well. So you could say these non-profits are already being run like businesses. But maybe they could be run better. What the execs did not list were ways to increase the use they got out of their existing resources by increasing operational efficiency. The study recommended the following approaches:
  1. Make better use of technology.
  2. Overcome inherent limitations in headcount by more effectively organizing and managing volunteers as an extension of paid staff.
  3. Explore and adopt new collaborative business models with complementary organizations.
  4. Convince corporate and private-sector donors to fund general operations instead of “signature” or “vanity” programs.
  5. Adopt appropriate metrics that enable organizations to evaluate the success and impact of their delivery of services and programs.
  6. Engage board members to ensure quality governance structures.
All of these in effect are efforts to allow more of the existing financial and human resources to flow directly into mission by lowering administrative costs, eliminating procedural barriers, and tapping underutilized organizational and community assets. If this is taken as a definition of efficiency, I think it's something both businesses and non-profits could use more of. I know mine could.
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Comments on "Efficiency in non-profit operations"


Anonymous Anonymous said ... (May 1, 2007 at 5:11 AM) : 

I couldn't agree with you more. And I'll add that aligning an organization's "human systems" (people, processes and tools) with organizatiional mission will lead to greater effectiveness!

Lisa McGrath
Apex Digital Systems


Blogger said ... (May 22, 2007 at 10:10 AM) : 

Excellent and thoughtful post. Perhaps this belongs under tracking, but in addition to measuring results, a nonprofit should reward results. Programs with poor results (including marketing efforts, which most nonprofits don't measure), should be scrapped. Staff who achieve strong results should be rewarded. At my nonprofit, we're paid according to what we achieve. I think that's quite rare in the sector, but it is an effective approach for us. Thanks for digging into this question with the depth you have, it's important.


Blogger Linda Rogers said ... (June 5, 2007 at 6:17 AM) : 

In the arts when a Board Member says, "we should run this place more like a business" they usually mean that we should assure that we turn a profit. Of course the business plan for various arts (I work in music) has included a formula for the ratio of "earned income" to "other income" that has proven to be workable for many years--in some cases centuries. It often comes as a surprise to Board Members--and indeed some never get it--that you can run an arts organization in a very "business-like" manner but there is no chance of actually funding all of your costs from ticket sales alone.


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