Executives and managers don’t often think of nonprofit organizations as competing in the same marketplace as profit-based companies. But even though these groups aren't out to turn a profit, they still have goals to accomplish, deadlines to meet, and people to manage--many of whom have moved from the private sector. Here are six lessons executives in the private sector can learn from their nonprofit counterparts.
Timing is everything
Successful nonprofit managers know that in a crisis, distribution and communication needs to be in place before supplies can be disbursed. The same philosophy holds true for training, supply, and production in the private sector. Anticipating and planning—whether it’s for a natural disaster, a major product release from a competitor, or your own announcement—is essential to being agile in the marketplace.
One CFO described his concern for timing with this anecdote: “The Red Cross upgraded its emergency help phone system after 9/11 with funds raised for the disaster; this rubbed donors the wrong way when it was reported in the media. So timing isn’t just about doing the right thing at the right time; executives need to be aware of the perceptions of that timing.”
Establishing (and maintaining) credibility
As nonprofits know, credibility is hard to establish and all too easy to lose. Executives need to build trust with suppliers, customers, and employees. In addition to the obvious marketing upsides, operating ethically can have a positive impact on the bottom line:
One nonprofit CFO at a financial literacy organization advised, “You want [your company] to be known for your positive qualities. When troubles do come, this may be what stands between you and financial ruin. Think of the hit that Toyota took over brakes, accelerators, and floor mats. Decades of being the safest, cheapest to maintain, and [having the] best-built cars meant the company didn’t collapse outright. Its hard-earned credibility on the quality issue bought it a second chance.”
Maintain a strong ethical standard to attract the best
Employees who work for an organization with high ethical standards, profit or nonprofit, are more likely to stay. Maintaining standards doesn't just help with retention though. Word of mouth can also open the door to a higher quality pool of talent. Not only that, it's good for business.
To give an example, certified “B Corps” (Benefit Corporations) are voluntarily meeting higher ethical standards for labor and sourcing practices to distinguish themselves in a cluttered marketplace. While the initial ramp-up costs for certification are high (up to $25,000 a year), a 2011 New York Times opinion piece found that B Corps are using the certification for old-fashioned networking: with impact for the bottom line in terms of attracting better talent, discounts from other B Corp suppliers, and customers who vote their values with their wallets.
Nothing is more expensive than “free"
The senior vice president of a major advocacy nonprofit cautioned, “Everyone thinks volunteers are great. But volunteers need training. There are labor laws—even with volunteers. They can mess up jobs, leave you in the lurch, act racist or sexist, just like a regular employee—but with less accountability.”
Remember: Volunteers must be managed, incentivized, and trained. For the private sector, this advice clearly applies to any “free labor--including internships or studentships or other kinds of relationships that look inexpensive on the outside--that may impact the bottom line through damage to credibility or public perception.
Passion enthuses nonprofits, but a good manager knows the same passion can also drive a business. The executive needs to translate this passion for their services and communicate that enthusiasm to their stakeholders. If you are truly evangelical about your products and see them as filling a genuine hole in your customers’ lives, your passion will infect and inspire those around you.
The most successful example of this kind of passion from both the for-profit and nonprofit worlds is Bill Gates, who brought his early passion for computing to millions through Microsoft and earlier business efforts, and more recently his passion for improving global health through the Gates Foundation.
Trust your employees
One senior nonprofit executive noted that employees and volunteers who feel trusted perform better. This is even truer in industry. A 2008 study in The Journal of Applied Psychology found compelling evidence that employees who feel trusted have improved customer service and sales records over employees who did not.
When does the executive know when a volunteer or employee is ready to be trusted with critical or highly sensitive work? While there are few universal best practices, there are general principles: proceeding gradually with increased responsibility, having clear goals that can be measured, and perhaps most importantly, try to build “peer trust” or “horizontal trust” between employees.
Irrespective of business size and structure, management can learn from the nonprofit world by delivering the right products at the right time; growing their businesses by carefully tending their reputation; and establishing a track record of delivering on their promises and behaving responsibly. A good manager can also learn that cultivating a trusted workforce isn’t surrendering control but a way of ensuring that you never feel the need to do everything yourself.
The businesses that last focus on more than simply doing business inexpensively: They believe in their products and services and their staff.