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Leadership, Strategy

Serving the NPO as a Consultant

One the main differences between profit-oriented businesses and nonprofit organizations (NPO) is that the main measurable output of an NPO is related to mission, as opposed to profit. This makes the mission all the more important for non-profit organizations. Whereas the for-profit company has primarily the same inputs and outputs (money), nonprofit organizations have the same inputs, but a different output. This output is performance relative to the mission (Collins, 2005).

Considered another way, metrics of a for-profit business are outputs per unit of input. The same is true for nonprofit organizations, except this output is their non-financial mission. Nonprofit organizations must know their mission and what results they are trying to achieve. They must build metrics around this instead of the financial bottom line (Drucker, 1990, p.10-11). Jim Collins, in Good to Great, said nonprofit organizations must “be assessed relative to mission, not financial returns” (2005, p.5).

One interesting personal reflection is that even in a nonprofit organization, the inputs and outputs can be the same, but only indirectly. For example, one could consider “brand image” as an input and an output. For the nonprofit organization, a higher brand image can result in more donations. And, the output of the organization can also be brand image, which can be indirectly related to a mission of lasting endurance. However, typically, nonprofit organizations consider brand as a means to an input of donations. Furthermore, to be solely concerned about brand image as an output can be considered shallow for the nonprofit organization.

In Good to Great and the Social Sectors, Jim Collins is specific about the definition of “great” in the context of nonprofit organizations. To be “great”, an organization must deliver superior performance, have distinctive impact, and lasting endurance, where the definition of and metrics for these requirements are somewhat different in the nonprofit domain, as mentioned above (Collins, 2005).

In a recent project, creating a plan/proposal for the Newberg Downtown Coalition Business Assistance Program, one of the early goals in our work was to become more specific in the program’s goals and align performance metrics for the program accordingly. In the words of our proposal, “the project team will determine some factors that will be evaluated to assess the success of the program “. We included a monitoring and evaluation strategy in the plan deliverable as well.

Drucker calls leadership a “foul-weather job” because the leader must (Drucker, 1990):

1) anticipate crisis

2) make hard choices

3) pay attention to the weather (changes in domain)

4) encourage selection of people of character and integrity

5) balance long range and short term goal priority in the organization

Because everything is easily a “good cause”, nonprofit organizations need to be more selective and practice the discipline of “organized abandonment” (Drucker, 2009, p.11) even more rigorously than for-profit businesses.

This was evident from the beginning discussions with our clients. There were lots of opportunities to do good in this project (lots of ideas and services for the local businesses), but the project team put in the proposal a framework for making the hard choices and limiting the program to only a few initial services, one of which was already partially in place. This would allow the consulting team to make sure that the services of the program truly align with the overall mission of the Newberg Downtown Coalition and performance could be measured and monitored to keep the flywheel moving (Collins, 2005, p.23-28). The proposal allowed for the program plan to include suggested future services and define them to a lesser degree. This allowed an escape valve for creeping scope during implementation.

In the creation of the proposal, we crafted the scope of the project based on business plan material obtained from the Nonprofits Assistance Fund (2010). It was an exercise in team building to cut down the scope of this business plan deliverable to something that we could all agree was achievable in the short time frame allowed for the engagement.

Negotiation of the scope of the project required level five leadership within the team, which is defined in Good to Great as exhibiting personal humility while maintaining strong professional will to do the right thing for the organization (Collins, 2005). In this case, many of us believed the right thing was a complete, but concise, business plan that included market requirements, competitive, organization, operational, financial, and assessment aspects of the program. Some of the consulting team members were initially not accepting the rigorous requirements of the project once fully defined in the first version of the scope. But, eventually, through discussion, everyone realized that we needed to do this in order to have a good result for the client organization. We included some minor reductions in the financial sections of the proposal scope, and decided to not do much of our own primary market research; instead, we would primarily use a George Fox University undergraduate study that was currently underway as our market requirements input.

References

Collins, J. (2005). Good to great and the social sectors: Why business thinking is not the answer. San Francisco: Elements Design Group.

Drucker, P.F. (1990). Managing the nonprofit organization: Principles and practices. New York: Harper.

Nonprofits Assistance Fund. (2010). Business plans for nonprofits and social enterprise. RetrievedDecember 10, 2010 from URL: http://www.nonprofitsassistancefund.org/pages/Resources_Businessplan.

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