Running your Nonprofit like a Business?

I cannot tell you the number of people over the course of my 20 years in nonprofits that congratulated me for running my nonprofit like a business and went on to tell me nonprofits should be run like a business. I never knew what to say. Thank you?

It seems to be one of the true disconnects that proves my often repeated phrase “where you sit always determines where you stand.” For those of us who have spent our careers in nonprofits, we hear it as an insult that implies businesses are better run, even though there is ample evidence to the contrary.

For those who were raised in the for profit sector, the comment acknowledges that some nonprofits are run by well intentioned but poorly trained leaders, and it is meant as a compliment. The compliment being that the Exec watches the bottom line and is accountable, professional and transparent.

We want, need and demand that our nonprofits be accountable, appropriate and transparent. However, we also want them to meet mission. Perhaps that’s the disconnect. Businesses have no mission.

Nonprofits have to manage the budget and meet the mission: We expect them to meet the needs of clients in an equitable manner. We insist that they spend money the way it was awarded and budgeted and when that isn’t possible, that the funder approves the change. We expect staff to be held to the same standards, and paid similar salaries for similar work. We count on our Executive Directors to be responsible to the Board and the Board to be responsible to the community.

Now that I own my own business, I can tell you that the checks and balances inherent in running a nonprofit are much more stringent than those needed to run a small business. As a business owner I can pretty much, within the bounds of the law, do whatever I want. I have no Board to report to, or to hold me accountable. It’s my company. I started it. I make the decisions and it lives or dies with me. That is the structure of a small business.

That is not the structure of a nonprofit. Nonprofits are not run by one person for a reason. The Board represents the community as the owners of the organization. The organization exists to meet a need. Businesses, which also address needs, exist to make money.

That’s the real crux of my beef with nonprofits being run like a business. When they are, the Exec leads and the Board is an after-thought; often because the Board was built that way by an Exec that wants to run the nonprofit like a business. The Exec sets the direction, and tells that Board what she or he feels they need to know, and the Board accepts that. There is a lot of rubber stamping and very little governance. In such cases, the Board only becomes engaged when there is a crisis. That was not the leader I aspired to be, and not the Board I built.

I want more from our nonprofits. I want them to meet the level of accountability our communities expect and deserve. I want them to meet their missions. I want them to have an engaged Board and innovative leadership and to move the needle of change in their community.

As always, I welcome your feedback and your experience.