Business can learn more from not- for- profits than not- for- profits can learn from business

I have long been a critic of those who argue that not-for-profit and civil society organisations should become "more businesslike" and operate more like business and remodel themselves along business and market lines. It is in my view a ludicrous and dangerous claim.

The claim reflects a naive understanding of not-for-profit  organizations and is predicated on a false assumption that not for profits are run by well intentioned amateurs who need a dose of "business thinking" to be more effective and effective. My view has always been that the reverse is in fact true.

Business and corporations would in fact benefit more from the values, principles and practices of many not-for profit and civil society organizations.

So I was interested in this piece by Debra Allcock Tyler ( Director of the UK Based Directory for Social Change) which appeared in the UK Third Sector News.

Charities are good at what they do, and business should learn from us

By Debra Allcock Taylor

Nick Hurd's recent assertion that charities should learn from businesses is the wrong way round, says our columnist.

I like and respect Nick Hurd, the Minister for Civil Society. I really do. But I find myself in the grip of an overwhelming desire to bash him over the head with a copy of the Charities Act 2006 after his recent remarks in this magazine. He said: "The sector has to open its mind to absorbing skills from the private sector because it clearly needs more business skills."

Have people forgotten the recent financial crises already? Maybe I wasn't paying attention, but I don't think it was expenditure on grants for charity bodies that brought the world's financial markets to its knees, was it? Was the banks' decision to extend credit to a sub-prime market a good business decision, or just greed? Was it good business to have the hedge funds underpinning so much of the financial economy?


It is estimated that, at the height of the financial crisis, about 95 firms in the UK were going bankrupt every day, some 20 per cent more than during the 1990s recession.

With the coalition government opening up the public services to competition and private providers to a much greater extent than any of its predecessors, one can't help but wonder if business models really are the most appropriate mechanism.

This culture of commoditising social needs - characterising our needy citizens as consumers of a public sector product - is, I think, dangerous. Vulnerable people aren't consumers. They're vulnerable people. And we are really skilled at helping them.

So why do people who don't run charities keep telling us how to do it? What precisely are these business skills that we apparently need? The ability to deliver excellent services to vulnerable people on tuppence ha'penny? The ability to convince people to give of their time and money for no other reason than it's the right thing to do?

There are probably some badly run charities, of course, but in my experience they are the exception rather than the rule.

So I have to ask, what is this constant exhortation to ape the private sector really all about? Is this just a euphemism for becoming inappropriately competitive; focusing on revenue rather than cause and becoming bigger, because that's what drives companies?

Forgive the sexism, but it's a bit of a macho paradigm, isn't it? It's the size that counts? Well, I don't think it's about how big you are or how much cash you flash. It's about being good at what you do.
Bulldog Rescue & Rehoming survives on less than £25k a year and does what it says on the tin: a wonderful job with an army of volunteers who simply care about what they do. It doesn't need to become Bulldog and Budgerigar Rescue & Rehoming.

Be open to new ideas and ways of working. But charities - I beg you, ignore those calls to be more like businesses. You're absolutely great at what you do when you remember you're charities. Frankly, I think business has more to learn from you.

Should more not-for-profits be encouraged to close down?

Interesting article in the New York Times about nonprofits that have closed or are planning to close in the next few years – not because of any financial trouble – but because they have accomplished their missions.

The New York Times emphasizes some of the benefits of agencies voluntarily closing their doors:

Executives who have closed nonprofits say a feeling of pride overcomes any potential regrets. 

“Knowing that we were going to close helped us work with extreme urgency and intensity and not slack off for a minute,” said David Douglas, a founder of Water Advocates, a charity that closed late last year. 

Over its five years, Water Advocates raised more than $100 million. Its goal was to increase awareness of water issues, as well as to pull together the efforts of a wide range of organizations. The open knowledge that Water Advocates was destined to go out of business helped it encourage greater collaboration among those various groups. 

“We weren’t trying to attract attention to ourselves, which allowed us to focus on the issue itself, and we were always looking at ways to hand off things to other nonprofit groups,” he said. “And we weren’t competing for money, which also helped us build relationships.”

As Ruth McCambridge writes in the Non-Profit Quarterly this an unusual occurrence:

"........... because a voluntary closing in a moment of strength is a fairly unusual outcome for a nonprofit. Many nonprofits institutionalize to such an extent that closing becomes virtually inconceivable."

But perhaps more NFP's should have the courage to ask the questions- is our mission still relevant and should we still exist?

Managerialism as a prevailing ideology in the not- for- profit sector

image courtesy of Steve Blizzard

This important piece by Vern Hughes, Director of the Centre for Civil Society first appeared in the Sydney Morning Herald on February 4 2011.

Australia's voluntary, charitable and community organisations have changed over the past three decades, almost beyond recognition. Such transformation of the non-profit sector has attracted little public debate.

 Many organisations that began life as voluntary associations have become corporatised instruments of government service delivery and no longer need, or even want, volunteers. Those that still have a place for volunteers are often trapped in a web of regulations and risk-management protocols that reduce volunteering to narrow, mechanistic and unsatisfying tasks.

Most found it easier to seek and obtain public contracts for their operations and to tailor their mission to the delivery of these contracts, than to rely on private fund-raising or commercial income generation.

In the process, their programs and operations came to reflect the silo structure of government, and their internal cultures mirrored the government's risk-averse culture. They became accountable, not to their clients or founders, but to their funding departments.

A generation of non-profit managers rose to ride this service-delivery train, replacing their organisations' once colourful and idiosyncratic cultures with a bland managerialism.

The result is a third sector in deep confusion, torn between its voluntary heritage and its managerialism. Most organisations with a history of more than three decades are unrecognisable from the groups that formed in church halls and around kitchen tables in a previous era.

Disability service organisations are a case in point. Most of the disability agencies now headed by chief executive officers, complete with a raft of risk-management, regulatory-compliance and brand-protection policies, were formed by parents of people with disabilities. These parents knew they needed to create, from scratch, the supports and services required by their sons and daughters.
They usually began around a kitchen table. Everyone was a volunteer. Consultants were unheard of. The only resources on tap were goodwill and a willingness to work together for no reward apart from securing something in the future for their loved ones.

Today many such parents find themselves referred to, in the annual reports of the bodies they created, as ''stakeholders'' in the welfare of their sons and daughters. They appear alongside key stakeholders such local governments, suppliers and corporate partners. Many shake their heads in disbelief at the entity they unknowingly created. ''We gave birth to a monster,'' some say.

Managerialism - in public, private and community sectors - is the prevailing ideology of our time. It has trumped entrepreneurship in the private sector, and perverted notions of service in the public sector. But in the non-profit sector it has swept all before it.

A perfect storm that threatens the future of the not-for-profit sector

Australian Greens Senator Rachel Siewert spoke some truths at the National ACOSS Conference this week, warning that the NFP sector faces a "perfect storm" of coinciding forces that threaten its future.

Whilst these threats have been acknowledged and recognised before by many in the the sector, they are becoming more urgent, and as Rachel points out, there is no evidence that any of the reform proposed by the Rudd or Gillard will address them. The threats identified by Senator Siewert were:

• The Social and Community Sector Workers pay equity case before Fair Work Australia, which has received no indication that Government will deliver a matching funding boost to services. She says everyone agrees a rise in wages is needed, but the sector is unable to support it without an increase in resources.
• The introduction of the Increased Super Guarantee provision – again with no promise there will be matching funds
• The increased cost of delivering services amidst increases in power, water, rent and insurance costs
• The struggle to find workers, a situation Senator Siewert says will only grow worse as the population ages, demands on services increase and the value of community sector wages continues to erode. She says in areas of Western Australia and Queensland, the Not for Profit sector – and in particular the aged care industry – is losing staff to the mining industry. She asks how can the sector hope to hold onto underpaid staff when they can get a job earning $80,000 as a cleaner in a mining town?

As Rachel points out Federal (and State Governments) have promised plenty, but delivered little. Indeed rather than deliver 'reform' Governments continue to impose inappropriate and contradictory funding and reporting requirements and fail to address the historically high levels of underfunding. Reform is done to the sector, rather than to inappropriate government policy, practices and processes.

She concluded with this:

“The Rudd and Gillard governments have continued to promise much needed reforms for not-for-profits and community services, but so far their much-vaunted compact with the sector has failed to deliver anything by way of practical reforms to address the crisis facing the sector".

 Very true.