The Critical Difference Between Not-For-Profit Organizations and For-Profit Enterprises
None.
I can hear the collective indignation of many people who just read the title of this blog and the first line. Here’s the essence of the argument. Not-For-Profits (NFPs) are in the “people” business and not about making a “profit”. The missions of NFPs are always about improving the quality of life for those they serve while for-profit enterprises are about returning more and more value to the shareholder whether the organization is privately held or publicly traded. It’s simply a matter of focus – people or money.
Wow. How did we get here? People are good, money is bad? Money is good, people are bad?
That wasn't very subtle. Try this more nuanced explanation: profit-oriented organizations are based on capitalism, “greed is good”, while NFPs balance the scales by operating in a capitalist economy but instead of focusing on greed, they focus on “helping others” implied by their not-for-profit status.
After having worked on and lived on both sides of the argument, what I have learned is that the very designations that we use to talk about these two approaches to human progress encourage mediocre performance for both types of organizations, no matter their designation. On the one hand, NFPs can at best, de-emphasize, and at worst, ignore the best practices of for-profit businesses because they are about people. Profit-driven organizations can at best, de-emphasize, and at worst, ignore the best practices of taking care of people because they are about profit.
What nonsense. The best organizations are all about people AND profit (or, in the case of NFPs, extra cash to do more good). No matter whether you are for-profit or not-for-profit, take material care of people and give them belonging, affirmation, and meaning, then teach them the rules of the economic game your organization is playing and they will also take care of your clients and customers. The result is success, which will be either profit or more money to do cool stuff.
How much more effective would our organizations be if there was NO critical difference?
Michael Smith is co-founder of DecisionGrid.