No Money, No Mission: Should Nonprofits Operate Like a Business?

Should nonprofits operate like a business?

I hear it almost every day: “But we are different…” or “That could never work with our organization because…”

Five years ago as the CEO of a well-established nonprofit agency, I used those excuses when approached by one of my board members, Tim Stack, about using the Great Game of Business in my nonprofit. Tim was the General Manager of one of the SRC subsidiaries and literally grew up with the Great Game of Business. Over the next four years, he worked one-on-one with me to break down all of the misconceptions that I had about why nonprofits could not apply the same principles found in The Great Game of Business. I had a Master’s in Nonprofit Management and was never exposed to the concepts that Tim was discussing with me.

It Makes Sense in Theory, But Can It Actually Work Successfully in Practice?

I have witnessed first-hand that treating a nonprofit or public entity like a business can work, and have seen plenty more examples of how these organizations can apply Great Game of Business concepts to achieve success in both their financial and program goals. After one year of full implementation of the Great Game, my agency exceeded $1 million in revenue (a 22% increase over the previous year), expanded services by 17% while also improving quality, and was awarded 2015 Mid-Size Agency of the Year Award from more than 300 agencies nation-wide. By playing The Game, our agency became better stewards of our donors’ dollars and enhanced our sustainability to ensure our mission will continue into the future.

Although social sector organizations operate differently than private businesses, the same concepts found within the Great Game can be applied. Jim Collins points out in his book, Good to Great and the Social Sectors, that nonprofit leaders should not necessarily try to operate like a business, but instead (whether you are in the nonprofit, public or private sector) your goal is to be great!

“It dawned on me: we need a new language. The critical distinction should not be between business and social, but between good and great. We need to reject the naive imposition of the language of business on social sectors and instead jointly embrace a language of greatness.” - Jim Collins.

Nonprofits must learn that it’s okay to make money in order to make their services sustainable, and they need to differentiate themselves from other nonprofits just like great businesses do. A mission-related output is one measurement of a successful organization, however, passion for the mission cannot overcome the importance of keeping financials in balance. After all, if you have no money, you have no mission. Focusing on self-funded opportunities and sustainable streams of revenue is key, and a balance is needed between financials and keeping the mission top of mind.

Katie Davis successfully adapted open-book and business principles to her nonprofit organization as the first steps of establishing the Great Game for Social Sectors.

Find out how you can apply the Game in your organization

at our next Get in the Game workshop for Social Sectors.