Using For-Profit Business Models to Achieve Nonprofit Success

Many of a community’s most difficult issues are addressed by nonprofit organizations. To be successful in tackling these issues, strong nonprofits design their approach to be effective and efficient. This is a hallmark of the for-profit business model, and nonprofits are increasingly looking at ways to operate their organizations using for-profit thinking. This does not mean compromising the values of the organization or its passion for mission. It does mean the organization should use sound business principles.

For profit businesses measure outcomes to determine whether they are doing the right things in the right way. Are they making money? Are they providing a return to their owners or shareholders? Are they meeting their customers’ needs? These businesses have methods and metrics in place to determine whether they are doing these things at a level necessary to sustain the financial stability of the operation.

Nonprofit organizations can and should do the same thing. And it should be done in the context of the purpose and mission of the organization. How is this accomplished? The organization will identify the outcomes it wants and how to measure their effectiveness. They will create metrics to measure their progress and success. They quantify the value of the services they are providing to the community. This is done with the input of the stakeholders. It sounds a lot like the way successful for-profit businesses operate.

Is this a quick and easy process? No, it’s not. It will involve the time and energy of many people. But organizations that have invested this time and energy have found the results to be well worth the effort.

Time for Reflection and Planning

As summer winds up, my thoughts tend to look back over the season to review where I have been and what I have done. The inevitable next step is to look forward to where I will go and what I will do. Nonprofit organizations do this (or should) on a regular basis, whether formally or informally. Sometimes it is included in a facilitated strategic planning session and sometimes it is just a discussion including management and board. The actual approach depends on the organization – where it is in its lifecycle and the environment in which it operates. Whether big or small, formal or informal, a successful evaluation and planning process will include these basic elements –

  • An assessment of where the organization has been and what it has done – In order to determine where you are going, it is important to acknowledge where you have been. How has the organization evolved, what challenges has it encountered, and very importantly, what has been accomplished?
  • A determination of where the organization is going and what it will do – In order to successfully move forward, there should be a consensus as to the direction of the organization. Will it continue on the path it is currently on, will it grow or will it contract? What is the vision?
  • A plan to accomplish the new or revised goals – The plan should include specific steps, assign accountability, and benchmarks to measure accomplishments.

There are many good approaches to this process. However, regardless of the size, style or situation of the organization, a regular and honest review of where the organization has been and done and where it is going and will do is a necessary step.