Mission-Based Management

Leading Your Not-for-Profit In the 21st Century

Peter C. Brinckerhoff

• Verlag: Wiley
• Jahr: 2009
• ISBN:
  9780470553954
• Auflage: 3
• Thema: Business
• Thema: Nonprofit Organizations & Charities

The only nonprofit management book you must have-in an exciting new edition

As a nonprofit manager, you have to be more effective and more efficient than ever to win funding and support to ensure your organization pursues its mission, meets community needs, and maintains its budget, while juggling the demands of funders, clientele, boards, staff, and community. This Third Edition of Mission-Based Management provides comprehensive, hands-on guidance that addresses your unique concerns as a nonprofit manager and policy-maker

• Addresses the effects of SOX, organizational transparency, new technologies, technology planning, and marketing in today's environment
• Is written by a nationally recognized expert who has trained thousands of nonprofit managers in hundreds of seminars on the best practices in nonprofit management
• Includes in each chapter a recap and a list of questions for group discussion

More than ever before, as a nonprofit manager, you want and need practical guidance on how to do your job and run your organization more effectively and efficiently. And more than ever before, Mission-Based Management, Third Edition provides the definitive answer.

CHAPTER 1

Introduction

Welcome. This book is intended for you, the leadership of our nation’s nonprofit charitable organizations. It is designed to give you a different insight into how top-quality nonprofits really run, what works, what does not, and how to ensure that your organization is one of the ones that works, both this year and throughout the twenty-first century. It is intended to help you become a mission-based manager.

In this introductory chapter we’ll review the core philosophies on which I have based the book, examine the reasons that I feel the book is needed, and then take the first look at what the book holds and the best ways for you as a reader and a management practitioner to use it. By the end of the chapter, you should have a better understanding of my philosophical perspective and also be ready to get the most from the book as a whole.

Three Core Philosophies

Before you continue, you need to know that the material in this book is based on three philosophies. These philosophies have been the core of my consulting, training, and writing since 1982, and they express better than anything I have seen my beliefs about what your organization is and what it can become.

First: Nonprofits Are Businesses

Your organization is a mission-based business, in the business of doing mission. For-profits chase profits—nonprofits pursue their mission. But just because you are not primarily motivated by profit does not give you a license to be sloppy or to ignore a good idea simply because it was initially developed for the for-profit sector. Let’s take another minute to examine this because it is really important to what you are going to read in the rest of the book.

In the past decade many nonprofits made the decision to stop being a charity and start being a mission-based business. What’s the difference? In both cases, the stewards of the organization (paid staff or governing and nongoverning volunteers) are responsible for getting the most high-quality mission they can out the door using all the resources available. The difference lies in how a charity and how a mission-based business view their resources.

A charity views its resources as a combination of four things: people, money, buildings, and equipment. If you think about it, your organization has some combination of these four things, too. The charity uses these four resources to provide mission, and when the resources are used up, mission stops.

A mission-based business also has the same combination of four resources: people, money, buildings, and equipment. But it looks beyond just those four and also considers business tools in performing mission. Thus, it utilizes the techniques that business has spent literally billions of dollars and thousands of person-years honing and it turns them to mission. What is the result? Good marketing becomes good mission; good human resources (HR) becomes good mission; good inventory management, good cash flow management, good business planning, all of these become good and better mission. More high-quality mission out the door. And, if this is done right—and here is the key—the other four resources last longer.

This philosophy is certainly not as shocking to most readers (or perhaps even a new idea) as it was when I wrote the first edition of Mission-Based Management in 1992. Only eight years earlier, in 1984, I had told a national audience that nonprofits needed to become more businesslike in their pursuit of mission, and I was not only booed, people actually threw things at the stage. We’ve come a long way since then.

But there are still people who are uncomfortable with the idea of using business skills in nonprofits. They worry that if we act too much like a business, we’ll become a business and lose our mission focus. I agree—mission is always first. Always. But if we don’t use these business tools, we won’t do as much mission as we could. It’s a balancing act: Stay on the mission track but use the best tools of business when they are appropriate.

A story may illustrate this issue best. In 2006, I was presenting for a full day on Mission-Based Management to a group of board members and CEO/executive directors from about two hundred nonprofits in California. I had given the content of this chapter and Chapter 3 in my first segment of the morning and, at the break, a man approached me to tell me he was really uncomfortable with the idea of using business tools in nonprofits. I learned that he was the board president of a homeless shelter and, in his other life, the president of a local bank. In fact, I found out later that he had an MBA from Stanford as well as an undergraduate degree from Harvard—a smart, highly educated businessman. But he was really hung up on the concept of, in his words, “using business tools in nonprofits. We’re better than that.”

I told him that he should never do things in his nonprofit that made him uncomfortable, but that I’d like him to answer three questions. He agreed.

First question: “Do you have and use telephones in your homeless shelter?” He said they did, but looked confused. Second question: “Do you have and use a copier at the shelter?” Again, his answer was a yes, combined with a furrowed brow. Third question: “Do you have and use computers?” A look of understanding came over his face. “Got it,” he said. “Okay. Okay, got it.”

You see, telephones and copiers and computers were invented first for business, not for nonprofits. They were business tools first. And telephones, copiers, and computers can be used for bad things, but we choose to use them in ways that pursue our mission. Likewise, marketing and cash flow management and HR are business tools that can all be used for bad things, but if we do not use them and use them as tools for good, we won’t be getting as much mission out the door as we could be. We’ll be failing as stewards.

Using good business skills as a mission-based manager does not, I repeat, not mean dropping services simply because they lose money, nor does it mean turning people away because they cannot pay. But it does mean paying attention to the bottom line, having a strategic vision, and negotiating in good faith and from a position of strength—in short, being businesslike in pursuit of your mission.

Your organization is a business, and the more businesslike you are, the better it will be for the people you serve.

Second: No One Gives You a Dime

This may come as a surprise, but your organization does not get gifts . . . Really. No one gives you anything, not government, foundations, United Way, corporations, or individual donors. If you are confused, that is okay. This idea goes against all your training to this point. Try looking at it this way and see if you feel different about yourself and your organization. Let’s assume that you come to me for a donation and you convince me that you really need the money for a service or a building. I write you a check for $100. Am I making the donation to you personally? Of course not. Am I giving a gift to your organization? You’re getting closer. But what I’m really doing, and what really happens in all of these transactions, is that I am purchasing services for someone or some family I will never meet. I am willing to give you money because you gave me what the business community calls an expectation of outcome. When I send money to an airline to pay for a plane ticket, I have an expectation of transportation in a few days or weeks. When I send money to a concert venue to purchase tickets, I have an expectation of entertainment the night of the concert. When I send money to a nonprofit, I have an expectation of service.

In other words, and here is the key: You earn all the money you get. Don’t let anyone tell you that you are a subsidized organization. Subsidies are things that people get without doing anything. I lived in the farm belt in Illinois for thirty years. We had many farmers who were paid by the federal government for not growing crops. That’s a subsidy. What you get is earned income, all of it.

The problem with thinking of your income as gifts is that the organization then acts like a charity. You become stuck in the mentality that you are so poor that the only way you can survive is by the beneficence of people or organizations richer than you. You continue to believe you are not earning your way when, in actuality, you are. It is essential that you and your staff and board understand this and believe it if you are to adopt the characteristics of success that are presented in this book. Why? Because if you keep thinking of yourselves as a poor charity, you will continue to be treated that way and not like the mission-based business that you are.

Third: Nonprofit Does Not Mean No Profit

Let’s cut to the chase. Whether you call yourself a not-for-profit or a nonprofit, you should not ever feel bad if you end the year with more money in than out. In short, making money is good for mission. Only by making a profit (yes, a profit) can you grow, serve more people, and try new services. Only by making money can you pay down any debts you have. Profit is not a bad thing in your organization; it’s a good thing. It’s also not always a possible thing, but we’ll get to that in later chapters.

Let’s look at this idea in three ways: the legal point of view, the ethical perspective, and from the vantage point of good management.

First, making money in a nonprofit is legal. Nowhere in any state or federal law, and nowhere in any state or federal regulation dealing with taxation or corporate structures, does it say that a nonprofit cannot make money, cannot make a profit. In fact, the Internal Revenue Service (IRS) code dealing with 501(c)(3) organizations says “. . . the profits of the corporation shall not inure to the benefit of . . .” This clause precludes staff or board from inappropriately benefiting from the organization’s profits, but the key to the phrase is that the IRS anticipates and accepts profits. Profits in a nonprofit are legal.

If you or anyone in your organization thinks that I am wrong about profits being legal, consider this: Your organization is considered tax-exempt (by reason of your 501(c)(3) status), but from what kind of federal taxes? I know you may not pay sales or property taxes, but those are state or local exemptions. At the federal level, you are exempt from what the IRS terms income tax. Now, for you and me, income tax means that every April we add up all of our income from the prior year and pay the IRS a portion of that. But the tax your nonprofit organization is subject to is a business tax, and guess what? Businesses do not pay tax on what you and I would term income; they pay taxes on profits. They add up all their revenue, subtract all their expenses, and pay, in taxes, a portion of their profits. Income to the IRS means profits to you and me. Thus, your organization has an exemption against paying taxes on its profits. Here is the question: If you cannot make a profit, why do you need a tax exemption?

In fact, the entire issue of nonprofits not being able to make money is just so much smoke, and it runs right in the face of the intention of Congress in giving you the charitable status you have. In the early 1950s, when the last substantive work was done on federal nonprofit statutes, Congress decided we needed more nonprofits, so it allowed your organization to keep what it earns and reinvest it in the community. They wanted to encourage our sector and did not think that we should be taxed for doing good things related to our mission. What’s happened since? All of us have screwed it all up by not allowing nonprofits to keep what they earn. When I say all of us, I mean funders, the press, the public, and those of us in nonprofits. We all bought into the idea that nonprofits should be poor, and it has deeply damaged the sector and our ability to do good mission. By keeping nonprofits poor, always scraping by from year to year or from payroll to payroll, we’ve sapped much of the ability to innovate, experiment, and come out with better services for people in need.

Profits in your nonprofit are also essential, a key element in financial empowerment, a subject that we will cover at length. As I said earlier, without profits, you cannot grow, you cannot innovate and try new ways to serve your communities, you cannot recruit and retain excellent staff, and you cannot take prudent risks on behalf of your clientele. You will see in later chapters that I contend that you need to make money as an organization at least seven out of ten years. To do less is not good mission-based management.

But what about the ethical perspective? This is hard. By not spending every dime you have every year on service, you necessarily will wind up saying no to someone who needs or wants your services, perhaps someone who is hungry, undereducated, or in need of spiritual help. And I doubt that anyone reading this book came to the nonprofit sector to say, “No, we won’t help you.” But if you say yes to everyone now, you won’t have any funds for next year. I am just as sure that your organization is not in business to solve a short-term problem as I am that you do not want to turn people away. Nearly all nonprofits are struggling to solve long-term issues: hunger, homelessness, drug addiction, the need for more education, arts, environmental quality, and on and on. Long-term problems require your organization to be around for the long term. Keep your organization poor and it won’t be. Again, this is a balancing act, one of many you have to do. Focus too much on mission and not enough on money and you are out of business. Focus too much on money and not enough on mission and you become just a business.

One more point here: I am not contending that you need to have every single service you provide be profitable every year. You do not, and you probably should not. There will be services that are so mission-rich that they can be money-poor. Services that only you provide in your community that do not pay for themselves or that are mission-critical. But if all you provide are mission-rich/money-poor services, you will soon be out of business and no good to anyone. Again you need a balance, and you need to use the business skill of return-on-investment (ROI) to maintain the right balance.

For-profit businesses are concerned about their financial ROI, and rightly so. If they invest funds in a building or a piece of equipment or staff expansion, they want to know how quickly they get their investment back and at what rate.

Nonprofit businesses need to also be concerned about ROI as well, but unlike for-profits, we have two returns: the financial return and the mission return. Thus,...