Recently, I read a blog posting entitled, “We Need to Change the Conversation,” by Larry Raff. It was an eye opener for me because he highlighted the need for nonprofit professionals to change how we think about and describe our organizations. He made me think about recent conversations I’ve had with program officers and even the members of my church. I realized that by changing the words I use to describe my college’s programs, I could bring about a change in how potential donors might view our requests for financial support.
As Mr. Raff points out, “words are powerful and have a way of evoking an immediate emotional response.” Hmmm, as a grant writer I knew that—in fact, I count on it. When I write proposals, my goal is to elicit positive responses to my need statements and warm fuzzy feelings about the impact that funders will have on my college’s students. As a matter of fact, I’ve spent years (far more than I care to admit) honing my writing skills.
But I’ve always seemed challenged by “the look” I get when I’m speaking one-on-one with program officers. Experienced grant professionals and even foundation officers know the look I’m referring to. At the very mention of the words nonprofit, college , or 501(c)(3), it’s the one that says, “Oh, you do good work in our community, but your organization doesn’t really operate like a business.” This is extremely frustrating to me because it simply isn’t true.
Nonprofits Are Businesses
The nonprofits had I have worked for could make a dollar stretch further than most for-profit companies could ever have imagined. They have been excellent stewards of the funds entrusted to them. As a matter of fact, I’ve been known to say that one of the community centers that I worked for would make a penny cry before they let go of it.
None of the organizations that I worked for in Indianapolis had fancy, hand-carved furniture in their CEO’s offices. They bought good, usable furniture at office resale stores or self-assembled furniture from Walmart. Their staff members didn’t get annual bonuses, no matter how exemplary their job performance had been. In fact, annual raises were a dream that seldom came true. Furthermore, the conferences my nonprofit brethren attended weren’t in Hawaii, Anchorage, San Diego, or Puerto Rico. No sir! They were usually to such exciting destinations as Omaha, Kansas City, St. Louis, Indianapolis, and Chicago so that attendees could get reasonably priced airfares and hotel rooms. And any lunches we were provided consisted typically of breakfast, salad, or taco bars. No prime rib dinners for us!
Furthermore, nearly all of the nonprofits that I’ve worked for were as meticulously managed as any successful for-profit company. They had budgets that were adhered to. They couldn’t simply raise the price of their “products” because they needed an influx of money. The fact is, many (if not most) of their customers paid very little for services; and, the staff members knew all too well that they could count on increased funding from a donor or grant source.
Thus, the longevity of nonprofits I worked for was tied directly to their administrators’ business and management skills—just like their for-profit counterparts.
Stakeholder Corporations vs. Shareholder Corporations
Mr. Raff proposes that we call the organizations you and I work for stakeholder corporations. We would then elicit a more positive response by explaining the similarities we have to shareholder corporations, rather than focusing on the differences.
So, let’s consider the similarities:
Both Are Types of Corporations
Nonprofits and for-profits are both types of corporations. They both bring groups of people together to form one legal entity dedicated to a stated purpose. The difference is one works to benefit its stakeholders and the other works to benefit its shareholders.
Both Work to Serve a Purpose
Whether a corporation is a nonprofit or a for-profit, it was created to serve a specific purpose. Nonprofits refer to their purpose as a mission; for-profits refer to their purpose in terms of serving a niche market. So it doesn’t really matter because the principle is the same.
Both Serve Customers
For-profit corporations serve their shareholders. Yes, they “serve” their customers too but only to benefit the shareholders that hold the corporation responsible for making wise financial decisions that generate a dividend for shareholders.
Nonprofits, on the other hand, serve many stakeholders. They include (but aren’t limited to) participants that directly benefit from an agency’s programs and individual services, extended families, the general public, etc.
Both Make a Profit
Both types of corporations work hard to make a profit. As stakeholder corporations, nonprofits don’t typically refer to net revenue as profit but in essence, it is. The only difference is that this profit benefits the organization—and the stakeholders it serves—rather than, as would be the case with a shareholder corporation, private individuals. So whether we use our profit to build up reserve funds or to reinvest in other programming, it is still profit.
Once, I was admonished by a college administrator for referring to the “profitable courses” we offered. After all, I’ve been around the corner a few times, and I know that nonprofits must earn a profit on some of their services to keep themselves afloat. Mind you, I’m not talking about large profits, simply some funds to save as their cash reserve.
For example, the college I worked for in Indiana made a profit on most of its entry-level courses such as English, math, history, and psychology. So how do they do this? To understand this, we need to consider the fact that these courses typically require only a classroom, an instructor, and a very minimal amount of technology. Thus, by charging a standard per-credit-hour fee for low-cost courses, colleges generate revenue (when combined with state allocations) that exceeds the actual costs associated with these basic courses. Therefore, they earn a profit that is then used to cover other student services such as tutoring, or offset the costs of courses that demand high technology and equipment. In the for-profit world, this is called profit.
Let’s Focus on the Similarities
These similarities are what we should be focusing on to advance the reputations of nonprofit organizations. We aren’t simply charities that help poor people. The fact is, most nonprofits don’t help people in financial need. Rather, they serve communities-at-large through animal shelters, schools, colleges, research projects, environmental projects, counseling services, and much more.
So what should we do to change how our donors and communities view us? First, we need to change how we think and talk about our organizations.
At the minimum, we need to change our elevator speech to make it easy to understand what our organization does for its stakeholders (not clients, students, or participants—stakeholders). Focus on the mission and keep the words simple but meaningful. Remember, we only have one time to make a good first impression upon a new, potential donor. Make it interesting and to the point. Entice them to ask more.
Service clubs, museums, churches, social service centers, youth development programs, and every other group formerly known as a nonprofit, is actually a stakeholder organization. Make certain that your donors know that your organization is a well-operated business that benefits its stakeholders by reinvesting its profits.