Operating Like A Business, Versus Using Good Business Principles

I have worked in and around nonprofit organizations for over 40 years. During this time I have learned that Boards of Directors and leadership of nonprofit organizations have many challenges, and keeping even the best nonprofits going is becoming more and more challenging. I have watched some very small nonprofits grow into excellent, stable programs, only to be destroyed from within by Boards who made naive decisions which eventually destroyed their organizations.

One of the most damaging things I have seen is a Board of Directors deciding their organization needs to operate more like a for profit business. This is a tempting thing for nonprofit Board members to do, because many of them come from corporate backgrounds and cultures, and their skill sets were developed and honed in those cultures If they can transform the nonprofit they serve into being more like the businesses they know, they can operate more comfortably, and under the delusion that they can do a good job without doing the very difficult job of learning about the clients they serve and about the stakeholders who fund them. Unfortunately, this isn’t usually good for nonprofits or their customers.

So, what happens when a Board gets obsessed with the idea that a NonProfit should operate like a business? There are generally two patterns of failure. The first type of failure is that nonprofits become so focused on the bottom line that they lose focus on their customers, lose their best staff, destroy their reputation and end up either being broken up, or shutting the doors. So they fail formally, and everyone knows it. This is actually the best outcome for a nonprofit that lost it’s purpose. Communities shouldn’t be asked to support nonprofits who offer little or no value to their customers.

The second type of failure is that they succeed in becoming a business, but fail in being a good nonprofit. A good nonprofit either has a time of financial challenge, or the Board or other leadership responds to gloom and doom prognostications and the decision is made to become more like a business. They then hire a CEO with a business only background, begin to focus on acquisitions, marketing, fund development, reducing costs, and public relations. All the time this is happening, they actual quality of the service delivery atrophies, and the people who care about the clients and worked at the agency because of the impact it made begin to feel disconnected, and either stay and burn out, or leave, taking their talents to the competition.

What remains after a few years is an organization that may be respected by those who donate money, and may even be considered an excellent organization by the community at large, but offers marginal to very poor quality of services. This happens because those who know no better tend to judge nonprofits by the same growth standards they judge businesses, rather than by the impact an organization actually makes.

If the story is good, and the damage control team skilled, a nonprofit can go on for years skimming the money that people donate intending to help people, while offering little value. These nonprofits usually look very corporate, have CEOs with exorbitant salaries, and have very high turnover rates. They also make claims like “we have a 100% high school graduation rate among our teens” without disclosing that teens can’t be in the programs unless they stay in high school and graduate. In short, they do the same type of spin doctoring and misleading as most for profit corporations.

The major problem with the idea of nonprofits becoming like a business is that for profit businesses and nonprofit organizations have different goals, and when you have different goals, you must have different strategies to achieve those goals. Simple. When we want to go to California from Illinois, we don’t head East. When we want to serve people as a primary purpose, we don’t model ourselves after GE.

A for profit business, for better and worse, has the primary goal of making money for those who own the business. The business might operate in very ethical, well-managed ways, but it’s goal is to generate income and distribute that income to those at the top. So income goes upward to the Board or other owners.

A nonprofit has the primary goal of raising money to maintain an organization that invests, in various ways, in those who need its services. In this situation, income should flow downward from the Board. A nonprofit should have a Mission, Vision, and Values which communicate the impact it is trying to make, and the dollars should be invested in bringing the Mission and Vision to fruition.

Therefore, when a nonprofit begins to operate like a for profit business, overhead usually increases to management, development and public relations functions, and investment in service delivery is reduced. The organization begins to talk, walk, and act like a corporation, and one of the two scenarios I described earlier often happens.

Having said all this, nonprofits need to implement good fiscal practices. They need money in savings, and perhaps even their own endowments to weather hard times. They need to hire qualified people who know their area of service to lead the organization, and they need to pay them fairly. They need accountants, but usually not as CEOs. They need Lawyers, but usually not as CEOs. They need marketing and public relations functions. However, these functions need to have different strategies than the same functions in for profits. These departments need to be focuses on creating and maintaining an excellent organization that raises money and distributes that money, through services, supports, and sometime actual dollars to the people the organization serves.

Most importantly, nonprofits need to consistently provide excellent services that benefit their customers and make a positive impact on their communities. They need clear Missions, Visions, Values, Goals, and Strategies for making these impacts. They need excellent well-trained stable staff who are committed to these.They need strong evaluation and research functions, if not on staff, then through collaborations with Universities, having researchers on the Board or other means. They need to offer great service, know they offer great service, and be able to prove they offer great service. When all these things happen nonprofits usually get better and offer value to the community.

Unfortunately, when the organization becomes too distracted by attempting to be like GE, it has been my observation that the actual quality of service usually decreases over time and all of the components of excellent service suffer and then fall by the wayside in pursuit of the wrong goal.

Leadership Assessment And Advising

Ray Hoskins and Assessments is now a Channel Partner with The Lions Lead.  Through this partnership, we offer a wide range of competency-based assessments that help organizations and individuals assess leadership competencies.  The assessments are paired with our Leadership Advising Services to help individual leaders and leadership teams improve their performance.

• Do you have a clear awareness of your leadership strengths and challenges?

• If not in a leadership/management position now, do you want to be?

• If you are currently an organizational leader are you achieving the results you want?

• Is leading stressful for you?

• Do you aspire to be a great leader?

So You Got That Promotion, Now What?

Some of us really want to be leaders. We work hard in our positions, hoping to be noticed as stellar performers in our area of work so we can be promoted. When the opportunity comes, we apply for that management job, secure in our knowledge of our area of work, and we get hired.
For many of us, it doesn’t take long to realize that expertise in our previous position, while useful isn’t enough. Being a good doer, can actually be a handicap in becoming a good leader and manager. What are your options:
1. Put our heads down and “fake it till we make it”. Perhaps we watch our own manager (who may not be the greatest) hoping to learn by osmosis what we need to do.
2. Begin to study, read leadership books, watch TED talks, perhaps even take a course or two on leadership and management.
3. Be systematic in our strategy. Working with Ray Hoskins and Associates, you
⁃ Assess your existing strengths and challenges using a competency-based assessment.
⁃ Assess priorities for immediate change.
⁃ Develop a leadership development plan.
⁃ Work with an experienced Leadership Adviser to help you make best use while developing and following a plan to become the leader you want to be.

Self-Awareness-Where Leading Begins

There are many cultural expressions of the importance of Self-Awareness. Statements such as Know Thyself and To Thine Own Self Be True have been around for centuries. Most of us have been exposed to the idea that we need to understand ourselves in order to have a better life. This idea forms the bedrock of most forms of counseling psychology and other personal change approaches.

What might not be as clear to most of us is how important self-awareness is in leading others. In fact, the research shows that an accurate knowledge and understanding of oneself is the most important skill of leadership.

Self-awareness is just what it sounds like—the ability to know oneself, to be aware of one’s own strengths and areas for improvement. Leaders and managers who have strong self-awareness understand their goals, values, beliefs, feelings, strengths, and limitations. They are able to use this information to guide decision-making.

When people lack self-awareness, they are unable to express the clear vision necessary to lead. If one’s self-perception differs greatly from the perception of others around them, it leads to feeling like others don’t understand them.

Also, when someone has poor self-awareness, others may see the resulting confusion acted out in the leadership setting. Poor self-understanding also leads to inconsistent behavior which confuses those we lead.

Take a moment and ask yourself, how well do you:
• Understand your personal abilities and competencies
• Understand what affects your performance
• Know your values, goals and beliefs and use them well to guide your decisions and actions
• Take time to think about important issues quietly and alone
• Strike a balance between self-criticism and hopefulness?

These are some of the attributes of leadership included in The Lions Leader Manager Assessment. Ray Hoskins and Associates use this assessment. It helps our clients assess their leadership competencies. We then work with clients to help them identify which changes they can make to lead, and indeed, live more effectively. It does all begin with knowing yourself!

Managing Your Emotions-Another Critical Leadership Competency

While Self Awareness is the most important competency for leaders, Managing Emotions is a close second. Many of us have worked in situations where one or more of the key leaders were poor at managing emotions. This is most often thought of as simply controlling anger. Yet, controlling fear, anxiety and other disruptive emotions can be equally important. Uncontrolled anger can lead to a very unhealthy culture. Anxiety and fear of failure can paralyze leaders who need to make critical decisions.

Dr. Dan Snively, in his Leader/Manager Assessment,  states: “Managing emotions refers to the ability to understand one’s own thoughts and feelings and how they affect the person and everyone around them. Leaders and managers who are able to effectively manage their emotions are able to understand how feelings affect behavior. They are able to behave or act appropriately in response to their feelings.” This definition isn’t about just controlling emotions. It is instead about the appropriate and effective use of emotions in leadership.

Being able to choose how to show up in every circumstance is very important to a leader’s effectiveness. Excellent leaders who manage their emotions are stable, predictable, and trusted. Leaders and managers who mismanage their emotions sabotage themselves and their environments. Without self-awareness and self-management most other personal and leadership attributes lose effectiveness.

So let’s take a moment and consider:

• How well do you understand your moods and emotions and their effect on your behavior?

• How well do you balance your positive emotions and control your reactions in a leadership situation?

• How well do you identify personal irritations to yourself and select appropriate responses?

• How well do you Balance private and public pressures and challenges?

• How able are you to think clearly and stays composed under pressure?

These are key behaviors involved in managing emotions. As you master skills in these areas, you can expect to be more effective in leadership situations.

These are some of the attributes of leadership included in The Lions Leader Manager Assessment. Ray Hoskins and Associates use this assessment. It helps our clients assess their leadership competencies. We then work with clients to help them identify which changes they can make to lead, and indeed, live more effectively. It does all begin with knowing yourself.