Run More Like a Business? Good Luck With That.

Nonprofits need to run more like a business, it’s often said. (Quite often  (opens in a new tab), actually.)

That seems obvious. After all, associations have the same need to keep the lights on and keep their customers (i.e., members) coming back. So why does this “more like a business” line keep coming up?

A study by Eric Johnson at Northwestern University’s Master’s in Learning and Organizational Change program suggests one reason: The distinctions between the structures of corporations and nonprofits simply make different demands on leadership style.

For “Striving for No Difference: Examining Effective Leadership Between Nonprofit and For-Profit Contexts  (opens in a new tab),” Johnson interviewed executives at 10 Chicago-area nonprofits with various budget sizes and missions. Each exec had moved into the nonprofit sector from the corporate world, and their experiences are fairly critical about how nonprofits think about  staff performance and data-driven strategy. Or, rather how they don’t think about those things.

Take performance: Most of the interviewees, Johnson writes, “cite workforce competence as a current challenge—they suggest nonprofit employees as less proficient, generally, than their corporate peers.” In part this is a function of how differently nonprofits establish expectations from their employees. One exec told Johnson, that at a corporation, “everyone is very much like you. You’re trained to solve problems very similarly, your language and your problem solving approach is very similar, so it’s a lot easier, and I think a lot more productive, quite frankly.”

Staff isn’t the only thing standing in the way. There are also boards to contend with. Though executives in the study stress the importance of data-driven action, they feel somewhat weakened by their boards, which “represent a major factor diminishing their overall authority and their ability to get things done.” The implication is that whatever leadership a nonprofit executive exerts has to run to some degree against the board’s instincts, be they misguided, overly fussy, or simply different.

Let’s establish a few caveats here. The sample size for this study is exceedingly small. It’s also geographically restricted; I wouldn’t be shocked to hear that a few of the execs interviewed shared a (possibly difficult) board member or two. Charitable nonprofits, where most of the interviewees appear to work, aren’t the same thing as associations. And the study was conducted via interviews rather than survey questions, which can lead to extended grousing.

All that said, I know I’d be hard-pressed to find an association executive who couldn’t relate to the staff and board issues that Johnson’s article details. One of the conclusions Johnson reaches is that “nonprofit chief executives may share influence or decision-making with a broader base of stakeholders, including volunteer boards of directors, and as such, they should consider developing expertise in ‘softer’ management approaches, such as consensus building.” I’d say that most successful association leaders have already cultivated soft leadership skills; those that don’t likely don’t last long.

The overall message of Johnson’s research is that people are attracted to nonprofitdom because, by and large, they like the culture: a mission that involves more than delivering profit to shareholders, an opportunity to work with a variety of people, a sense of making a difference in the world. There are tradeoffs for that: Things move slower, and problems drag out. But nobody says making the leap wasn’t worth it.

So if you’re transcending those problems—if you are indeed running “more like a business”—what works and what doesn’t to make that happen?

(iStockphoto/Thinkstock)