Non-Profits vs Profits

by Don Harkey

Most of us are involved with a non-profit organization somewhere in our lives. Whether it's a church or a charity organization, non-profits are everywhere. Yet in the world of organization behavior, non-profits are often considered to be "second-class" organizations. Do the same principles of organization apply to non-profits like they apply to profits? What about principles of motivation and management?

Jim Collins felt compelled to address this issue after publishing his groundbreaking book, Good to Great. Good to Great outlines the common traits of organizations who make a jump from being very good at what they do to being great at what they do. The natural question for leaders of non-profits is, "does this apply to us?". One of the principles of the book, for example, is the "hedgehog concept". It says that great companies know the answers to 3 questions.

1) What are we the "best in the World" at?
2) What are we passionate about?
3) What is our economic engine?

Organizations of all types have great difficulty answering these questions. The buzz from the non-profit leaders came from the 3rd question. What is the economic engine of a non-profit? The "economic engine" of a profit organization is a good understand of what drives profits to the company. For example, Walgreens discovered that the key to its profits comes from the number of times a customer visits their stores. Kimberly-Clark learned that its profit comes from the number of consumer brands they carry.

What is the "economic engine" for a church? What is the "economic engine" for the United Way? This spurred a quick spin off monograph from Jim Collins called "Good to Great and the Social Sectors". The booklet changes "economic engine" to "resource drivers" and contains the statement "why business thinking is not the answer". Do the rules really change from non-profits to profits?

This is the question we will be exploring this week. We'll talk about specific non-profit entities and see how they are similar and different from profit organizations. This knowledge will help us better understand profits and non-profit organizations! Enjoy!