7 For-Profit Principles that Build Nonprofit Success

At the recent BoardSource Leadership Forum in Chicago, I got to hear Steve Rothschild discuss his take on best practices for nonprofit leaders. In his  book The Non Nonprofit: For-Profit Thinking for Nonprofit Success, Rothschild offers seven principles for “creating a financially sustainable, socially responsible organization.”  Rothschild has street-cred when it comes to applying for-profit concepts to nonprofits. Back in the day, he was the product manager at General Mills who launched Yoplait yogurt in the US market (an opportunity he admits to getting because no one else thought it would go anywhere). Seeking new opportunities at mid-life, Rothschild focused his entrepreneurial energies on social issues. He founded Twin Cities RISE!, a nonprofit that trains under- and unemployed adults for jobs and connects them with employers.

Here are what Steve Rothschild considers seven for-profit principles for nonprofit success:

Have a Clear and Appropriate Purpose

The purpose of your organization generates passion in the people it attracts to serve as board members, staff, volunteers, and donors. It provides a test for decision-making and strategic planning, hiring, and investment. A clear purpose serves to unify the diversity of those drawn to make it happen.

Measure What Counts

It isn’t enough to collect data if the results don’t matter. Where many jobs training programs report on how many clients were trained, the number of training hours clocked, or the number of clients who complete the program, Twin Cities RISE! chose a different metric. They measure their success by how many of their clients “get and keep a job that has an annual salary of at least $20,000 with benefits for at least two years.” This is where they set the bar because this is what they believe it takes to overcome chronic poverty in the community.

Be Market Driven

Rothschild reminds us that the client of a nonprofit organization is not necessarily the customer. The clients of Twin Cities RISE! are those under- or unemployed individuals who participate in the job training programs. Their customers are the employers who hire them. As the president of a nonprofit publishing house, my clients were authors and my customers were the distributors and booksellers and readers who bought  our books. “Some nonprofits . . . generally fail,” says Rothschild, “for the same reason that many for-profits fail: they don’t identify their customers correctly.”

Create Mutual Accountability

“Mutual responsibilities are discussed up front, agreed on, and revisited as necessary throughout the relationship.” Rothschild applies this to everyone involved in the organization’s endeavor: board and staff, clients and donors. People respond to social compacts, and accountability builds community, integrity, and commitment to intended outcomes.

Support Personal Empowerment

Don’t look to Rothschild for warm-fuzzies about empowerment. His approach to empowering people relies on paring cognitive and emotional skills with a positive belief system. “Using these skills,” writes Rothschild, “a person can manage his or her emotions, thinking, and behavior to achieve positive, long-term life goals. Because of their positive beliefs about what is possible . . . they make choices that optimize potential benefits to themselves and society.” This approach to empowerment may be the strongest aspect of Rothschild’s book, and may well be a worthwhile subject for his next publication. Anyone who has worked with a group of people—on a board, a staff, a committee—knows how people who lack relational skills and positive beliefs can sabotage themselves as well as the group.

Create Economic Value for Social Benefit

A compelling reminder from Rothschild is that “every improvement in social good does in fact have monetary value—to the participant, the state, or some other stakeholder.” When a nonprofit organization understands for whom it provides economic value, then it knows who will be most willing to invest in its programs.

Be Learning Driven

Rothschild is another proponent of what LinkedIn founder Reid Hoffman has termed “permanent beta.” All organizations, for-profit and nonprofit alike, need to design constant testing and learning into their routines. “That means you start your venture with a working model that makes sense based on your best thinking. Then you experiment, evaluate, adjust, experiment again, evaluate again, adjust again . . . until you reach your intended outcomes.”

10-Minute Board Discussion

How can we learn what economic value our nonprofit programs produce?


Image courtesy of iStockphoto/frender

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