The Mission-Driven Business

It is funny how sometimes the most profound insights can happen in unexpected settings. Such was the case while ushering at Rosh Hashanah services this weekend.

Just before the holiday, I was pondering a scenario that questioned whether nonprofits are mission-driven businesses. A colleague of mine shared the following case study: Suppose that a nonprofit pre-school had exactly one opening and two families vied for that slot. The first was a couple that had no connection whatsoever to the mission of the school but could pay 100 percent of the tuition; the second was a single parent who was strongly connected to the mission, but could only afford 50 percent of the tuition. Who do you take?

Alas, both the words “mission” and “business” are vexing terms here. Yes, one would want to enroll the child from the needy (and connected) family, but my hypothetical school needs to stay solvent, so the businesslike choice is to take the family that can pay.

With these thoughts still floating in my mind, I entered my synagogue early on Saturday for my morning of ushering. Immediately I became immersed in a sea of activity: the clergy was systematically reviewing last minute details; the staff was in high gear to ready the building; and a small army of volunteers was hastily preparing to welcome 1,000+ families. What was clear to me in those harried moments is that my synagogue operates as a highly functional organization – even on the holiest days of the Jewish calendar.

But what happened next was even more amazing: As the service started, the mechanical and coordinated motions seamlessly transitioned into a highly spiritual and uplifting experience. The countless hours of preparation and organization dissipated into the background. Like the foundation of a building, all that hidden work helped support and strengthen these special moments for our community.

As I absorbed this juxtaposition while fulfilling my volunteer duties, two light bulbs came on: First, I realized that my synagogue is a great example of a mission-driven business: it certainly exists to fulfill a higher purpose but it operates no differently than any other major organization. Indeed, even institutions of worship need people who know how to attract members, keep the building running and operate it in a financially solvent manner.

The second light bulb illuminated my quandary with the pre-school example. I never had a doubt that in order to fulfill the mission, the right choice would be to accept the child from the single mom. But how does one address the fiscal question? The answer is the strategic trajectory that one chooses.

In the algebra of nonprofits, to solve for “X” the leader of the pre-school needs to say: “we exist to welcome families from all walks of life so that they can be enriched by our pre-school experience…and we make this possible by earning revenue from tuition and by earning revenue from philanthropy. That is how we run our business, by viewing both our participating families and our financial supporters as necessary constituents to fulfill our mission.”

The pivot in my thinking is not that philanthropy is somehow a new part of the equation, but that its purpose is viewed in a different manner. Philanthropic giving is a strategic revenue source to realize the ultimate goals of the organization, rather than just to fill a deficit. The mission-driven business understands what its goals are and how to achieve them. The mission informs the choices that the organization will make, but the business planning ensures that it can sustain these choices in a fiscally sound manner.

Back at my synagogue, the service concluded and I felt myself moved by these insights. . The weeks ahead will surely allow me test my notions in real-life, and I hope to contribute toward making good decisions on behalf of my organization.

In this spirit of optimism, I hope that Rosh Hashanah is a season of renewal for people of all faiths, and that each of us has occasion to advance his/her understanding of the world in which we live. Happy New Year!

Community links in the age of Linked In

I must admit that I rather enjoy the online social networking world. Whether it is the steady stream of updates from friends on Facebook, or the terse notes from those I follow on Twitter, these messages keep me in touch with people living across the street and across the ocean.

Yet, the question that keeps me up at night is whether social networks are a genuine form of community.

For me, the term community is defined by several characteristics:

First, communities unite people who share common traits or a common purpose. Communities are not random amalgamations of people, but rather, exist for explicit reasons. Moreover, people who belong to a community can define their affiliation.

Second, communities must have a sense of place. Often, groups that define themselves as a community will associate with a physical space, whether it is a church, a club, a neighborhood, a town or even a country, to bind them together. But whether such a place exists or not, a community must “reside” somewhere in order to sustain itself.

Third, communities must have boundaries. In some cases, they are geographical, such as a neighborhood. In other cases, they are the norms, rituals, practices or beliefs of the group. This sense of boundaries also characterizes that there are both insiders and outsiders in a given community (although the broadest definition of “community” would certainly include all those who would want to identify with it).

Finally, communities imply an ongoing connection between members of the group. Communities that exist through daily activity amongst their adherents are often the strongest ones, but whether the level of contact is constant or occurs episodically, communities require regular and habitual interactions between people to sustain themselves.

If these four points represent a kind of litmus test whether social networks are, in fact, communities, I find myself concluding that yes, they are. Indeed, whether it is an online network or a chat group, these sites create affiliations between people that are visible, accessible, definable and sustainable.

But how do I reconcile the fact that I’m rather uncomfortable with this conclusion? After all, in my professional life I’ve dedicated nearly two decades toward creating and strengthening the kinds of communities where one actually needs to be physically present to participate.

For me, the answer is that whether I like it or not, millions of people are creating new definitions for themselves of what it means to belong and to affiliate. Social networks help to facilitate these connections in ways beyond anything what traditional community planners could ever have imagined.

Looking ahead, social entrepreneurs seeking to strengthen communities in the physical world have much to gain from studying the dynamic nature of communities in cyberspace. Already there are exciting synergies between our digital and corporeal lives and I for one am looking forward to being a part of these new ideas.

But in the meantime, I’ll be updating my status and reading the latest tweets as I keep pondering future definitions of community.

Nonprofit Management: Old School as the New Strategy

After reading Reengineering the Corporation by the late Michael Hammer in 1994, I was so enamored with his “clean slate” approach to business practices that I became determined to explore how its teachings could change the nonprofit world. I wrote several papers in graduate school about how communal organizations could utilize reengineering principles in their businesses. I even attended a seminar offered by Hammer & Company to learn how I could bring reengineering concepts to the organized Jewish community.

But 15 years later, I find myself thinking about the nonprofit world very differently and am also rediscovering that there is enormous value in “old school” thinking. Of course, every nonprofit executive must run their organization as if it were a business (especially in terms of quantifying goals and accountability). However, past operating practices may also be incredibly relevant as nonprofits adapt to new economic and social realities.

I offer two specific observations:

Bring Back the Volunteers. As many not-for-profit enterprises became more sophisticated over the past two decades, they shrunk their volunteer leadership ranks. Large community boards were replaced by smaller governing boards; committees that once focused on operations were reduced or even eliminated. Most dramatically, decision-making power shifted away from the lay leadership and to the professional staff.

This drive to professionalize nonprofits brought many positive changes, but it also reduced the number of people who felt connected and committed to these organizations. What is therefore needed is 21st century approaches to engage larger numbers lay leaders. While every nonprofit is unique, ideas include advisory committees examining new uses of technology; planning groups charged with conceiving “green” initiatives; or lay-professional teams working to bring novel demonstration projects to life. Volunteers are not only vital to the vibrancy of nonprofits, but also uphold a modified teaching from the movie Field of Dreams: “build it together, and they will come.”

Bring Back the Smaller Donors. A common trend among many philanthropic organizations is that they are raising more money from a smaller donorbase than in the past. From a bottom-line perspective, the news may seem fine, but there are also negative consequences. In today’s challenging economy, a top heavy donorbase translates into big problems when major donors need to reduce their gifts. Beyond the financial challenges, having fewer donors also indicates that less people feel connected to the important community-building organizations.

Fundraising appeals are often effective barometers in measuring how nonprofits relate to a given community. They allow hundreds, if not thousands, of individuals to feel that they are making a difference to causes that are important to them. Furthermore, every gift made to a nonprofit is in essence a vote of confidence. Today’s nonprofits would therefore be wise to energize their broader fundraising efforts, especially because their annual campaigns are also “campaigning” to secure those all-important philanthropic votes.

Reflecting further on these observations, “old school” to me is not about turning back the clock to 1984, but rather, it is about ensuring that modern nonprofits have the social capital needed to succeed in 2009 and beyond. Viewed in this context, what I am really suggesting is a hybrid approach.

In the automotive world, hybrids are likely key to revitalizing their industry; perhaps the same is true for many not-for-profit organizations as they map out their future paths.