Wednesday, June 30, 2010

The power of a radical thought: How for-profit businesses can learn from nonprofits

A couple of weeks ago I got an advanced copy of a new management book to review. This is kind of surprising because I haven’t read any management books for years. Years ago I got really tired of the management theories du jour phenomenon --that over-all guiding principal that some "great" corporate CEO used to run some huge company. (In a lot of cases, a couple years after the "guru" left, the company was in shambles.) There seemed to be a new great idea that would solve all management problems at least every eleven months.

This book is a little different. Zilch does have a central theme--doing more with less. I wouldn't call it a management theory. It is more a state of mind.

What is more unique about Zilch is that, after years of hearing that non-for-profit organizations need to be run more like a business, its author--Nancy Lublin--has the gall to propose that for-profit businesses can learn a lot from not-for-profit businesses. She then proves it in about 240 fun pages (if you don’t like slightly snarky humor about management you probably won’t find it fun).

Lublin provides practical advice on how to get the most out of your employees, your customers, your board, your brand and your stories. All at extremely low cost. These are proven techniques from the not-for-profit world--where doing things at low cost is the norm every day—not just in a recession.

Some of the advice is pretty common sense (but I’ve seen a lot of managers with NO common sense). For example:
  • Money isn’t the only way to motivate your employees. Lublin uses managing volunteers as an example (from my experience, not an easy task).
  • Be shockingly transparent about why someone is promoted. You loose the impact of the promotion on other employees if they have to guess the reason for the promotion.
  • Hire passion, not experience. You can’t create passion but the passionate will “make it their business” to learn what they need to know.
  • All your board members should be passionate about your products. Here’s an interesting question: Do the board members of most major corporations even use the products of the corporation?
  • Treat your customers as allies, not as the enemy. This line needs to be followed by that famous quote “Duh.”
  • Be honest with your customers, employees, shareholders (stakeholders)--They can immediately recognize PR hype.
Regarding financial reporting, Lublin's advice is a little vicious: “Live as if you lived in a glass house.” She notes that many corporations complain about all the reporting now required by the Sarbanes-Oxley regulation. Her response to the complaints:
Well, boohoo….Transparency has always been a way of life for not-for profits. We’re required, through iRS Form 990 to provide the public with a comprehensive view of our financial information. …. All our expenses are public—all of them! You can find out what we spend on postage and shipping, on travel to conferences….the works.
Lublin gets radical with her suggestions for boards of directors—based on how the best not-for-profit boards operate (She does note that there are many not-for-profit boards that don’t live up to her expectations.). She first notes that from a legal perspective, the duties of the board of a for-profit business are not all that different than the duties of the board of a not-for-profit business. They both have a “duty of care” and a “duty of loyalty.” (see page 118 of Zilch for more details). So, examples of what for-profit boards can learn from not-for-profit boards:
  • Don’t compensate board members. On not-for-profit boards, board members are usually not compensated, but they are expected to give cash to the organization.
  • Create explicate guidelines for board members. Clear conflict of interest guidelines are an obvious need. Many nonprofits also have a formal position description that defines the tasks of board members—just like you would have a position description for any employee.
  • Don’t put the CEO on the board. You can really blow the checks and balances a board provides if the CEO is on the board.
  • Meet in the Field. Get your board members out of the board room to see your operations and meet your employees.
  • Encourage the board to communicate directly with staff. This is even radical for many not-for-profit organizations but, done right, it can help the board get great insights.
  • Require board members to love your purpose. Every organization has a purpose—and this isn't just the bottom line. Think about Google—one of their major purposes is “to index the world.” Board members need to buy-in to that purpose.
So, buy the book.

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