A business-like Approach To A Not-for-Profit
Quite often, we come across the argument that a not-for-profit needs to be run in a business-like manner. The clamour for this has grown louder with many corporate firms setting up their own foundations and a committee of their boards beginning to oversee the developmental efforts. The argument is that just like any business would worry about its return on investment, a not-for-profit should worry about its Social Return on Capital. Overall the rational is that resources should be put to their best possible use.
The fact that resources are limited and there are alternate strategies for their use, the argument for business-like approach makes absolute sense. After all, business approach is all about resolving a problem sustainably- with solutions worked out in a manner that are affordable by the customers. Any resources deployed on solving a problem beyond what is required optimally is a waste and a burden on the consumers. One cannot deny the applicability of the same principle to not-for-profit space, albeit, at times, instead of end customers it is the government who will bear the costs. However, overall logic that cost of solution be affordable still holds good else government too cannot scale it up beyond a point.
The big question is- how do we run a Not-for-profit in a business-like manner- generating cost effective optimal solutions- keeping scalability in mind.
One way of approaching the issue is to understand what key practices seem to be missing in our not-for-profits that make it un-business like. If we can get those practices in, we move them closer to running them in a business-like manner. I would like to focus on three practices that often seem missing in management of a not-for-profit– strategy, goal-setting and measurements. We will take them up one by one.
Strategy, as we all know, helps an organisation clearly answer the big question– where to spend time and energy and where not. In the chase towards solution to a problem, there are critical bottlenecks and non-critical bottlenecks that teams encounter. As a general rule, first and foremost critical bottlenecks need to be attended to. All non-critical bottlenecks, even if acted upon, may not help move the problem to a solution- hence there is a need for being cautious while making investments in overcoming non-critical bottlenecks. Unfocussed efforts on trying to deal with everything (including non-critical issues at the particular stage of development) can lead to dissipated efforts and sub-optimal results. All this tantamounts to deciding on ‘Big Yeses’ and ‘Big Noes’ right upfront.
Often leaders in many non-profits see strategy as too esoteric and believe that decisions are better taken as the team encounters opportunities and problems on the ground. Having chosen an area to work– say youth skilling or development, decisions are not taken upfront: the belief being that big clear ‘Yeses and Noes’ may create limits on the ground. What compounds the problem is the belief that each level of the organisation has enough wisdom and capacity to take best decisions and make best choices as they encounter issues. Or sometimes, one sees a ‘democratic strategy’ worked out- often with compromised priorities.
Strategy is all about looking at the problem to be resolved from a helicopter view and then deciphering what critical bottlenecks need to be attended to so that the desired solution can be reached most optimally. In the absence of strategy, organisation can go all over the place without making a dent on the problem. All ‘feel good factors’ get attempted at the same time. It is akin to an uncoordinated orchestra wherein each player plays what he or she likes – the cacophony displeasing the audience.
One way of incorporating strategy into not-for-profit’s way of working is to finalise its theory of change and use it as a litmus test to decide what to do and what not. Theory of change precisely lists out what intervention will lead to the desired solution. All activities planned to be undertaken should be in consonance with the theory of change.
Talking about goal-setting, it is the exercise of setting stretched goals in the overall context of strategy and then finding out ways and means to deliver those goals. Stretched goals are best set by the top management after considering the best available benchmarks and their dreams & aspirations. Often, stretched goals, as they are being planned, reveal deficiencies in the key skills that need to be hired. Sometimes they may point out to needed financial resources that organisation will have to additionally deploy. The implementation plan then is focussed on acquiring those skills or finances or both as the case may be in addition to executing the activities planned.
Stretched goals often lead to innovation. As the teams are pushed to stretch beyond their comfortable space, many innovative practices get deployed on the ground. A few of them work and a few don’t- leading to many innovative practices becoming part of standard methodology.
However, goal setting, in a not-for-profit setting often, amounts to an agglomeration exercise wherein, what teams at the ground deliver is collated to arrive at what the organisation will deliver. These are what can be called as ‘safe goals’ and reflect a safety factor that each level has built in to what they will plan to achieve. Anything coming from the top as a dream to be achieved is often brushed aside as ‘number chasing’ and hence to be avoided at all costs.
We’ll now come to the issue of measurement. I have come across many excellent NGOs who are scared to hell when any suggestion is made to quantify the work they do or the results they produce. All appeals for quantification by a donor or a few enlightened internal souls are frowned upon. Such a not-for-profit feels most comfortable with anecdotal evidence. Review meetings are characterised by programme leaders sharing an emotional story that draws claps of hands– volume of work, extent of improvement, input out ratios are the terms too business-like and no one seems to be bothered about wasting time on such issues. Lot of pride is taken in the fact that the organisation is full of passion (read emotions) and organisation has been able to prevent any corruption of their pristine approach with ‘number crunching’. I have also seen NGOs take a position that any attempt to introduce figures would wean them away from their real work. People on the ground will start chasing figures and not worry about the process.
It would serve not-for-profits well, if they were to keep the golden rule in mind – “What gets measured gets improved”. The design and execution of interventions needs to revolve around this golden rule. Measurements and consequently data, as all businesses show, can help validate various decision making points and help improve efficiencies all along the value chain. If we are serious about continuous improvement in our not-for-profit work, we have no choice but to measure.
The issue of outcomes and processes needs little elaboration. Very rightly, in development arena, both outcomes and processes are equally important. But then the same is true even for businesses. For this very reason, data is captured and used at both the outcome level as well as process level. Neglecting one over the other could not only harm the overall objective in the long run but also negate the very purpose of the organisation. The argument that if measurements are made available to development professionals on the ground, they will start chasing numbers and shall compromise on the processes is totally misplaced. The design of measurements, data capturing and monitoring has to be such that both process and outcomes are equally measured and monitored.
All in all, not-for-profit needs to operate in a culture of measurements. The reviews, key decisions, and the strategic shifts- all need to be driven by data and analysis. No doubt, in a not-for-profit work, there can be larger chunks of activities and results which are not as easily measurable as in a normal business. Nevertheless proxy measures need to be designed which co-relate well with the parameters that need tracking. The argument that there is a challenge on measuring the ‘soft and unmeasurable’ cannot be accepted. In fact, a continuous focus on measurement helps refine the proxy measures and move them closer to direct measures in due course.
One can easily see how absence of strategy, goal setting and a culture of measurement can lead to sub-optimal performance. Such an approach leads to wasteful deployment of scarce resources. We, the leadership in not-for-profits, perhaps owe it to our customers- the poor people we serve, to make our organisations work in a business-like manner. We cannot afford to waste scarce resources – more so when such a large segment of our population continues to wait for development services to reach them.
Jitendra Kalra heads the Reliance Foundation as the Chief Operating Officer since 2015. An Ex-Civil Servant, Kalra comes with more than 24 years of rich experience in the Development sector and Indian Civil Services. He also held the position of CEO of Dr Reddy’s Foundation and made significant contributions to skilling and livelihood space. Prior to that, he was the ‘National Expert’ and ‘Focal Point Manager’ at UNIDO and was responsible for the development of various poverty intensive clusters in the state of Orissa, Andhra Pradesh, Karnataka, Tamilnadu and Maharashtra.
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