Platt Perspective on Business and Technology

Nonprofits and mission centered operations

Posted in nonprofits by Timothy Platt on December 30, 2009

Business operations covers basically all consistently followed and repeated processes and procedures that can be set up according to standardized methods, guidelines and approaches. This is in contrast to projects that are more one-off and unique, at least from specific project to specific project. A lot of operations are standardized across industries and quite similar between for profit and nonprofit organizations. So for example in Finance, GAAP or Generally Accepted Accounting Procedures are basically the same across all businesses in the United States with comparable and generally quite similar standards used in most countries and regions globally. That said, there are aspects of business strategy for which nonprofits offer unique challenges and opportunities. Addressing them has to translate into ongoing Operations and operational processes to have practical impact so it follows that nonprofits have at least some relatively unique sides to their Operations as well, at least when effectively managed and run. This posting seeks to address some of these nonprofit-specific constraints and to present the case that nonprofit leadership should think in terms of Operations that specifically support their organizations as nonprofits.

As a starting point, I begin with the obvious – nonprofit status in most places is as much a tax liability reduction criterion as anything. So Finances and fiscal planning and strategy have to center around meeting and exceeding minimum standards and requirements needed to obtain and keep a nonprofit status according to tax law and government regulation and definition. This puts constraints on operational goals and priorities and it informs reporting and quality assurance throughout the organization. I cite in this context the basic argument I developed in my posting Nonprofits and Mission Centered Strategy that nonprofits are in many respects like for profit growth strategy companies, with revenue generated being put back into supporting mission rather than being taken out.

That imposes strict caps on funding available for operations, and certainly for the biggest expense lines for most organizations like payroll. More has to be done by the same or by less and a key criterion for operational planning and performance review has to be an assiduous ongoing drive for efficiency and in cutting out waste.

I touched upon this at the strategic level in my point four in Nonprofits and Mission Centered Strategy where I noted that:

• Nonprofits need to be agile and ready to shift operational and strategic gears, at least as rapidly as their discretionary income based market space does – which can be very fast at times.

Every business should follow this basic type of efficiency approach in connecting its strategy and operations to its markets and their revenue potential. For nonprofits there is less room for error or for allowed inefficiency.

Scalability enters in here. Growth in organizational scale to more effectively and fully meet the requirements of addressing mission and vision, have to be tightly coupled to revenue generation and have to be developed so as to increase the levels of revenue generated. As a simple explanatory example, if you increase headcount by X you want everyone on average to still help generate on a per person basis at least as much revenue as before. And ideally this headcount increase would lead to increased per person revenue generated and increased overall levels of efficiency and productivity so revenue generation would increase by more than X.

In reality, every business has revenue generating and cost center operations and units, and nonprofits are no exception. So Operations have to be strongly connected to strategy and at all levels to find effective balance across all business components and to insure that overall the organization meets its goals in returning revenue to mission. I add that for any organization, and certainly for nonprofits it is important in this regard to move away from the simple all or nothing profit versus cost center approach and view organizational units for their ability both to generate revenue (and expense) and their ability to facilitate other units in generating revenue (and expense).

• What should you centralize and offer as organization-wide shared resources and services?
• What should you develop as separate capabilities within organizational units? That can mean for separate physically dispersed offices or office regions. It can mean seeming duplication of resources in support of different functional units and branches in the table of organization. This can be viewed and divided in a variety of ways.
• How do you best coordinate and evaluate ongoing efficiencies?

There are no single, standardized answers to these and similar questions that would apply to all organizations or even just to all nonprofits, but the types of considerations discussed in this posting have to be taken into account in answering them, and even just in determining which questions to focus on as having high priority.

The next posting in this series is going to look into nonprofits and staffing, and career potentials for those who work with nonprofits.

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  1. […] effectiveness in directing as much of their gross income as possible towards mission (see Nonprofits and Mission Centered Operations). • The key differentiator of success can be in finding operational processes and approaches that […]

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