Particularly during times of declining revenue, non-profit executives are challenged to identify and build new revenue sources. And, unlike business, they must do so while maintaining their commitment to their service mission.
Judy Peters is CEO of a $13 million enterprise. At that level of annual revenues, her organization must function like a business - but it is not a business in the classic sense of the word.
It is a not-for-profit organization located in Cleveland called West Side Ecumenical Ministry. www.wsem.org
Like any business with that kind of revenue, she has lots of employees (100+) and tremendous challenges with operations issues such as securing revenue, managing administrative costs and balancing budgets.
Unlike any business, her bottom line is a mission, specifically:
Enable the needy, the oppressed, the hungry, the undereducated, the homeless to be sustained, encouraged, fed, cared for, trained and given hope and skills for a better life and to know God's love from human hands and hearts.
Therein lies my fascination with "the business of good": WSEM's mission statement is certainly very different than any of ours. But what else is different for Judy regarding running a $13 million business?
The only thing I can think of is that our businesses are generally easier to measure - mostly by profitable growth.
A non-profit like WSEM must be judged not just by its viability and growth, but by its mission fulfillment.
Just a little trickier, I think.
In her presentation to the Business of Good Forum last week, Judy brought home how much more difficult it is for a principled manager of a non-profit to find the balance between mission and operations.
Here's how she put it:
"So, you're giving one bag of groceries a week to the poor families of your neighborhood and a family you gave to yesterday comes in and says 'we were so hungry, our food is already gone, can you give us another bag?"
It's at these moments, Judy says, she sees the "tension between the mission and the operations."
And she simply asked us, "what would you do?"
Then she added another, more daunting, question. She said her $13 million budget in 2009 will next year be $7.5 million - the result of their largest government program being abandoned in our state's budget crunch.
She finds herself in the place that so many businesses have found themselves in the last 24 months - fighting for survival due to huge declines in revenue.
In response, she's taken traditional actions such as layoffs and furloughs. (Interesting note: many of those she's laid off are now clients of WSEM programs.)
And so Judy asked us again, perhaps forever changing the format of our forum, "What would you do if you were me?"
She outlined for us her two most specific challenges:
- Funding erosion, which as she said, didn't just happen with government cuts but has been eroding with the decline of traditional fund raising methods (events, direct mail, etc) for some time, and
- Defining their core services. That is, prioritizing what their most important functions are.
Those two issues have a very similar ring to what I'm facing on several businesses I'm working with right now!
These questions are difficult and yet they are what make me glad that I'm exploring the borders between for-profit and non-profit organizations. The need is greater than ever and the rewards for overcoming these kinds of challenges are meaningful to me.
In our forum that day, many managers of both types of organizations were present and they had several suggestions in response to Judy's challenge:
You must determine which of your services are irreplaceable in the neighborhood you serve
You should decipher rationally which of your services operate at a "profit" and which ones "lose money"
You should explore merging with or acquiring other organizations that work in your field
You should develop new revenue streams that might fit with your organization talents and goals
The last question is the one I explore most with non-profits because there is no more compelling question facing the organizations we serve. That is, can we identify more stable streams of income than the increasingly difficult and variable sources they've used in the past? I'll explore specific examples of new revenue streams in another article on another day.
Mergers and acquisitions in the non-profit business? Mother Theresa must be spinning in her grave!
Or would she be?
Those who studied her work found that Mother Theresa's fame was not entirely accidental. It served an operational purpose in fact which was attracting huge benefactors...with whose money she built capacity to serve more of the poorest of the poor.
After the forum, Judy asked if she could "come up with a plan and come back to us and present it." She felt the business angles we took in exploring her mission challenges might really help WSEM build their capacity to serve their mission.
So what's more important? Mission or Operations?
Since we all operate from limited resources, methinks it must be both.