Q: What do you think distinguishes the not-for-profit sector from the for-profit sector? Is there really a difference?
A: The easy answer is that mission distinguishes the sectors. Not-for-profits frequently have a social mission that is clearly articulated in their materials. The mission of most business ventures and for-profits is to make profit.
Having said that, the distinctions are becoming increasingly blurred. There is a category of business ventures that define themselves as social entrepreneurship because they are making a profit for a worthy cause. Also, there are not-for-profit organizations, such as Harvard University, that number among the wealthiest in the nation. Mission and money are not mutually exclusive.
The markers for success in both sectors are remarkably similar. For instance, in both sectors, successful ventures meet a need and meet it well. These ventures generate more benefits and/or wealth, and they are financially healthy and sustainable. Leaders in both sectors need to balance their budgets, generate resources and meet mission standards and expectations.
One big distinction between them is with regard to attitude toward money within the sector. Not-for-profit ventures historically set themselves apart from their profit peers based on the idea that they operate for the “higher good.” Somehow, this has been characterized as operating away from or without need of money which has led to some interesting consequences. Not-for-profit leaders, who often contend with boards comprised of successful business people among others, must often perform miracles on tight budgets. Part of the legacy of this kind of thinking is that not-for-profits are expected to do more with less. This has consequences for salaries in the not-for-profit sector which have traditionally been lower than they are in the business sectors.
The more-with-less assumption also has an impact on what I call “organizational self esteem,” where the organization “brand” takes a hit when the not-for-profit ethic comes bundled with notions related to lack, scarcity and want. This is not always a healthy scenario. On the other hand, an emphasis on dollars and profits to the exclusion of all else can be misplaced. This position, too, lacks balance and may not operate well if left unchecked.
In some ways, it could very well be argued that the differences between for-profit and not-for-profit organizations aren’t as vast as it may seem on the surface. The biggest difference more clearly comes in the form of both the organizations’ funding sources as well as their bottom lines and the importance put on that as a measure of success.
Contact Karen Alphonse at Karena@execSearches.com or visit ExecSearches.com for more information about our career coaching services.
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I agree, the “more with less” mindset does not produce a healthy scenario. The social benefit sector should invest in long term capacity, infrastructure and qualified staffing. I’m currently reading Dan Polotta’s book Uncharitable, which makes the case many times over.