Tuesday, September 15, 2009

Should charities work like a business?

I think in some ways yes, in other ways no.

Let me explain.

The argument for 'yes'

There are three areas where I feel charities can benefit substantially for behaving like (well run) businesses.

Preparedness to invest

If you look at the top 20, 50 fundraising charities in any market, there is usually one thing they all share. They have spent money on fundraising. There is the odd exception of organic growth, but they are the exception.

Interesting to note that one of the biggest success factors behind the Obama fundraising juggernaut was the willingness to spend money.

Preparedness to take informed and well thought through risks

Often that risk (or perceived risk) may in actual fact be the spending of money in fundraising. I'm a big believer in the need to fall, or even stumble along the way, to make serious inroads. That means failing, an often scary word in the world we operate.

But smart, growing and successful businesses take considered risks. They are prepared to slip up in order to grow significantly. Charities with big aspirations should follow suit.

Acceptance of short term sacrifice for long term growth

Did you know Amazon didn't make any profit in its first six years in operation?

The easiest analogy to make is planned giving. Far too often I see charities pull the rug from planned giving investment for fear of hurting the bottom line, right now.

The argument for 'no'

Not all business are smart, well run and profitable.

So why follow principles just because that's the way the commercial world operates? I say this because I've heard many a fundraiser utter words to the effect of 'this is what I did when I worked in the corporate world'.

Remember,tradition can be destructive. Do something because it is right, not just because you've always or someone else has done it that way.

Obsession with cost and ROI.

I accept there are certain parameters charities must work within. But a focus purely on cost and return on investment can be harmful.

Focus wherever you can on net income. I've seen many charities fail to grow (and ultimately help more beneficiaries) because they couldn't see how to put net return ahead of the cost to produce/return.

Like any scanning of the environment, 'for' or 'non' profit, take the good and forego the bad.


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