Good Business Behavior Is in Too-Short Supply at Charities

To the Editor:

Pablo Eisenberg’s opinion piece about the dangers of commercialism in the nonprofit sector is well taken (“The Public Loses Out When Charities Become Too Businesslike,” June 10).

Still, there is another side to this issue. After many years of sharing stories with colleagues, providing technical assistance, and conducting training sessions, I have concluded that there are at least three facets of “businesslike” behavior that are in too-short supply in our sector, namely: market responsiveness, management accountability, and systematic measurement of success. Admittedly, these may also be in short supply in many for-profits, but they are issues worth addressing in either case.

By “market responsiveness,” I mean an objective consideration of what a given organization’s various markets really want, and an unprejudiced analysis of whether those needs are being met. These markets include not only clients and audience members, but also funders, community leaders, and others. Often, nonprofit managers prefer to address what they think these markets should want.

As a professional fund raiser, I want to make special mention of the philanthropic community, which is a “market” that merits enormous respect. When that respect flags, the philanthropic market begins to be viewed, astonishingly, as a necessary evil, rather than as an agglomeration of business partners. Requests for recognition, involvement, and reporting — fair requests in return for donors’ generosity — may be viewed as nuisances. Elsewhere in the same issue of The Chronicle, Lewis B. Cullman, a philanthropist and former businessman, described this pitfall succinctly: “Too many institutions in their greed and need — and sometimes plain obtuseness — end up being disdainful of the people who support them.”

Insensitivity to markets can only be sustained in an environment of non-accountability. As the for-profit world has recently demonstrated by negative example, strong governance involving checks and balances is crucial to keeping nonprofit management operating with maximum efficiency and integrity.

Which leads to the third facet of businesslike behavior: systematic measurement of success. But what constitutes “success” in the nonprofit world? Mr. Eisenberg is absolutely right in his overall message: Success should not be defined by for-profit standards — that is, by money alone. Instead, success must be measured by the nonprofit’s ability to accomplish its mission. But that profound difference from the for-profit world is no excuse for a casual approach to measuring success.

Nonprofit managers at all levels should be trained to think in terms of results. We should learn to use those management tools applicable to our situations in order to measure employee effectiveness, efficient use of resources, follow-through on commitments, and more.

It’s a difficult balancing act — taking a businesslike approach to a decidedly non-businesslike goal: that is, intentionally failing to make money in order to further the public good. As Mr. Eisenberg points out, and as I know from firsthand experience, well-managed nonprofit groups have been doing just that for decades. It is a high standard to which our entire sector should aspire.

Matthew Bregman
Vice President for Institutional Development
BAM Local Development Corporation
New York

To the Editor:

I have read with interest the recurring debate in The Chronicle‘s pages over the concept of applying business principles to nonprofit organizations. The majority seems to equate business principles with excessive executive salaries, cash-flow positive programs (at the expense of users), and draconian hierarchical structures. All of these reactionary and inflammatory responses prove how desperately the nonprofit world needs to advance in this area.

I returned to college to obtain my master’s degree in business administration after working for many years in the traditional nonprofit world. I did this after realizing that many nonprofits relied upon the sympathy of the public to justify unprofessional staffs, lack of planning, unrealistic program expectations, and shoddy accounting. These problems are not inherent to nonprofit organizations, but they are certainly easier to perpetuate when you are not seeing your personal funds dissipate due to these practices — as would happen in the business world.

There is a middle ground, and it is essential for nonprofit leaders to accept the need to change many of the industry’s practices. We live in a world of increasingly finite resources, and the efficient and effective utilization of assets is the core of business training. How does this philosophy threaten any organization or its mission? It does not; rather, it threatens only those who are happy to dissipate the assets of others while indulging in personal, quixotic crusades.

Every critic of business practices who writes to The Chronicle cites the egregious (and I agree) disparity in salaries between rank-and-file employees and executives in the private sector. None, however, have noted that because many nonprofits rely upon volunteer labor, the salary of any nonprofit executive is infinitely higher than that paid to their volunteers. One good thing about business school is that it makes you realize infinity is a much higher multiple than any given number.

Jack McReynolds
Manager of Arts and Communications
Housing Authority
Huntsville, Ala.