Do Business and Nonprofit Boards Have Common MOs?

By: Eugene Fram

My blog posts in the past have frequently suggested that nonprofit boards can successfully adapt common practices used by for-profit boards. Gail McGovern, former senior business executive, now CEO of the American Red Cross posits that both types of boards innately borrow from each other’s operating traditions. * Following are my reactions to the major issues she raises:

What Businesses Can Learn from Nonprofits

Focus on the people you serve: Nonprofits are at an advantage because a large proportion can interact or at least see clients on a daily basis, especially if the care is related to a matter of life and death. Consequently, those involved can build a passion for the mission that is hard to reproduce in the for-profit setting. Some firms, like Ben & Jerry, have been built on employee passion derived from the firm’s profit sharing with charitable organizations. The new hybrid FP-NFP (B corporation) corporate model should provide ways that for-profits can use to become closer to customers. Big data applications should be helpful with this process.

Motivate through the power of your ideas, not the power of your office: Working with volunteer forces nonprofit managers to be more sensitive to subordinates and other stakeholders. They learn how to garner interest to large or modest projects. For example, a university president, working under what is called “shared governance,” may even have to consider the reactions of a group beginning ranked professors in making promotion decisions.

Lead with your heart and your head: There are times management has to move quickly to assist a stakeholder. The New York Times has had a Christmas promotion to easy the problems of the “neediest” in New York City. Public school teachers commonly use their own funds to buy school supplies for children who don’t have them. These acts of human kindness are essential to building cooperation, compassion and altruism in the business culture.

What Nonprofits Can Learn from Business

Instill a culture of fiscal accountability: Nonprofits like businesses need to make tough choices, but they can often postpone them or even ignore them. A business can summarily drop an unprofitable product line, all other things being equal. But a nonprofit may not be able to drop a costly program, if the clients involved have no other place to receive the aid being provided. However nonprofits often have to make tough investment choices—invest in IT vs. invest in client services. Investing in IT may be he better choice, but internal and external pressures the organization would face may dictate the client investment.

Invest in your people: It’s obvious that nonprofits must attract, retain and motivate the best people. However nonprofits often rely on the mission dedication of their employees. Too many do not support professional growth and even top talent that can quickly grow stale in the fast-paced 21st century.

Embrace change: Change is difficult in nonprofits because budgets need to focus on customer programs that must be financed by outside and distant donors. Bold and even modest experimentations are difficult to initiate. Problems of information technology takes visionary leaders to succeed in meeting its challenges. They seem to be in short supply in both nonprofit and business organizations.

Based on her experience in both environments, Gail McGovern maintains that both private and public sector boards– despite their mission disparity– can learn from each other. And in fact, in the last decade, their MOs have demonstrated as much. Wegmans, a growing supermarket chain has prioritized employee satisfaction to the extent that it is widely recognized as one of the top workplaces places in the country. And on the nonprofit side, The Alzheimer’s’ Association has hit the funding jackpot with an innovative promotional stunt – the Ice Bucket Campaign! McGovern suggests that this crossover of MOs is the wave of the future for corporate and nonprofit organizations.

* http://fortune.com/2016/05/10/american-red-cross/

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