Not-For-Profit vs For-Profit sectors: are they so different after all?
- October 13, 2016
Upon first glance, the answer would appear to be a fairly firm “yes”.
Firstly and fundamentally, not-for-profit organisations exist to fulfil a social purpose; their ‘mission’. In contrast, private or ‘for-profit’ organisations, as the name suggests, exist to make money. Any funds secured above target by not-for-profits are directed back into the organisation to fund additional services or programmes, rather than into the pockets of shareholders, as is the case with private businesses. For example, when the #nomakeupselfie campaign raised over £8m in 6 days for Cancer Research UK in 2014, this unexpected income was used to fund 10 new clinical trials, which otherwise the charity would not have had the means to fund. Culturally, this sense of working towards a ‘greater purpose’, instils a passion and commitment within the not-for-profit workforce that can be difficult for other sectors to replicate.
Accountability is another key area of difference. Not-for-profit organisations often rely entirely on donations, and as such are accountable to the public for their spending, something which in recent times has been subject to increasing scrutiny. It therefore comes as no surprise that not-for-profits are likely to have tighter budgets and less resource available to them than their private counterparts. Though this can present challenges, it can also encourage creativity and innovation. Whilst any private business will tell you that keeping costs down is pretty important to them too, this level of responsibility and trust is unique to the not-for-profit sector.
Whilst charitable organisations do not make profit for profit’s sake, it is important to remember that, just like businesses, they must ensure the organisation’s income exceeds its expenses, and face consequences if they do not do so.
Not-for-profit and for-profit organisations are both operating in increasingly regulated and competitive environments. Organisations in these sectors must work hard to deliver excellent customer/supporter experiences, and to develop innovative new products to make them stand out from the crowd, whether that’s Google’s ‘Pixel’, or Macmillan’s ‘Go sober for October’. In addition to staying abreast of their competition, it is vital for organisations across all sectors to adapt to their ever-changing working environments. Whether these developments are political, economic, social or technological, it is the organisations that are able to anticipate and flex, in order to meet challenges and seize opportunities, which thrive.
Finally, and perhaps most importantly, finding and retaining great people remains a key challenge across both the private and third sectors. In both cases, strong leadership combined with an effective management operating system are crucial, and are the differentiating factors between high and low performing organisations. A robust management operating system equips leadership teams with the tools to effectively forecast, plan, control, report on and review their area of responsibility. When resources are limited, the importance of a well-thought out plan, and the regular appraisal of this plan vs what is actually happening, is heightened yet further.
Being able to accurately measure, interpret and use this information to eliminate issues and drive performance improvements remains the bedrock of any successful operation; whether that operation makes millions providing I.T. support, selling children’s toys, or channels millions into funding medical research or educational programmes.
Perhaps they’re not so different after all.