This article appeared in the Philadelphia Business Journal in 2013. It continues to accurately convey my belief about both non-profit and public management.
I work for the Board of Trustees, teachers, staff and students of Germantown Academy (GA), and our collective reach exceeds our grasp. Always has. Always will, and we are proud of that. It really means that our vision and our mission have an endless capacity to grow and to react to the demands of a changing society.
A direct result of this is that, as the person assisting our Head of School with the financial management of the Academy, I see us forever dealing with the reality of scarce resources. There are 125 full time teachers at the school, and they all have inspired ideas about programs and curricula they would like to pursue. We can’t afford to pursue them all. That is not, in the end, a bad thing. As a matter of fact, if there is a non-profit somewhere not facing the crunch of scarce resources, then I would say there is something wrong with the scope of its vision.
The clear conclusion to be drawn from this reality is that our school, like all healthy non-profits, has to be better run and managed financially than for-profit companies. Yes, we must be more business-like than businesses! This sounds wrong to the ear of many in a non-profit community, but it is accurate and essential in order for us to move toward the never-ending goal of fully meeting our evolving vision.
This push to be very business-like needs to be seen in the correct context in order to be more palatable. The image of being business-like for many in the non-profit world implies that actions are being taken just to save money. In order to change that impression, those running non-profits must be able to explain this notion of “scarce resources forever” effectively to the entire community.
Cutting funding in one area of a non-profit needs to be explained clearly and transparently as having been driven by the greater value of allocating those funds to a new program or an enhancement of an existing one. And in order to be accepted by the community, the driver of those funding decisions must always be (as worded for our particular case): “What is best for the school as a whole?” The result of this process is that there will always be those in the community who are disappointed with a given decision. In many ways the morale within a non-profit will be driven by the quality of those funding allocations and the ability of non-profit managers to be convincing about why those choices are made.
For excellent, well-run non-profits this tension never lets up, and it is intensified by the fact that many who work in the non-profit world do so out a love and passion for the cause to which they are committing their life’s work. It makes decisions, which do not go their way, all the harder to manage and accept. Knowing this pushes effective non-profit managers to strive to ensure that there is not a single dollar going to waste.
Before coming to GA twenty years ago I worked at a small public finance investment-banking subsidiary of a large California bank. We worked crazy hours, and we knew that we only got paid if we closed the deal. Closing a large deal was always sweet, but it did have the ability to overshadow tight financial management. And as I looked at the larger bank as a whole, it became clear that so much money was being made day-in and day-out on car and home equity loans that hard decisions about effectively managing every dollar could be avoided. It was not hard to find people who spent 8 hours at their desk but who were not vital to the bottom line.
A member of the Board of Trustees at GA once commented that, as difficult as it was for a business to go through a recession, it had the inevitable consequence of forcing businesses to be lean and to make tough, effective decisions about both their short and long term strategies. I believe that the difficult choices facing businesses in a tough recession is the place that good non-profit administrators find themselves in everyday of every year. Added to this is the fact that instead of the simple measurement of net profit, non-profit administrators have a much more complex sets of challenges in measuring their success. As an example: Did the additional reading support in 2nd grade mean that 10 years later the students graduating were better prepared to face college and their lives beyond college? Hard to measure indeed. Inevitably there are some non-profits which see their non-monetary goals as justification for being casual about tough financial management. However, excellent non-profits recognize that their vision and their mission give them no room to be anything other than disciplined, thoughtful, strategic, inspired, caring — and dollar conscious –- in all of their decision making.
