SDC Symposium Topic Four: Sector Blending (November 8, 2011)

This is the fourth in a series of blog posts leading up to the 2011 SDC Poverty Symposium. Each post will explore one of the main topics to be discussed in the Symposium's 11 workshops and two keynote speeches. For more information, including registration, please visit the SDC Symposium webpage

Implementing Business Practices in the Nonprofit Sector

We’ve all heard people say that government, and to a lesser extent nonprofits, should be “run like businesses.”  Is this possible?  If so, are there limits to the possibilities based on the differing objectives of these sectors?  We’re going to explore these possibilities and limitations in multiple, in-depth workshops.  Specific topics to be discussed include,

Efficiencies: A common critique of both the public and nonprofit sectors is that they’re bloated and inefficient due to a funding structure that lacks cost reduction incentives.  While creating more revenue is one method for strengthening an organization, an efficient use of existing revenue should be the first step taken to improve an organization’s financial position.  Sessions will include examples from quality assurance experts and private consultants that provide insight into how organizations can increase their financial efficiency through specific planning and management processes.

Understanding the Market: Nonprofit organizations often think about services first and finances second.  In contrast, businesses (ideally) study markets to identify activities that will produce income and a profit.  Nonprofits should always remain steadfast to their missions, which is their very meaning of existence.  However, while missions help guide an organization’s activities, missions do not necessarily dictate specific strategies—after all, there is usually more than one way to achieve the same goal.  Attendees will hear from experts in business development who work with both for-profits and nonprofits ranging in size from micro-enterprises to Fortune 500 companies.  Specific topics to be discussed include financial planning, current market trends, sustainability, and growth strategies.  We will focus on how nonprofits can become informed and nimble enough to adapt their activities to environmental changes, while preserving the commitment to their missions.

New Organizational Models: Over the past 20 years, a great deal of experimentation has taken place in regards to organizational structuring—specifically a blending of the for-profit and nonprofit models.  This so-called “fourth sector” seeks to combine the profit incentives of a for-profit with the social good of a nonprofit.  Consequently, fourth sector organizations can be described as a for-profit company with the soul of a nonprofit.  The fourth sector is not designed to displace either traditional for-profit or nonprofit organizations.  Instead, experiments with this model aim to address a specific wedge of the market—the size of which is still to be determined.  Opponents of the fourth sector model raise concerns regarding the impact of the current tax code, as well as how organizations can juggle two goals: profit and social good.  Workshops on this topic include insight from some of Milwaukee’s fourth sector leaders through panel discussions and in-depth case studies that demonstrate how attendees can successfully enter the fourth sector.  Be sure to check out what governmental actions can stimulate and help structure the fourth sector!

Setting the Parameters: Despite the potential for innovation, it is important to remember that nonprofit organizations are nonprofit for a reason—if they could be run as a business, and someone could make a profit, they would probably already be a for-profit organization.  The goods and services that nonprofits provide are unique, but nonetheless valuable.  Various failures in the free market system often preclude the social good nonprofits create from being produced by a for-profit organization.  Conversations will explore what strategies will help stimulate innovation and what strategies represent dangerous red herrings.

The degree to which nonprofits can and should be “run like businesses” remains undetermined.  Nevertheless, there are tools in the private sector that can be invaluable to nonprofit poverty reduction strategies.  Today’s presenters have expertise in both of these domains and will share their knowledge with those seeking to incorporate businesses practices into their nonprofit organizations.

Dave Celata

Intergovernmental Affairs & Research Manager