The following is excerpted from The Pollyanna Principles: Reinventing ‘Nonprofit Organizations’ to Create the Future of Our World. To read these chapters from the beginning, head here. The Pollyanna Principles will be officially released on January 25th.
In yesterday’s excerpt, we considered one of the sources of the systems used by Community Benefit Organizations – the model of Old-World Charity. Today’s excerpt looks at the other major source of the systems used in these organizations: the Business World.
Chapter 3: The Origins of Nonprofit Systems and their Effects (continued)
The Business World
Over the past decade or more, “nonprofits” have overwhelmingly been encouraged to “run more like a business.”
As we look at the path of our human history, such emphasis is not surprising. While commerce has been part of that continuum since the early days of humanity, the industrial revolution brought to the fore a global emphasis on the making of money that has only strengthened with time.
Just as there are assumptions inherent in the approaches that come from the Old-World Charitable Model, there are assumptions and expectations inherent in the business approaches organizations are encouraged to use.
Assumptions re: the Bottom Line: The last line of a Profit & Loss statement shows whether a company has profits or losses – are they making or losing money? That literal “bottom line” is also the metaphorical bottom line in a business… profit.
Yes, there are businesses who care about the planet, about doing the right thing, about giving back. There are small, privately owned firms that make decisions based not only on profits, but on what is fair and just, sometimes to the detriment of profit. There are even the rare publicly held firms that make clear to their investors that they operate by a code of values that may place “doing the right thing” above profits.
But even in businesses with socially conscious investors, if the business is not making money, the investors will eventually find other places to invest. Profit is the bottom line.
Assumptions re: Organizational Strength: Planning for and ensuring the business survives and thrives is imperative if there is to be an ongoing mechanism for generating profits.
Assumptions re: Market Demand: In a business that relies on revenues to create profits, market demand is opportunity. Without demand, there are no sales, no profits. Marketing, advertising, and other promotional activities therefore exist to create demand, to ensure ongoing sales and profits. And the more demand, the better.
Assumptions re: Profit Centers: If the goal is to make money, then to make the very most money, every aspect of the company will generate a profit. “Profit Center” thinking assumes each effort of a company will pay for itself and make money.
Assumptions re: Investors’ Short-term Focus: Investors are a major source of capital for public corporations. The benchmark for investors used to be annual earnings. But just as the rest of life has sped up, the fast pace of the industrial age has become the “now” pace of the information age. Annual earnings have become quarterly earnings have become daily announcements on the Internet.
Investors may be patient for a little while as something is promised to develop. Some savvy investors actually seek out big-picture investments such as research and development or venture funds, that naturally take more time. But for the average investor, the most attractive project will be the one that consistently proves itself in the short term.
Assumptions re: Scarcity of Revenues and Investment Resources: Revenues (and the customers who provide them) are not believed to be limitless, but finite. Therefore, the only way one company can gain as much revenue / customers as possible is if others in that same industry gain fewer customers, less revenue. Industry leaders work hard to be the #1 soft drink, the #1 selling car, the #1 business automation system.
In addition to finite revenues and profits, it is also believed that investment resources are finite. If an investor invests heavily in one company, it is assumed she will have less to invest elsewhere.
Assumptions re: Competition: If revenues and profits are limited, and investment capital is limited, then logic tells us we must compete for those scarce resources, to ensure the business can survive and to ensure the profits will continue to roll in. Cola wars. Burger wars. Network TV wars. We are used to hearing such military terms when it comes to business, as we assume the aggressive, competitive stance of warfare is the only way to survive and thrive – to be #1.
From these assumptions, then, systems rooted in the Business World will measure results against questions such as these:
Will it bring in money?
Will it bring it in fast?
Will it generate more demand for our products?
Will it make our company strong, durable for the long haul?
Will it make investors move away from our competitors and instead invest with us?
Will it sell more product?
Will it leave our competition in the dust?
Will it result in profits both in the short term and the long run?
For the next chapter, click here – Chapter 4 – The Present Created by Our Past
For the rest of this week, you can preview the whole first section of The Pollyanna Principles here at Creating the Future. If you want to be notified when the next installment is posted, let us know. And please, link here to learn more about the book, and to review the table of contents (as well as all 6 of the Pollyanna Principles).