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Non-Profits Borrow from Business to Enhance ROI

stock_businesswoman8Successful organizations have three ingredients that drive results—a strong strategy, access to capital, and leadership talent. While this has long been understood in the business world, non-profit enterprises have only more recently begun to embrace the idea that such basic management principles can affect their delivery of services and their impact on the constituencies they serve.

In other words, having a big heart and dedication to a lofty mission are no longer the only requirements for those seeking leadership positions in non-profit organizations.

“Good management is good management, regardless if it occurs in a Fortune 500 company or a family-owned non-profit,” affirms Liz Howard, an alumnae of the Kellogg School of Management at Northwestern University and associate director of the school’s Center for Non-Profit Management. Accordingly, many non-profits now actively recruit both recent MBAs and seasoned executives to fill a range of positions. And if the rise in social enterprise MBA programs is any indication, the attraction is mutual.

Bridgestar, an organization that aims to connect management leaders to nonprofit opportunities, identified at least 80 social enterprise programs at business schools across the country and has strategic alliances with many of them, including Forté member schools Fuqua, Kellogg, Stanford, Harvard, Yale, and Babson. Kathleen Yazbak-Chartier manages the recruiting function at Bridgestar. “By tapping into those programs, we are working to create a broader, deeper pool of people who are interested in migrating from corporate work to work in social services, education, and health care organizations,” she explains.

In Bridgestar-speak, those who make such a transition are called “bridgers.” Taking that leap into non-profit management is a much more natural transition today than it was in the past—even as recently as a decade or two ago. “People don’t stay in one job for their whole career anymore,” says Howard. “And there’s a blurring of sectors—people can move into and out of corporate, non-profit, and government work much more readily than they used to.”

Connections between the two worlds have also become much more tangible: there are plenty of examples of non-profits whose models have direct parallels to business. Food banks, for instance, are a supply chain business; and microfinance is simply finance on a different scale. Likewise, public education may be a non-profit venture, but as the Wallace Foundation’s Director of Education Richard Laine points out, New York City, alone, has a $13 billion education system and rivals the cash flow of a multi-national business.

Public education needs to emulate the systems perspective of a large business in order to be more effective, Laine believes; and more than anything else, it needs strong leaders. “When we define effective leadership—whether it’s in a school or a business—we are talking about the same conditions. Leaders need good data in order to assess processes, they need authority over resources, people, money, and time.”

These conditions, so self-evident in businesses, are often lacking in education. For instance, schools have a lot of testing data, but school leaders are not necessarily able to effectively interpret and operationalize the results in a way that positively affects the bottom line—a child’s education. A classic example is the human resources disconnect between the needs of children and the capacity of teachers. “In education, at the highest need schools you see the most turnover and the most junior teachers,” complains Laine. “In a business, you don’t put your first-year engineer on your shot to the moon.”

In response, the Wallace Foundation, created 20 years ago to fund education initiatives, has refined its concept of education leadership. “For the first ten years or so, the foundation talked a lot about doing good, and it put a lot of money into programs that were nice, but often they didn’t survive after the life of the grant,” says Laine, who has an MBA from the University of Chicago. Finally, the board decided if it really wanted to change the way public education works, the foundation had to borrow a page from business—it had to change organizational structures and train new leaders. “We’re trying to shift principals from being managers of buildings to leaders of instructional improvement, and we do this through a very business-like model of pin-pointing what we need to change to improve quality at a school,” Laine says.

As Bridgestar recruits businesspeople into leadership positions in non-profits, it is working to track their success and identify their impact. Yazbak-Chartier says they have identified some skills and abilities that transfer most advantageously from one domain to the other. “First, we’ve found that entrepreneurial skills are important—in the sense that people who have had experience in resource-constrained environments and those whose experience is more broad, rather than very specific, are very good fits.”

Multi-disciplinary project experience and overall flexibility are also great qualities for prospects. “Non-profit leaders are able to liaise across functions and even fill in where necessary,” Yazbak-Chartier says. Those with a more collaborative management style, and those who listen well and who can quickly respond to change are better able to make the transition to non-profits. “The ability to develop certain types of metrics and track accordingly is also very important, since data sources in the non-profit world are harder to come by,” she says.

In her position as senior program officer for the Klarman Family Foundation, Meg Brooks Swift is well aware of the challenges. The small, family-run foundation gives about $5 million a year to non-profits, but it really doesn’t know how effective it is. Swift, who’s been with Klarman for less than a year, says, “I’m putting evaluative methods in place that will help them assess their impact, and developing systems that will help the organization better target and track its giving.”

Her University of Texas McCombs School MBA has served her well in both this capacity and in her former position with Harvard’s Public Service Network. “The ability to synthesize a lot of information, the softer people skills, and the IT experience I got at UT have been invaluable,” she says. She has also leaned heavily on her negotiations, marketing, and finance knowledge.

It’s clear what benefits non-profits derive from pulling business talent in the door, but what do MBAs have to gain? Almost always, bridging to a nonprofit means that they will forsake larger corporate salaries and defined career pathways. But the trade-off, say those who’ve done it, is worth it. “I saw an opportunity in the non-profit world to have tremendous responsibility early in my career and the opportunity to do a lot of different things in the course of the day,” says Kellogg’s Howard.

While the flexibility one might find in a non-profit environment is valuable for women re-entering the workforce after taking time off for family, it will not necessarily be less work. “In fact, given a lack of resources, you will probably find a very fast pace, particularly, I would imagine, in education,” Howard says.

“I have never worked as hard as I have at Bridgestar,” admits Yazback-Chartier. “But there is something about it, a genuine sense of responsibility. When you’re connected to the mission of the organization, you’re working from the heart, and it is energizing rather than draining.”

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