“Business Thinking”

This is the fourth in a series of six blog posts.

Related to the emphasis on boundary-blurring and the frequent dissing of the term “nonprofit” that I have discussed in my last several posts is an equation of “business thinking” with effectiveness. You would think, after what we have witnessed in the past several years, that the word “business” would not be used as a synonym for “effective.”

But it is. And an increasing number of people, including those who should know better, seem to be falling into this trap.

Among the biggest cheerleaders for the mindset that equates business with effectiveness are Matthew Bishop and Michael Green, authors of the 2008 Philanthrocapitalism: How the Rich Can Save the World. They argue that a new breed of “philanthrocapitalists” are working to “apply the secrets behind their money-making success to their giving.” (As if this idea never occurred to Carnegie and Rockefeller.) They write:

“While some are skeptical about the invasion of the M.B.A.-enabled executives in suits into the Birkenstock world of charity, many philanthrocapitalists believe that the world of giving could benefit at least as much as business from a bigger role for professional intermediaries and advisors, and from the sort of transparency and accountability that exists in financial markets.”

Oops.

While they have tempered their cheering somewhat (in an apparent attempt not to be utterly tone deaf, the paperback version of their book is subtitled How Giving Can Save the World), they and a legion of others continue to suggest that companies have some kind of unique claim on concepts such as strategy and rigorous performance assessment. Those espousing this view typically give short shrift to how much tougher strategy and assessment are in the nonprofit sector, which, after all, addresses the most difficult, stubborn, and systemic problems.

Yet, despite these challenges, examples of nonprofits that operate in a strategic and data-driven way abound. (I’d be the first to concede that examples of nonprofits that do not operate so effectively abound, too – both observations are true.) As Wharton Professor Peter Fader, who is Co-Director of the Wharton Customer Analytics Initiative, has observed, nonprofits often excel in using “their data to better understand their ‘customer base.’ In this area, big companies with lots of resources really can learn from their cash-strapped non-profit cousins.”

Similarly, the late Peter Drucker, who Bishop and Green have attempted to posthumously claim was the “high priest of philanthrocapitalism” – a label I am guessing he would have rejected – argued in 1989 that corporations had much to learn from nonprofits when it comes to questions of strategy and governance. That piece was titled, “What Business Can Learn from Nonprofits.”

But, today, even those inside the world of nonprofits and philanthropy have internalized the idea that operating “like business” means operating effectively – never asking, which business?

Lehman Brothers?

Sears? (In its heyday or now?)

Or Apple? (Now or when it was struggling in the 1980s?)

In a Wall Street Journal op-ed, Charles Bronfman and Jeffrey Solomon argue “that to have a sustained and strategic impact, philanthropy must be conducted like business – with discipline, strategy, and a strong focus on outcomes.” But since when is strategy – the word has its origins in the military, and is derived from the Greek word for army – the sole province of business? (Bronfman and Solomon’s assertion also raises the question of what they mean by “outcomes?” Is profit the outcome they refer to, or are they arguing that business has been focused on larger and much more difficult to measure societal outcomes? It isn’t entirely clear.)

Yet just as Bronfman and Solomon are wrong to equate effectiveness and business, those on the other side of the debate, such as former Ford Foundation executive Michael Edwards, are also wrong, in my view, when they seem to diminish the role of sound strategy and planning. Edwards, who has offered an eloquent counter to “philanthrocapitalism,” argues, “Martin Luther King had a dream, not a business plan.” That may be true, but King sure had a strategy – and it was both well-conceived and well-implemented. [Note: I changed a sentence in this paragraph in response to a comment from Michael Edwards suggesting that I had not accurately represented his perspective.]

The point is this: Being strategic and effective are sector-crossing concepts – though what good strategy looks like and how to implement it is of course different in each context.

This seems so simple, so straightforward, so obvious. Yet the equation of “business” and “effective” has become a mantra.

It is now seemingly everywhere. Writing on the Forbes website, Gregg Fairbrothers and Catalina Gorla declare, “Of course we believe that successful nonprofits should think like for-profits and strategically position themselves for growth and scale; however, this mindset comes few and far between.” Similarly drunk on the Kool-Aid of business superiority, Alexis Ohanian writes on the Wired website, “Let’s be real: The nonprofit model is broken. The 20th-century way of guilting people into giving to an opaque, inefficient organization with massive overhead is no longer a viable model. The good news is that a better way of unleashing the charitable spirit in us all is being pioneered by” – you guessed it – him. He cites as evidence of the superiority of his model the fact that his organization, Breadpig, has raised $190,000.

No, I did not forget a zero. He has raised $190,000 and thinks this means he has found the formula to fix the “broken” nonprofit sector. Let’s be real, indeed.

Thankfully, there are some in business who are keeping it real: who seek to carefully study and learn about the nonprofit sector before generalizing about it – like Jim Collins. In a much-quoted line from his Good to Great in the Social Sectors that seems unfortunately not to have been internalized by those either in the nonprofit sector or outside it, he makes the point as well as anyone has: “We must reject the idea — well-intentioned, but dead wrong — that the primary path to greatness in the social sectors is to become ‘more like a business.'”

He observes something I know all too well from my days working as a strategy consultant in the corporate world (and that most of us can relate to simply by recalling our last interaction with an airline or cable company), but that too often goes unacknowledged: “Most businesses — like most of anything else in life — fall somewhere between mediocre and good. … So, then, why would we want to import the practices of mediocrity to the social sector?”

Good question.

 

Phil Buchanan is President of CEP. You can follow him on Twitter at @philCEP.

Author’s note and acknowledgment: The views expressed here are mine. Healthy debate on these issues occurs within the walls of CEP and in our board room. I am grateful to the many people, including CEP board members and staff, as well as colleagues and friends outside CEP, who gave me feedback on earlier drafts of these posts, much of which I incorporated. Some of what appears in this post, and in the previous several, draws on other pieces I have written for other publications.

Please read on to see the rest of this series:

Part One – Our Starry-Eyed Idealization of Markets
Part Two – The Need for Clear Boundaries
Part Three – Wearing It Proudly: Clarity on Being Nonprofit
Part Five – Companies to the Rescue
Part Six  – The Risks Posed by a Sector’s Silence: Toward a Forceful and Positive Articulation of the Nonprofit Sector


 

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