Profiting from non-profits

Fans of disco will be saddened by the YMCA’s rebranding as “The Y”. Why is a charity trying to ‘revitalise its brand’? Is this evidence that they are following the common advice for non-profit organisations to become more like for-profit businesses? A recent Economist article argues that what’s more interesting is that the reverse may be happening too….

The article points out that the typical charity or non-profit ‘should’ be horribly inefficient due to the absence of a profit motive. But some people dispute that non-profits have to be inefficient. Some are massive organisations (often found in the world healthcare industry). They can be particularly good at motivating workers and at marketing.

In tough economic times businesses would do well to find ways of motivating workers without paying them a fortune—which anyway is no guarantee of success, as the recent performance of generously paid bankers has made clear. Few non-profits pay well and many depend on volunteers. It helps that they tend to have a clear purpose to which these underpaid employees and volunteers are often personally committed. They often have a flat management structure. Non-profit bosses tend to muck in with volunteers when the heat is on (you’ll find them, for example, helping to stuff goody bags for fund-raising events). New employees are quickly given real responsibility, even if they are young. Ensuring there is plenty of time during the working week for fun can deliver better results than a bonus.

What about marketing? A lot of effort goes into convincing donors that they are getting value for their money. The key is to focus on building long-term relationships based on frequent contact, repeatedly saying thank you and sending updates through newsletters. This contrasts sharply with the one-off transactional approach to customers that is all too common in the business world.

The article finishes by arguing that it is time that business started to tap the valuable know-how of the best non-profits rather than dismissing the whole lot as hopelessly inefficient.