Management-lessons to learn from NPOs

The relationship between government, the business community and society is fundamentally changing. In recent years, many non-profit organizations (NPOs) have had to rethink their strategies and come up with new approaches in order to be able to accomplish their missions and operate efficiently on tight budgets.

In overcoming these challenges, NPOs have developed some strategies and skills that set them apart: They are innovative, highly professional and have managed to simultaneously achieve economic success and create social impact.

In the following interview, Renate Buber, Professor at WU Vienna's Institute for Nonprofit Management and Academic Director of the WU Executive Academy's Professional MBA Social Management, explains not only what executives of for-profit businesses (FPBs) can learn from this success story but also why it opens up enormous opportunities for FPBs and NPOs alike.

Prof. Buber, you say that FPBs should deepen their understanding of what makes NPOs tick, and vice versa. Why?

Prof. Buber: Most businesses have come to realize that it is increasingly important to accept social responsibility. And this is neither a fig leaf nor an end in itself. What they are interested in is to build their reputation and, more and more often, to open up new business opportunities. As for NPOs, they are increasingly operating in fields where they are direct competitors of FPBs.

Think, for instance, of accommodation providers such as Kolping Wien that are, of course, mission-driven but nonetheless offer services at market prices. One question businesses should ask themselves more frequently is this: In what ways can they accept social responsibility and, at the same time, support projects of NPOs they will also benefit from?

What exactly are you thinking of?

Prof. Buber: Apart from corporate giving, where employees are granted leave to give back to society, or cause-related marketing, where part of a product's sales price goes towards a social project, there are many ways true win-win situations can be created: A business specializing in sales might, for instance, train the employees of an NPO, helping them acquire important skills that they can use in the course of negotiating with sponsors or funding partners. In return, the business providing the training will become more socially aware and hence will emphasize the social side of things more frequently, as a result of which it may be able to reach out to a new customer segment.

So the question of social awareness is crucially important in this context?

Prof. Buber: Yes, it is. From the perspective of NPOs, there have always been 2 dimensions to this: What matters is not only the output, i.e. the result produced, but also the outcome, that is the social impact made. In an FPB context, this could mean that in order to achieve business success, one invariably needs to create social impact.

From a business point of view, this is perfectly sensible, considering that consumers are increasingly acting in a socially responsible manner and buying products that make sense not only product-wise but also as far as their social impact is concerned. 

Executives of NPOs have some specific skills that set them apart. What are these skills, and why could they be useful also for managers of FPBs?

Prof. Buber: As a rule, NPOs have a wide variety of stakeholders: funding partners, clients, relatives, the media, volunteers, donors, employees, etc. So one skill that sets executives of NPOs apart is their ability to reconcile diverging interests and take management decisions that strike a fair balance between them and hence will be approved of by everybody.

Also, there often are 2 aggravating factors: For one thing, the interests of service users, i.e. clients, are usually at odds with those of funding partners or donors because the better the services clients receive, the higher the costs. For another, executives of NPOs are frequently faced with a paradoxical situation: The better NPOs function, the lower the demand for their services in the future. Just think of drug-counseling centers, for instance.

Are there other examples?

Prof. Buber: Another thing that sets managers of NPOs apart is that they are resourceful and open to innovation. Critics might say they have to be. And that is absolutely right. Imagine you are constantly expected to achieve maximum results with minimum input. This challenge calls for resourceful executives. The reason they have an affinity for innovation is that in many cases innovation enables NPOs to provide even better services with fewer resources.

When it comes to managing people, there is also a lot to learn from NPOs, isn't there?

Prof. Buber: Absolutely. As a rule, executives of NPOs make consensual decisions, i.e. they take them together as a team. This increases motivation and takes leadership to a new level.

Moreover, when it comes to coping with extremely stressful situations, NPOs have developed a strategy that has become part and parcel of their work: There are regular team meetings and one-on-one or group supervisions to discuss the strains and stresses encountered on the job, and highlight alternative strategies for dealing with them more effectively. This way, people do not take their problems home with them and can join forces in creating a positive error culture.