Why Profit is Not Dirty Word….

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We have a fear in the nonprofit sector of profit, of having too much cash. Clearly, there are limits to the cash a nonprofit can make, but why are we still acting like making money is a bad thing? Let’s explore this more in depth.

In my early days in the nonprofit sector, a very wise Executive Director who operated an amazing social enterprise, used to say “Profit is not a dirty word”. I used to wholeheartedly agree and I think this was one of the reasons, we always got along well.

I came from the for-profit sector. I am, and continue to be a firm believer, that we have to pay people well, train them, inspire them to work in an amazing place, and the rest takes care of itself. I am also a firm believer, that as nonprofits, particularly amidst the uncertainty of government funding, declining donors and changing funding priorities, having your own source of “profit” is and continues to be the best way to ensure the health and viability of your nonprofit.

There are nonprofits who run for profits. There are nonprofits who own franchises. There are nonprofits that have franchised themselves. The creativity of the sector knows no limits. Why then, do we continue to be so scared of risk and profit?

Non-Profits Continue to be scared of experimenting and that is a problem….

I think it has something to do with the fact that we tend to overload our boards with individuals who are risk adverse. Think here accountants, lawyers, bankers, insurance people and HR specialists. What we really need is to balance that risk with venture capitalists, entrepreneurs and others who are “solutions” focused.

It also has something to do with the “culture” of the sector. We are afraid to pay people what they are worth–our own employees sometimes live in poverty. We are afraid to spend money on experimenting, lest we be accused of misspending. The whole sector operates on a shoestring budget that there is no room for extras. We are afraid to try new things, in case we fail and someone hears about it and a funder does not give us money in the future. The whole system operates on fear.

The Whole System Operates on Fear

I have worked with organizations that suddenly have a surge of cash, from a funder, grant, or successful operations and don’t know what to do with it. It sits in reserve accounts, untouched, accumulating interest, rather than out in the community doing social good.

I understand the reservation, the fear, the hardwork it took to make that money. However, from a social liability and social contract perspective, there is an obligation to put that money to work in the community. Try something new. Do something that advances your mission in some way. Do not be afraid to fail, because in failing you will learn and eventually, do great things.

Two of the most successful nonprofit leaders that I can think of, did their best work when left alone by the board of directors. One in particular, was an amazing person, who for years worked in an administrative capacity for an organization. A sudden change in leadership saw her take the reins. After some initial hiccups, she came out of her shell. As the board evolved, we were all so busy, we pretty much left her alone. And do you know what happened, in 3 years she tripled the business of that organization.

She and her staff experimented with new programs, services and partnerships. Some were not successful, but the majority were. She asked for forgiveness, rather than beg for permission. It wasn’t always easy being her board, but in the end we got there.

Her organization is thriving all because, we as the board, gave her the room to grow. Now, there is some administrative catch up. She is learning this other side of leadership–what to do when you are successful and the social accountability that comes from that. She will do great, because she always has. I admire her for all she has achieved. She has been recognized for her community contributions, her leadership and her commitment to her sector. All because we gave her room to experiment and grow. I am exceptionally proud of her.

I can understand that some parts of the sector can do this easier than others. I can also understand that most boards are very conservative and need to be to guide organizations. I guess my challenge to you today is to not allow a fear of potential success limit the dreams you as a leader have for your organization and for your teams. Profit is not a dirty word and in fact, it can empower our organizations to become more competitive, focused and resilient.

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