That Dirty “P” Word in not-for-profit

Apr 3, 2017

This month on the blog I want to talk dirty…Lets talk about that dirty  “p” word in not-for-profit – PROFIT.

Some months ago I posted a live facebook session sharing my experience within the not for profit sector on the notion of “profit”.

I was particularly interested in the topic as NFP leaders and managers approached massively changing times.  Changes that cause us to review our models of service delivery in response to changes in how we are funded.

Since then I have read quite a few articles around “profit” and “financial reserves” in the NFP sector.

 (The ACNC has guidelines on how NFP’s should handle “reserves” and why they are important. You can read it here. A good article giving our sector clarity on what is considered “acceptable” practice. )

Even so,  suggesting to Not for Profit organisations that we should make a profit can still cause quite a reaction – from resistance through to disgust.

The word “profit” in not-for-profit simply means that as an organization or an entity our primary objective and purpose is not to make a profit.  Whereas our commercial cousins have at its core a goal to make profit for the benefit of their stakeholders.

That’s not our objective in our not-for-profits.

Our objectives are usually aligned to responding to community need,  relieving poverty, improving quality of life, and addressing social issues.

But that does not mean that as a not for profit we are “for-loss”.  Yet, the idea of creating wealth and profit is considered negative.  It raises immediate concern that the dollars are not being used appropriately; or raises suspicion that organisations are somehow “profiteering”.

So, if we are not for profit, and we are not for loss..then what are we?

Profit for Purpose

We are “Profit for Purpose”.

Even when I say that it sometimes gets a little bit of a reaction from people in our sector.

To me profit-for-purpose is all about making sure that we are, as an organization or an entity, generating enough income so that we can support and continue to do the good work that we do within our communities.

Even more-so we should be dedicated to delivering such value that we generate a value exchange that enables us to continuously improve and deliver high quality services to those in need – to reinvest in our organisations, our people, and our communities

We have an obligation to be able to operate “not at a loss” in order to be able to meet our requirements;  to attend to our staff in terms of their entitlements and meet other compliancy requirements.

If we don’t make some kind of profit or we operate at a loss consistently over time, we won’t exist. Critical services won’t be delivered.

Becoming Profit for Purpose

I’d encourage our NFP leaders and managers to think more about profit for purpose, and how it factors in your organizational strategy.

We cannot successfully, consistently and sustainably deliver services if we operate at a loss.  And in these changing times, we certainly won’t be able to do better, be better and help more.

How we generate value, and exchange value for value in our not-for-profits will become an even bigger necessity.  It’s time to give it attention, or have some kind of  interest and strategy in making sure that your organization is not consistently running at a loss.

Where do you start? It all starts with clarity of purpose.  For what purpose are you generating profit? It is the role of organizational leaders to create clarity of purpose. To develop organizational cultures that support the purpose and teams of people who can deliver on that purpose at consistently high standards.

For assistance, support and clarity on your purpose and how to develop an organization that is truly “profit for purpose”, contact me for a complimentary call today.

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