Measuring success in not for profit organisations
Measuring success in a commercial organisation is like peeling an onion: you peel back the surface layers – the things that occupy attention – and you are left with a single metric: profit. All the focus on, for example, customer care, employee development, innovation, is ultimately for one purpose, making money. But what about organisations that specifically describe themselves as ‘not for profit’. When they peel back the layers, what do they find?
It’s not obvious to people working in commercial companies because its taken for granted but the profit motive is actually a kind of moral compass. It is a framework against which actions can be judged ‘right’ or ‘wrong’. No matter how far the surface issue might seem from the core trade of the enterprise, the profit motive is buried in the fabric of decision making. An employee isn’t pulling their weight? It’s a development issue for the person and their boss, it’s a fairness issue for their colleagues, but ultimately it’s a financial issue for the company if earnings potential is being held back. Even if nothing is done – a competence issue for the company’s management – it is at least uncontested that something should be done. The company is there to make a profit, after all.
Can the 22% of the workforce that work in the public sector or charities really lack a moral compass when they are at their work? Not quite. What fills its place is much more human and fascinating.
These organisations have a blend of different moral compasses all co-existing together and coming from different sources. One source might be the professional ethos of a group of employees, such as doctors in the NHS, or scientists in a research establishment, or teachers in a school, or lawyers and police in the justice system. Another source might be public policy, the declared objectives of the funding body. Yet another might be the mix of values and behaviours that the public attach to the organisation. And finally, of course, there is the declared objectives of the organisation itself!
Several problems are immediately obvious from this list. Firstly, the interpretive and subjective quality is in stark contrast to the arithmetic objectivity of a profit calculation. Secondly, the potential for conflict and confusion, as competing frameworks might lead to quite different decisions for exactly the same set of circumstances. Using a new and expensive drug is a classic example of this. Thirdly, is the porous quality of these organisations. Take a school as an example. There is the core ‘business’ of educating young people. But a school touches so many areas in the community around it. There are concert bands, sports teams, evening classes, and youth clubs that are like satellite organisations around the school. In addition to education there are other social interests in the school such as health, immigration, welfare, parenting. All this, together with the fact that the ‘service’ – getting an education – touches the lives of the customers at such a deep level that friends and family will talk about the experience for decades afterwards. This isn’t a business with clear ‘borders’ within which the organisation is master of its own destiny. It lacks the sort of clarity that exists between supplier and customer. The sort of clarity that exists when I choose to buy a mars bar. Instead it’s a glass box, with lots of people peering in, and whose walls expand and contract depending on the circumstances. It’s what makes such organisations rather wonderful, and a challenge to manage.
How then, do you measure success in this environment? There will of course be a formal answer to that question. A league table, or financial target. What interests me is what’s there when you peel these back. In my experience, the answer is raw and visceral and quite unlike the ‘nice’ public-spirited perception of these organisations. It’s personality. Specifically, the character of the leaders. The organisation is successful if the leaders are successful: not in a vague organisational sense, but in the personal sense of individual recognition, career advancement, and acclaim. And to be even more specific, take any group or department within these organisations and the same principle applies: I’m up if my boss is up.
This is what makes managing such organisations such a challenge. When a group or department or whole organisation start identifying with the personal career success of its leader, instead of, as in a commercial organisation, their contribution to the bottom line, they become that much more difficult to manage. Organisational objectives can get badly out of alignment; decision-making becomes more complex.
The classic example of this is a university. I was once told by a leader of one of these organisations that the very last thing I should ever do is announce that a decision has been taken. In such organisations, no one will buy in to a decision until all the key opinion formers have been individually consulted. So the old joke is true. Once the decision is taken, the debate begins.
Chief executives of these organisations recognise they’re managing a collective of personalities. In this way, managing a not-for-profit business has more in common with the entertainment world than with the corporate world.