36
37 According to Lewis (2003b), the adoption of business and management practices by a non-profit often stems from its desire to appear as if it can effectively handle large and complex projects in order to attract the resources of external or international funding agencies. In fact, the business- like management of development projects is often seen as attractive to funders as they equate a NPO that utilizes management and business practices as being more ‘professional’, and thus more effective, efficient and trustworthy in nature. Such a perception is likely to attract more funding from a greater variety of funding agencies, thus enhancing the attractiveness of the adoption of business and management practices by NPOs.
NPOs can range in size and complexity from small, community-based organisations to large, international non-profits with centers throughout the world. In this evolution from small to larger and more complex organisational structures, the NPO may find the adoption of business practices to be an effective means of handling the increasing complexity that such an evolution brings, and a worthy tool for dealing with more complex managerial issues (Lewis, 2003b).
In addition, the increasing number of NPOs all competing for the same scarce resources has ensured that the organisations that can guarantee funders efficient and effective utilization of their donations (for example through mechanisms ensuring accountability and effective performance standards) will be more likely to receive such donations (Kaplan, 2001). This sense of competition has also encouraged non-profits to seek other avenues of income generation such as the sale of certain goods or products, which require good business and management practices, in an attempt to sever their dependency on donations and funding alone (Lewis, 1998).
The notion of the Amalgams as mentioned above, represents the idea that the adoption of business and management practices and methods of operation need not be an either/or dichotomy. NPOs can incorporate certain business practices into their daily functioning should they see their operations as being compromised without the use of such practices. They may also do so as a means of balancing the tension of fulfillment of their social mission with their ability to remain financially sustainable (M. Sanders & McClellan, 2012).They may choose to apply existing business principles to certain aspects of their functioning (such as the management of finances, human resources, etc.) or to their overall functioning. This will ultimately depend on the decisions and evaluations of those in management and leadership positions in the organisation as to whether the organisation they manage requires business practices to improve
38 its functioning or not. The adoption and utilization of particular business practices by non-profits who wish to remain relevant and successful is known as the copy-cat principle (Anheier, 2000).
Purists should not throw the baby out with the bath water and should be open to learning from the for-profit sector, especially if this can improve the efficiency and effectiveness with which they uphold their social cause or mission. Adoption of business practices can be crucial in allowing the organisation to remain sustainable and competitive in an ever-changing environment (Mahmoud & Yusif, 2012). However, in cases in which the organisation is run by people who admonish the use of business practices, this will entail a significant change in the collective mindset of the organisation. This would have to address the seemingly irreconcilable tension between business practices, and concepts exemplifying the essence of the non-profit sector, namely that of philanthropy, altruism, compassion, voluntarism and public welfare (Anheier, 2000). However, even the Purist perspective of opposition to business and management practices is understandable given the tendency of management models to focus on profit generation as the bottom line (Anheier, 2000), a bottom line that is ill-suited to NPOs.
The choice of whether NPOs should or should not adopt business and management practices is a contentious one, which shall not be resolved easily, if at all. Although the boundaries between the for-profit and non-profit sectors are becoming increasingly blurred, the application of business models, tools and practices, as is, to the non-profit context remains questionable. A further argument against this adoption is the need for NPOs to be aware of their unique identities and contexts in which they are embedded, and the unique factors influencing them as compared to for-profit organizations (such as dependence on donors, contribution to a social mission, etc.), and in the process, develop their own tools and techniques (Myers & Sacks, 2003), which may prove to be more effective in ensuring their sustainability.
As Moore (2000) contends, non-profit and governmental organisations cannot focus on financial performance alone, they have to also ensure that they are constantly producing some social value as stipulated by their social mission which serves as the prime reason for their existence. This has significant implications for the application of business and commercial models of operation and management to the non-profit sector and in fact, could be the fundamental reason for the existence of the tension between the use and non-use of such models by NPOs in the first place.
However, essentially the focus in this debate about whether to adopt business and management practices should be on attempting to find a middle path that accommodates the beneficial aspects
39 of the business world, without compromising the organisations social endeavors. As Dees (1998, p. 67) states: “The challenge is to harness these social impulses and marry them to the best aspects of business practice in order to create a social sector that is as effective as it can be.”
However, this tension between social mission maintenance and financial sustainability is an inherent and inescapable part of the functioning and sustainability of all NPOs (Nickel &
Eikenberry, 2009; M. L. Sanders, 2012). The social mission of a NPO is the reason it exists as it serves to guide the organisation and those in it as to exactly why they are doing what they do.
For example, the social mission of an old-age home is to provide for the needs of the elderly and to assist in their day to day care. However, in order to fulfill its social mission effectively, the organisation must also have the financial resources to do so; thus creating a contradictory tension that needs to be dealt with to ensure the sustainability of the NPO. Effective non-profit management may in fact depend on “recognizing, understanding, and managing this tension.”
(M. L. Sanders, 2012, p. 182).
An amalgamation of business and non-profit principles and methods of operation is most readily evident in the growing incidence of organisations popularly known as ‘social enterprises’. These are organisations that may possess a mix of commercial and philanthropic motives by functioning like a business, while also contributing to some social cause or the other (Dees, 1998). The table below situates social enterprises in the middle of a spectrum between purely philanthropic and purely commercial organisations, to indicate its borrowing of principles, motives and methods of operation from both these types of organisations:
40 Table 2-3: The Social Enterprise Spectrum (Dees, 1998, p.60)
Motives, Methods, and Goals
Appeal to goodwill Mixed motives Appeal to self- Mission driven Mission & Market driven interest Social value Social & economic value Market driven Economic value
Beneficiaries Pay nothing Subsidized rates, or Market-rate prices mix of full payers & those
who pay nothing
Capital Donations & grants Below-market capital, or Market-rate capital mix of donations and
market rate capital
Workforces Volunteers Below-market wages, or Market-rate mix of volunteers &compensation
fully paid staff
Suppliers Make in-kind donations Special discounts, or Market-rate prices mix of in-kind & full
price donations
Viewing NPOs as being operated for the purpose of achieving some social mission, while at the same time recognizing its continuous plight for financial viability will also contribute to research that is more inclusive and realistic in the sense that it will include the two most important aspects (i.e. social mission and financial viability) that play a crucial role in the NPO’s quest for sustainability. Such research will assist in better understanding how the human resources and structures in such organisations deal with these tensions in a productive manner and this understanding can then be applied to other contexts that experience the same tension (M. L.
Sanders, 2012), for example, commercial businesses that engage in social work. This is especially relevant considering that commercial, non-profit and governmental organisations are now becoming much more similar in their operations and management (Frumkin, 2002), and thus experience similar tensions and challenges.
Purely Philanthropic Purely Commercial
41