On the last page of Business Week, Jack and Suzy Welch answer one or two questions submitted by readers each week. The answers are usually very good, representing a nice mix of real-world practice and academia. BW gives the team enough room, too, to keep things from becoming quick, “Dear Abby”-kinds of answers.In the most recent issue, the Welches respond to a question from a person thinking of moving from non-profit management to for-profit management. I found the answer somewhat helpful, but relatively old school and inconsistent with my experience in non-profit work.
A woman from Virginia asks: “I have a master’s in public administration and have worked in government for 13 years, but I am thinking about making the leap to the private sector. Any advice?”They then go on to describe the experience of a friend who worked for a nonprofit wildlife organization and became disenchanted with her career and compensation. So, off she headed to the private sector, only to find that nobody would hire her. They quote one hiring VP as saying, “Public sector hires never work out. They can cross the border into the business world, but they never seem to grasp the culture.”
The Welch’s opening response: “Forget everything you know. O.K., that’s an overstatement.”
The Welches peg the major difference, and stumbling block, between private and public as competition. “Public-sector organizations basically have none.”
Here’s where it gets a little fuzzy. I think of non-profit as being everything from PBS to the American Lung Association to civic organizations to churches to industry trade organizations. The example the Welches give is of a “wildlife” executive, clearly in this sector.
I think of public sector as government. That’s different. I do believe government can be slower, less competitive, and doesn’t hold performance to the same rigorous standards as the private sector. (Though notice I did not say government employment was easy.)
The Welches highlight two skills fostered in non-profit environments that are particularly useful in the private sector: motivating people with few tools (read: money), and facilitating relationships between intransigent groups.
In the end, Jack and Suzy say, “The border isn’t closed if you understand where you’ve been. We’d say make the journey anyway. The change of scenery will do you good.”
I sit on the board of two non-profits, and have sat on several others over time. My reading of the non-profit sector is that it is every bit as competitive as the for-profit (though perhaps not in the same head-banging way). In several cases, I would put the managers of these non-profit organizations up against for-profit managers in similar sized companies any time. Here are a few of my take-aways:
1. Non-profits compete aggressively: PBS for eyeballs and share-of-wallet. Ministers for parishioners. Historic sites for visitors and donations. They live in the same brutal world that for-profits live in, and often (with little protection) become leading-edge indicators of economic down-cycles.When you see an organization like the New England Historic Genealogical Society, after 150 years, embrace digitization of its collection, a global web opportunity, and the emerging use of DNA in genealogy, you realize that the same remarkable things being done in the for-profit section are also being done in the non-profit sector. When the Welches differentiate the two worlds by “competition,” they are either thinking exclusively of the government sector, or of a non-profit world that no longer exists.
2. Non-profits have had to weather both the digitization of data, and the rise of the Internet, just as for-profits have. In many cases, non-profits have had to invest in web creation and infrastructure at a far greater rate then they have been able to generate new revenue streams.
3. That means that non-profit boards, which may once have been social clubs, are now facing the same questions that for-profit boards face: How do we stay relevant? How do we create new revenue streams? And, how do we protect the asset and keep from going out of business? When a two-year old technology start-up worries about going under, it’s expected. When a 50 or 100 or 150-year-old organization worries, it takes on a whole new meaning.
4. Non-profits quite often have an overarching mission that makes certain financial moves impractical or impossible. The mission of a for-profit is to enhance the value of the asset, period. The mission of a non-profit might be to create an educational workshop, protect an historic site, or reach as many low income people as possible. Those kinds of critical missions may eliminate options that would drive top line or profit growth.
5. Non-profits generally pay less, and don’t have financial tools, like stock options, to attract and retain people. The silver lining is that many of the folks who come to work for non-profits have a passion for the mission of the non-profit, knowing full well that they are not making career choices that optimize their financial compensation. That doesn’t mean that they haven’t optimized their career choice, however.
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