The Business of Nonprofits

Much has been written about appropriate business models in nonprofit organisations. In what many are calling a paradigm shift in this sector, from a 'non-profit' mindset to a more 'business-like" mindset, there is evidence that the sands are shifting quite rapidly in a sector that has traditionally seen itself in a different light to that of a business. 

Additionally much has been written and spoken about the comparative positioning within a social-good perspective and whether this shift is in fact good, or is it actually undermining the sector and detracting from the social focus that should be at the heart of this sector's approach - the age old "Mission / Margin" argument. 

Whichever side of these arguments you sit, there is a number of realities that cannot be ignored, with these realities not really responding to the social considerations of the nonprofit sector, but the realities of markets, economics, and government policy. In essence, these realities are:

1. Economic circumstances in Australia are challenging and despite what politicians may tell us, the reality is that as Australia shifts from a mining economy to other forms, fallout will occur and consumers and businesses alike are being cautious. This caution challenges the ability of nonprofit organisations to increase funding from philanthropic sources.
2. Governments are facing many years of ongoing deficits irrespective of their political persuasion. Nonprofits that really heavily, or in fact entirely on government sources for their funding are facing the greatest risk to their sustainability and therefore their existence.
3. Government policy, again irrespective of political persuasion, is tending to prioritise their funding in this sector to larger service providers and relying on these server providers to interact with smaller organisations to deliver services at the ground level. This is a shift in governments' own business models and leaves smaller and possibly medium-sixes nonprofits at the mercy of larger nonprofits. This will, over time, force a degree of rationalisation into the sector. I make no value judgement as to the positives and negatives of such an approach, but merely state the obvious - it is happening.

An interesting article recently appeared in the Nonprofit and Voluntary Sector Quarterly (Volume 44, No.2 April 2015, pas.205-222) entitled "Being Nonprofit-Like in a Market Economy: Understanding the Mission-Market Tension in nonprofit Organising" written by Matthew Sanders, Assistant professor, Communication Studies, Utah State University. It makes for interesting reading as it trawls through various arguments associated with both sides of this debate. What is unique about this article is that it focuses on the role of communication in potentially bridging the apparent competing aspects in this debate.

In essence however, market and political realities are what they are and nonprofit organisations will not be able to address these in isolation. What they may be able to do is to better understand how they can work within this apparent conflict of ideas to build better organisaiotns and to design and deliver their services accordingly. Don't fight it - work within it!