November 2009


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Upon joining the non-profit sector, a number of people opined to me that they are happy I’ve decided to dedicate my time and effort towards strengthening the sector’s work. In fact, one of the sound bites I kept hearing is that non-profits – despite their inability to sell equity (and thus raise money through either private investors or the larger public capital market) or the lack of an agreed upon “profit” metric for measuring organizational success – need to behave more like for-profit businesses. So, listen up my fellow non-profit professionals, I’m going to impart some words of wisdom I learned from my days working in the for-profit world (at institutions such as Freddie Mac, UBS Investment Bank, and others).

We need larger pay packages to attract and retain qualified professionals. In order to create the type of fast thinking, innovative companies such as AIG, Bear Stearns, Enron, Tyco and others, we need to increase our compensation packages. Currently, this kind of fast-thinking/innovative executive talent retails for approximately $10.5 million, or roughly 344 times the average worker’s salary ($30,700). Since the average executive director of Southwestern Pennsylvania only makes a mere $96,110, or 3.6 times the average worker’s salary – that’s a lot of innovation we’re leaving on the table! Lesson #1: if we are to attract for-profit executive talent then we must start paying our non-profit executive directors better.

Ignore sustainability and adopt a “do whatever it takes” attitude to exceed your short-term goals. We in the nonprofit sector spend far too much time talking about creating sustainable programs and achieving long-term outcomes. Instead, we need to adopt a more market-centric view of the world, just as for-profit businesses have to when their performance is measured by the market. Take General Motors, for instance. In the late 1990s and well into the first decade of the 21st Century, GM ignored suggestions that the company should rethink its focus on the sale of light trucks and SUVs and instead become a pioneer in the production of fuel-efficient (sustainable) automobiles. However, GM’s short-term focus on becoming the premier seller of light trucks and SUV (its most profitable product line) seemed to be paying off:

In 2002, GM sold more than 8.5 million cars and trucks and was the first auto manufacturer to sell 1.2 million SUVs and 2.7 million trucks in a calendar year. The company set industry sales records in the United States and owned nearly 15 percent of the global vehicle market. And investors took notice – the company’s stock rose approximately 45% over the next year.

Of course, you know the rest of the story by now – fuel prices rose and consumers grew tired of paying for non-fuel efficient vehicles. GM was stuck with a bunch of cars and trucks (mostly trucks) that they tried to “give away” with 0% financing and large rebates – again, focusing on exceeding the company’s short-term sales numbers even at the expense of hurting long-term profit margins – but nobody wanted them. Lesson #2: for-profits rarely practice sustainable planning so why should your organization.

The market rewarded GM's banner 2002 year with stellar market returns in '03. Nevertheless, GM's lack of a sustainable business model finally forced the company into bankruptcy in '09.

Transform your board. Nonprofit executive directors, not only are you egregiously underpaid relative to your for-profit brethren, but also you need to hold more board power. This year’s Nobel Memorial Prize in Economics winner, Oliver Williamson, in a recent article, “Corporate Boards of Directors: In Principle and in Practice,” submits that today’s corporate boards are largely ruled by the CEO and are passive financial stewards. He writes:

The CEO is in de facto control of the operation and composition of the board…most boards most of the time are responding with nodding approval, and boards are beset by inertia, hence are slow to become active when the corporation experiences adversity” (260).

In hindsight, we’ve spent far too much time espousing the idea that nonprofit boards need to be active and chart the agency’s strategy, raise money, etc. After all, when is the last time you heard of a corporate board functioning this way? No, on a corporate board the CEO/Chairperson sets the agenda and the remaining board members are asked to “nod in approval.” Lesson #3: we need to retrain our board members to be passive financial stewards and centralize all power with the executive director (and newly appointed chairperson).

As you read these “lessons,” I hope it is apparent by now that there is an awful lot each sector – the for-profit and non-profit – can stand to learn from one another. I think the three lessons above illustrate areas the for-profit sector should take a cue from the nonprofit sector and consider adopting these practices. Conversely, there are a number of for-profit practices – strategic planning, capital budgeting, using data to inform evaluative programmatic judgments and more – that I believe are beneficial for nonprofits to adopt. However, to think that either sector has a monopoly on best practices is just over simplistic and flawed logic. As Jim Collins’ writes in his monograph Good to Great and the Social Sectors, “We need to reject the naïve imposition of the ‘language of business’ on the social sectors, and instead jointly embrace a language of greatness” (2). Touché, Jim.

 

Happy ThanksgivingWhat does Thanksgiving mean to you?

For many, it means food, family, fun (hopefully) and some time to get away from work and relax.  Not everyone is so fortunate, however, and it is good for us to take a moment or two and reflect upon our blessings, no matter how small or insignificant they might seem.

Here are the things I am thankful for this year:

  1. I am gainfully employed. I work in the building that houses the local job center and I see so many people in the lobby and elevator visiting that office.  I’ve chatted with several of them in passing and some are so sincerely wanting work and are at their wit’s end – it makes me sad.  On days at work when I want to pull my hair out, I remind myself that I am lucky to have a job and to just “get over it.”
  2. My parents. For some reason, practically every electronic device, appliance, and automobile I own has decided to go on the fritz in the past year in a big way.  I despise myself when I have to borrow from my mom and dad, but they are more than happy to lend it and I feel fortunate that they’ve got my back.  I know it’s not always going to be that way.
  3. Smartphones. I recently broke down and bought a Google Droid.  I am continually amazed by how much convenience is afforded in one small device that fits in the palm of your hand.  Ten years ago, I complained to a friend that I wanted a single device to replace my music player, my camera, and my PDA.  Apparently I wasn’t the only person who felt that way and I’m glad the tech giants were listening.
  4. Holiday music. I listen to holiday tunes starting in July, but they become very prevalent around this time of year (which means more variety and listening options).  My favorites are the oldies – Bing Crosby, Perry Como, Andy Williams, etc.  When I was very young, I had a record player and adored my Perry Como and Andy Williams Christmas albums.  Hearing those songs is like a time machine to the days when life was simple, and my brother and I woke our parents up at 5 am because we couldn’t wait to get started opening our presents.  Holiday music = nostalgia = good feelings.
  5. Online shopping. I used to do the Black Friday insanity – camping out at my store of choice at 3 a.m. to get the “good stuff” before it was gone.  Those days are over for me.  I do all my shopping online, where the deals are just as good if not better than in the stores.  Once again, hooray for technology.
  6. The nonprofit sector. I know that there are many days when we feel like we are beating our heads against a wall.  When I think about how many lives our sector touches and the work that we collectively accomplish, however, I can’t help but feel grateful that nonprofits do exist.  I cannot imagine leading a life driven solely by making money and I am grateful that I can work in a place that has meaning and a mission.
  7. President Obama. People are starting to complain that he isn’t effecting change fast enough.  Give the man a break already.  He’s taken the leadership mantle under the worst possible conditions – do we really want him making snap decisions?  I like that he looks before he leaps and that he recognizes that problems that have been years in the making cannot be fixed overnight.
  8. Our soldiers. I frequently disagree with the decisions made by our government in sending troops overseas, but I appreciate the men and women who go forth willingly and do service for our country.  We owe them our respect and gratitude.
  9. Windows 7. It’s about time you got it right, Microsoft.  Thank you for finally making a decent OS that is stable, attractive and intuitive.
  10. Social networking. I love that I can talk to people with whom I went to high school so many years ago again.  I love that I can play a game with someone in Thailand or Norway.  We may not have figured out all the ways in which social networking can be leveraged, but I’m enjoying it as we do.

What are you thankful for this year?  🙂

I am going to boast for my colleagues.  They are modest.  I am not.  A little less than two weeks ago, they pulled off an incredible feat: they invoked a feeling of warmth between me and technology.  Now, don’t get me wrong, I like technology quite a bit.   Unfortunately, technology doesn’t like me.  See, I believe my technological challenges are a direct result of an electro-magnetic field that surrounds me.  Anything electronic that enters this field is promptly rendered inoperable.  Any Dell, Apple, or Verizon Wireless technician will verify this. (Ask them about it. They know me by name). 

 Therefore, anyone who can simplify technology = instant super hero.  Jeff and Cindy, you are my super heroes!  As usual TechNow was a smash! Thanks for providing a forum for accidental techies.  Thanks for making technology fun, interesting and (perhaps most important) uncomplicated.  Thanks for amassing top-notch presenters, participants, and exhibitors. And, lastly, thank you for unabashed musical renditions from the Sound of Music. 

Jeff, Cindy, and all TechNovians, here’s to you!

 

 

Last Thursday was the Bayer Center’s annual TechNow conference.  This year, it featured terrific breakout sessions on everything from thin client computing and greening your IT to how to make oneself over from accidental techie to intentional techie.  Also, there was plenty of networking.  Some participants won fabulous prizes including a 32″ plasma TV.  Also, Ami Dar from idealist.org gave a keynote speech that managed a rare feat: it was both practical and inspiring.

As if all that weren’t enough, this year’s conference featured a musical number that turned into a sing along.  See the “studio version” on the conference web site or the live performance below.  And save the date:  next year’s TechNow is tentatively scheduled for October 28, 2010.