3 Reasons Running a Successful Nonprofit is Harder Than Running a Business

What if you had a dollar for every time someone told you your nonprofit should operate more like a business? Would you be rich? I thought so.

There are so many reasons why that line of thinking is harmful, but this one tops my list: running a successful nonprofit is actually much, much more difficult than running a successful business. Why? Here are just three reasons:

Stakeholder dynamics are complex 

Most for-profit companies are well-served by that old adage, “the customer is always right.” Sure, many for-profit companies have other stakeholders to consider, such as their board of directors, shareholders and employees, but ultimately, everyone is pretty clear on the fact that unless the customer (the person exchanging money for the product or service) is satisfied, the business will fail.

In a perfect world, your nonprofit would be able to prioritize the needs and preferences of its “customers” – the people and communities you exist to serve – above all else. But there’s a big challenge that keeps many organizations from doing so. Except in the case of nonprofits with earned income models, a nonprofit’s “customers” are not the same stakeholders who support the organization financially. That financial support often comes from other stakeholders: individual donors, foundations and corporate partners who fund a nonprofit’s operations and make it possible for the organization to keep providing the services and programs its “customers” want and need. And because money makes the world go ‘round, your nonprofit likely feels pressure at times to put the preferences of donors and funders above those of the people and communities you exist to serve. Listening to what your “customers” want and need from your organization and continually evolving to respond to it is hard enough. Ensuring your donors and funders are aligned around those same priorities so that your organization can remain both financially solvent, and do right by the people and communities you exist to serve can sometimes feel downright impossible.

Success is difficult to define and even harder to measure

Sure, for-profit companies have a whole slew of performance metrics they like to measure and track. But here again, everyone is pretty much on the same page that unless a business is turning a profit (at least after its startup phase has passed), it is on the fast track to failure. Success = profit in the business world.  Plain and simple.

Success is much more difficult to define in the nonprofit sector, and it is even harder to measure. Ultimately,  most organizations will agree that it comes down to making an impact on your mission, but by nature, that means there are as many definitions of nonprofit success as there are nonprofits themselves. Your organization cannot just set a profit goal and track its progress against it. Instead, you must narrowly define the scope of your mission in quantifiable terms, and find a way to track a variety of outcomes that come together to advance it, some of which can take ages to materialize. It’s expensive, complex, time-consuming work, and even when nonprofits do it well, it’s often misunderstood by donors and funders.

Social impact is a long game

When a for-profit business launches a new product or service, they can typically get a sense of its success relatively quickly. Either it sells, or it doesn’t. At the very most, it may take a year or two to get a read on whether a business innovation is working.

It’s a different story in the nonprofit sector. Social impact is a long game, and it can take years, or even decades to determine if what you’re doing is making the difference you intended. Take, for example, iMentor. The organization’s mission is as follows:

“iMentor builds mentoring relationships that empower first-generation students to graduate high school, succeed in college, and achieve their ambitions.”

Social impact is a long game, and it can take years, or even decades to determine if what you’re doing is making the difference you intended. Click To Tweet

iMentor begins working with young people during their freshman year of high school, but determining success relative to their mission on an individual level takes at least eight years from the time someone enters the program to the time they graduate from college. To truly get a sense of whether what they’re doing is having an impact on that last part of the mission – helping young people “achieve their ambitions” – it would require staying in touch with students even longer, into their post-college years. That’s not an easy feat. Even when organizations do manage to track their impact over the long haul, the necessity of doing so makes it extremely challenging to make real-time adjustments based on data about what’s working.

It’s hard, but you give us hope

You clearly deserve more credit for all the complex challenges you must face in your quest to make a difference at your nonprofit. Your job is one of the hardest ones out there, but you constantly amaze me with your ability to overcome obstacles like the ones I’ve ranted about here (yes, these only scratch the surface) and make a difference for the people and communities you work with. Thank you for all that you do!

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