5 Reasons Why It’s Harder to Lead a Nonprofit than a For-Profit

 

By Marc Hardy, PhD
www.SharingFire.com

Business leaders role their eyeballs at me when I say that if someone can run a successful nonprofit then they can run a successful for-profit – but the opposite is not true. That’s a pretty audacious statement, but hear me out. The fact is that a top nonprofit leader needs to know all the business skills to run a company, plus skills that are not taught in business schools. In addition, a nonprofit leader’s resources to attract and retain talent are much more limited, and additional people skills are necessary to reduce attrition and turnover. Because of the difficulties they face, they are definitely in a league of their own. Let’s look at my assertions point by point:

1. Like business leaders, nonprofit leaders need to understand finance, human resources, marketing, strategic planning, communications, etc. In addition, as it becomes necessary for nonprofits to create additional revenue stream through creating products and starting social enterprises requires entrepreneurial knowledge and skills. Unlike for-profits, nonprofits cannot rely on stockholders to underwrite their growth. They must sell an idea to a donor who will not get a financial return on his or her investment and must be content with a social return. They don’t teach that in the business world.

2. Nonprofit leaders must also understand the grant proposal world and how to build relations with foundations and government funders. This, again, is not something that is taught in business schools or required of business leaders. It is an art and science and is learned over time. It is also very time consuming to write a successful grant and requires a good deal of teambuilding and inclusiveness, leadership skills that are difficult for many leaders.

3. Recruiting and managing volunteers is also an additional skill that nonprofit leaders must possess. In addition, CEOs must not only find dynamic volunteer board members, they must also manage them. Since they volunteer, their commitment to the organization may be more limited that a board member who is paid to be on a company board. When board members are paid, there is an expectation of performance and contribution. With volunteers, the relationship and motivations are more complicated and require the talents of inspiring others to be intrinsically, rather than extrinsically, motivated.

4. Nonprofit leaders must motivate their employees with incentives that are not primarily financial in nature. In addition, most nonprofits have limited insurance plans and underfunded or no retirement programs. So attracting top people to the sector is always a challenge and leaders have to rely on their ability to treat people well in other ways, such as showing them appreciation, helping them grow professionally and feeling like they are part of a family and a greater cause for good. Business leaders do not usually have possess those attributes, but if they do, the result is often profound and profitable.

5. Business people will often scoff at the efforts of nonprofits and point to the fact that they haven’t made much progress in making the world a better place. Many even insinuate that business is better at offering and instituting solutions to the local and global problems we face. But business has been around since the merchant class began in the 15th Century and if business could have solved society’s ills it would have done so by now. In fact, one of the reasons we have a nonprofit sector is because of “market failure,” the inability of the markets to address a particular ill or issue.

Take heart, nonprofit leaders. You are a special kind of leader doing very important work under very demanding circumstances. Being a nonprofit leader is harder than being a for-profit leader. But as Tom Hanks stated in the movie A League of the Own, “It’s supposed to be hard. If it wasn’t hard, anyone would do it. The hard is what makes it great!”

Marc Hardy, Ph.D. is the Director of Nonprofit Certificate Education at the University of Notre Dame. He speaks and writes on the subject of “Leadership through Sharing Fire,” (www.SharingFire.com) and can be emailed at DrMarc@SharingFire.com.

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