This Makes Running a Non-Profit Harder than Running Anything Else

In my line of work, I interact with hundreds of people a year, and connect with individuals from diverse social and professional backgrounds. I've thus spent a good part of the last 8 years understanding how businesses are run and talking to business leaders about the challenges faced in doing so. While the starting point to address business challenges for most leaders is in understanding their customers' needs, this isn't that straightforward for leaders of non-profit organizations.

Who is the customer?

Profit-making organizations have it easy: They know exactly who their customers are and their income is derived from these customers. However, for a non-profit, is the customer their donors who actually pay for the services that they never even receive? Or is it the beneficiaries or clients of the non-profit's mission that seldom pay up but are the actual recipients of the services provided by the non-profit? Or could it even be that the volunteers and people working for non-profits are the actual customers, since without the people, there would be no organization to sustain.

The problem of identifying who the actual customer really is, and building an organizational strategy to cater to the needs of these customer groups is what makes running a non-profit harder than running anything else. And this dilemma eludes to the conclusion that non-profits need to develop a strategy beyond their mission statement.

The triple-customer approach

Donor is the customer: Simply acknowledging the donor as the customer can be a double-edged sword. This would effectively mean that programs, strategies, and resource allocation would solely be dictated by the donor group without really taking the needs of the clients into account. For example, a donor would like to sponsor a school development program in a posh locality that houses some of their important corporate clients. While this may help the donor advance their business interest, it will seldom align with the mission of the non-profit. Almost every non-profit leader will acknowledge the above situation to be the most common problems encountered while running their organization.

Clients are the customer: A non-profit that only acknowledges their beneficiaries or clients as their customer, ends up shutting shop sooner that they would have ever imagined. Understanding the needs of their clients can help design programs, build strategies, and develop capabilities necessary to cater to their needs. But if there are no donors and volunteers to buy into the mission of the non-profit, this approach will jeopardize the financial stability of the organization. For example, a minority ethnic community that isn't favored by the political landscape of their country may never end up getting financial resources from the government. While non governmental organizations would see this as a pressing problem to address and a worthwhile community to cater to, they may find it hard to get corporate donors to support their mission. This is because of the looming fear of getting into the bad books of the government which could eventually affect the core business operations of the corporate donor.

Volunteers & staff are the customer: Statistics show that the monetary value of annual man-hours contributed by volunteers in the United States is much larger than the sum of all financial contributions made to charities. Additionally, while most full-time staff are paid to work at a non-profit, their salaries are often lower than their for-profit counterparts. This effectively means that staff are also volunteering with their skills and time towards solving a social issue. The above arguments lay a strong emphasis on the need for non-profits to value their people more than any other customer group. But, this may not be the most prudent approach from a financial stability as well as social impact lens. Organizations that cater to the needs of their people while ignoring the needs of the donors or the communities they work for, end up being a pseudo-impact entities that have little to show for in terms of advancing their social mission.

Conclusion

As much as we like to think that non-profits do not compete with each other, this has never been further from the truth in today's day and age. The resources that non-profits compete for are limited and this makes the industry one of the most aggressive in terms of competition. They compete for donors against other fund-raising organizations, they compete for the time of volunteers against other personal obligations and opportunities, and they even compete for their clients: If people do not choose to use the benefits provided, a non-profit group cannot fulfill its social mission. Worse yet, each set of customers wants something different. Creating value for one segment doesn’t automatically satisfy the others. If strategy is about serving a set of customer needs better than competitors do, non-profit organizations must find a way to simultaneously fill the needs of each one of their customer groups.

The problem is, no organization can follow three unrelated strategies to create three different kinds of value for three separate stakeholder groups. A single, overarching strategy must be developed to simultaneously meet the needs of all three 'customers' in a way that is both internally consistent and mutually reinforcing.