Clearly the big difference between for-profits and nonprofits and governments is that pesky little word profit. Social-sector organizations are mission-driven, not profit-driven. So instead of the bottom line being strictly money — although that’s necessary to keep the doors open — the real reason for these organizations’ existence is public service.
Jim Collins, author of Good to Great, just published a supplement to his book that talks about how social sector organizations should think about their strategy, or economic engine, not in terms of profit but in terms of resources. Collins says, “The critical question isn’t ‘How much money do we make?’ but ‘How can we develop a sustainable resource engine to deliver superior performance relative to our mission?’”
Based on Collins’ research of hundreds of social sector companies, the resource engine has three components, which can be developed into goals in the Balanced Scorecard areas.
- Time: How well does your organization attract staff and volunteers to contribute their efforts at normally lower than market wages? Think about developing goals in areas of people and learning.
- Money: How stable and sustainable is your cash flow? In the Balanced Scorecard areas, this is covered in the customer perspective. Do you have solid programs that deliver to keep your cash flowing?
- Brand: How effective are you at developing relationships and emotionally connecting with potential supporters? Managing your brand is part of the operational area.
With these components, you can develop revenue goals to create an effective resource engine. And these types of goals make more sense to your staff and board, instead of talking about profit.