Managing the Nonprofit Organization by Peter F. Drucker

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This summary makes extensive use of direct quotes from the book, either “in quotation marks” ...

... or in block quotes.

The summarizer’s notes and opinions are [written in square brackets].

Preface

Individual burnout ... is so acute in non-profits precisely because the individual commitment to them tends to be so intense.

Non-profits face very big and different challenges.

The first is to convert donors into contributors. ... We know that we can no longer hope to get money from “donors”; they have to become “contributors.”

It is much more than just getting extra money to do vital work. Giving is necessary above all so that the non-profits can discharge the one mission they all have in common: to satisfy the need of the American people for self-realization, for living out our ideals, our beliefs, our best opinion of ourselves. To make contributors out of donors means that the American people can see what they want to see---or should want to see---when each of us looks at himself or herself in the mirror in the morning: someone who as a citizen takes responsibility. Someone who as a neighbor cares.

The second major challenge for the non-profits: to give community and common purpose. ... It is working as unpaid staff for a non-profit institution that gives people a sense of community, gives purpose, gives direction. ... “Here I know what I am doing. Here I contribute. Here I am a member of a community.”

Precisely because volunteers do not have the satisfaction of a paycheck, they have to get more satisfaction out of their contribution. They have to be managed as unpaid staff.

Part One: The Mission Comes First

—and your role as a leader

1. The Commitment

The first job of the leader is to think through and define the mission of the institution.
Setting Concrete Action Goals

A mission statement has to be operational, otherwise it’s just good intentions. A mission statement has to focus on what the institution really tries to do and then do it so that everybody in the organization can say, This is my contribution to the goal.

The task of the non-profit manager is to try to convert the organization’s mission statement into specifics. The mission may be forever—or at least as long as we can foresee. ... But the goal can be short-lived, or it might change drastically because a mission is accomplished.

Managers of non-profits also have to build in review, revision, and organized abandonment. The mission is forever ... the goals are temporary.

One of our most common mistakes is to make the mission statement into a kind of hero sandwich of good intentions. It has to be simple and clear. As you add new tasks, you deemphasize and get rid of old ones. You can only do so many things.

As you add on, you have to abandon. But you also have to think through which are the few things we can accomplish that will do the most for us, and which are the things that contribute either marginally or are no longer of great significance.

So you constantly look at the sate-of-the-art. You look at the opportunities in the community. ... The specific objective may change. Things that were of primary importance may become secondary or even totally irrelevant. You must watch this constantly, or else very soon you will become a museum piece.

The Three “Musts” of a Successful Mission

Look at strength and performance.

Look outside at the opportunities, the needs.

Look at what we really believe in.

And so one asks first, what are the opportunities, the needs? Then, do they fit us? Are we likely to do a decent job? Are we competent? Do they match our strengths? Do we really believe in this?

You need three things: opportunities, competence; and commitment. Every mission statement ... has to reflect all three or it will fall down on what is its ultimate goal, its ultimate purpose and final test. It will not mobilize the human resources of the organization for getting the right things done.

2. Leadership Is a Foul-Weather Job

Fortunately or unfortunately, the one predictable thing in any organization is the crisis. That always comes. That’s when you do depend on the leader.
The Problems of Success

Problems of success have ruined more organizations than has failure, partly because if things go wrong, everybody knows they have to go to work. Success creates its own euphoria. You outrun your resources. And you retire on the job, which may be the most difficult thing to fight.

If the market grows, you have to grow with it, or you become marginal.

The lesson for the leaders of non-profits is that one has to grow with success. But one also has to make sure that one doesn’t become unable to adjust. Sooner or later, growth slows down and the institution plateaus. Then it has to be able to maintain its momentum, its flexibility, its vitality, and its vision. Otherwise, it becomes frozen.

Hard Choices

Non-profit organizations have no “bottom line.” They are prone to consider everything they do to be righteous and moral and to serve a cause, so they are not willing to say, if it doesn’t produce results then maybe we should direct our resources elsewhere. Non-profit organizations need the discipline of organized abandonment perhaps even more than a business does. They need to face up to critical choices.

Once you acknowledge that, you can then innovate—provided you organize yourself to look for innovation. Non-profit institutions need innovation as much as business or governments.

The starting point is to recognize that change is not a threat. It’s an opportunity.

  • Unexpected Success in Your Own Organization
  • Population Changes
  • Changes in Mind-Set and Mentality

The lesson is, Don’t wait. Organize yourself for systematic innovation. Build the search for opportunities, inside and outside, into your organization. Look for changes as indications of an opportunity for innovation. To build all this into your system, you, as the leader of the organization, have to set the example.

First, organize yourself to see the opportunity. If you don’t look out the window, you won’t see it.

Then, to implement the innovation effectively, there are a few points you must be aware of. First, the most common mistake—the one that kills more innovations than anything else—is the attempt to build too much reinsurance into the change, to cover your flank, not to alienate yesterday.

Next, you have the problem of organizing the new. It must be organized separately. ... If you put new ideas into operating units ... the solving of the daily crisis will always take precedence over introducing tomorrow. ... And yet you have to make sure the existing operations don’t lose the excitement of the new entirely. Otherwise, they become not only hostile but paralyzed.

The Innovative Strategy

You need ... a way to bring the new to the marketplace. Successful innovation finds a target of opportunity. Somebody who is receptive, who welcomes the new, who wants to succeed and ... has enough stature, enough clout in the organization so that, if it works for him or her, the rest of the organization will say, Well, there must be something to it.

If you first plan and then try to sell, you’re going to miss the important things. ... Selling has to be built into planning, and that means involving the operating people. But don’t forget one thing: everything new requires hard work on the part of true believers—and true believers are not available part time.

How To Pick a Leader

The first thing to look for is strength—you can only perform with strength—and what they have done with it.

Second, ... look at the institution and ask: What is the one immediate key challenge?

Then ... look for ... character or integrity. A leader sets an example, especially a strong leader. He or she is somebody on whom people, especially younger people, in the organization model themselves.

In the non-profit agency, mediocrity in leadership shows up almost immediately. One difference clearly is that the non-profit has a number of bottom lines—not just one. ... You deal with balance, synthesis, a combination of bottom lines for performance.

The non-profit executive does not have the luxury of dealing with one dominant constituency, either.

You can’t be satisfied in non-profit organizations with doing adequately as a leader. You have to do exceptionally well, because your agency is committed to a cause. You want people as leaders who take a great view of the agency’s functions, people who take their roles seriously—not themselves seriously.

Your Personal Leadership Role

The new leader of a non-profit doesn’t have much time to establish himself or herself. Maybe a year. To be effective in that short a time, the role the leader takes has to fit in terms of the mission of the institution and its values. ... To work, the role has to fit in three dimensions. First, the role has to fit you—who you are. ... The role you take also has to fit the task. And, finally, the role has to fit expectations.

You have two things to build on: the quality of the people in the organization, and the new demands you make on them.

The leaders who work most effectively ... never say “I.” ... They don’t think “I.” They think “we”; they think “team.” They understand their job to be to make the team function. They accept the responsibility and don’t sidestep it, but “we” gets the credit. There is an identification ... with the task and with the group. This is what creates trust, what enables you to get the task done.

As a leader, you are visible; incredibly visible. And you have expectations to fulfill.

You are visible; you’d better realize that you are constantly on trial.

Basic leadership competences:

  • The willingness, ability, and self-discipline to listen. Listening is not a skill; it’s a discipline. Anybody can do it. All you have to do is keep your mouth shut.
  • The willingness to communicate, to make yourself understood. That requires infinite patience. ... You have to tell us again and again and again. And demonstrate what you mean.
  • Not to alibi yourself. Say: “This doesn’t work as well as it should. Let’s take it back and re-engineer it.” We either do things to perfection, or we don’t do them. We don’t do things to get by. Working that way creates pride in the organization.
  • The willingness to realize how unimportant you are compared to the task. Leaders need objectivity, a certain detachment. They subordinate themselves to the task, but don’t identify themselves with the task. The task remains both bigger than they are, and different. The worst thing you can say about a leader is that on the day he or she left, the organization collapsed.

When effective non-profit leaders have the capacity to maintain their personality and individuality, even though they are totally dedicated, the task will go on after them. They also have a human existence outside the task. Otherwise they do things for personal aggrandizement, in the belief that this furthers the cause. They become self-centered and vain. And ... jealous.

One gives one’s very best efforts. What attracts people to an organization are high standards, because high standards create self-respect and pride. ... It is the job of the leaders to set high standards on one condition—that they be performance-focused.

Most leaders I’ve seen were neither born nor made. They were self-made. We need far too many leaders to depend on the naturals.

It’s [the] willingness to make yourself competent in the task that’s needed that creates leaders.

The Balance Decision

One of the key tasks of the leader is to balance up the long range and the short range, the big picture and the pesky little details. You are always paddling a canoe with two outriggers—balancing—while managing a non-profit. One is the balance between seeing only the big picture and forgetting the individual person. ... The opposite danger is becoming the prisoner of operations. That’s much harder to avoid. The effective people do it very largely through their work in associations and other organizations.

Another [example], ... even harder to handle, is the balance between concentrating resources on one goal and enough diversification. If you concentrate, you will get maximum results. But it’s also very risky. Not only may you have chosen the wrong concentration, but—in military terms—you leave your flanks totally uncovered.

The even more critical balance, and the toughest to handle, is between being too cautious and being rash. Finally, there is timing. ... People who always expect results too soon.

As in all Aristotelian means, the first law is “Know thyself.” Know what is your degenerative tendency.

I’ve seen more institutions damaged by too much caution than by rashness.

Make sure you know your degenerative tendency and try to counteract it.

Then there is the balance decision between opportunity and risk. One asks first: is the decision reversible? If it is, one usually can take even considerable risks. In the non-profit institution, you constantly must gauge whether the financial dimension of a risk is too great. ... Then one asks: Is it a risk we can afford? All right, if it goes wrong, it hurts a little. Or is it a risk that, if things go wrong, will kill us? Or the trickiest of them all, the risk we can’t afford not to take.

The balance decisions are what we need non-profit leaders for, whether they are paid or volunteer.

The Don’t’s of Leadership

Far too many leaders believe that what they do and why they do it must be obvious to everyone in the organization. It never is. Far too many believe that when they announce things, everyone understands. No one does, as a rule. Yet very often one can’t bring in people before the decision. ... Effective leaders have to spend a little time on making themselves understood.

Don’t be afraid of strengths in your organization. ... You run far less risk of having able people around who want to push you out than you risk by being served by mediocrity.

Don’t pick your successor alone. ... You end up with carbon copies, ... weak. ... Leaders don’t pick their own successors. They’re consulted, but they don’t make the decision.

Don’t hog the credit.

Don’t knock your subordinates.

The most important do: Keep your eye on the task, not on yourself. The task matters, and you are a servant.

3. Setting New Goals — Interview with Frances Hesselbein

Frances Hesselbein was National Executive Director of the Girl Scouts of the United States of America, the world’s largest women’s organization, from 1976 to 1990.

The interview covers the development and introduction of a new Girl Scouts program: the Daisy Scouts for 5-year-olds. The program:

  • was market-driven (a need was seen)
  • sought targets of opportunity (areas and people willing to join)
  • provided training to volunteers, which was essential
  • emphasized recruiting volunteer leaders
  • considered volunteers as the most important market or customers
  • considered volunteers as unpaid staff

Drucker: You determine their job, you set the standard, you provide the training, and you basically set their sights high. ... Volunteer professionals ... get their satisfaction out of their work, not the paycheck.

Hesselbein: [Also] the recognition. It is important that someone says: “Thank you very much, you’ve made a major contribution.” This is an important part of the support and care of that volunteer workforce.

Drucker: Isn’t it pretty typical of the non-profit organization that it has more than one customer?

Hesselbein: Rarely does a non-profit organization have “a” customer. If we market to only one of our customers, I think we fail.

General conclusions about introducing a new program:

Hesselbein: You must carefully construct a marketing plan. Not just disseminate information about it, but understand all the ways there are to reach people and use them. Distributing written materials isn’t enough. You need people in the marketing chain. And there has to be continuing evaluation—getting feedback on how we are doing. And if a strategy is not working, regroup and move ahead in a different way.

4. What the Leader Owes — Interview with Max De Pree

Max De Pree is chairman of Herman Miller, Inc. and of the Hope College Board, and is a member of the board of Fuller Theological Seminary. He wrote Leadership Is an Art (1989).

De Pree: We come to life with a tremendous diversity of gifts. I think from there, a leader needs to see himself in a position of indebtedness. Leaders are given the gift of leadership by those who choose or agree to follow.

The leader owes certain assets to an organization. [E.g.] the ability to recruit the right people ... the ability to raise the necessary funds ... the values of the organization. The leader is accountable for expressing [the values], making them clear, and ensuring to the people in the organization that the values will be lived up to in a way in which decisions are made. Vision [and] agreed-upon work processes come under this heading.

Drucker: You develop people, not jobs.

De Pree: Yes, ... when you take the risk of developing people, the odds are very good that the organization will get what it needs.

Here we’re talking about potential. [This] ... also applies ... to the development of an organization. I think if we focus on goal achievement, we miss the chance we have of realizing our potential. Goal achievement is an annual matter related to the annual plan. But the realization of our potential, that’s a life matter.

Any time we talk about accountability and about achievement, it has to be clear that we are going to delegate thoroughly. Delegate with a certain abandon so that people have space in which to realize potential, in which to be accountable, in which to achieve.

A leader must have vision. It is natural for a leader to be a person who is primarily future-oriented. ... Those are not exactly the same things. I believe that the first duty of a leader is to define reality. Every organization, in order to be healthy, to have renewal processes, to survive, has to be in touch with reality.

We have to deserve the person who works for us. We owe him or her, which is what you meant by indebtedness. Because they are not committed to us by necessity; they are committed to us by choice.

Opportunity is clearly one of the most important things that we seek today in our working lives.

Mistakes are not terminal. Mistakes are part of education. ... When we challenge people on the high side, the odds are much better that we’re going to get both better performance and more development of the person.

Drucker: On two conditions. ... One has to be willing to give the person who tries a second and perhaps even third chance, but I wouldn’t waste my breath on people who don’t try. And then there has to be a mentor if you give that much load, that much demand, that much responsibility to beginners...

De Pree: The way in which you judge the quality of leadership [is] by what I would call the tone of the body, not by the charisma of the leader, not by how much publicity the company gets, or the leader gets, or any of that stuff. How well does the body adjust to change? ... deal with conflict? ... meet the needs of the constituency or customers?

Drucker: We are all used to talking about the leader as the servant of the organization. ... The leader starts out with the realization that he and the organization owe; they owe the customers, the clients, the constituency, ... the followers, ... [and the] volunteers. And what they owe is really to enable people to realize their potential, to realize their purpose in serving the organization.

5. Summary: The Action Implications

Non-profit institutions exist for the sake of their mission. They exist to make a difference in society and in the life of the individual. ... The first task of the leader is to make sure that everybody sees the mission, hears it, lives it. ... And yet, mission needs to be thought through, needs to be changed.

One looks to the outside for opportunity, for a need.

The mission is always long-range. It needs short-range efforts and very often short-range results.

But also we need to be result-driven. We need to ask, Do we get adequate results for our efforts? Is this their best allocation. ... Need ... by itself is not enough. There also have to be results.

Leadership is accountable for results. And leadership always asks, Are we really faithful stewards of the talents entrusted to us? The talents, the gifts of people ... [and] money. Leadership is doing. It isn’t just thinking great thoughts; it isn’t just charisma; it isn’t play-acting. It is doing. And the first imperative of doing is to revise the mission, to refocus is, and to build and organize, and then abandon.

The first action requirement [is] the constant resharpening, the constant refocusing, never really being satisfied. And the time to do this is when you are successful.

The next thing to do is to think through priorities. That’s easy to say. But to act on it is hard because it always involves abandoning things that look very attractive, that people both inside outside the organization are pushing for.

Leaders set examples. The leaders have to live up to the expectations regarding their behavior.

Ask yourself, as a leader, what do I do to set standards in the organization? What do I do to enable the organization to tackle new challenges, to seize new opportunities, to innovate? What do I do? ... Take action responsibility. What are my own first priorities, and what are the organization’s first priorities, what should they be?

In the non-profit ... increasingly there are only leaders ... paid and ... not paid. ... Mission and leadership are not just things to read about, to listen to. They are things to do something about. Things that you can, and should, convert from good intentions and from knowledge into effective action, not next year, but tomorrow morning.

Part Two: From Mission to Performance

—effective strategies for marketing, innovation, and fund development

1. Converting Good Intentions into Results

The non-profit institution is not merely delivering a service. It wants the end user to be not a user but a doer. It uses a service to bring about change in a human being. ... It creates habits, vision, commitment, knowledge. It attempts to become a part of the recipient rather than merely a supplier. Until this has happened, the non-profit institution has had no results; it has only had good intentions.

You need four things ... a plan, marketing, people, and money.

Non-profit institutions that do well used to think they didn’t need marketing. ... Nobody trusts you if you offer something for free. You need to market even the most beneficial service. But the marketing you do in the non-profit sector is quite different from selling. It’s more a matter of knowing your market—call it market research—of segmenting your market, of looking at your service from the recipient’s point of view.

To run a non-profit effectively, the marketing must be built into the design of the service. This is very much a top management job, although ... you need a lot of input from your people, from the market, and from research.

An important point to remember ... in designing a non-profit’s service and marketing is to focus only on those things you are competent to do. ... Don’t put your scarce resources where you aren’t going to have results. This may be the first rule for effective marketing.

The second rule, know your customers. Yes, I said customers. Practically everybody has more than one customer, if you define a customer as a person who can say no.

The design of the right marketing strategy for the non-profit institution’s service is the first basic strategy task: the non-profit institution needs market knowledge. It needs a marketing plan with specific objectives and goals. And it needs what I call marketing responsibility, which is to take one’s customers seriously. Not saying, We know what’s good for them. But, What are their values? How do I reach them?

The non-profit institution also needs a fund development strategy. ... The non-profit institution has to raise money from donors. It raises its money—at least, a large portion of it—from people who want to participate in the cause but who are not beneficiaries.

Almost by definition, money is always scarce in a non-profit institution. Indeed, a good many non-profit executives seem to believe that all their problems would be solved if only they had more money. In fact, some of them come close to believing that money-raising is really their mission.

But a non-profit institution that becomes a prisoner of money-raising is in serious trouble and in a serious identity crisis. The purpose of a strategy for raising money is precisely to enable the non-profit institution to carry out its mission without subordinating that mission to fund-raising. This is why non-profit people have now changed the term they use from “fund raising” to “fund development.” Fund-raising is going around with a begging bowl, asking for money because the need is so great. Fund development is creating a constituency which supports the organization because it deserves it. It means developing what I call a membership that participates through giving.

Your first constituency in fund development is your own board. ... You need a board that takes an active lead in raising money, whose members give both of themselves and by being fund-raisers, fund developers.

But you also want something else on the board which has to do with money: the ability to audit the balance between your program and your resources. That is what gives you assurance.

In fund development you appeal to the heart, but you also have to appeal to the head, and try to build a continuing effort. The non-profit manager has to think through how to define results for an effort, and then report back to the donors, to show them that they are achieving results.

You also have to educate donors so that they can recognize and accept what the results are.

This moves us to constituency building over the very long term. ... Building up a long-term constituency, people who remember, who are not giving simply because someone rings a doorbell. They see the support of the institution as self-fulfillment. That is the ultimate goal of fund development.

2. Winning Strategies

There is an old saying that good intentions don’t move mountains; bulldozers do. In non-profit management, the mission and the plan ... are the good intentions. Strategies are the bulldozers. They convert what you want to do into accomplishments.

Strategies ... are action-focused.

Improving What We Already Do Well

To work systematically on the productivity of an institution, one needs a strategy for each of the factors of production. The first factor is always people. It’s not a matter of working harder; ... It’s a matter of working smarter, and above all, of placing people where they can really produce. The second universal factor is money. How do we get a little more out of the [always scarce] money that we have? ... And the third factor is time.

One needs productivity goals—and ambitious ones. ... Set your objectives high. Not so high that people say this is absolutely absurd, but high enough so that they say: we’ve got to stretch.

Constant improvement also includes abandoning the things that no longer work; and it includes the innovation objective. ... What is our innovation strategy? Where are we going to do something different, or do the same thing quite differently? Set the goals—and go to work.

You can set goals that are not measurable but can be appraised and can be judged [qualitative goals].

Then you have to ask, What are the specific results I want? ... First, you need the goal, and it’s got to fit your mission. But it also has to fit the environment in which you work. Then you thing through specific results for specific areas.

Look at the ultimate beneficiaries—call them the market—the ultimate clients. ... Each of these groups [is] a separate market ... you go after them separately. And you develop a marketing plan. You will need money, and will have to allocate it sensibly. You will have to communicate and you will have to have feedback.

First, the goal must be clearly defined. Then that goal must be converted into specific results, specific targets, each focused on a specific audience, a specific market area. You may need a great many such specific strategies.

Next, you will need a marketing plan and marketing efforts for each target group. How are you really going to reach this specific segment? You now need resources—people, above all—and money. And the allocation of both.

Next comes communication—lost of it—and training. Who has to do what, when, and with what results? What tools do they need? ... You have to ask who must do what, and in what form they should get it so that it becomes their work.

Then you need logistics. ... What resources are required?

Finally, you ask: “When do we have to see results?” Try not to be impatient. But you must be able to see whether you are on course when the results come in. What feedback do you need? How do you measure your achievement ...? You need feedback and control points.

To carry out the process, you need to use both written and verbal communication. A written process has the great advantage that you can [review it with everybody]. Above all, you invite questions. But you also have to encourage people to come back and [ask questions verbally].

But there is one don’t on strategy. Don’t avoid defining your goals because it might be thought “controversial.”

With strategy, one always makes compromises on implementation. But one does not compromise on goals, does not pussy-foot around them, does not try to serve two masters.

Here is another don’t: Don’t try to reach different market segments with the same message.

How To Innovate

Usually, there is no lack of ideas in non-profit organizations. What’s more often lacking is the willingness and the ability to convert those ideas into effective results. What is needed is an innovative strategy. The successful non-profit organization is organized for the new—organized to perceive opportunities. Innovative organizations systematically look both outside and inside for clues to innovative opportunities.

One strategy is practically infallible: Refocus and change the organization when you are successful. ... At that point, let’s hope, you have some character in the organization who is willing to be unpopular by saying, “Let’s improve it.” If you don’t improve it, you go downhill pretty fast.

The great majority of major institutions that have gotten into real trouble ... are successes that rested on their laurels. ... When you are successful is the very time to ask, “Can’t we do better?” The best rule for improvement strategies is to put your efforts into your successes. Improve the areas of success, and change them.

The responsibility for this rests at the top, as in everything that has to do with the spirit of an organization. And so the executives who run innovative organizations must train themselves to look out the window, to look for change. The funny thing is, it’s easier to learn to look out the window than to look inside, and that’s also a smart thing to do systematically.

The change outside is an opportunity. ... Demographics ... is your first source.

Then you look inside your organization and search for the most important clue pointing the way to change: generally, it will be the unexpected success. Most organizations feel that they deserve the unexpected success and congratulate themselves on it. Very few see it as a call to action.

The first requirement for successful innovation is to look at a change as a potential opportunity instead of a threat.

The second question is, Who in our organization should really work on this? That’s a crucial question. Most new things need to be incubated. They need to be piloted by somebody who really wants that innovation, who wants it to grow, who believes in it. Everything new also gets into trouble, so look for somebody who really wants to commit himself or herself and who has enough standing in the organization.

Then thing through the proper marketing strategy. What are you really trying to do?

Look into the possibility of developing a niche. ... That is a strategy: if you come out with a specialty, don’t try to do everything for everybody.

The Common Mistakes

There are a few common mistakes in doing anything new.

One is to go from idea into full-scale operation. Don’t omit testing the idea. Don’t omit the pilot stage. If you do, and skip from concept to the full scale, even tiny and easily correctable flaws will destroy the innovation.

But also don’t go by what “everybody knows” instead of looking out the window. What everybody knows is usually twenty years out of date.

The next most common mistake is righteous arrogance. Innovators are so proud of their innovation that they are not willing to adapt it to reality. It’s an old rule that everything that’s new has a different market from the one the innovator actually expected.

Another common mistake is to patch up the old rather than to go all-out for the new.

There comes a point when one has to look at what the job requires, and design for the job, rather than saying, “This is how we’ve always done it. Let’s improve it a little bit.” This is one of the critical decisions. It is one of the crucial tasks of the executive to know when to say, “Enough is enough. Let’s stop improving. There are too many patches on those pants.”

Don’t assume that there is just the one right strategy for innovations. Every one requires thinking through anew. ... Before you go into an innovative strategy, don’t say, “This is how we do it.” Say, “Let’s find out what this needs. Where is the right place in the market? Who are the customers, the beneficiaries? What is the right way to deliver it? What is the right way to introduce it? Let’s not start out with what we know. Let’s start out with what we need to learn.”

When a strategy or an action doesn’t seem to be working, the rule is, “If at first you don’t succeed, try once more. Then do something else.” The first time around, a new strategy very often doesn’t work. Then one must sit down and ask what has been learned. ... Try to improve it, to change it and make another major effort. Maybe ... you should make a third effort. After that, go to work where the results are.

There are exceptions. ... But they are very rare. ... There are also true believers who are dedicated to a cause where success, failure, and results are irrelevant, and we need such people. They are our conscience. But very few of them achieve. ... So, if you have no results, try a second time. Then look at it carefully and move on to something else.

3. Defining the Market — Interview with Philip Kotler

Philip Kotler is a teacher at the J. L. Kellog Graduate School of Management of Northwestern University, and author of Strategic Marketing for Non-Profit Institutions.

Kotler: I felt very strongly that marketing, like the other business functions, was generic and universal, and applied to all institutions, and that it ought to be brought into the non-profit world more consciously.

Many institutions misunderstand it. They confuse marketing with either hard selling or advertising, and therefore, don’t show an aptitude for it.

The most important tasks in marketing have to do with studying the market, segmenting it, targeting the groups you want to service, positioning yourself in the market, and creating a service that meets needs out there. Advertising and selling are afterthoughts. ... The aim of marketing is to make selling unnecessary.

The shortest definition [of marketing] I’ve heard is that it is finding needs and filling them. I would add that it produces positive value for both parties. ... [When] you start with customers, or consumers, or groups you want to serve well—that’s marketing. If you start with a set of products you have, and want to push them out into any market you can find, that’s selling.

The problem with many sales-oriented or product-oriented organizations [is] that they think they have such a good product, they don’t understand why people are not rushing to buy it or to use it.

Every organization is swimming in a sea of publics. ... The problem marketing has to solve is, How do I get the response I want? The answer marketing gives is that you must formulate an offer to put out to the group from which you want a response. The process of getting that answer, I call exchange thinking. What must I give in order to get? How can I add value to the other party in such a way that I add value to what I want? Reciprocity and exchange underlie marketing thinking.

Marketing is now thought of as a process of segmenting, targeting, and positioning—I call it STP marketing.

Positioning raises the question: How do we put ourselves across to a market we’re interested in? How do we stand out in some way? You cannot be all things to all people. So most organizations engage in the search for their own uniqueness, what we might call a competitive advantage or advantages. That comes by cultivating certain strengths and putting them across as meaningful to the market you’re going after.

Drucker: So the mission may well be universal. And yet to be successful, the institution has to think through its strategy and focus on the main target groups in marketing and delivering its service. The same thing is true for fund-raising, isn’t it?

Kotler: Fund-raising requires careful identification of the appropriate sources of funds and the giving motives. Why does that donor give money? To whom does the donor give money?

Drucker: I think we need product differentiation in the non-profit institution as much as we need it in business.

Kotler: Marketing really is spurred by the presence and the increase in competition that the institution faces in a way that it never faced before. Most organizations don’t get interested in marketing when they are comfortable. Suddenly they find that they don’t understand their customers very well... And these institutions become aware of a competitive situation.

The chief executive officer should, of course, be the chief marketing officer. Marketing doesn’t get anywhere in an organizations without the head of the organizations getting interested in it, understanding it, and wishing to disseminate its logic and wisdom to the staff and people connected with the institution. Still, the CEO can’t do the marketing. The work has to be delegated to someone who is skilled in handling marketing. Most institutions appoint a director of marketing or a vice-president of marketing. ... There’s a difference, of course. The director of marketing is seen as a person who has “skills will travel,” and not someone who is in a policy-making or policy-influencing position. That’s why I favor a vice-president of marketing position, because that person really should sit with all the other officers as they try to visualize what the future of their institution will be.

Drucker: And how can we tell whether marketing in a non-profit institution ... is making a genuine contribution?

Kotler: Marketing is supposed to do the following. It is supposed to build up what I call share of mind and share of heart for the organization. ... A good marketing program will build up more awareness and more loyalty or bonding with the public you are trying to serve. ... It’s measurable through normal marketing research.

The [right] order [of marketing is]: first, do so me customer research to understand the market you want to serve and its needs. Second, develop segmentation and be aware of different groups that you’re going to be interacting with. Third, develop policies, practices, and programs that are targeted to satisfy those groups. And then the last step is to communicate these programs. Too many ... non-profit organizations go right into advertising before they’ve gone into the other three steps, and that’s really doing things backwards.

I’ve often said that non-profit organizations that have no marketing, or little marketing, will probably take five to ten years to really install effective marketing procedures and programs if they’re fully committed to installing them. And mind you, many organizations give up after one or two years. ... It takes five to ten years because marketing is more than a department, it’s really everyone in the organizations pursuing one goal and that is to satisfy the customer, to serve the customer.

Marketing in a non-profit organization becomes effective when the organization is very clear about what it wants to accomplish, has motivated everyone in the organization to agree to that goal and to see the worthwhileness of that goal, and when the organization has taken the steps to implement this vision in a way which is cost-effective, in a way which brings about that result.

Marketing is a way to harmonize the needs and wants of the outside world with the purposes and the resources and the objectives of the institution.

4. Building the Donor Constituency — Interview with Dudley Hafner

Dudley Hafner is executive vice-president and CEO of the American Heart Association.

Drucker: What we used to call fund-raising, we now call fund development. [Why?]

Hafner: It’s recognizing that your true potential for growth and development is the donor, is someone you want to cultivate and bring along in your program. Not simply someone to collect this year’s contribution from.

It applies to all of the non-profit organizations. One of the things that helps an organization move forward is to have a broad, sound, solid advocacy base. One of the places to develop that is within your giver group. You need those advocates.

Drucker: It must greatly reduce the acquisition cost; the cost of getting the money, when you have a donor base that is already sold. You don’t have to sell every year.

Hafner: It’s just much more efficient to organize with the notion that you are going to have a long-term relationship with your donors, that you’re going to help them increase their support to the organization. But from an effectiveness standpoint, it also makes a lot of sense because for a non-profit organization to be really successful, you have to have a lot of people caring about how it does. You want that donor to take ownership in your program.

You have to have a very clear mission and very clear goals.

Development means bringing the donors along, raising their sights in terms of how they can support you, giving them ownership in the outcome of your organization. That takes a long-term strategy rather than putting together an annual campaign to go out and collect money.

Drucker: You have to think through to whom you make sense.

Hafner: Then appeal to them in a very forceful, forthright manner.

People [who] get involved ... do become advocates.

Drucker: What kind of materials do you supply [to local groups]?

Hafner: We have a prescribed structure that we offer to the local leadership. We have job descriptions. We have a way for them to formulate goals for now and five years out. And then we have the materials that support each one of those elements of the fund-raising.

For long-term growth of the an organization, you have to appeal to the rational in the individual as well as the emotional part of the individual.

What we’ve found in asking for a specific gift is that it dramatically improves the return in our campaign.

Once you’ve given a gift that is suggested, you fall into a category that the non-profits should pay special attention to: the long-term strategy of upgrading that gift.

Drucker: Your market research tries to identify two things, to use technical terms: both market segmentation and market value expectations.

You also look upon fund development as an educational campaign, not just to get money but to strengthen [your] objectives.

Hafner: You have to have a strategy for your fund development and know what you expect out of the various strategies, what your return expectations are. Then you measure your success against that.

Drucker: If you were to pick out one or two factors that are crucial to fund development and fund-raising, ... what would you pick out?

Hafner: The care and treatment and cultivation of the donor. The second thing I would do is ask for a gift that is in relationship to the individual’s ability to give. Those two things will give you long-term, stable growth. It will give you broad-based advocacy, and I think those are the two most important parts.

Drucker: I think the strongest thing you said just now to me is that fund development is people development. Both when you talk of donors and when you talk of volunteers. You are building a constituency. You’re building understanding, you’re building support. You’re building satisfaction, human satisfaction in the process. That is the way to create the support base you need to do your job. But it’s also the way you use your job to enrich the community and every participant. And it’s based on clear mission, on extensive and detailed knowledge of the market, of making demands on both your volunteers and your donors, but also on feedback from your performance, which, I think, is something on which a good many non-profits organizations are pretty weak. You never hear from them what the results are.

5. Summary: The Action Implications

Strategy converts a non-profit institution’s mission and objectives into performance. Despite its importance, however, many non-profits tend to slight strategy. It seems so obvious to most of them that they are satisfying a need, so clear that everybody who has that need must want the service the non-profit institution has to offer. One central problem is that too many non-profit managers confuse strategy with a selling effort. Strategy ends with selling efforts. It begins with knowing the market—who the customer is, who the customer should be, who the customer might be. ... The non-profit institution needs a marketing strategy that integrates the customer and the mission.

An effective non-profit institution also needs strategies to improve all the time and to innovate. The two overlap. Nobody can ever quite say where an improvement ends and an innovation begins.

And then the non-profit institution needs a strategy to build its donor base. It needs to develop a donor constituency.

All three of these strategies begin with research... They require organized attempts to find out who the customer is, what is of value to the customer, how the customer buys.

The most important person to research is the individual who should be the customer. ... The most important knowledge is the potential customer.

This understanding of the importance of strategy is particularly crucial to non-profit managers when it comes to their donors.

The ones that get results—the ones that attract and build a fund constituency—say, “This is what you need. These are the results. This is what we do for you.” They look upon the donor as a customer. This is the essence of a strategy: it always starts out with the other side.

The next step in non-profit strategy ... is the training of your own people. ... The way to train people is behaviorally: This is what you do.

In non-profit management, training doesn’t apply only to the employees; training volunteers may be even more essential, especially in an organization in which volunteers are the interface with the customers, with the public.

When it comes to introducing something new, when it comes to innovation, non-profit strategy requires careful thought and planning: where to start and with whom. Start with people who want the new to succeed. Don’t try to have everybody in the organization run with the new first. That route always gets into trouble.

Look for a target of opportunity, for somebody in the organization who wants the new, who is convinced of it, who is committed to it. The strategy in innovation is to think through this process at the start, so that you can identify somebody willing to work hard at making the new successful, and somebody whose success then becomes a multiplier in the organization.

Knowing the customer also enables the non-profit organization ... to know what results to expect. It is important to define goals and know what realistically should work. ... Then one can feed back from results.

Strategy also demands that the non-profit institution organize itself to abandon what no longer works, what no longer contributes, what no longer serves. ... If you don’t build [abandonment] in, you’ll soon overload your organization and put good resources where the results don’t follow.

The question always before the non-profit executive is: What should our service do for the customer that is of importance to that customer? Then think through how the service should be structured, be offered, be staffed. End up with nuts and bolts: What to do, when to do, where to do. And most importantly, who is to do it?

Strategy begins with the mission. It leads to a work plan. It ends with the right tools—a kit, say... Without that kit, there is no strategy.

The last thing to say about strategy is that it exploits opportunity, the right moment. ... The need presents itself in a specific form, and it is the function of research to find out, at this time, what that form is.

Strategy commits the non-profit executive and the organization to action. Its essence is action—putting together mission, objectives, the market—and the right moment. The tests of strategy are results. It begins with needs and ends with satisfactions. For this you need to know what the satisfactions should be for your customers... What is really meaningful to them? Non-profit people must respect their customers and their donors enough to listen to their values and understand their satisfactions. They do not impose the executive’s or the organization’s own views and egos on those they serve.

Part Three: Managing for Performance

—how to define it; how to measure it

1. What Is the Bottom Line When There Is No “Bottom Line”?

Non-profit institutions tend not to give priority to performance and results. Yet performance and results are far more important—and far more difficult to measure and control—in the non-profit institution than in a business.

When non-profit executives face a risk-taking decision, they must first think through the desired results—before the means of measuring performance and results can be determined. The executive who leads must first answer the question, How is performance for this institution to be defined?

It is not enough for non-profits to say: We serve a need. The really good ones create a want.

As non-profit executives begin to define the performance that makes the mission of their institution operational, two common temptations have to be resisted. First: recklessness. It’s so easy to say that the cause is everything, and if people don’t want to support it, too bad for them. Performance means concentrating available resources where the results are. It does not mean making promises you can’t live up to.

But equally dangerous is the opposite—to go for the easy results rather than for results that further the mission. Avoid overemphasis on the things the institution can easily get money for, the popular issues, the easy things.

The non-profit does not get paid for performance. But it does not get money for good intentions, either.

Planning For Performance

Performance in the non-profit institution must be planned. And this starts out with the mission. ... For the mission defines what results are.

And then one asks: Who are our constituency, and what are the results for each of them?

One of the basic differences between businesses and non-profits is that non-profits always have a multitude of constituencies.

The first—but also the toughest—task of the non-profit executive is to get all of these constituencies to agree on what the long-term goals of the institution are. Building around the long term is the only way to integrate all these interests.

If you focus on short-term results, they will all jump in different directions. ... Unless you integrate the vision of all constituencies into the long-range goal, you will soon lose support, lose credibility, and lose respect. ... [Successful non-profit executives] start out by defining the fundamental change that the non-profit institution wants to make in society and in human beings; then they project that goal onto the concerns of each of the institution’s constituencies.

This kind of planning is quite different from what business people usually mean by the term. To formulate the plan successfully, non-profit executives think through the concerns of each of the institution’s constituencies. They try to understand what is really important... Long-term concerns must be identified. Integrating constituency goals into the institution’s mission is almost an architectural process, a structural process,. It’s not too difficult to do once it’s understood; but it’s hard work.

Moral Vs. Economic Causes

The discipline of thinking through what results will be demanded of the non-profit institution can protect it from squandering resources because of confusion between moral and economic causes.

Non-profit institutions generally find it almost impossible to abandon anything. Everything they do is “a good cause.” But non-profits have to distinguish between moral causes and economic causes. A moral cause is an absolute good. ... In an economic cause, one asks: Is this the best application of our scarce resources?

To believe that whatever we do is a moral cause, and should be pursued whether there are results or not, is a perennial temptation for non-profit executives—and even more for their boards. But even if the cause itself is a moral cause, the specific way it is pursued better have results. There are always so many more moral causes to be served than we have resources for that the non-profit institution has a duty—toward its donors, customers, and staff—to allocate its scarce resources for results rather than to squander them on being righteous. The non-profits are human-change agents. And their results are therefore always a change in people. ... The non-profit institution, ... has to judge itself by its performance in creating vision, standards, values, commitment, and human competence. The non-profit institution therefore needs to set specific goals in terms of its service to people. And it needs constantly to raise these goals—or its performance will go down.

2. Don’t’s and Do’s — The Basic Rules

Disregarding them will damage and may even impair performance.

Non-profits are prone to become inward-looking. People are so convinced that they are doing the right thing, and are so committed to their cause, that they see the institution as an end in itself. But that’s a bureaucracy. ... And that not only inhibits performance, it destroys vision and dedication.

In every move, decision, and policy, the non-profit institution needs to start out by asking, Will this advance our capacity to carry out our mission? It should start with the end result, should focus outside-in rather than inside-out.

Dissent ... is essential for effective decision making. Feuding and bickering are not. In fact, they must not be tolerated. They destroy the spirit of an organization.

Feuding and bickering ... usually are symptoms of the need to change the organization. It may have grown very fast and in the process outgrown its structure; nobody quite knows what he or she is responsible for. Then people begin to blame each other.

That’s a sign that you’d better look at your organization. Are you organized for yesterday rather than today? ... When the noise level rises, it’s a sign of discomfort. Your organization structure and the reality of your operation aren’t congruent anymore. Then you need a change in your structure.

A final don’t: Don’t tolerate discourtesy. ... Manners are the social lubricating oil that smooths away friction. ... One learns to be courteous—it is needed to enable different people who don’t necessarily like each other to work together. Good causes do not excuse bad manners. Bad manners rub people raw; they do leave permanent scars. And good manners make a difference.

The most important do is to build the organization around information and communication instead of around hierarchy. Everybody in the non-profit instead—all the way up and down—should be expected to take information responsibility. Everyone needs to learn to ask two questions: What information do I need to do my job—from whom, when and how? And: What information do I owe others so that they can do their job, in what form, and when?

Above all, people in the information-based organization need to take responsibility for upward communication.

In the information-based institution, people must take responsibility for informing their bosses and their colleagues, and, above all, for educating them. And then all members of the non-profit institution—paid staff and volunteers—need to take the responsibility for making themselves understood.

This requires that everyone think through and put down in writing what the organization should hold him or herself accountable for by way of contribution and results. Then, everybody has to make sure that this is understood from the bottom up, from the top down, and sideways.

This is also the one way to build mutual trust. Organizations are based on trust. Trust means that you know what to expect of people. Trust is mutual understanding. Not mutual love, not even mutual respect. Predictability. This is far more important in the non-profit organization, because typically it has to depend on the work of so many volunteers and on so many people whom is does not control.

You need mutual trust—and if you don’t know what to expect from one another, you will soon feel let down by that fellow or that woman next door. People assume—rightly so in a non-profit institution—that they are all dedicated to the same cause. So, when they are betrayed, or feel betrayed, it hurts much more. It’s more important in the non-profit institution than it is in a business to insist on the clarity of commitments and relationships, and on the responsibility for making yourself understood and for educating your co-workers.

Everyone believes in delegation. But it needs clear rules to become productive. It requires that the delegated task be clearly defined, that there are mutually understood goals and mutually agreed-on deadlines, both for progress reports and for the accomplishment of the task. Above all, it requires clear understanding of what the person who delegates and the person who takes on the assignment expect and are committing themselves to. Delegation further requires that delegators follow up. They rarely do—they think they have delegated, and that’s it. But they are still accountable for performance. And so they have to follow up, have to make sure that the task gets done—and done right.

Finally, it is the duty of the person to whom a task is delegated to inform the delegator of anything unexpected that happens, and not to say, “But I can take care of it.”

Standard Setting, Placement, Appraisal

For each person to take responsibility for his or her own contribution and for being understood requires standards. Standards have to be concrete.

Standards have to be set high; you cannot ease into a standard. ... Slow is different from low. Sure, at the beginning of a new effort with a new person, you go slow. You make mistakes. But the standard is clear.

Clear standards are particularly important in the non-profit institution that is both centrally run and a “confederation” of autonomous locals.

Next, such organizations need control of standards. That’s the most difficult thing to do. That’s where the chief executive officer needs not so much skill as respect, so that a local council will accept a veto from the center even though it doesn’t like it. ... A confederation requires that the top people constantly visit the organization’s various locations—that they do so personally rather than through staff.

And the people in the central organization must remind themselves all the time: We are the servants of the local chapter. ... They do the work. We are not their bosses; we are their conscience.

And the people in the local chapter ... must remind themselves all the time: we represent the larger institution. What we do or not do, and how we do it, is seen by all our constituents as the deeds, the standards, the personality of the entire organization.

Standards should be very high and goals should be ambitious. Yet they should be attainable. Indeed, they should be attained, at least by the star performers of the institution. The non-profit institution therefore needs to work hard at placing people where they can perform.

But one also needs to use the star performers to raise the sights, the vision, the expectations, and the performance capacity of the entire organization. One features performers. The best way—and the way that conveys the most recognition and builds the most pride—is to use star performers as the teachers of their colleagues.

People need to know how they do—and volunteers more than anyone else. For if there is no paycheck, achievement is the sole reward. Once goals and standards are clearly established, appraisal becomes possible. Sure, it’s the responsibility of the superior. But with clear goals and standards, the people who do the work appraise themselves.

An appraisal should always start out with what the person has done well. Never start out with the negative: You’ll get to it soon enough. But one can only base performance on strengths, on what people have got rather than on what they ain’t got.

And it is the function of any organization to make human strengths effective in performance and to neutralize human weaknesses. This is the ultimate test.

The Outside Focus

One more basic rule: Force your people, and especially your executives, to be on the outside often enough to know what the institution exists for. There are no results inside an institution. There are only costs. Yet it is easy to become absorbed in the inside and to become insulated from reality. Effective non-profits make sure that their people get out in the field and actually work there again and again.

And don’t let people stay forever in a staff position in the office. Rotate them regularly back into work in the field.

3. The Effective Decision

Executives, whether in a non-profit institution or in a business, actually spend little time on decision making. Far more of their time is spent in meetings, with people, or in trying to get a little information. Yet it’s in the decision that everything comes together. That is the make or break point of the organization. Most of the other tasks executives do, other people could do. But only executives can make the decisions.

The least effective decision makers are the ones who constantly make decisions. The effective ones make very few. They concentrate on the important decisions.

The most important part of the effective decision is to ask: What is the decision really about? Very rarely is a decision about what it seems to be about. That’s usually a symptom.

Decisions always involve risk taking. And effective decisions take a lot of time and thought. For this reason, one doesn’t make unnecessary decisions.

And don’t make decisions on trivia. ... Don’t waste time on them.

Opportunity and Risk

One starts out with the opportunity, not with the risk: If this works, what will it do for us? Then look at the risks. There are three kinds of risks.

There is the risk we can afford to take. If it goes wrong, it is easily reversible with minor damage. Then there is the irreversible decision, when failure may do serious harm. Finally there is the decision where the risk is great but one cannot afford not to take it.

The Need For Dissent

All the first-rate decision makers ... had a very simple rule: If you have consensus on an important matter, don’t make the decision. Adjourn it so that everybody has a little time to think. Important decisions are risky. They should be controversial. Acclamation means that nobody has done their homework.

Because it is essential in an effective discussion to understand what it is really about, there has to be dissent and disagreement. If you make a decision by acclamation, it is almost bound to be made on the apparent symptoms rather than on the real issue. You need dissent; but you have to make it productive.

Instead of arguing what is right, assume that each faction has the right answer. But which question is each trying to answer? [They each see a different part of the reality.] Then, you gain understanding. You also gain, in many cases, the ability to bring the two together in a synthesis. ... Look upon dissent as a means of creating understanding and mutual respect.

Emotions always run high over any decision in which the organization is at risk if that decision fails, or in one that is not easily reversible. The smart thing is to treat this as constructive dissent and as a key to mutual understanding.

If you can bring dissent and disagreement to a common understanding of what the discussion is all about, you create unity and commitment. ... In essentials unity, in action freedom, and in all things trust. And trust requires that dissent come out into the open, and that it be seen as honest disagreement.

This is particularly important for non-profit institutions, which have a greater propensity for internal conflict than businesses precisely because everybody is committed to a good cause. Disagreement isn’t just a matter of your opinion versus mine, it is your good faith versus mine. Non-profit institutions, therefore, have to be particularly careful not to become riddled by feuds and distrust. Disagreements must be brought out into the open and taken seriously.

A second reason to encourage dissent is that any organization needs a nonconformist. If and when things change, it needs somebody who is willing and able to change. ... You want a critic—and one the organization respects.

Bringing disagreement into the open also enables non-profit executives to brush aside the unnecessary, the meaningless, the trivial conflict. It enables them to concentrate on the real issues.

Conflict Resolution

You use dissent and disagreement to resolve conflict. If you ask for disagreement openly, it gives people the feeling that they have been heard. But you also know where the objectors are and what their objections are. And in many cases you can accommodate them, so that they can accept the decision gracefully.

Another way to resolve conflict is to ask the two people who most vocally oppose each other, especially if both of them are respected community members, to sit down and work out a common approach. They do this by starting out with the areas in which they agree.

The third way is by defusing the argument. ... You play down the areas of disagreement and play up the areas of agreement.

One cannot prevent conflict. But one can make it ... secondary. And the best tool for this is the constructive use of dissent.

From Decision To Action

A decision is a commitment to action. But far too many decisions remain pious intentions. There are four common causes for this. One is that we try to “sell” the decision rather than to “market” it. [Difference between decision-making in Japan and in the West.]

A second way to lose the decision is to go systemwide immediately with the new policy or the new service. This jumps the testing stage. ... [Concentrate on targets of opportunity.]

Third: no decision has been made until someone is designated to carry it out. Someone has to be accountable—with a work plan, a goal, and a deadline. Decisions don’t make themselves effective; people do.

Fourth: Nobody really thought through who has to do what. [Communication, training, tools.]

Every decision is a commitment of present resources to the uncertainties of the future. This ... means that decisions will turn out to be wrong more often than right. At the least they will have to be adjusted.

The decision always has to be bailed out. That requires two things. First, that you think through alternatives ahead of time so that you have something to fall back on if and when things go wrong. Second, that you build into the decision the responsibility for bailing it out, instead of going in and arguing about who made what mistakes.

4. How to Make the Schools Accountable — Interview with Albert Shanker

Albert Shanker is president of the American Federation of Teachers.

Discusses performance from the perspective of schools and teaching.

Shanker: I think the priority is to assess achievement longer range.

5. Summary: The Action Implications

Performance is the ultimate test of any institution. Every non-profit institution exists for the sake of performance in changing people and society. Yet, performance is also one of the truly difficult areas for the executive in the non-profit institution.

In a non-profit organization, there is no ... bottom line. But there is also a temptation to downplay results. There is the temptation to say: We are serving a good cause. ... That is not enough. ... Service organizations are accountable to donors, accountable for putting the money where the results are, and for performance.

There are different kinds of results. First, you have immediate results. Then, you have the long-term job of building on those first results.

We need to remind ourselves again and again that the results of a non-profit organization are always outside the organization, not inside.

One starts with the mission, and that is exceedingly important. What do you want to be remembered for as an organization—but also as an individual? The mission is something that transcends today, but guides today, informs today. ... From the mission, one goes to very concrete goals.

Only when a non-profit’s key performance areas are defined can it really set goals. Only then can the non-profit ask: “Are we doing what we are supposed to be doing? Is it still the right activity? Does it still serve a need?” And above all, “Do we still produce results that are sufficiently outstanding, sufficiently different for us to justify putting our talents to use in that area?” Then, you can do the next important thing, which is every so often to ask: “Are we still in the right areas? Should we change? Should we abandon?”

One needs to define performance for each of the non-profit’s key areas.

Good intentions, good policies, good decisions must turn into effective actions. The statement, “This is what we are here for,” must eventually become the statement, “This is how we do it. This is the time span. This is who is accountable. This is the work for which we are responsible.” Effective organizations take it for grated that work isn’t being done by having a lovely plan. Work isn’t being done by a magnificent statement of policy. Work is only done when it’s done, by people, with a deadline. By people who are trained, who are monitored and evaluated, who hold themselves responsible for results.

The ultimate question, which I think people in the non-profit organization should ask again and again and again, both of themselves and of the institution, is: “What should I hold myself accountable for by way of contribution and results? What should this institution hold itself accountable for by way of contribution and results? What should both this institution and I be remembered for?”

Part Four: People and Relationships

—your staff, your board, your volunteers, your community

1. People Decisions

People decisions are the ultimate—perhaps the only—control of an organization. People determine the performance capacity of an organization. No organization can do better than the people it has. ... An effective non-profit manager must try to get more out of the people he or she has.

The quality of these human decisions largely determines whether the organization is being run seriously, whether its mission, its values, and its objectives are real and meaningful to people rather than just public relations and rhetoric.

[Those who make good people decisions] start out with a commitment to a diagnostic process.

Properly done, the selection process starts with an assignment—not merely with a job description. Next, the executive forces himself or herself to look at more than one person. ... Thirdly, while reviewing candidates, the focus must always be on performance. ... The right questions are: How have these people done in their last three assignments? Have they come through? Then, fourth, look at people's specific strengths. What have they shown they can do in their last three assignments.

How To Develop People

Any organization develops people; it has no choice. It either helps them grow or it stunts them.

What not to do. First, one doesn't try to build on people's weaknesses. ... If you want people to perform in an organization, you have to use their strengths—not emphasize their weaknesses. ... One can expect adults to develop manners and behavior and to learn skills and knowledge. But one has to use people's personalities the way they are, not the way we would like them to be.

A second don't is to take a narrow and shortsighted view of the development of people. One has to learn specific skills for a specific job. But development is more than that: it has to be for a career and for a life. The specific job must fit into this longer-term goal.

[Don't] establish crown princes ... "comers". ... Look always at performance, not promise.

With the focus on performance rather than potential, the non-profit executive can make high demands. One can always relax standards, but one can never raise them.

"Don't hire a person for what they can't do, hire them for what they can do." [slogan of the Association of the Handicapped]

Next, the non-profit executive must learn how to place people's strengths.

The lesson is to focus on strengths. Then make really stringent demands, and take the time and trouble (it's hard work) to review performance.

For all this to come together, the mission has to be clear and simple. It has to be bigger than any one person's capacity. It has to lift up people's vision.

One of the great strengths of a non-profit organization is that people don't work for a living, they work for a cause... That also creates a tremendous responsibility for the institution, to keep the flame alive, not to allow work to become just a "job."

That sense of mission should be a tremendous source of strength for any non-profit organization. But it comes with a price tag. The non-profit executive is always inclined to be reluctant to let a non-producer go. You feel he or she is a comrade-in-arms and make all kinds of excuses. ... If they try, they deserve another chance. If they don't try, make sure they leave.

Effective non-profit organizations also have to ask themselves all the time: Do our volunteers grow? Do they acquire a bigger view of their mission and greater skill? They look at the people who work for them not as a static resource, but as a dynamic, growing force.

The most important way to develop people is to use them as teachers. Nobody learns as much as a good teacher. Selecting someone to be a teacher is also the most effective recognition.

The final development tools is needed less for volunteers than it is for regularly employed staff workers, who can so easily become inbred and ingrown. Push them outside.

It is a common complaint that many bosses do not really want top-performing subordinates because they put pressure on them. That's just what an effective organization does want, and that's where a volunteer organization has an advantage. The volunteer who performs isn't out to get the paid executive's job, as a rule, and is not seen as a threat. ... You want performers to put on the pressure. You want them to ask: Why can't we do more? Why can't we do better?

Building The Team

The more successful an organization becomes, the more it needs to build teams. In fact, non-profit organizations most often fumble and lose their way despite great ability at the top and a dedicated staff because they fail to build teams. A brilliant man or woman at the top working with "helpers" functions only to a very limited extent; the organization outgrows what one person can do. Yet teams do not develop themselves—they require systematic hard work.

To build a successful team, you don't start out with people—you start out with the job. You ask: What are we trying to do? ... What are the key activities needed to achieve our results? Then, and only then, do you ask, What does each of the dozen people at the top have by way of strength? How do the activities and skills match? ... You identify individual strengths, then you match the strengths with key activities. And position your players to take action.

A common mistake is to believe that because individuals are all on the same team, they all think alike and act alike. Not so. The purpose of a team is to make the strengths of each person effective, and his or her weaknesses irrelevant.

Personal Effectiveness On The Job

Once the right match is made, there are two keys to a person's effectiveness in an organization. One is that the person understands clearly what he or she is going to do and doesn't ride off in all directions. The other is that each person takes the responsibility for thinking through what he or she needs to do the job. That done, the person goes to all the others on whom he depends [in person!]... and says, "This is what you are doing that helps me. This is what you are doing that hampers me. And what do I do that helps you? What do I do that hampers you?"

The individual who goes through these steps every six months will find that most obstacles disappear.

As an organization grows, the non-profit executive must also encourage people at all levels to ask themselves: What does our top management really have to know? I call that educating the boss. It fosters cohesion by forcing individuals to look beyond the scope of their own efforts, departments, and needs.

The Tough Decision

An effective non-profit executive owes it to the organization to have a competent staff wherever performance is needed. To allow non-performers to stay on means letting down both the organization and the cause.

One common problem is the person who has been in the same job twenty-two years and clearly finds no more stimulus left in it. ... The solution is "repotting"—to put the person in a different environment.

A tougher problem is the conflict non-profit executives often face between the need to ensure competence and the need for compassion. But the executives who agonize over this decision do worse than those who say, "We made a mistake. I cut. It's going to hurt, but I cut." It's usually cleaner, faster, and less painful.

The Succession Decision

The most critical people decision, and the one that is hardest to undo, is the succession to the top. ... Every such decision is really a gamble. The only test of performance in the top position is performance in the top position—and there is very little preparation for it.

You don't want a carbon copy of the outgoing CEO ... carbon copies are always weak. Be a little leery, too, of the faithful assistant who for eighteen years has been at the boss's side anticipating his or her every wish, but has never made a decision alone. ... Stay away, too, from the anointed crown prince.

Look at the assignment. ... What is going to be the biggest challenge over the next few years? Then look at the people and their performance. Match the need against proven performance.

In the end, what decides whether a non-profit institution succeeds or fails is its ability to attract and to hold committed people. Once it loses that capacity, it's downhill for the institution, and this is terribly hard to reverse.

Are we attracting the right people? Are we holding them? Are we developing them? ... Are we attracting people we are willing to entrust this organization to? Are we developing them so that they are going to be better than we are? Are we holding them, inspiring them, recognizing them? Are we, in other words, building for tomorrow in our people decisions, or are we settling for the convenient and the easy today?

2. The Key Relationships

One of the most basic differences between non-profit organizations and businesses is that the typical non-profit has so many more relationships that are vitally important. ... Every non-profit organization has a multitude of constituencies and has to work out the relationship with each of them.

Begin with the board. ... In the typical non-profit organization ... the board is deeply committed.

To be effective, a non-profit needs a strong board, but a board that does the board's work. The board non only helps think through the institution's mission, it is the guardian of that mission, and makes sure the organization lives up to its basic commitment. The board has the job of making sure the non-profit has competent management—and the right management. The board's role is to appraise the performance of the organization. And in a crisis, the board members may have to be firefighters.

The board is also the premier fund-raising organ... If a board doesn't actively lead in fund development, it's very hard to get the funds the organization needs.

A board that understands its real obligations and sets goals for its own performance won't meddle. But if you leave the board's role open and undefined, you'll get one that interferes with details and yet doesn't do its job.

In my experience, the chief executive officer is the conscience of the board.

Over the door to the non-profit's boardroom there should be an inscription in big letters that says: Membership on this board is not power, it is responsibility. ... Board membership means responsibility not just to the organization but to the board itself, to the staff, and to the institution's mission.

Another common problem is the badly split board. Every time an issue comes up, the board members fight out their basic policy rift. This is much more likely to happen in non-profit institutions precisely because the mission is, and should be, so important. In my experience, the role of the board then becomes both more important and more controversial. At that point, teamwork between chairperson and chief executive officer becomes absolutely vital.

Two-Way Relationships

Only two-way relationships work. Every organization wants stars and needs stars. But ... the star is not separate from the cast.

An effective non-profit executive starts building this two-way relationship with the staff, with the board, with the community, with donors, with volunteers, and with alumni by asking: "What do you have to tell me?" Not, "This is what I am telling you." That question brings problems out in the open. And the funny thing is that most of the problems that bother people so much turn out to be non-problems when you bring them out in the open.

Relations With The Community
Non-profit institutions serve one specific community interest. Each has to maintain relations with governmental agencies, with all the other institutions in the community, and with the community's people in genera. ... It requires that the service organization lives its mission. That is why volunteers are so important. They live in the community and they exemplify the institution's mission.

3. From Volunteers to Unpaid Staff — Interview with Father Leo Bartel

Father Leo Bartel is Vicar for Social Ministry of the Catholic Diocese of Rockford, Illinois.

Bartel: Our volunteers are now "colleagues." In fact, we shouldn't even talk of "volunteers" anymore; they are really "unpaid staff."

It seems to me ... that quality control is maintained because of the common vision. These people are truly dedicated. And we can depend on their goodwill.

If people are properly motivated ... developing competence becomes part of their very need.

We hold them to high standards. We have high expectations for them. I believe firmly that people will tend to live up to the expectations that others have for them.

Drucker: The board is there for specific assignments.

4. The Effective Board — Interview with Dr. David Hubbard

Reverend David Hubbard is president of Fuller Theological Seminary in Pasadena, California.

Hubbard: We need to think of the management of ... non-profit institution's as a partnership between the board and the professional staff.

A board needs to know that it owns the organization ... for the sake of the mission which that organization is to perform. Board members don't own it as though they were stockholders voting blocks of stock; they own it because they care. ... They actually own it in partnership because, in a sense, the organization belongs just as much to others.

[This partnership] starts with the way the mission of the institution is stated. And that mission itself needs to be stated with sufficient breadth to allow for flexibility. The mission needs to be welcoming of change. Then you need people who are open to that mission.

Board members are governors. ... Board members are sponsors, and here we get to their role in giving money and raising money. They are ambassadors—interpreting the mission of the institution, defending it when it's under pressure, representing it in their constituencies and communities. Finally, they are consultants; almost every trustee will have some professional skill which would be expensive if you had to buy it.

It's the old principle of no surprises for the boss. Keeping a board well informed is hard work. It takes time, it takes communication.

Presentations to an entire board without a lot of spadework, when feelings are strong and attitudes are entrenched, is very difficult. A board can con itself into unity and take a unanimous adversary stance to a proposal unless there is a lot of preliminary conversation on a one-on-one basis to develop advocacy for the idea within the board. The board has to have its own internal advocates.

You have to talk to the people who would be viewed as the point person on a particular issue. ... And you look particularly for pockets of opposition and work with them. ... You have to work with both sides and prepare the person, who may not, at first glance, look like a supporter, for the fact that the subject is coming up. You say, "You may not like it or support it. I'm not asking you to, but let me explain in a little detail why I think we need to do it."

If someone loses in a board vote, I make it my aim at the first possible break to go to the person who lost and thank him or her for the courage to express a contrary opinion.

Drucker: You depend on the board, and therefore you can be more effective with a strong board, a committed board, an energetic board, than with a rubber stamp.

Building relationships with the board is a crucial, central part of the task of the CEO.

Hubbard: An organization hasn't come anywhere near its full potential unless it sees the building of a great and effective board as part of the ministry of that organization.

5. Summary: The Action Implications

[Volunteers] are different from paid workers in a non-profit only in that they are not paid.

People require clear assignments. ... They need to know what the institution expects of them. But the responsibility for developing the work plan, the job description, and the assignment should always be on the people who do the work.

The effective non-profit executive finally takes responsibility for making it easy for people to do their work, easy to have results, easy to enjoy their work. It's not enough for them, or for you, that they serve a good cause. The executive's job is to make sure that they get results.

Part Five: Developing Yourself

—as a person, as an executive, as a leader

1. You Are Responsible

The first priority for the non-profit executive's own development is to strive for excellence. That brings satisfaction and self-respect.

Paying serious attention to self-development—your won and that of everyone in the organization—is not a luxury for non-profit executives.

You want constructive discontent.

The key to building an organization with such a spirit is organizing the work so everyone feels essential to a goal they believe in.

To Make A Difference

From the chief executive of a non-profit on down through the ranks of paid staff and volunteers, the person with the most responsibility for an individual's development is the person himself—not the boss.

You can only make yourself effective—not anyone else.

Creating a record of performance is the only thing that will encourage people to trust you and support you.

All the people I've known who have grown review once or twice a year what they have actually done, which part of that work makes sense, and what they should concentrate on.

Only by focusing effort in a thoughtful and organized way can a non-profit executive move to the big step in self-development: how to move beyond simply aligning his or her vision with that of the organization to making that personal vision productive. Executives who make a really special contribution enable the organization to see itself as having a bigger mission than the one it has inherited.

The critical factor for achieving this kind of success is accountability—holding yourself accountable. Everything else flows from that. ... The important thing is not that you have rank, but that you have responsibility. To be accountable, you must take the job seriously enough to recognize: I've got to grow up to the job. Sometimes that means acquiring skills. ... You ask: What do I have to learn and what do I have to do to make a difference?

Setting An Example

In all human affairs there is a constant relationship between the performance and achievement of the leaders, the record setters, and the rest. In human affairs, we stand on the shoulders of our predecessors.

An executive leads by example.

2. What Do You Want to Be Remembered For?

To develop yourself, you have to be doing the right work in the right kind of organization. The basic question is: "Where do I belong as a person?"
"Repotting" Yourself

Sometimes a change—a big change or a small change—is essential in order to stimulate yourself again.

The switch doesn't have to be something far afield.

When you begin to fall into a pleasant routine, it is time to force yourself to do something different. "Burnout," much of the time, is a cop-out for being bored.

The excitement is not the job—it is the result.

To build learning into your work, and keep it there, build in organized feedback from results to expectations. Identify the key activities in your work—perhaps even in your life. When you engage in such activities, write down what you expect to happen. Nine months or a year later, compare your expectations to what actually happened. From that you will learn what you do well, what skills and knowledge you need to acquire, what bad habits you have.

Look at the people in your own organization, your own environment, your own set of acquaintances. What do they do really well—and how do they do it? In other words, look for successes. ... Then try to do it yourself.

It's up to you to manage your job and your career. To understand where you best belong. To make high demands on yourself by way of contribution to the work of the organization itself. To practice what I call preventative hygiene so as not to allow yourself to become bored. To build in challenges.

Doing The Right Things Well

Most of us who work in organizations work at a surprisingly low yield of effectiveness. ... Effectiveness is more a matter of habits of behavior, and of a few elementary rules. ... In solo work, the job organizes the performer; in an organization, the performer organizes the job.

The first step toward effectiveness is to decide what are the right things to do. Efficiency, which is doing things right, is irrelevant until you work on the right things. Decide your priorities, where to concentrate. Work with your own strengths.

You identify strengths by performance. There is some correlation between what you and I like to do and what we do well. There is a strong correlation between what we hate to do and what we do poorly simply because we try to get it out of the way as fast as possible, with minimum effort, and postpone ... working on it at all.

Strengths are not skills, they are capacities. The question is not, can you read, but are you a reader or a listener, for instance? This particular characteristic is almost as strongly determined as handedness.

People have become more understanding in recent years of how strengths vary from person to person. ... Too many think they are wonderful with people because they talk well. They don't realize that being wonderful with people means listening well.

Self-Renewal

Expect the job to provide stimulus only if you work on your own self-renewal, only if you create the excitement, the challenge, the transformation that makes an old job enriching over and over again. Seeing both yourself and the task in a new dimension can sometimes expand this capacity.

The most effective road to self-renewal is to look for the unexpected success and run with it. Most people brush the evidence of success aside because they are so problem-focused.

The three most common forcing tools for sustaining the process of self-renewal are teaching, going outside the organization, and serving down in the ranks.

All the individuals who have the greatest ability for self-renewal focus their efforts. In a way, they are self-centered, and see the whole world as nourishment for their growth.

What Do You Want To Be Remembered For?
It is a question that induces you to renew yourself, because it pushes you to see yourself as a different person—the person you can become.

3. Non-Profits: The Second Career — Interview with Robert Buford

Robert Buford is chairman and CEO of Buford Television, Inc. (Texas), and founder of two non-profit institutions, Leadership Network and the Peter F. Drucker Foundation for Non-Profit Management.

Buford: Stay in touch with your constituency, or you run the risk that they will change and you won't. You'll be left a prisoner of your own tradition, a prisoner of the insiders in an organization and their desires, and will miss the role of a service organization, which is to serve.

4. The Woman Executive in the Non-Profit Institution — Interview with Roxanne Spitzer-Lehmann

Roxanne Spitzer-Lehmann is corporate vice-president of St. Joseph Health System, a chain of non-profit hospitals headquartered in California.

Spitzer-Lehmann: I think the best self-development is developing others. I'm fortunate enough that people will tell me when I'm wrong, when I come on too strong, and when I don't give them enough time to do their own thinking.

My role is not to give the answers. My role is to facilitate their brainstorming and thinking. And then to pull it together into something that we all go out and implement. My job is to establish the goal and the vision. Their job is to figure out how we can do it together.

5. Summary: The Action Implications

"You are responsible for allocating your life. Nobody else will do it for you." [Joshua Abrams] ... When we talk of self-development, we mean two things: developing the person, and developing the skill, competence, and ability to contribute. These are two quite different tasks.

Developing yourself begins by serving, by striving toward an idea outside of yourself—not by leading. Leaders are not born, nor are they made—they are self-made.

Change when you are successful—not when you're in trouble.

Self-development becomes self-renewal when you walk a different path, become aware of a different horizon, move toward a different destination. This is a time when outside help, a mentor, can provide useful help.

Probably the best of the nuts and bolts of self-development is the practice of keeping score on yourself. It's also the best lesson in humility.

Self-development is neither a philosophy nor good intentions. Self-renewal is not a warm glow. Both are action.

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