Managing the Non-Profit Organization: Principles and Practices

Contributors

Frances Hesselbein was from 1976 until 1990 National Executive Director of the world’s largest women’s organization, the Girl Scouts of the United States of America. She is now President of the Peter F. Drucker Foundation for Non-Profit Management.

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 is the author of Leadership Is an Art (Garden City, N.Y., 1989).

Philip Kotler teaches at the J. L. Kellog Graduate School of Management of Northwestern University in Evanston, Illinois. His pioneering work, Strategic Marketing for Non-Profit Institutions, first published in 1971, is now in its fourth edition.

Dudley Hafner is Executive Vice-President and CEO of the American Heart Association.

Albert Shanker is President of the American Federation of Teachers AFL-CIO.

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

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

Robert Buford is Chairman and CEO of Buford Television, Inc., in Tyler, Texas. He has founded two non-profit institutions, Leadership Network and the Peter F. Drucker Foundation for Non-profit Management.

Roxanne Spitzer-Lehmann is Corporate Vice-President of St. Joseph Health System, a chain of non-profit hospitals headquartered in Orange, California. She is the author of Nursing Productivity (Chicago, 1986).

Preface

Forty years ago, when I first began to work with non-profit institutions, they were generally seen as marginal to an American society dominated by government and big business respectively. In fact, the non-profits themselves by and large shared this view. We then believed that government could and should discharge all major social tasks, and that the role of the non-profits, if any, was to supplement governmental programs or to add special flourishes to them.

Today, we know better. Today, we know that the non-profit institutions are central to American society and are indeed its most distinguishing feature.

We now know that the ability of government to perform social tasks is very limited indeed. But we also know that the non-profits discharge a much bigger job than taking care of specific needs. With every second American adult serving as a volunteer in the non-profit sector and spending at least three hours a week in non-profit work, the non-profits are America’s largest employer. But they also exemplify and fulfill the fundamental American commitment to responsible citizenship in the community. The non-profit sector still represents about the same proportion of America’s gross national product—2 to 3 percent—as it did forty years ago. But its meaning has changed profoundly. We now realize that it is central to the quality of life in America, central to citizenship, and indeed carries the values of American society and of the American tradition.

Forty years ago no one talked of non-profit organizations or of a non-profit sector. Hospitals saw themselves as hospitals, churches as churches, Boy Scouts and Girl Scouts as Scouts, and so on. Since then, we have come to use the term non-profit for all these institutions. It is a negative term and tells us only what these institutions are not. But at least it shows that we have come to realize that all these institutions, whatever their specific concerns, have something in common.

And we now begin to realize what that something is. It is not that these institutions are non-profit, that is, that they are not businesses. It is also not that they are non-governmental. It is that they do something very different from either business or government. Business supplies, either goods or services. Government controls. A business has discharged its task when the customer buys the product, pays for it, and is satisfied with it. Government has discharged its function when its policies are effective. The non-profit institution neither supplies goods or services nor controls. Its product is neither a pair of shoes nor an effective regulation. Its product is a changed human being. The non-profit institutions are human-change agents. Their product is a cured patient, a child that learns, a young man or woman grown into a self-respecting adult; a changed human life altogether.

Forty years ago, management was a very bad word in non-profit organizations. It meant business to them, and the one thing they were not was a business. Indeed, most of them then believed that they did not need anything that might be called management. After all, they did not have a bottom line.

For most Americans, the word management still means business management. Indeed, newspaper or television reporters who interview me are always amazed to learn that I am working with non-profit institutions. What can you do for them? they ask me, Help them with fund-raising? And when I answer, No, we work together on their mission, their leadership, their management, the reporter usually says, "But that’s business management, isn’t it?"

But the non-profit institutions themselves know that they need management all the more because they do not have a conventional bottom line. They know that they need to learn how to use management as their tool lest they be overwhelmed by it. They know they need management so that they can concentrate on their mission. Indeed, there is a management boom going on among the non-profit institutions, large and small.

Yet little that is so far available to the non-profit institutions to help them with their leadership and management has been specifically designed for them. Most of it was originally developed for the needs of business. Little of it pays any attention to the distinct characteristics of the non-profits or to their specific central needs: To their mission, which distinguishes them so sharply from business and government; to what are results in non-profit work; to the strategies required to market their services and obtain the money they need to do their job; or to the challenge of introducing innovation and change in institutions that depend on volunteers and therefore cannot command. Even less do the available materials focus on the specific human and organizational realities of non-profit institutions; on the very different role that the board plays in the non-profit institution; on the need to attract volunteers, to develop them, and to manage them for performance; on relationships with a diversity of constituencies; on fund-raising and fund development; or (a very different matter) on the problem of individual burnout, which is so acute in non-profits precisely because the individual commitment to them tends to be so intense.

There is thus a real need among the non-profits for materials that are specifically developed out of their experience and focused on their realities and concerns. It was this need that led a friend of mine, Robert Buford of Tyler, Texas—himself a highly successful business builder—to found Leadership Network, which works on leadership and management in non-profit institutions, and especially in the large pastoral churches, both Protestant and Catholic, that have grown so rapidly in this country in the last twenty years.

I have been privileged to work with Bob Buford from the beginning on this important task and it was out of this experience that the idea for this book emerged. Or rather, what emerged first was a project for a set of audio cassettes designed by me, directed by me, and largely spoken by me on Leadership and Management in the non-profit Institutions (The non-profit Drucker).

We chose audio cassettes as our first vehicle for two reasons. First, versatility; they can be listened to in one’s car driving to work, in one’s own home, or at a meeting. But also we thought it important to bring to the non-profit audience the experience and thinking of distinguished people who have built and led important non-profit institutions, both large and small. And this is better done by the spoken word than by a printed text. Accordingly, we produced, in the spring of 1988, a set of twenty-five one-hour audio cassettes. They are being used successfully across the spectrum of non-profit institutions, especially to train new staff people, new board members, and new volunteers.

From the beginning, we also thought of a book that would address itself to the non-profit audience, and a good many of the users of the non-profit Drucker have urged us to make available the same material in book form. We want to read you, these cassette users told us, but in such a way as also to hear the person and especially you, Peter Drucker, as well as the people you interviewed on these tapes.

This book starts out with the realization that the non-profit institution has been America’s resounding success in the last forty years. In many ways it is the growth industry of America, whether we talk of health-care institutions like the American Heart Association or the American Cancer Society which have given leadership in research on major diseases and in their prevention and treatment; of community services such as the Girl Scouts of the U.S.A. and the Boy Scouts of the U.S.A. which, respectively, are the world’s largest women’s and men’s organizations; of the fast-growing pastoral churches; of the hospital; or of the many other non-profit institutions that have emerged as the center of effective social action in a rapidly changing and turbulent America. The non-profit sector has become America’s Civil Society.

Today, however, the non-profits face very big and different challenges.

The first is to convert donors into contributors. In total amounts, the non-profit organizations in this country collect many times what they did forty years ago when I first worked with them. But it is still the same share of the gross national product (2–3 percent), and I consider it a national disgrace, indeed a real failure, that the affluent, well-educated young people give proportionately less than their so much poorer blue-collar parents used to give. If the health of a sector in the economy is judged by its share of the GNP, the non-profits do not look healthy at all. The share of GNP that goes to leisure has more than doubled in the last forty years; the share that goes to medical care has gone up from 2 percent of the GNP to 11 percent; the share that goes to education, especially to colleges and universities, has tripled. Yet the share that is being given by the American people to the non-profit, human-change agents has not increased at all. We know that we can no longer hope to get money from donors; they have to become contributors. This I consider to be the first task ahead for non-profit institutions.

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.

Then there is the second major challenge for the non-profits: to give community and common purpose. Forty years ago, most Americans already no longer lived in small towns, but they had still grown up in one. They had grown up in a local community. It was a compulsory community and could be quite stifling. Still, it was a community.

Today, the great majority of Americans live in big cities and their suburbs. They have moved away from their moorings, but they still need a community. And it is working as unpaid staff for a non-profit institution that gives people a sense of community, gives purpose, gives direction—whether it is work with the local Girl Scout troop, as a volunteer in the hospital, or as the leader of a Bible circle in the local church. Again and again when I talk to volunteers in non-profits, I ask, Why are you willing to give all this time when you are already working hard in your paid job? And again and again I get the same answer, Because here I know what I am doing. Here I contribute. Here I am a member of a community.

The non-profits are the American community. They increasingly give the individual the ability to perform and to achieve. 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. But most Non-profits still have to learn how to do this. And I hope to show them how—not by preaching, but by giving successful examples.

This book consists of five parts:

I. THE MISSION COMES FIRST

—and your role as a leader

II. FROM MISSION TO PERFORMANCE

—effective strategies for marketing, innovation, and fund development

III. MANAGING FOR PERFORMANCE

—how to define it; how to measure it

IV. PEOPLE AND RELATIONSHIPS

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

V. DEVELOPING YOURSELF

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

In each part I first address the topic. This is then followed by one or two interviews with a distinguished performer in the non-profit field. Each part then concludes with a short, action-focused summary.

I owe a heavy debt to many people. First, I wish to express my thanks to the contributors, the non-profit leaders who so generously gave of their experience and thereby made this book possible. Their achievement in their own institutions shows all of us what can be done and how it should be done.

Then I owe more than I can express in words to my friend Robert Buford, who throughout this entire project has been steadfast in his support, in his advice, in his commitment. His example, that of a successful business leader who is dedicating more and more of his great competence, his time, and his money to leadership in the non-profit, human-change institution, gives guidance to all of us.

Finally, this book owes a great deal to three editors: to Philip Henry, the producer and editor of the audio tapes; to my friend and editor at HarperCollins, Cass Canfield, Jr., who skillfully designed a structure that transforms the spoken into the written word and yet maintains the immediacy of oral communication; and to another old friend, Marion Buhagiar, who, as so often in the past, edited my text with respect both for the integrity of the work itself and for the integrity of the English language.

To all of them, my warmest thanks.

Claremont, California

July 4, 1990

PART ONE

The Mission Comes First

and your role as a leader

1. The Commitment

2. Leadership Is a Foul-Weather Job

3. Setting New Goals—Interview with Frances Hesselbein

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

5. Summary: The Action Implications

1

The Commitment

The non-profit organization exists to bring about a change in individuals and in society. The first thing to talk about is what missions work and what missions don’t work, and how to define the mission. For the ultimate test is not the beauty of the mission statement. The ultimate test is right action.

The most common question asked me by non-profit executives is: What are the qualities of a leader? The question seems to assume that leadership is something you can learn in a charm school. But it also assumes that leadership by itself is enough, that it’s an end. And that’s misleadership. The leader who basically focuses on himself or herself is going to mislead. The three most charismatic leaders in this century inflicted more suffering on the human race than almost any trio in history: Hitler, Stalin, and Mao. What matters is not the leader’s charisma. What matters is the leader’s mission. Therefore, the first job of the leader is to think through and define the mission of the institution.

SETTING CONCRETE ACTION GOALS

Here is a simple and mundane example—the mission statement of a hospital emergency room: It’s our mission to give assurance to the afflicted. That’s simple and clear and direct. Or take the mission of the Girl Scouts of the U.S.A.: to help girls grow into proud, self-confident, and self-respecting young women. There is an Episcopal church on the East Coast which defines its mission as making Jesus the head of this church and its chief executive officer. Or the mission of the Salvation Army, which is to make citizens out of the rejected. Arnold of Rugby, the greatest English educator of the nineteenth century, who created the English public school, defined its mission as making gentlemen out of savages.

My favorite mission definition, however, is not that of a non-profit institution, but of a business. It’s a definition that changed Sears from a near-bankrupt, struggling mail-order house at the beginning of the century into the world’s leading retailer within less than ten years: It’s our mission to be the informed and responsible buyer—first for the American farmer, and later for the American family altogether.

Almost every hospital I know says, Our mission is health care. And that’s the wrong definition. The hospital does not take care of health; the hospital takes care of illness. You and I take care of health by not smoking, not drinking too much, going to bed early, watching our weight, and so on. The hospital comes in when health care breaks down. An even more serious failing of this mission is that nobody can tell you what action or behavior follows from saying: Our mission is health care.

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.

Many years ago, I sat down with the administrators of a major hospital to think through the mission statement of the emergency room. It took us a long time to come up with the very simple, and (most people thought) too obvious statement that the emergency room was there to give assurance to the afflicted. To do that well, you have to know what really goes on. And, much to the surprise of the physicians and nurses, it turned out that in a good emergency room, the function is to tell eight out of ten people there is nothing wrong that a good night’s sleep won’t take care of. You’ve been shaken up. Or the baby has the flu. All right, it’s got convulsions, but there is nothing seriously wrong with the child. The doctors and nurses give assurance.

We worked it out, but it sounded awfully obvious. Yet translating that mission statement into action meant that everybody who comes in is now seen by a qualified person in less than a minute. That is the mission; that is the goal. The rest is implementation. Some people are immediately rushed to intensive care, others get a lot of tests, and yet others are told: Go back home, go to sleep, take an aspirin, and don’t worry. If these things persist, see a physician tomorrow. But the first objective is to see everybody, almost immediately—because that is the only way to give assurance.

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. As long as the human race is around, we’ll be miserable sinners. As long as the human race is around, there will be sick people. And, as long as the human race is around, there will be alcoholics and drug addicts and the unfortunate. For hundreds of years we’ve had schools of one kind or another trying to get a little knowledge into seven-year-old boys and girls who would rather be out playing.

But the goal can be short-lived, or it might change drastically because a mission is accomplished. A hundred years ago, one of the great inventions of the late nineteenth century was the tuberculosis sanatorium. That mission has been accomplished, at least in developed countries. We know how to treat TB with antibiotics. And so managers of Non-profits also have to build in review, revision, and organized abandonment. The mission is forever and may be divinely ordained; 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. Look at what we are trying to do in our colleges. The mission statement is confused—we are trying to do fifty different things. It won’t work, and that’s why the fundamentalist colleges attract so many young people. Their mission is very narrow. You and I may quarrel with it and say it’s too narrow, but it’s clear. It enables the students to understand. And it also enables the faculty to know.