In my previous two postings, we explored several for-profit characteristics that can be applied to NFP organisations. Here we will explore how for-profit entities can learn from their NFP counterparts. Firstly, I like to split the NPF sector into two distinct categories: charities and service-driven organisations. Charities raise funds which are then distributed to other causes and organisations; whereas service-driven organisations operate more similarly to for-profit entities. The models are very distinct, and the service driven organisations are the subject of this posting.
The more efficient NFPs utilise ERP systems, strategic planning principles, financial forecasting and many of the tools that a for-profit does. What differs greatly between NFPs and for-profit entities is the speed in which a NFP can react. NFP entities have far less levels of hierarchy due to strict limits on the amount of the budget that can be spent on administrative expenses. Most NFPs operate within 15-18% of the administrative budget. Strategic objectives, decision making and operational efficiency are all impacted by this flattened hierarchy. Leadership teams are far more confined in the NFP sector, which means that the time span from decision to implementation is far shorter than in the for-profit sector.
For-profit entities often spend far too much time planning, and little or no time on actual action. By the time a plan has been implemented, it has become reactionary in nature. In the NFP sector, this tends not to be the case because the top level decision makers are far closer to the front-line service delivery. The NFP is also able to react far more quickly to adverse situations. Planning, execution, budgeting, reporting and other major functions are far more efficient in the NFP sector. The for-profit sector provides much of the modeling for NFPs to follow; however, it has much to learn in the efficiency and execution examples set by NFPs.