What can non-profits and for-profits learn from each other?

18 April 2017

Entrepreneurial leaders in for-profit organisations and collaborative leaders in non-profits have much to teach each other, says Michael Austin.

You would think the gulf between not-for-profit organisations and those chasing a dollar would be vast; that if leaders from each were put in a room together, there would be little they could usefully gain from the meeting. Not so, says Michael Austin of the University of California, Berkley.

"One of the interesting things from my work with boards and executive teams is this notion of how they learn from each other," says Professor Austin, who is director of the university's Mack Center on Nonprofit and Public Sector Management in the Human Services.

"In the case of one entrepreneurial board president, what he brought to the non-profit agency were concepts that had to do with thinking big – because in the social services we operate with this mentality that we have to work with what we have, and that thinking big is some sort of luxury."

A lawyer in a large law firm who sat on the board of a non-profit, was equally impressed by the process that the organisation went through in examining its history, defining its mission, and assessing the client populations it served. It had never occurred to the lawyer that his firm could similarly benefit from strategic planning, says Austin.

"In a sense that is not so strange. Where should attorneys learn about strategic planning, or the notion of how you build a culture in an organisation?"

Non-profit organisations are increasingly borrowing insights and tools from for-profits, including HR and financial information systems, and marketing strategies, says Austin.

"One of the things the non-profit sector can contribute is immense experience in dealing with vulnerable and unemployed populations. But we have not done enough to help companies understand and build out their corporate social responsibility statements."

Where for-profits encourage staff to work as volunteers in the community, the interesting question, says Austin, is: how are those volunteer workers managed and how do they bring back their learning to their own organisations, let alone spread their experience among the non-profit sector?

"Another area the two sectors are actively engaged in is social enterprise, where we are trying to figure out how to build for-profit enterprises whose profits serve the interests of the non-profit. And that is proving to be phenomenally complex."

For-profits and non-profits operate in distinct contexts, he says. For-profits function in relation to shareholders, customers, workers, and the social and physical environment, while non-profits do so in relation to funders, policy makers, service users, staff, and the community. But both types of organisation face a serious question: where is the voice of the staff and the service users, or customers, in the system?

"That is a huge hole right now."

Entrepreneurial leaders tend to be found in for-profits, which put a premium on innovation, says Austin. They are less common in non-profits, where generally there is less latitude to take risks.

"But there is a growing sense that it is where we need to go – thinking about how we might deliver services differently, for example, and what that might mean."

Among the key characteristics of entrepreneurial leadership, he lists perseverance, charisma, self-reliance, risk-taking, a tolerance of uncertainty, and a "capacity to move with the ebb and flow of change and opportunity".

By contrast, non-profits are a natural home for collaborative leadership.

"The skillset that we see in non-profit organisations is rooted in the idea of community – of what 'we' are about. This kind of leadership involves collecting input from stakeholders including board members, clients, elected officials, or whoever they might be in the larger community, because that is who we serve," says Austin.

Non-profits also make use of systems thinking, he says.

"So much of what community leadership is about is big picture 'frames' for thinking about change. And it involves a very deep investment in people.

"This is not unique to no-profits, but it is a dominant characteristic of what it means to engage community."

Professor Michael Austin spoke about 'what leaders of non-profit and for-profit organisations can learn from each other' at an event hosted by the Business School, in collaboration with the University's Faculty of Education and Social Work, in March 2017.


Michael Austin

Michael Austin is the Director of the Mack Center on Nonprofit and Public Sector Management in the Human Services at the University of California, Berkley.



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