Six Things Nonprofits Can Teach Small Business

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October 16, 2014; Yahoo! Small Business Advisor

In an article in Yahoo Small Business Advisor, small businesses are urged to look to the practices of nonprofits. It lists six lessons that appear to us to be very interconnected—most of which flow back to staying attentive to and responsive to stakeholders—but it is certainly worth some attention.

In a 2007 study covered in NPQ, nonprofit leaders rated higher than their business counterparts in 360-degree reviews, besting them in 14 out of 17 leadership characteristics. Here is what Jean Lobell and Paul M. Connolly wrote about the differences:

“Of the 14 dimensions in which nonprofit leaders outscored their for-profit counterparts, the most dramatic differences between nonprofit and for-profit leaders appeared in six dimensions that include skills similar to those often included in discussions of emotional intelligence….These dimensions are characterized by sensitivity to people and situations and the use of personal versus hierarchical power.”

Another more recent NPQ article, Toward a Nonprofit Theory of Leadership and Organizational Culture,” aligns with the previous piece in emphasizing leadership’s responsibility in communication, decision-making, and creating culture. In this decade in particular, these skills will be at a premium, as issues of transparency and accountability and “organizational stickiness” surface as serious considerations for for-profits as well as nonprofits.

What are some of the strengths listed by the Yahoo article?

Timing is important. Leaders must be proactive, but anticipate the need to react. It is necessary to make sure all of the pieces are in place and understand how many situations should be handled before putting out a product or service. Reacting too early can damage relationships with clients, investors, and the public. A nonprofit CFO describes the importance of timing:

“The Red Cross upgraded its emergency help phone system after 9/11 with funds raised for the disaster; this rubbed donors the wrong way when it was reported in the media. So timing isn’t just about doing the right thing at the right time; executives need to be aware of the perceptions of that timing.”

Be credible and attentive to stakeholders. Leaders need to build and maintain fair, trusting relationships with everyone affected by the organization.

Integrity is essential. Not only should leaders show reliability to customers, but trust and honesty must also be shown to employees and volunteers. The stronger the ethical standards of an organization are, the more likely it is to attract funders, up-and-coming talent, and clients.

Nothing is free. Nonprofits are blessed with the ability to engage volunteers in their causes, but doing so is never free. It requires investing in the relationship between the volunteer and the organization, and that can and often should change the face of your organization. For-profits are facing similar issues in their customer bases, many of which now expect higher levels of responsiveness.

Passion drives success. If a leader does not have passion for his or her career, it shows. Having a lack of enthusiasm for the organization’s mission lowers staff morale, does not support innovative thinking, and can hinder fund development.

Trust works both ways. As much as a leader’s employees and clients must trust him or her, the leader needs to place trust in others. By setting deliverables, specified roles, and organizational policies, employees have a framework to work within—and the leader needs to delegate with confidence.

In any case, it appears that all this time, while some have longed for nonprofits to be “more businesslike,” nonprofits have been developing some pretty sophisticated twenty-first century leadership skills.—Erin Lamb