September 26; Which Is Harder To Manage? A For-profit or Not-for-profit Business?
MANAGEMENT BY THE BOOK:
365 Daily Bible Verse &
One-Minute Management Lessons For The Busy Faithful

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Chapter Nine: Finance; September 26

The Lord answered,

“Who then is the faithful and wise manager,

whom the master puts in charge of his servants

to give them their food allowance at the proper time?

Luke 12:42

Which Is Harder To Manage? A For-profit or Not-for-profit Business?

Double-Vision

It is my favorite debate: Who is the customer?

The answer is easy in a for-profit enterprise. Transactions are simple, even when made complicated by contract lawyers and law. Here’s the legal deal: offer, consideration and acceptance between a willing and competent buyer and seller.

The for-profit business leader has a smallish number of relationships to manage. The seller has a product or service to sell (offer); the customer (buyer) accepts offer and trades money (consideration) for the offer. As such,

Buyer => Money => Seller

Buyer <= Goods <= Seller

However, this is still a lot to manage in the for-profit business. Professor Henry Mintzberg reminds us of the,

Fact: Managing is as much about lateral relationships among colleagues and associates as it is about hierarchical relationships. The management literature has long slighted the importance of lateral relationships in managerial work, and it continues to do so.

Yet study after study has shown that managers generally spend a great deal of their contact time—often close to half or more—with a wide variety of people external to their own units: customers, suppliers, partners, government and trade officials, and other stakeholders, as well as all kinds of colleagues in their own organization with whom they have no direct reporting relationship. (Mintzberg 2013)

John Maxwell’s 360 Degree Leader and William Oncken Jr.’s Molecule of Management both reinforce what the experienced CEO has learned on the job: He has to persuade a whole lot of people—people he can’t fire.

The for-profit business is easily defined where the buyer who pays is the same person who gets the goods.

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Now let us imagine Mintzberg’s “lateral relationships” in a not-for-profit where the person who pays—the buyer—is not the person who gets the goods. A third party is the receiver.

Donors, volunteers and clients make this a simple linear formula but a complicated buyer-seller-consumer relationship.

Donors => Money => Value-Adding Non-Profit Business => Goods => Consumer

The consumer who gets the goods is not the one who paid the price. This is charity.

The non-profit manager’s work is twice as hard as for her for-profit cousins. Marketers will tell us that the customer determines the value of the good or service provided. The customer decides—not the seller.

But the question is more than “who is the customer?,” but how to deliver value – to a customer who pays and receives nothing. And to the consumer who pays nothing and receives the goods. They are both customers who demand value in the same transaction train.

Cui bono? Follow the money to learn who benefits. The donor gets peace of mind (value); the non-profit manager generates value; the recipient gets a changed life (value).

The Lord answered, “Who then is the faithful and wise manager, whom the master puts in charge of his servants to give them their food allowance at the proper time? Luke 12:42

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