The Business of Doing Good

By Jill Tyrer

Even at a local level, many not-for-profit organizations

have multimillion-dollar budgets, layers of management, stringent business

practices, and accountability requirements that could send an entrepreneur over

the edge. Historically treated as the poor relations of the corporate family,

these organizations have come into their own in the business world, showing

that success in doing good means business practices done well.

Whether they are dedicated to feeding homeless people,

protecting wildlife habitat, promoting the arts, or boosting education, what

not-for-profits have in common is a mission that serves as the organization’s

driving force. It is what motivates both paid employees — which are usually few

— and volunteers — which are usually the backbone of the organization.

The mission, and an organization’s effectiveness in

fulfilling it, are also what attract funding. Other than such organizations as

Goodwill Industries, the revenue needed to reach their goals does not come from

selling some goods or service — except in the broadest sense. It comes from

individuals, companies, foundations, and from government sources. And these

organizations have no intention of winding up a fiscal year showing a profit.

But just because they don’t turn a profit doesn’t mean they

don’t take in money. It is how they handle that money that is critical to their

continued funding — and to their ability to accomplish their mission. They must

show that the money, through good business practices, is being used efficiently

and effectively. They also must add finesse and courtesy into their management

techniques, because they are heavily dependent on a workforce that, though

dedicated, does not get paid. It takes business savvy, good business practices,

and an extraordinary level of dedication to run a successful not-for-profit.

Means to a Mission

Southwest Florida has a number of notably successful

not-for-profit organizations, although success is not measured merely by

financial accounting. For instance, in its annual fund-raising campaign, the

United Way of Lee County had the largest percentage increase of all similarly

sized United Ways. For the past 18 years, Goodwill Industries of Southwest

Florida, Inc., has ranked among the top five Goodwills in the nation in terms

of revenue over expense. The membership of the Boy Scouts Southwest Florida

Council ranks in the top 10 percent in the Southern Region. Both the YMCA of

Lee County and the local Boy Scouts council have achieved success in recent

years, too, in that both had been struggling financially until new directors

helped regain some financial stability.

Each organization has its own measurements of success, which

are tied directly to its mission.

“The YMCA’s mission is to build strong kids, strong families

and make a strong community,” says Dave Fulscher, CEO of the YMCA of Lee

County. “We measure that by involving more and more people and also by

conducting surveys on people we involve.”

The Boy Scouts of America measures success through critical

achievements, such as financial stability, membership growth, and achievements

related to that growth, says Gary Hampton, scout executive of the Southwest

Florida Council.

One of the keys to a successful not-for-profit is adhering

to the organization’s mission, having a good plan to accomplish that mission,

and not being distracted from it, says Susan McManus, executive director of the

Collier County Education Foundation. “A lot of things can come along that can

derail an organization, get you off-track. You have to know what your vision is

and set your priorities and you have to have consensus from the board as to

where you’re going.”

At the same time, she adds, the organization has to be

adaptable. “Your board of directors and your whole vision for your organization

has to respond and be flexible to what’s happening. I think that’s a real

critical point, not staying stuck in what you’re doing, thinking you have all

the answers.”

Goodwill has diversified in recent years by opening a banquet

facility and building housing, but both fit into its mission of helping people

with disabilities find work. The banquet facility not only brings in money from

the conferences and meetings held there, it doubles as a training facility for

clients interested in food service. The housing also is designed to help

clients. As Carla Craver, director of human services, pointed out: “If your

living environment isn’t stable, you aren’t going to move on.”

Defining Success

A not-for-profit’s financial situation is critical — but

only to the extent to which it helps an organization reach people and make an

impact.

Traditional businesses focus on maximizing efficiency and

effectiveness as a way to increase profit, says Kelly Graddy Powell,

communications director for the United Way of Lee County. “The difference is

that the point of our efficiency and effectiveness is to help as many people in

the best way possible.”

The United Way’s mission is not to serve one particular

group of people, but to raise money to distribute among agencies, such as Meals

on Wheels or the Southwest Florida Marine Institute, that do serve people. It

evaluates the needs of its member agencies — 50 of them in Lee County this year

— then launches its annual fund-raising campaign. (This year, the goal is set

for about $3.4 million.) For the past seven years, it has achieved its

ever-increasing campaign goal and has exceeded the goal for the past two years.

To help its allocations committee determine how much money

to raise for an agency, and to encourage would-be donors, the United Way has a

particular interest in helping its agencies demonstrate how well they perform.

“We’ve been focusing on outcome measurements — how you measure the impact of

what you do,” says Cliff Smith, president of the United Way of Lee County.

“Historically, the way agencies do that is almost intuitively.” For example, an

agency dedicated to helping underprivileged children might report that it

helped 100 children last year. “If you ask ‘Were you successful?’ then they’ll

say ‘Let me tell you about Johnny,’ or ‘Let me tell you about Mary,’ and

they’ll do it case by case. But from a business point of view, how do you

measure that impact? You have to take all those individual cases and put them

together in some way to help you track success.”

“Nonprofits that are successful have good management teams,

the organizations have good reputations, and the community can trust where the

resources are going,” says Kathy Beehler, president of Goodwill Industries of

Southwest Florida, Inc., which has a budget of more than $8 million. “They’re

also very conscientious about safeguarding those resources, making sure they go

as far as they possibly can.”

Being able to quantify achievements also gives agencies the

management tools to know where and how to focus their resources, enabling them

to enhance their effectiveness and efficiency, Cliff Smith adds.

“The process of applying for United Way funding kind of

forces some of the agencies to take a businesslike approach,” adds Laurel

Smith, vice president of Gravina Smith and Associates marketing and public

relations firm, who is volunteering as this year’s United Way campaign chair.

“Accountability and record-keeping is definitely one of those things being

emphasized in the non-profit world. ... When we’re taking people’s money, we

need to be accountable and it’s important that we show them that the money’s

being used effectively and efficiently.”

Accountability

Not-for-profits might not be answerable to stockholders, but

they are very accountable to their funding sources, particularly if those

sources include governments and foundation, says Meg Geltner, general manager

of the Salvation Army’s Lee County unit — one of the largest in Florida. “I can

assure you that the accountability I’m required to display is equal, if not

greater than in the private sector.” The Salvation Army includes its church,

but it also covers numerous programs ranging from substance abuse

rehabilitation and counseling, to sheltering abused women and children, to

feeding and providing medical care for homeless people, to helping prisoners

readjust to society.

It runs all these programs locally with a budget of about $6

million, much of which comes from grants. The money, can be used only for

specific purposes and must be closely tracked.

Under a particular grant, for instance, a battered woman

might go to the Salvation Army with her children seeking shelter, but the staff

members can’t simply take them in and begin caring for them. The staff has to

itemize every service they provide, which is included in the monthly report.

“We can’t even give them a pair of socks without tracking it,” Geltner says.

Toothpaste, hair-spray, laundry, transportation, training, classes, daycare,

mental health intervention — everything they receive is accounted for in the

report. And that is for a single grant of $37,000 out of a $6 million budget.

Funding also changes regularly, so all programs are subject

to instantaneous change. For example, funding for daycare might stop at the

same time more money becomes available for the soup kitchen, so the

organization has to scramble to try to find other ways to take care of those

daycare clients. That also means that the paid staff members might suddenly

have a different job — or possibly even be out of a job.

Of course, all the record-keeping increases the indirect, or

administrative, cost to the organization, and a high administrative cost can be

death for a not-for-profit. If potential donors perceive that the agency is

putting too much of its revenue into administration, they may very well take

their money elsewhere.

Partly because the nature of not-for-profits has changed, it

has also become increasingly important to them that businesses view them as a

viable and important part of the community’s economy.

“We are no longer charities,” Geltner says. “We are an

industry within this community.” In fact, she is one of the driving forces