Blurring the lines between profit and not-for-profit

For decades the traditional perspective has been that businesses are there to make money – the Milton Friedman theory – and charitable organisations exist for the purpose of solving social problems. This is all starting to change. Globally a new generation of philanthropists is driving change. These people are highly educated, often with an MBA or equivalent, they understand how business functions and they have witnessed the speed with which contemporary businesses such as Amazon, Ebay, Microsoft, Apple, Intel have grown and generated wealth.

Not only is this new generation of people running the worlds largest and most successful businesses, they are moving into leadership positions in national charities and philanthropic funds. This phenomenom is not restricted only to the self-title developed nations either; Asian and Indian businesses are generating immense wealth and some of that wealth is finding an outlet in philanthropy.

The new generation of business leaders and charity executives are not held back by tradition. They understand how to utilise technology and the power of mass communication. They are prepared to take risks and to fail in the short term – they believe it is okay to lose a battle, so long as the war is won. Don’t misunderstand me, they understand the need for businesses to make money, they dont necesarily believe that money should be stored away, it should be invested where it will do some good. It is these experiences, beliefs and values that will drive future relationships between the corporate sector and the not for profit sector.

Recently it has been suggested to me that the gap between the corporate sector and the nonprofit sector is created by a lack of understanding by each sector of the other sector. That may be true but I wonder if that really is the issue. I wonder if this is a hangover from the traditional perspectives of the role of each sector?

Surely both sectors want the same thing! Both for-profit and not-for-profit organisations needs to operate in a sustainable manner if they are to create an impact on society. Both sectors need a healthy community. It appears to me the so called gap between the two sectors may be more perception than reality.

Generational change will also help challenge some of the misperceptions that exist. Like the one that suggests management skills are better in the for profit sector. I have never believed this. During the past decade I have worked with some very talented people in nonprofit management.

I sense the future for the nonprofit sector is bright. I sense there will be a blurring of the lines between the two sectors – even between Government, business and the charitable sector. I have no doubt there will be less not for profit organisations in the future. If current trends remain consistent the future conversations will not be about the differences between the two sectors, rather how the two sectors can work together to deliver solutions to social problems that impact upon everyone.

Those are my thoughts for the day

Let The Journey Continue

John Coxon

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Power to the people

I wanted today to write about an experience I had recently working with a client. This client is a commercial operator, so in one sense we were also playing in a different paddock, as 99% our work in the past ten years has been with nonprofit providers.

The client is a family owned business with a professional management team. The owners wanted the management team to implement immediate production cuts to ease an overstocking situation. A typical response, attack the symptom and disregard the root cause of the problem.

When invited to provide guidance and advice my immediate response was that it wasn’t a problem; rather an opportunity. Here was an opportunity for the management team to show leadership and engage with staff – in particular those staff most impacted upon by the production cutbacks.

Over a couple of weeks I worked with the management group and guided them through a process of understanding their feelings and emotions (SARA – see much earlier blog), understanding those feelings were normal and moving to a point of acceptance; whereby they could start to contribute to a solution.

Once the management group had worked through how they felt and were united as a team they were able to move forward with their staff. Instead of presenting an angry reaction to staff, the management team presented themselves as balanced, rational and reasoned.

The next stage was to engage the staff. My proposal to the management team was that those most impacted upon by the cutbacks were the ones most able to identify and implement a solution. I also proposed that by engaging staff in the decision making, the management team didn’t have to ‘tell’ staff the bad news and didn’t have to ‘sell’ the solution to the staff.

At a all of staff briefing the staff were bought up to date – honestly and with complete transparency – no finger pointing, no butt covering – just facts on the table, supported by evidence and an invitation to discuss amongst themselves possible solutions. The managers provided support by listening and providing advice in a non-judgmental manner.

Within 48 hours those staff had devised their own solution and begun to offer suggestions on how to attack the root cause of the problem. Each staff member worked through their emotions, in their own way and supported by their manager. Staff were also offered independent mentoring and its a sign of their own capabilities that few required this.

Yes, the management team still have to work with the owners on the root cause of the problem. That process is underway at present. It won’t be easy. Working with the owners of a family owned business is never easy. The owners incentives and motivations are very different to those of their paid employees.

I am confident that that management group have developed some skills and have framework within which to conduct these ongoing discussions and they have had the common sense to engage a neutral external advisor – someone to help take the heat out of things. I am confident the two groups will discover that they all want the same thing and that it is possible to achieve that – even from different perspectives.

There are lessons in this case study for every management group – even those in the nonprofit sector.

Those are my thoughts for the day.

Let The Journey Continue

John Coxon


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Don’t blame people for being stingy

According to Australian Tax Office statistics, around 64% of Australian’s do not donate anything to any charity. Of those that do donate, the average donation is less than 1% of income.

It is easy to blame people for being stingy. In doing so we avoid talking about the real issue. People donate to causes that they feel an affinity for. Today there are so many charitiable organisations vying for our money it can be difficult to sort out who is who and which of them are relevant. This confusion makes it easier for us to do nothing at all.

If a charity is to appeal to a potential donor then firstly the charity must be relevant. That means they must actually have an impact upon society. More to the point, potential donors need to understand that impact and relevancy.

This means the charity must become expert marketers. They have to understand and utilise every communication channel. They have to understand the information needs of donors and provide them with appropriate and timely information that creates a desire to donate.

We are not a stingy society. Just look at what happens when then is a natural disaster. People dig deep into their pockets, without question.

A natural disaster has high visibility and its impact is obvious. Media serve both to deliver news and encourage donations. By comparison the majority of charities engaged in wooing donors act like party wallflowers. Thier websites and marketing material lack consistency, their message is muddled, they provide no reason to donate (other than to win a prize in some instances) and they fail to differentiate themselves from all the other charities that need donations.

For a number of years I was a regular donor to a national charity. Not because I had any real affinity to that charity, more because they phoned me when I was busy, during working hours and made it easy for me to use a credit card to make a donation. I had no clear understanding of the aims, goals, outcomes of the charity and no idea as to what I was purchasing or eligible to win. In recent years I have stopped these donations because I ceased to have a reason to continue. Research has shown that around 75% of donors (out of the 35% that do donate) fail to make consecutive donations.

This serves to illustrate one of the future challenges facing charities. The paddock is becoming increasingly crowded. There is competition for every donated dollar. On the flip side there is considerable potential for increasing the percentage of donors and the amount donated. Those charities that will be successful in attracting their share of donations will be those that send me, and others a message about their impact and just how relevant they really are.

Those are my thoughts for the day.

Let The Journey Continue

John Coxon

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When does a board take responsibility?

Recent reports of a private school in Melborne, Victoria calling in administrators and facing possible closure due to its banks refusing to continue providing credit. The school is reportedly $18M in debt. According to media reports almost two years ago the Australian Securities and Investment Commission red-flagged the schools rising indebtness.

Now like many commentators I am not privy to the internal discussions by the board of Mowbray College. Therefore the purpose of this article is not to pass judgment; rather to pose a question or two for other organisations to consider.

At what point do board members beging to ask questions? How much debt must an organisation accrue before board members implement risk management strategies? Why did the board allow this situation to reach a point that a major funder withdraws funding? When did the board members stop considering the future wellbeing of stakeholders such as students and staff?

This is not the benefit of hindsight. I am not proposing a solution to Mowbray College here. I am hoping to raise awareness amongst those of you engaged in governance or management of your own organisation.

The questions I pose are not rocket science. They could be posed by a 10-year old. They could be answered by a third year student of business studies.

Those engaged in governance and management of our organisations have a responsibility to manage risk. This is a key management function. It is not about eliminating risk. There will always be elements of risk. It is not about avoiding risk. That is self defeating. It’s about being able to recognise potential risk, having in place some form of risk analysis, being able to identify the risk triggers or events and implementing appropriate remedial strategies in advance.

Failure to do so is a failure of management.

It is irrelevant how Mowbray College is bailed out of this situation. In some form or another there will be a bailout. Somehow the community will pay collectively for this failure of management. The real point is, this should never have occured.

I know businesses operate on debt. So being in debt isn’t the issue either. The issue is that no one appears to have started to ask questions. No one appears to have taken action. Or if they did ask questions they were ignored by the board and management.

What can you do in your organisation to manage risk? Firstly have in place a process for identifying and assessing risk. Then have in place a process for minimising the negative impact as a risk environment presents itself.

Those are the tools. Equally as important, though some might suggest even more important is this. Ask questions. Challenge the assumptions inherent in decisions. Seek clarification and seek evidence to support decision making processes.

You will not recieve an award for employee of the year. In many instances you will not be either liked or appreciated for you efforts. No matter. What is really important is this. In doing the above you might just have done sufficient to ensure your organisation is not the next Mowbray College.

Those are my thoughts for the day.

Let The Journey Continue

John Coxon

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Preparing people for responsibility

From time to time we hear people talk about succession planning. In these days of constant staff turnover, and in the commercial sector even a constant turnover of employers, where loyalty is the highest item on anyone’s agenda, what does succession planning imply?

In the past typical succession planning involved preparing someone for greater responsibility in a higher management role. This can still apply in large hierarcial organisations. More typically today, succession planning refers to preparing someone to maximise their potential through a combination of greater responsibility, engagement in higher decision making processes and management of either projects or people or both.

Whereas past succession planning may have revolved around promoting the longest serving person or the highest performer; today succession planning is about taking the bright people, those that have shown potential and putting place a coordinated and collaborative development pathway.

What do I mean by coordinated and collaborative? Someone with potential does not, and cannot achieve their full potential on their own. They are not an island. Their success and therefore the success of your organisation is dependent upon a network of relationships. Each person in that network is a stakeholder with an interest in the development of our potential high flyer.

Whatever the development pathway and processes, it should be put together through collaborative discussions amongst stakeholders. In this way the development is relevant to the needs of both the individual and the organisation. In this way a two way feedback loop between the person being developed and stakeholders and also between stakeholders themselves is developed. It is the feedback that guides the development process.

In some instances organisations continue to prepare people for succession to higher roles, particularly the CEO role, at the same time and despite such efforts many organisations continue to recruit senior executives from outside the organisation. This can lead to disillusion amongst people with potential. It can also cause organisations to hold back on developing those with potential for fear they may be lost to competitors. Both of these situations can result in the best people leaving on their own accord.

Let’s change how we think. There is talent inside our organisations. There are good people in there with great potential. This potential can only be realised when we create a learning environment where people can establish personalised development pathways, enjoy mentoring relationships, recieve appropriate supervision and coaching, become engaged in projects that stretch them, recieve positive and constructive feedback and be allowed to learn from their mistakes and their experiences.

It’s not much to ask is it? Well actually, evidence suggests its an awful lot to ask, which might go a long way towards explaining why the majority of organisations do not have in place effective succession plans, or effective development pathways for people with potential. The fear of being our best holds us back.

Those are my thoughts for the day.

Let The Journey Continue.

John Coxon

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West Coast DHB works hard to meet stakeholder demands

Health care providers in any country, especially those funded by Government face often conflicting demands from stakeholders. The demand for health services continues to rise, thus increasing both the cost and the demand for funding, while the taxation bucket that provides funding continues to shrink.

West Coast DHB experiences all of the above while also serving a diverse and sparse population over a wide geographical region. There are other DHB’s in New Zealand with similar issues. The challenge for those in remote and rural areas is to maintain a level of service that meets the needs of the community. This requires a significant investment in facilities and equipment along with innovative strategies for either attracting suitably qualified people or transferring patients to where the best service is available.

Hospitals are a very important part of our social fabric. In many instances a hospital is the largest employer in a region along with local government. Any reduction in healthcare services not only impacts upon service delivery but also impact upon local employment opportunities.

The challenge for our communities is to understand that a hospital can only ever be the ‘ambulance at the bottom of the hill’. A hospital fixes a problem that we have created. So many instances of hospital care might have been avoided by people taking personal responsibility for their own lifestyle and health.

Our hospitals would be much more efficient if all they needed to do was provide emergency treatment and enable babies to be born. Aged care should not be a responsibility of a hospital, nor should mental health services or even dementia care. Ensuring we don’t require treatment for lung cancer, diabetes or obesity is our individual responsibility, not that of a hospital.

The problem is not a lack of healthcare funding; its how that funding is spent that is the root cause of the problem.

Those are my thoughts for the day.

Let The Journey Continue

John Coxon


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Taking control of communications

Over the past few months I have watched the agonising twitches of a management team under seige in a nonprofit organisation. Unable, and unwilling to take responsibility for stakeholder communication they have found their destiny and fate being decided in a trial by media.

This is not a suggestion the media have presented information that is untrue. To the contrary what they have printed has its basis in fact. On the other hand it would be reasonable to suggest the overall media presentation has been unbalanced.

Unbalanced media should not surprise anyone. The aim of media is to attract eyeballs that can be converted to advertising revenue – and in the instance of this particular media channel, increase returns to shareholders. When given a choice media will always err towards the controversial; at the expense of feel good.

I suggest the problem is not media itself. I believe the problem is that nonprofit management teams fail to take responsibility for comprehensive stakeholder communication. They fail to develop capacity and skills in utilising the full range of media channels available to them. They fail to respond to unbalanced media reports with a factual response.

It is my experience the media will respond, and often print or report upon information that is factual and supported by evidence. It is also my experience that when nonprofit orgs fail to take responsibility for stakeholder communication, then the media will step in and fill in the gaps. Complete with their own biases.

While management incompetence may be at the root of the problem, a contributing factor is their lack of understanding of who their stakeholders are?

A good number of management groups consider only those that provide the funding are stakeholders. This is a very narrow perspective. My observations of the unfolding events over recent months show that when things go wrong the group of stakeholders can become very diverse indeed. This suggests that before things turn bad it is critical that management teams have a good understanding of various stakeholder groups, their needs and how they obtain their information.

People obtain information from a number of sources. The day when mainstream media rule the waves are gone. Both Government and mainstream media recognise the ease of access of social media and moved into that space.

Why is it taking so long for nonprofit management teams to do the same?

No longer are nonprofit organisations reliant upon mainstream media to spread the news. Today management teams have quick and easy access to websites, blogs, social media such as YouTube, Facebook, Twitter and even text messaging. In addition there are old standbys such as newsletters (aided by email). How may CEO’s have a blog? How many organisations use the real estate on the front page of their website as a means to telling their story – and changing the information regularly? How may use these means to respond to media reports in a factual manner?

A part of the problem, I believe is that so many of our nonprofit managers fail to really understand the impact of informal media channels. The benefit is not just in ease of access and relatively low cost; it is also the virtually unlimited number of readers, the power of ‘viral’ transmission, where information is spread by others for the benefit of others.

The failure of management teams to (a) understand who stakeholders are, (b) the information needs of stakeholder groups, (c) different types of media channels and (d) a lack of a strategic online communication strategy is not only management incompetence, it is negligent and their actions may contribute to increased risk for their organisation.

I may be wrong. But, if I am not wrong then your organisation will find out only after it is too late. The argument should not be whether I am right or wrong; the argument should be about what do we need to do to reduce risk in our own organisation.

Those are my thoughts for the day.

Let The Journey Continue

John Coxon



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