"IIs our role just to make money?” exclaimed an exasperated senior association executive who clearly did not believe that it was. Nonprofits tend to attract people who like the idea of serving a greater good and who take gratification from something other than monetary rewards. If it receives any consideration at all, money tends to be viewed by association executives as a necessary evil best left to professional fundraisers!
One might think that this cavalier attitude toward money would give associations an advantage over for-profit organizations offering similar products and services. Giving away things that others charge for provides an advantage…or does it?
In fact for-profit enterprises have made and are making significant in-roads into areas that have traditionally be the reserve of nonprofits. Last year The Washington Post company (publisher of The Washington Post newspaper, Newsweek magazine and owner of numerous radio and television stations) announced that for the first time in their corporate history the majority of their revenues came not from their news operations but from their education and training businesses. They now consider themselves a “learning company.”
For-profits like the Washington Post company and others have learned that there is money to be made in continuing and professional education and training and they are moving in aggressively to take ownership of these fields. Their programs are well run, well attended, and clearly profitable.
Some nonprofits have positioned themselves to take advantage of this wave of interest in education and training; however many are stuck association “old-think”—in which association executives repeat the mantra that their venerable old programs are not and may never be profitable but they are part of the association’s core function and must continue to be run on a deficit basis….
The desire to “do good” is the motivating factor that draws many people into association work; but association executives would do well to realize that there is nothing noble in losing money. Lest associations continue to have their lunches eaten by for-profits, association executives at all levels would be well served by adopting a little “for-profit thinking” when it comes to money issues—namely:
· Know that flat or declining revenues is a sign that something may be fundamentally wrong with your program, product or service. This is a warning bell--an indication that a thorough audit is needed of your marketplace, including: a customer satisfaction survey; benchmarking against the competition (if you do not know who your competition is, then that is another problem!); and a trend analysis of the needs of your target market(s).
· Understand that profitability is a measure of efficacy. If your revenues are rising but so are your losses, then either your programs are being mismanaged or your pricing is wrong. In such a situation market success in the form of increased sales can actually destroy your organization if it is not efficiently structured.
· Know that customers expect to get what they pay for. People the world over are prepared to pay for quality and inherently question the value of anything they are offered for free or at low cost. This is particularly true the more things are critical to us. What person needing heart surgery will feel entirely comfortable going into an operating room knowing their surgeon was the least expensive that could be found? Focus on quality and price your product or service accordingly—this is what your customers expect.
An association’s role may not be “just to make money,” but money does serve as a good tool by which to measure quality, effectiveness and efficacy. Such thinking has always been part of for-profit management; and if nonprofits are to hold their own in this increasingly competitive environment they will do well to adopt it!
Steven M. Worth is president of Plexus Consulting Group, Washington, D.C. E-mail: steve_worth@plexusconsulting.com.
