The NonProfit.MBA origin story

In January 2015, I started a new job as the Executive Director of a small nonprofit organization in Virginia. The mission and work of the nonprofit was within my area of expertise. But I had not been an Executive Director before. I had worked as a consultant on international development projects, as a grassroots lawyer, a college lecturer, and as a social entrepreneur. But not as a nonprofit Executive Director.

I felt that I had skills, passion, and subject-matter knowledge, but I was not an expert in nonprofit management practices, and the organization I had committed to leading needed a lot of re-building in order to achieve its mission.

I needed a tool that would help me look at my organization as a system, so I could know what parts of it needed to be worked on, decide which part needed to be worked on first – how to prioritize the focus on my energy, and then how to improve each organizational area. I also needed a tool to communicate to my staff and Board the situation of the organization and how I thought we were going to go about improving things.

I searched for books and online courses that could give me a comprehensive nonprofit management approach, but couldn’t find any.

Most nonprofit management literature and resources addressed specific nonprofit topics separately from one another, as if they were disconnected “chunks” of practices that didn’t necessarily work together.

I decided to turn to for-profit resources for answers on how to run my nonprofit.

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Given that there are many more sources of for-profit business knowledge than for nonprofits, this seemed like a good idea to me. I decided I would only take from for-profit knowledge what I thought would help me increase the quality of the results that my organization produced for the people we served.

A resource that offered a comprehensive yet simplified approach to business concept and principles, was a book that I was already familiar with: The Personal MBA by Josh Kaufman.

In the Personal MBA, Josh Kaufman uses this concept of business: “a repeatable process that creates and delivers something of value, that other people want or need, at a price they’re willing to pay, in a way that satisfies the customer’s needs and expectations, so that the business brings in enough profit to make it worthwhile for the owners to continue operation.”

He then defines the 5 parts of a business the following way:

  1. Value Creation – Discovering what people need or want, then creating it.
  2. Marketing – Attracting attention and building demand for what you’ve created.
  3. Sales – Turning prospective customers into paying customers.
  4. Value Delivery – Giving your customers what you’ve promised and ensuring that they’re satisfied.
  5. Finance – Bringing in enough money to keep going and make your effort worthwhile, and decide how to best use your limited time and resources in the future.

Kaufman’s approach to business in the Personal MBA had its advantages, especially when compared with other business books. His concept of business was more about creating value for other people than about making money at all costs.

In the Personal MBA, he states that “the purpose of every business is to make someone’s life a little bit better in some way”, and that “the best businesses in the world are those that create the most value for people”. Kaufman’s approach felt right to me, and a close fit to nonprofit work.

In fact, it opened my mind to the idea that a nonprofit can be a business. A nonprofit business. To me, “business” became a term used to reflect that an enterprise was rationally organized, and functioned with discipline in order to achieve its purpose. This is regardless of wether if its purpose is to distribute a profit among its owners, or to advocate for marginalized communities.

Another advantage of Kaufman’s book was that it deconstructed what a business is and how it operates. It breaks down the compounded idea of a business in its conceptual building blocks, taking off many of the cultural interpretations of what a business “should” be. This allowed me to compare one conceptual building block at a time to my own practice as a nonprofit Executive Director. I could take each single concept, test and experiment applying it to my work and then learn from that experience.

And, of course, most importantly, it covered all the important parts of a business. As new Executive Director, I had finally found a tool that would allow me to gain a comprehensive understanding of my organization so that I could manage all its moving parts as a system.

I began using Kaufman’s business concepts to organize my thinking and work as Executive Director.

Kaufman’s “model” wasn’t a perfect fit for my work, but it was still very useful.

It helped me understand that there are fundamental activities that any type of organization has to engage in to be successful, and that if any of these activities are not carried out, success cannot be achieved. That seemed very reasonable to me. At least as a starting point.

As I went on doing my job, I adapted Kaufman’s business concepts to my practice as nonprofit Executive Director, and I also added some ideas that I felt were missing.

For example, Kaufman’s model was built around the idea that a business is a series of processes. I found that while that was true, investing time and energy in my staff and volunteers – the people who carry out those processes – was crucial for our success. But Kaufman’s model didn’t include a team of people as a fundamental part of a business, so I added the organization’s people, its team, as a core business element.

I also changed the order of Kaufman’s business’ parts. I think it makes sense for a for-profit to have “Finance” as the last part of a business process sequence because profit is frequently considered the ultimate test of success of a for-profit business. But I moved “Finance” into a new category called “Operations” in which I also incorporated other things, like infrastructure management, and IT management. For my organization, finances are extremely important, but not the last process or part of our business.

Another change was the language.

For example, the term “Sales”. It is possible, and even useful, to understand the idea that a nonprofit business needs to convert prospects into customers. That’s what we do when we convert a potential donor or volunteer, into a committed one. But the word “Sales” felt foreign to our culture, as well as to the culture of donors and volunteers. I changed it to “Engagement”. Kaufman’s business part called “Value Delivery” was very useful to understand that our Program was how we delivered value as a nonprofit. Since the term “Program” is so common in nonprofit language and culture, I replaced “Value Delivery” for “Program” and placed it last in our business processes. For similar reasons, I substituted “Value Creation” for “Purpose” and “Marketing” for “Outreach”.

It also made sense to change the name of these “business parts” or “processes” to something that reflected how interconnected and people-centered these elements were from my perspective. I decided to call them “Core Functions”. Like individual pieces of a system in which each part has a function. Each Function is a business activity that must be carried out by a nonprofit’s staff or volunteers.

The following pyramid, broken into two opposing triangles shows how I translated The Personal MBA 5 Parts of Every Business into six Nonprofit Core Business Functions:

A nonprofit business model

I developed my own comprehensive, interconnected, systemic approach to nonprofit management to fit my needs as Executive Director.

My approach identifies six Core Business Functions for a nonprofit. A nonprofit Core Business Function is an intended and purposeful set of activities necessary for a nonprofit business to operate successfully. Implementing these core business Functions helps the nonprofit move towards sustainable achievement of its mission.

I developed my own comprehensive, interconnected, systemic approach to nonprofit management to fit my needs as Executive Director.

Each of these Core Business Functions has a description, contains Components that are made up by Activities, and explained with key Concepts. Each of these elements will be developed and shared in subsequent posts, so … subscribe to the NonProfit.MBA now !

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