Run It Like a Business

Being like a business isn't always all it's cracked up to be. Photo by Flickr user watz.

Denver Mayor Hancock vows to “run government like a business.” Charles Bronfman and Jeffrey Solomon, in the Wall Street Journal, argue that “philanthropy must be conducted like business.”

It’s a persistent if tiresome meme.

We understand the idea, of course: a nonprofit is more likely to be high-impact if it’s focused, disciplined, and outcome-focused. And we agree. But these aren’t characteristics of “business,” and the prescription shouldn’t be “run your nonprofit or government agency like a business.” Rather, they are characteristics of effective organizations regardless of sector, and the prescription ought to be: “run your organization using best practices and learning from across sectors.”

We’ve argued in this blog and elsewhere (and it’s a key argument of our forthcoming book, The Nimble Nonprofit), that nonprofits are like businesses in fundamental ways and have a lot to learn from the best practices of other sectors. There are plenty of practices common in the private sector that nonprofits would do well to draw from. (And yes, of course, the private sector can learn from nonprofits, too, but at Bright+3 our focus is on helping nonprofits improve).

But that’s very different than arguing that governments or nonprofits should be run “like a business.” In fact, for every example of a well-run, successful business you can point to others – Lehman Brothers, Enron, Kodak, Saab, Borders, Hollywood Video, MySpace, and Washington Mutual just to name a few – that exemplify poorly run businesses.

And while governments aren’t really our focus, it’s worth noting that the metaphor breaks down pretty quickly. Although part of what government does involves providing services – providing value to stakeholders – many of its responsibilities simply don’t track to conventional notions of return-on-investment: protecting rights, navigating the balance between the interests of individuals and those of groups or neighborhoods, ensuring that everyone in the community has a meaningful opportunity to participate in community decisions (if you wanted to create a slow, inefficient decision-making process, ensuring that everyone gets to play a role is a great strategy), and the like.

When it comes to government officials proclaiming that government should be run like a business, I worry that they don’t really understand the unique, non-market role of government. When nonprofit folks and philanthropists make the same assertion about nonprofits, I think they are idealizing the private sector (which has many, many more examples of poor practice and failure than it does of success).

Nonprofits (and government) have a lot to learn from best practices in the business world, and – to further complicate matters – nonprofits really are businesses in many important respects. Pretending that the laws of business physics don’t apply to nonprofits is a conceit that often undermines our ability to solve problems and effect change. But the facile “being like a business” sound bite obscures and undermines those lessons rather than highlighting then.

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