Why purpose is the competitive edge for not-for-profits

After working in not-for-profits for the last twenty years in health; mental health; education, training and employment; children and family; and international development, it has always been a challenge to navigate the political cycles, competitive tendering and fixed term service contracts, government service reforms and departmental restructures, fundraising competition and falling net returns, rising compliance requirements and risk management, and the increasing complexity and intransigence of the needs of people we support.

In 2014, then executive director of the Brotherhood of St Laurence, Tony Nicholson, voiced this concern. ‘If we don’t begin to re-think now, the way we operate, the next two decades will witness the sector’s gradual demise’. His premise was that not-for-profits cannot continue to meet society’s current and emerging needs, and so fulfil their purpose, by contracting to the government and, in doing so, having to become ever bigger, efficient, professional and subject to regulation.

Tony concluded that, ultimately, in being beholden to government for their funding and authority to deliver their services, they will die. If not now, at some point in the future they will not be big, efficient or professional enough to win the government’s favour. In the meantime, the gap inevitably widens between the needs of its constituents and the response of the government’s prescribed and regulated services delivered by the not-for-profit.

I don’t blame the government decision makers. Public visibility and expectations are high and there is constant budget pressure with ongoing departmental and service cost savings required.

Whilst this approach has introduced monitored quality standards and enabled consistency of service delivery, the reality is that it has seen the defunding and demise of smaller, locally appropriate, expert services run by not-for-profits that effectively addressed the specific needs of a section of the community, usually those most in need with high and complex needs.

But Tony Nicholson’s prediction does not have to come true.

So many times - by Boards, governments, corporates and supporters - I’ve been told that the answer is to be more business-like, or even replicate a business. Having started in business, I don’t agree. In my experience, a company is not, in itself, more efficient or effective, and certainly does not offer a values-based culture. As Jim Collins, the world’s most read management guru, noted ‘we must reject the idea—well intentioned, but dead wrong—that the primary path to greatness in the social sectors is to become more like a business’.

Instead, the answer lies in the very essence of not-for-profits. Their competitive advantage drives from their underlying belief and purpose. But, just because not-for-profits are founded on a purpose, it doesn’t mean they are purpose-driven.

They are mainly focused on attaining contracted outputs as government service providers to get paid (or they spend most of their time in a cycle of short term grant funding); competitive tendering with each other and the private sector; managing the risks of their cohort with government and public expectations; allocate no or little resources to monitoring and evaluation to demonstrate outcomes or impact to fulfil their purpose; avoid advocacy for system and policy change lest they risk their funding; and have to invest more in marketing to attract donations.

But no not-for-profit was started simply to run a service contract or grant agreement, or to grow their income. They were founded on the belief in human rights and social or environmental justice.

From the European settlement of Australia in the 1850s, not-for-profits, such as the city missions, were established by the belief that the rapidly growing city dwellers should be living in accordance with Christian ordinances, as well as the Christian belief to help the poor enshrined in Jesus’ teachings. In turn, religious faith led to the widespread belief in fundamental human rights, leading to the Geneva Declaration of the Rights of the Child of 1924 and the 1948 Universal Declaration of Human Rights.

Whether it is the Smith Family’s belief that ‘every child deserves a chance’, Launch Housing’s belief that housing is a basic human right that affords people dignity and everyone has a right to a home, or Variety’s belief that all kids deserve a fair go, the belief in human rights forms the basis of social justice that underpins purpose-driven organisations.

Supporting LGBTQIA+ young people and their mental health, Minus18 believes in an Australia where all young people are safe, empowered and surrounded by people that support them. The belief that diseases, from cancers to dementias to malaria, can be cured lies at the heart of health not-for-profits, be they raising funds, carrying out research or developing better treatments.

So, every not-for-profit - as purpose-driven - needs to be focused on demonstrating the impact they can make for the people or planet they support through their underlying belief and living out their purpose. In turn, staff and supporters are more engaged, excited and motivated; management’s decision making is anchored in these changing times; as go-to trusted partners, governments recognise the added value of compelling data and outcomes achieved over and above the outputs recorded; shared purpose partnerships are more likely to arise; and, above all, people are empowered to live better lives in a better system.

This is an edited extract from the book 'PurposeFull: How businesses and not-for-profits do better as purpose driven organisations' available $29.95 from inhousebookstore.com.au or Amazon