A friend called the other day with a Big Idea to Do Good to ask if she should develop it as a for profit or a non-profit. That's not only a really good question to ask at the outset of any venture, it's also a more complex one than you might think - especially these days.

Why these days? Well, as you may be aware, the boundary between for profit and non profit is becoming more porous every day. First, there are the C-Corps who spin-off foundations and/or nonprofit arms to do good (Ben and Jerry's, for instance did this) - or who simply use their marketing departments as the aegis. There are also the C-Corps whose missions are socially conscious from the outset, or like Tom's that's an example of both. Then there is the growing world of social entrepreneurs, who start up projects to do good using the traditional for profit structures: LLC (Do Well. Do Good., for example), S-Corps, etc. And then, within the last few years, there are the new corporate forms such as the low profit, limited liability company (L3C) and B-Corp that are formalizing the hybridization of for profit and non.

All of these new forms and variations, even though creating more complexity, are, in my mind, good news. Why? Because they signal a growing understanding among us that doing good is not something that should be done as an afterthought or on the side, as occasional volunteer work or church activity. No. That way of thinking is dying. We now realize that we can earn our living (even a good one!) and do good at the same time - they can work hand-in-glove.

And not only can we do this, we should and must. If the reach of technology with its 24/7 stream of information has meant anything, it's meant an expanded awareness of the enormity of world issues begging for solution. From the environment to food supply, to human health and education, to poverty and social injustice, there is business to be done here. And more and more people are stepping up to take part. As a result, more ways are emerging to structure this new kind of business that does good as its mission, with a wider range of choices for start-ups.

So, how does one begin to answer the question: under what structure should I develop my Big Idea? First off, thinking of the range of possibilities in terms of a continuum can be helpful. With one end being the "pure" nonprofit and the other being the "pure" for profit, like this:

The 501(c)3 end of the spectrum of choices represents the most altruistic of missions, with the highest level of public involvement and scrutiny, as well as the biggest benefit of tax deductible donations. The other end is where the C-Corp is, with its profit motive as primary and its leaders both responsible for decisions and benefitting financially. This spectrum should not be interpreted as one of good to bad or even less money to more, but rather as a reflection of the overarching purposes of the range of corporate structures - there are, of course, plenty of nonprofit organizations with large budgets, just as there are plenty of C-Corps with small ones.

Next, ask yourself some basic questions - such as:
    
    1) Why am I considering a nonprofit? What benefits do I imagine will be gained by it?
    2) What concerns do I have about forming a nonprofit? What limitations do I imagine will be the result?
    3) What uncertainties/unknowns do I have about nonprofits? What do I think I know for certain? 
    
Then answer the same questions about a for profit structure. And with this information, you can start to weigh the benefits of the various options out there for your particular situation. For example, if you like the notion of letting people know that your Big Idea is primarily about doing good in the world, rather than making you a millionaire (which, by the way, is not bad in itself nor is it incompatible with the nonprofit, per se) then you may be leaning more toward the nonprofit side of the equation. But if, at the same time, you are concerned about wrangling a broadly representative, volunteer board in addition to managing your start-up and you don't need donations (in other words, you expect to be able to sell your product/service at a profit), then you might want to take a look at B-Corp and L3C options.

The most important thing is to do your research well in advance of filing for whatever structure you choose. Having to change your incorporation status after the fact just means more paperwork and less time to devote to your Big Idea to Do Good!

For more detailed information on what a 501(c)3 nonprofit organization is about, see Chapter 1 of Nonprofit-KnowHow - take a look here. And thanks to Sarah for raising the question!

Guest Blog Post

by Sheri Chaney Jones

“That is what every nonprofit needs, but can’t afford.”         
 
This was said to me by a nonprofit director when I was describing that my organization helps nonprofits measure and communicate their impact and value. She is not alone. Many nonprofit leaders incorrectly perceive program evaluation and data-driven decision making as a luxury they cannot afford.  

My new acquaintance is correct that every nonprofit needs to be engaged in program and outcome measurement. Organizations with high measurement cultures systematically collect and use a variety of data to manage operations and demonstrate effectiveness. Organizations with high measurement cultures are significantly more likely to report increases in positive press, funding, efficiency, staff morale and organizational change.  

The nonprofit director was also correct that a perception exists among nonprofit leaders that they cannot afford measurement activities. This perception prevents organizations from engaging in these critical tools. Although eighty-one percent of nonprofit leaders surveyed by the Center for Effective Philanthropy believe nonprofits should demonstrate the effectiveness of their work through performance measures, our research reveals that only 32% of nonprofits are fully embracing a high measurement culture. Lack of funding and resources are often cited as the main obstacles.

There is good news. This perception is a myth!  No correlation exists between organizations successfully using data to demonstrate effectiveness and a nonprofit’s budget and size. In other words, there are several small nonprofits excelling at program evaluation and then there are very large organizations not using or collecting the required data.

How nonprofits demonstrate and communicate effectiveness is a predictor of organizational success. Demonstrating impact is becoming increasingly more important as funders shift toward outcomes-based funding. Nonprofits excelling because of their data-driven practices go beyond using performance measures and outcomes data as an external reporting tool. They have the right measures, organizational structures, and leadership in place to systematically use these data to manage programs, make improvements, and demonstrate their unique impact and value. 

Greatness starts with the commitment of an organization’s leader to move from having data to achieving excellence with data.  Here are three distinct features that separate the “great” from the “good enough.”

1.     Defining Success:  Great organizations measure success based on the distinct impact they are making and the effectiveness of their services delivered relative to their resources. In addition to measuring participants served, money raised, and activities performed, they measure outcomes -- the extent their programs and services have changed lives and circumstances for their participants, stakeholders, and communities.  
  
2.    Leadership:  Great nonprofit leaders never take their eyes off the mission. They lead with humility and passion for the mission and do whatever it takes (ethically) to fully realize this mission. They align their measures with this mission. Great leaders use these measures to make course corrections when results are less desirable. Data are also used to celebrate success when desired targets are met.  
  
3.     Culture:  Great organizations consistently strive for a high-performance culture with a foundation built on performance and outcome measures. They do this by hiring and retaining the right people for their organizations. They understand that talent can compensate for lack of resources, but money never compensates for lack of the right people. To keep the right people, they create systems based on data, learning, feedback and autonomy. These elements encourage, motivate and reward their high-achieving, positive, self-motivated team members. They avoid the “doing more with less” syndrome by seeking the right people and creating the right data-driven systems that naturally produce more with less.  
  
Great nonprofits let go of the excuse that performance and outcome measurement are “too expensive”. Instead they ask,  "How can we achieve our desired impact and excellence?" Measurement is an essential tool that helps nonprofits achieve greatness regardless of organizational size and budget.  

The first step toward excellence is to create and use success measures. Once this commitment is made, organizations find the resources needed to successfully engage in the activities. Those who are successful know that performance measurement is achievable, can fit within their budget, can be done with their own staff, and will lead to positive results!

Sheri Chaney Jones, President of Measurement Resources Company, improves the social sector through the use of measurement, evaluation, and organizational development.  For more measurement tips, download Sheri’s free eBook, Ten Tips to Open the Door to More Grants (and Other Funding).  Overcoming Common Mistakes in Outcomes Measurement.

Measurement Resources helps organizations successfully collect, organize, and use impactful data so they can fully achieve their missions.  Clients save public dollars, demonstrate effectiveness, and increase revenues as a result of working with Measurement Resources.

People want to be inspired by a grand destination and clear about what they will do to get there, just as they want a say in both.

By Rebecca Reynolds

Vision - Mission. These two little words could hardly be more misunderstood. It's odd. And worse, it's debilitating for the organizations suffering under the misunderstanding. Here are some of the common misapprehensions:

1) "Vision and Mission generally mean the same thing." Nope. I frequently hear people refer to their "vision/mission" or sometimes their "mission/vision." While it's true that an organization's vision statement and mission statement rely on each other so fundamentally that the organization should have both and should use them together, the two statements are quite different. We'll get to how below.

2) "We only have a mission statement." Not good. This implies that the vision statement isn't really important, but to me signals that the organization simply doesn't know what a vision statement is (and why it's important) so, of course, they don't have one.

3) "Vision - mission, whatever." Yikes. This world-weary attitude signals that the organization has given up entirely on expressing the two most fundamental aspects of itself - and usually this is for one of two reasons: either the organization is too busy (read, too in the weeds) to make time for them or because it has no idea how to express them in a meaningful way. Past attempts have likely resulted in something more like slogans, which haven't had the gravitas to last - so they gave up all together.

All of the above result in an incredible amount of busy-ness - lots of running around doing, or maybe just lots of running around, but without meaningful result. How can two little words - vision and mission - amount to the difference between effective and not in an organization? How can that be possible?

It is possible. Eminently so. Here's why.

All organizations (dare I say, all groups of people) operate best when everyone involved understands the answers to the two fundamental questions the vision and mission statements answer:

1) Why does the organization exist, for what desired future condition?
2) What is the specific and perhaps unique way the organization has chosen to work toward this future? Or more simply, what does the organization do and for whom?

Without clear answers to these essential questions, the people in the organization may work hard, but without the larger context that gives meaning to that work. This is like saying "let's get ready for a trip," without specifying where we're going. And obviously, saying "we're going to be the best prepared travelers in the world" doesn't help much. The question still is "where are we going?"

In many organizations, the vision statement describes what the organization will look like at some future point. Being "the greatest coffee company in the world" may inspire the owners or shareholders of said coffee company and may be an important thing to make clear to employees, but a real vision statement speaks to what the world will look like in the future as a result of the organization's work. This is what attracts people to an organization - especially nonprofit organizations.

The vision statement describes the desired future that inspires its work, which hopefully is more than simply being the best at what it does. The vision statement speaks to our hearts and to our imaginations. And a good one is so easy to recognize that it can never be forgotten. That's a vision statement doing its job.

The mission statement, on the other hand, grounds us. It speaks to the head. When we first learn of an organization (just like when we meet a person), we want to know what does it do? What's its job? No fluff, no hyperbole, just get to the point.

What. Why. - Head. Heart.

This is so simple, many organizations seem to have forgotten how important it is to answer these questions. And not just in a small room with a few leaders. Although even that's better than nothing. In fact, this is how these questions have been answered for eons. Someone got the inspiration for a grand destination and chose a course of action to get there. Everyone else follows the appointed leader. But since we are changing to a society that more and more wants to be involved in choosing our destinies and what we do to reach them, it's increasingly important to answer these fundamental questions in an open forum with as many people as will be affected.

Ironically, the nonprofit organization is a model for this since it has needed to operate this way forever. The reason being simply that its livelihood depends on people choosing to support it and become involved rather than simply be paid to do a job. This paradigm is the way all business will be done, since it's no longer good enough, for most of us, to be told what to do. People want to be inspired by a grand destination and clear about what they will do to get there, just as they want a say in both. This is collective leadership in action.

In the end, it's not about being able to define vision and mission. What is important is being able to clearly express the answers to the questions they represent. In this way, everyone that comes into contact with the organization can easily understand its importance in the world - which enables them to choose to be a part of it or not. And for those leading their organizations, opening the process of answering these questions to those who will be affected means a more robust, aligned and synergistic organization. What could be better than that?

Guest Blog Post

By Denise McMahan

Many of us recall David La Piana’s The Nonprofit Strategy Revolution, which pushed past our traditional notion of strategic planning and brought more time-sensitive, relevant thinking to the forefront. La Piana acknowledges that even while Revolution was being published, clients began to raise the common questions surrounding the economic and operational implications of strategic decisions. Specifically, how could they effectively connect their strategy with an execution plan that would truly grow the organization? Answering this question involved developing a rigorous methodology for connecting mission, strategy and execution. 
 
The methodology described in The Nonprofit Business Plan roots strategic decision making in a strong financial analysis. Known as
“DARE2Succeed,” the principles in the methodology have been repeatedly tested in La Piana’s consulting practice to ensure the book represents practical and workable approaches to improving your organization’s outcomes. I asked coauthor Lester Olmstead-Rose about the most common reasons for pursuing a new business model. I loved his answer so I’m sharing it with you.

McMahan: You explain every nonprofit should engage in ongoing strategic planning but the “deeper dive” of business planning
depends upon your circumstances. What is the most common reason nonprofits should consider formulating a business model? 

Olmstead-Rose: The most common need for business planning is when you know or discover your business model is broken. An obvious example of this is when you can’t pay for what you are doing and you need to come up with a new approach to pay your bills. 
 
We had an executive director come to us who had a really descriptive phrase about why she wanted to enter into a strategy
development process followed by business planning. She said, “I can’t keep raising a million and spending a million!”Isn’t that what so many nonprofits do, living right on the edge all the time and under constant threat of collapse? It means their economic logic isn’t working; they haven’t created a good mechanism to pay for the extent of work they have taken on. But in considering a broken or
stressed business model, don’t forget it is not just a question of money. Any part of the scope of your program or organization may be challenged–for example, the population you serve has changed dramatically or your geographic reach is too big or too small.  
 
Beyond addressing a problem in the business model, business planning is also a great tool to use when thinking about  expansion. We get organizations coming to us saying, “We do this great work, now we want to take it to scale.” Business planning can identify the avenues for doing that and let you know if it’s viable, or if you’re going to lose your shirt and undermine the good you’re already doing. 
 
We’ve had an organization approach us that wanted to start a capital campaign to build new facilities and then use those new
facilities to both expand current programs and start new work. Business planning is a perfect approach for them to make sure they can sustain those programs in the long run.  


Denise McMahan is founder and publisher of CausePlanet, a thriving one-of-a-kind professional development website for busy nonprofit leaders who want to stay informed about essential reading through Page to Practice™ book summaries, author interviews and relevant discussion by peer contributors. Denise dedicated much of her early career to fundraising in academia and experiential education where she was twice recognized for innovation and model account, raising millions of dollars and surpassing client goals. McMahan equally enjoyed working on client side, coaching major gift volunteers and mobilizing unrestricted giving to reach unprecedented participation. In addition to overseeing CausePlanet, McMahan is a writer for nonprofit and corporate clients.

You can read the complete author interview with Olmstead-Rose and learn more about what’s inside The Nonprofit Business Plan: A Leader’s Guide to Creating a Successful Business Model by downloading a Page to Practice™ book summary at CausePlanet.org. Download this book or dozens of other titles by visiting our summary store or subscribing to our summary library. Or try us out by printing a free sample.
 
Image credit, AustinArtist, via iStockPhoto.com