Integrating More Entrepreneurship into Non-profit Organizations

Now more than ever it is time for healthcare networks, hospitals, charitable organizations, universities, schools, and professional societies have a greater sense of business acumen and innovation.  Businesses by their nature have marketing knowledge and tend to stay innovative to be competitive.  Today’s consumer and today’s economy, entrepreneurship is even more paramount.

It is interesting and enlightening to read what was well-known and popular business book from previous decades.  One such book that is still a great read is Innovation and Entrepreneurship, Practice and Principles by famous business and organization writer Peter F. Drucker.  He devoted a whole chapter, “Entrepreneurship in the Service Institution” where he describes three primary reasons why non-profits struggle becoming an “enterprise.”

  1. Not for profit hospitals, universities, and charities are based upon a budget, and not paid out for positive results. Since Drucker published his book in 1985 healthcare has made strides in conducting their institutions more like a business.  But it is a government that is forcing them to take this action.  Physicians and clinics were one reimbursed by a “fee for service.”  Healthcare payouts are becoming more of a “pay for performance.”  It is creating better and more efficient healthcare.  Still, there is a mindset that is seeing more people, doing more, and getting a larger budget is a success.  That  is not necessarily true any longer.
  2. Not for profit organizations are dependent on several supporters, partners, colleagues, and team members. In business, ultimately, it is one supporter of the business, the customer, that takes precedence as the number one marketing spokesperson.   Religious groups and healthcare systems feel that they must satisfy everyone and in so doing, a large group of individuals have a voice and form a constituency.
  3. The most important reason is non-profits see their organization as a moral absolute rather than be subject to “making a profit” that is cost versus expense model. Business, as we know, is seeking to lower costs or increase sales to obtain the highest yield.  Everything in the business world is relative.  When performing charity service, there is no greater bottom line.  It is simply “doing good.”  And if you are “doing good” then there is no “doing better.”

non-profits innovation-two-minds

Peter Drucker saw the need for innovation and entrepreneurship in the not for profit sectors over thirty years ago.  The need for innovation may even be greater.  He said it best when he declared, “To build entrepreneurial management into the existing public-service institution may thus be the foremost political task of this generation.”