May 2007 NEWSLETTER: Putting the PROFIT into your Not-for-Profit
"Putting the PROFIT into your Not-for-Profit"
This newsletter is a free service to the North American not-for-profit community from William Harper Associates. Its focus is on helping organizations that do good, do better ... by identifying cost-saving or revenue-generating ideas, in order to dedicate more resources to the organization's Mission.
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May 2007: Putting the PROFIT into your Not-for-Profit
This month's PROFIT idea is … leverage your core competencies.
Leverage your core competencies - now there's a $50 phrase! Consultant-speak if ever we heard it. But, stripping off the buzz-words leaves a simple concept: get more out of what you already do well.
What do you do?
Let's start with this simple question: just what is it that you do? But let's put a bit of a twist on it. Instead of describing what you do in terms that are intimately tied into our specific mission, we want to look at "business processes". Here are some examples:
- A food bank collects food donations, stores and repackages them, and distributes them to their clients, a charitable activity if ever there was one. But, what are the "business processes" involved in doing this? Logistics: scheduling pick-ups, matching resources (trucks, staff, etc.) with tasks and locations in the most efficient means possible. There's also a warehousing function: sorting, organizing, storing, and accessing goods in an efficient manner that facilitates fulfillment. There are other processes at work here too: packaging, scheduling clients, communications and 'marketing'.
- A member-driven association collects member fees, maintains records about their members and their needs and interests, markets and delivers services, and may regulate their members' activities in some way. There are a host of very generic business processes employed here: marketing and communications, registrarial (record-keeping) activities, research and analysis, quasi-legal administrative processes, and so on.
- A community arts organization stages exhibits and shows. Processes here range from the logistical to design, to marketing, and possibly to manufacturing.
What do you do really well?
Now, of those things you do, you need to identify the things you do really well. Not just well, but really well. Let's face it, many of the things you do, others do, too. And, they do them pretty well, too. So, find those things you do so well that they give you an advantage over others. It is this advantage, not just the activity itself, which you can translate into greater rewards.
But, this is where some serious honesty is required. You do many things well enough to continue operating - but there are maybe one or two things that you do really well, that your circumstances dictate you be better at, and that's what needs to be focused on.
And, to be honest, it's not likely that you do things really well just because you are "good guys" (I'm sure you are), because you are dedicated and hard-working (I'm sure you are), or because your staff are "the best" (I'm sure they are). It's likely in response to circumstances that have forced you to work better than everyone else in a particular area. The trick is to find that area, and identify those factors that objectively confirm your excellence.
Things to consider:
- complexity - is your operation more complex than most because of what you do? For example, does your food bank have to be faster at pick-ups than the FedEx's and UPS's of the world, because the food is not only perishable, but has already been prepared and served? Is your membership structure more complicated than most, because of a wide range of membership organizations (for example, ranging from individuals to multi-location companies, with many different profiles and attributes)? Is your arts programming complicated by serving individuals with physical or emotional challenges that many organizations just can't or don't handle? If you've adapted to some of these unique circumstances, meeting a need that few others could hope to, you may have complexity on your side.
- volume - are you already one of the biggest at what you do? Serving more clients, registering more members, managing more programs than anyone else in town? The biggest isn't always the best, but often a high volume forces organizations to learn efficiencies and service techniques that others just haven't had to embrace as a matter of survival.
- timeliness - do you have to do what you do faster than most? Are you dealing with extremely time-sensitive goods or services (like the food bank)? Do you have members with particular timing requirements that you have learned how to meet? If so, you've probably had to engineer your processes to be super-efficient and fast. And, these processes might just dazzle others in a different context as a result.
- staff skills - look deeply at your staff (and volunteer) skill set and competencies. For whatever reason, have you assembled a team that is truly outshining their peers? Maybe you had to over-hire on skills to get the abilities you needed, and are now blessed with a staff resource that could do even more.
- seasonality - do you have a particular busy period (time of year, time of day, etc.) that you need to be equipped for? Do you have excess capacity at certain times because of this?
- past experience - maybe you've had some of the above challenges in the past, and still have a capacity that exceeds your current needs. Is your own membership declining, leaving you with surplus capacity?
- profile - is your service or activity on display because of your circumstances? Have you had to be the best of the best because of who you are? For example, are you the registrar of registrars? Is there an expectation on you that exceeds all others, just because of who you are or who you serve?
How could you do more of it?
Having identified that certain, special thing that only you do so well, the next step is to figure how to do more of it. This may be easy, in that you already have surplus capacity. Or, you may have created processes that are particularly scalable (for example, by investing in leading-edge, robust technologies). If so, the circumstances almost demand that you do something with this surplus capability.
Or, it may not be so easy. You might need to add staff, warehouse space, or other resources. If this is the case, it is not so obvious that you should proceed. It will be necessary to move cautiously to expand only when it is likely to have a positive pay-back.
The best situations are those where you can make better use of what you already have. For example, your trucks are already driving down the street - could they do pick-ups and deliveries for others? Do you have seamless, scalable technology that could process many more transactions with no impact on your existing services?
But, even if you have to acquire more resources, the incremental cost of doing so may be a small portion of your total investment in the process, and would also be a small portion of others' cost in replicating your process. For example, maybe all you need to do is add a part-time (and flexible) staff person or put one more vehicle on the road. In this case, there is still an inherent advantage to expanding your scope of activity.
(Or, do you have expertise, knowledge or information that is inherently "leverable"? Any information-based advantage you have can be put to expanded use. For example, could you sell this knowledge, license your processes, or train others in your ways? This is another whole category of leverage that is beyond the scope of this article.)
Once you've figured out how to scale up beyond your own needs, it's time to find a partner!
Who to Serve?
So who will you want to work with? Who needs your services? The answer may be right under your nose. Start by looking at your own immediate and extended "family" of organizations. If you are a food bank, identify other food banks. If you are an association, look to sibling bodies in other jurisdictions. Or, look at those with "neighbouring" missions - food banks might offer services to clothing banks; health-profession associations might work with other health-care bodies.
There are several advantages to looking close-by: you probably already have a relationship to build on, or at least an acquaintance; the processes that need to be in place to serve them will likely be very much like your own; the culture of similar organizations may itself be similar, smoothing the process of learning to work together; the missions of similar organizations may be synergistic.
The other place to look for customers is in your own back yard. If you own a building, do you have tenants that you could provide added services to? Or maybe fellow tenants down the hall if you rent? Other organizations in your physical neighbourhood? Don't look too far afield, especially when you are getting started. Down the road, as you grow (and work out the inevitable growing pains), you can cast your net farther.
How can you benefit from it?
Remember, this Newsletter is all about "profit", so our goal here is to generate added resources directed to your own mission. And there are lots of ways to do this.
The obvious one is money. Charge fees to others for these services. The particulars of how to price for the services you offer is beyond the scope of this article, but just remember your "profit motivation". Don't be shy about this! The trick is to find a price that exceeds your total incremental cost of offering services, but is still competitive with what others would have to pay for these services elsewhere.
One pricing tip, particularly as you start out: consider pricing activities on a per-transaction basis. This will be very appealing to a smaller or growing organization that would otherwise have to incur some fixed costs to meet its evolving needs. And, for you, starting small is the way to go as you learn how to be in the business of serving others.
There are other ways to benefit from offering services to others, though, and these should not be overlooked. For example, the following are good and valuable incentives for proceeding:
- staff challenge - you've got good, skilled staff that just aren't challenged by serving your own needs. Expanding your services to others will offer professional growth and development to the team, and support their own career progression. While that's good for them, it's also good for you, reducing staff turnover, saving recruiting costs, and so on.
- skills development - as your staff members grow, their increased skill sets are available to you. Perhaps your staff team can develop supervisory skills, new technical abilities, or selling and marketing skills, that will in turn serve your organization well going forward.
- share investments - particularly as your activities become more capital intensive, for example, requiring heavier investments in information technology, new facilities and so on, sharing these costs is wise. Together with your partners, you can share investments in these assets, along with new processes and abilities, while you retain substantial control over these investments.
- supporting your mission - the partners you can most profitably serve will often be in similar areas of activity, with similar missions. Serving those organizations may directly benefit your own mission. Indeed, it may be appropriate to do so purely for this reason, though you should generally recover your incremental costs at a minimum.
A key to success is to take a long view, and develop a well-thought out plan. Consulting with possible partner organizations at an early stage will give you an assessment of the market place for your services. And, consulting with the staff that will be on the front-lines is also key.
William Harper has significant experience in shared services, including running a not-for-profit IT service bureau, and working collaboratively with peer organizations. We can help you identify and implement initiatives in this area. Call us to explore the potential.