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Updated by kgradybrock on Dec 06, 2017
Headline for Top 10 Reasons it is Harder to Run a Nonprofit than a For-Profit
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kgradybrock kgradybrock
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Top 10 Reasons it is Harder to Run a Nonprofit than a For-Profit

After 20+ years working diligently in the nonprofit sector, my husband (a small business owner) stated one evening that when he retired he would like to run one of his favorite nonprofit organizations. I have never been so frustrated with him! Why do people always believe a good For-Profit CEO would be a good Nonprofit CEO? And why do they believe managing a nonprofit is a “retirement” job?
Below are 10 Reasons why it is Harder to Run a Nonprofit than a For-Profit... and maybe if corporate executives understood the differences better, the sector as a whole would gain some greatly needed credibility.

1

CEO’s “Boss"

Most For-Profit CEOs don’t have a boss, and if they do it is only one person or a small board with a common goal (profit). A nonprofit CEO has a large number of volunteer Board Members that serve as his/her boss. In addition, the board roster changes annually (with a variety of agendas), making it difficult to maintain trust. In addition to board members, a nonprofit CEO is also accountable to donors, Clients, Community, etc.

2

Bottom Line

A For-Profit has a clear and quantitative bottom line - profit. On the other hand, a nonprofit has multiple bottom lines, including a mission, income, percentage of overhead, scale, reputation, program outcomes, and more!

3

Shared vs Multiple interests

In a For-Profit business everyone's interests are aligned to making money. This shared interest increases collaboration, environment and culture.
Nonprofits, however, have a wide variety of stakeholders that often have different or competing interests.

4

Funding of Professional Support and Training

Professional support and capacity building are often a priority in a for-profit business, because leaders understand the importance. This makes it fairly easy to fund the training and resources needed to succeed.
Due to the tight budget of most nonprofits, little to no money is available for training and professional support. Stakeholders, however, still expect a successful and growing nonprofit - without the professional support needed to excel.

5

CEO Job Description

A For-Profit CEO’s primary responsibilities include leadership and strategic planning; and because the organization is staffed to ensure the greatest effectiveness, the CEO is able to focus primarily on work that will propel the business forward.
Nonprofit CEO responsibilities, on the other hand, include everything from management, HR, fundraising, accounting, taking out the garbage and more!

6

Satisfied Clients Lead to...

In a for-profit business, excellent work and “satisfied customers” lead to increased and more consistent income and profits.
When a nonprofit is successful and has satisfied clients, it leads instead to drained resources at an increasing rate (excellent work does not guarantee future donations).

7

Acceptable Leadership Style

In a For-Profit company, a CEO’s leadership style can be adapted to whatever is most effective. The ability to choose the most effective leadership style based on the company’s needs, means that business can adapt and stay competitive by making quick and authoritative decisions.

Nonprofits, however, must always lead with influence (which takes time, patience and a specific set of skills unique to nonprofits). In order to get anything accomplished, a nonprofit leader must bring many stakeholders together for a collective decision.

8

Growth and Strategic Planning are Driven by...

Good programs and/or products are what drives the success and growth of a For-Profit organization.
A nonprofit is primarily driven by the changing desires and demands of volunteer boards, donors, etc. Often the needs of the clients are abandoned in an effort to please managing boards and/or funding sources.

9

Adaptability

Adaptability is essential in our fast paced world. For-Profit organizations can adapt fairly quickly because it is essential to being competitive in today's marketplace.

Nonprofits adapt very slow because the CEO must garner support by influencing a variety of stakeholder groups to come to a collective decision.

10

Much More!

A nonprofit leader has one of the most challenging jobs in society. What are some examples you have that prove a nonprofit is more difficult to lead than a for-profit business?