The Nonprofit Motive
This article first appeared in The Wall Street Journal, Manager's Journal, March 17, 1997.

After 10 years in the private sector, I recently became executive director of the Atwater Kent, Philadelphia 's history museum. My friends say I've joined the leisure class. They're wrong. Nonprofits present managerial problems that would drive captains of industry nut.

Consider the dilemma of the roof. Fresh in my new job, I was summoned one day to join the museum's curator and architect on the building's 170-year old roof, to inspect a serious leak. I asked the obvious question: What will it cost to fix?

"Do you want a roof that will last 10 years, 20 years or 60 years?" asked the architect. An easy question: Given our budget, the 10-year model would have to do.

"Wrong answer," said the curator. "This building is a National Historic Landmark. It is also one of the city's most important artifacts. Our mission is to preserve it for posterity, and that clearly requires buying the best."

I was not prepared for this. I had spent a decade as managing partner of a marketing communications company. When I was hit by a midlife urge to give something back to the community, I sold my interest in the firm and dusted off my master's in historic museum management. I was confident that managing a museum would be like running a business. But it isn't. I was used to making decisions whose consequences would be felt for 60 day or 60 months - not 60 years.

A nonprofit's mission complicates short- and medium-term management decisions by redefining what is a rational trade-off. The mission affects personnel management as well. People who work for a nonprofit generally aren't in it for the money. That means managers cannot simply apply the typical carrot-and-stick approach to supervising a staff. They also need to satisfy their employees' needs for commitment and personal fulfillment.

One in five enterprises in the U.S. is a nonprofit. The three largest private employers in Philadelphia - the University of Pennsylvania and two major medical institutions - are nonprofits. Whether the mission is education, charity, health or culture, nonprofit executives must constantly juggle inspirational leadership and no-nonsense management.

Today these trade-offs are tougher than ever. Government funding is being cut back. Business executives who sit on nonprofit boards are challenging the organizations to apply private sector tools like strategic planning and zero-based budgeting.

And corporate America is competing with nonprofits: Disney is opening an American history theme park, and the Nature Company sells the same sorts of specimens you see on exhibit at the local natural history museum. Likewise, nonprofits are establishing for-profit enterprises to help fill their financial gaps. The Atwater Kent has recently set up a retail operation, a small consulting practice and a business renting our facility for events.

Yet no sane nonprofit executive would want his work judged by business standards. Museum managers, for instance, run enterprises that can only earn a small fraction of their income through sale of their core "products." Admission fees constitute only about 15% of revenues, and schools can only afford to pay about 25% of the cost of an educational program.

Economic realities like these underline a central paradox: The nonprofit's most "uneconomical" functions are often precisely those that add the most value for their communities. Thus, there will always be a limit on the utility of business techniques in such organizations.

Recently one of our curators wanted to install an exhibit case. The spot she picked out was the very space the development director had reserved for a catering table. This time the curator prevailed, but who should win the next round?

I wouldn't trade places with my colleagues in the corporate world - not because my job is simpler than theirs, but because it is more complicated. I wanted a big new challenge - and at this wonderful old museum, I've more than found one.