1) Retained earnings – In the corporate world (public or private), after profits are distributed to shareholders the excess is deposited into an account for future growth and development. This is vital to the long term sustainability of any company. Could this money have been spent during the fiscal year on things of importance? Yes, but the things of tomorrow are also important due to the responsibility leadership has to its customers, employees (and their families), and shareholders. Being in business longer than one year is vital, so they plan to have the necessary capital to sustain themselves. NONPROFIT LESSON #1: It’s acceptable to have some money set aside for next year. If your mission is continual, shouldn’t you have a plan for funding to match the mission?
2) Competitive wages – Inside our great free market economy, competitive wages are determined by what…the market. If you want the best team, you can’t pay minimum wage and expect to recruit them. Solid organizations understand the cost of hiring new employees. Compensation is not the only thing which lowers turnover, but it can’t be left out of the equation. NONPROFIT LESSON #2: In Wayne Elsey’s book Almost Isn’t Good Enough, he describes the flawed thinking that nonprofit employees should earn much less than for-profit employees. The market forces mentioned above apply equally to nonprofits. How could any of us expect to recruit a “rockstar” performer and offer them 50% of what they are currently making with their for-profit company. Obviously, revenues will ultimately dictate how much you compensate them: Not enough revenue… Raise more money!
3) Continuous improvement – Have you ever been asked to complete a survey regarding a company’s performance? Why are they doing this? They value feedback, and these answers help them serve their customer better. This is also frequently done internally, maybe following a large event or new product roll out. NONPROFIT LESSON #3: When was the last time you asked one of your major donors how your organization was performing? When was the last time your team reviewed a recent project to reflect on the lessons learned and how it could be improved in the future? We have to close the circle on learning and not forget we can’t settle for mediocrity, because our donors and those served by our organizations deserve our very best.