Profitability is the thing that drives your organization forward. It allows you to do more with the right people, invest back into your organization, and ultimately grow. It doesn’t matter if you are a non-profit or for-profit organization. The only area where profitability truly doesn’t matter is government. But that’s only because…ok, that’s a topic for an entirely different type of blog.
Non-Profits are For-Profits Too!
In working with a non-profit organization recently, we were discussing how the organization’s decision makers were focused on driving a larger portion of the revenue away from operational costs, towards the “program” side of the organization. This is a very appropriate strategy, particularly for non-profits. The more money dedicated to the mission of the organization, the more success can be claimed. This, after all, is what brings in more revenue to continuously advance the mission. People donating to a cause want to “see” their donations at work. If you can show that more money went to programs as an overall percentage of your outlays, the more people are willing to give to the cause. This in turn increases overall revenue. This is exactly how to think like a for-profit business and makes complete sense!
In the business world, it’s the same goal, it just goes by a different name. It’s about finding a balance between investing in the operational capabilities that keep your organization running productively and ensuring enough profitability for continued growth. It can be a tricky exercise. Whether the goal is shareholder value, increased personal revenue, or return for a cause that people are passionate about, the incentives at play are very much the same.
Cutting costs means profitability
It can be very frustrating to feel like the tools that help drive the success of the organization aren’t getting the right attention they need! As an operator, you have to figure out how to empathize with the decision makers’ focus on profitability.
We completely agree that profitability (no matter how you measure it) should be the essential goal. We also believe operations should be optimized as much as possible. Spend too much without getting maximum ROI and your valuable resources are wasted. Invest too little and you cannot keep up with the required productivity to achieve the goal in an extremely fast paced and competitive market. Both of these conditions can sink any organization, and do it quickly. As an operator, you have been tasked with cutting costs wherever you can. This is very important for point 1 above, do not waste your resources. But part of cutting costs isn’t just about reducing the dollars you are spending. It’s just as much about how an expenditure can increasing profitability.
Striking the balance requires focus
Since technology is one of those essential tools almost every organization has to have, how can you know if you are making the right level of investment, particularly when there is no apparent right or wrong answer? For many organizations under 200 or so employees, it can be tough to figure out the following three very important elements to investing properly in your technology toolset:
- Quantify how much to spend and on what;
- Tie the operational expenditures to profitability; and
- Properly place technology in context as an essential tool to achieve the desired goal.
The organizations that do understand and master these three things do not stay at their current size very long. They learn how to leverage an effective toolset to drive productivity and increase their market share. They embrace technology to operate in new ways to market their services, managing their processes, and keep their people productive and successful.
The follow up post to this one is going to focus on number 1 above. Smaller organizations and their operators often have a hard time knowing where to start. Since this is a very important element to constantly be improving upon and constantly be evaluating your tool set and how it is driving efficiency and productivity. Getting started with the right tool set and knowing how much you should be investing is more of an art than a science. So we will discuss how to approach this. Stay tuned.
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