Schumpeter: Profiting from non-profits

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Non-profit organizations such as the one formerly known as the YMCA are commonly advised to become more like for-profit businesses. Management experts and consultants view them as horribly inefficient due to the absence of the concentrating power of the profit motive. The negative reaction to the Y’s rebranding suggests that non-profit outfits are not all that good at emulating business even when they try. There has been barely any reciprocal pressure on for-profit firms to learn from the non-profits. Yet this is what Nancy Lublin, one of America’s most successful non-profit leaders, proposes in a new book, “Zilch: The Power of Zero in Business.”

Ms Lublin dismisses the common charge that non-profits are inefficient. Some are, but many of them are not. She also dislikes the use of “non-profit” to describe the sort of organisation that she once founded (Dress For Success, which gives smart suits to poor women to wear in job interviews) and that she now runs (, which encourages social activism by young people). “Non-profits include loss-making companies like General Motors,” she explains. “We’re a not-for-profit, as we’re not even trying to make a profit.”

Some non-profits, as Schumpeter will continue to call them, are almost indistinguishable from for-profit businesses. America’s big non-profit hospitals can wield budgets as big as its for-profit ones. But most have to scrape by on “zilch” or, at most, on a fraction of what is taken for granted in the for-profit world. The ones that succeed typically do so by being highly efficient. Ms Lublin profiles non-profits as varied as Habitat for Humanity, which builds cheap homes; Make A Wish, which fulfills the dreams of terminally ill people; Kiva, a microlender; and, which funds classroom projects. She argues they are particularly good at motivating workers and at marketing.

Full story: Schumpeter: Profiting from non-profits | The Economist