Jim Collins is all the rage in business circles.

  • His Good to Great (date) explores the factors that make some companies stand out from the rest. What could be more important in a competitive economy? 
  • His Built to Last (date) explores the elements that make a company’s success more enduring than that of the Pet Rock.

Young people buy the former Stanford professor’s books either because they would like to go to work for a company that insulates them from ubiquitous downsizing or they want to launch a company that will survive beyond the angel financing stage.

Now Collins has published a short monograph for people in non-profit organizations: Why Business Thinking is Not the Answer: Good to Great and the Social Sectors (2005). At an incredibly modest 35 pages, overextended non-profit leaders have got to ask: What’s not to like?

Collins wrote his brief little booklet because he found that 30-50 percent of his readers come from non-business fields. Perhaps they are hoping to learn how to apply business solutions to their own problems. Collins is skeptical of that approach. “We must reject the idea — well intentioned, but dead wrong — that the primary path to greatness in the social sector is to become ‘more like a business’ ... (because) many widely practiced business norms turn out to correlate with mediocrity, not greatness,” he writes.

In addition, “the inherent complexity (of nonprofits) requires deeper, more penetrating insight and rigorous clarity than your average business entity.”

Yet, Collins believes that the challenge for both business and non-profit organizations is the same: “building a framework of greatness.” To a large extent, this comes down to constructing a “culture of discipline.” That’s important work for non-profits because, Collins writes, “If we only have great companies, we will merely have a prosperous society, not a great one.”

Collins’ focuses on five issues:

  • Defining “great” — how to calibrate success without business metrics;
  • Level 5 Leadership — how to get things done within a diffuse power structure;
  • Getting the right people on board despite constraints common in the social sector;
  • The Hedgehog Concept — how to rethink the economic engine without a profit motive;
  • Turning the Flywheel — how to build momentum by building brand.

Too many organizations, but especially non-profits, fall into the trap of defining success in terms of inputs. That’s the kind of thinking that converts cops into report takers, social workers into bureaucrats and soldiers into brass polishers. Achieving greatness requires a shift in focus — from inputs to outputs, Collins says.

“A great organization is one that delivers superior performance and makes a distinctive impact over a long period of time,” he writes. Businesses can measure performance in financial terms. Nonprofits have to measure it in relation to their missions. But, Collins says, “the basic idea is still the same: separate inputs from outputs, and hold yourself accountable for progress in outputs, even if those outputs defy measurement.”

As it turns out — and Collins offers some helpful examples — “clear, rigorous thinking” can uncover a series of indicators with which a non-profit’s performance can be measured.

Collins’ insights about what he calls Level Five Leadership are especially helpful. A hint of what he has to offer: “Level Five leaders differ from Level Four leaders in that they are ambitious first and foremost for the cause, the movement, the mission, the work — not themselves. ... Level Five’s compelling combination of personal humility and professional will is a key factor in creating legitimacy and influence.” That’s important to remember because it’s a leader’s widely-recognized legitimacy and acceded influence that consolidate the genuine and practical power needed to lead in an otherwise diffuse environment.

But Collins also recognizes that a leader’s effectiveness depends in good part on top quality followers, and here he says the right people “are self-motivated and self-disciplined” — compulsively driven to excellence. How do you find them when you can’t be the highest bidder? He offers three helpful insights:

  • Despite limited resources, be selective in hiring because “the more selective the process, the more attractive a position becomes.”
  • Recognize that non-profits have the edge in feeding the “desperate craving for meaning in our lives.”
  • Realize that the number one resource for a great non-profit is having the right people on board and committed to the mission — because the right people can often attract money “but money by itself will never attract the right people.

Collins shows particular savvy when he divides nonprofits into four types, depending on the type of economic engine they have. For example, hospitals need to focus on business revenues rather than charitable donations and private grants; for charities, it’s just the opposite. Nonprofit organizations affiliated with government rely on neither business revenues nor grants because they are tax supported, and some organizations rely heavily on both types of funding. “Each economic quadrant demands its own unique skills,” he writes.

Collins offers up two powerful conceptual helpmates — the Hedgehog Concept and the Flywheel — that should prove helpful to leaders who want their nonprofit organizations to achieve greatness. And his chart at the end of the booklet that compares for-profit and nonprofit organizations on nine criteria is something every nonprofit leader should seriously consider sharing with every member of his or her board.

Some frugal types may balk at paying $9.95 for this little booklet. But to busy leaders in the nonprofit sector, its brevity represents added value. Which would you rather have — a small booklet that you have read and found helpful to you, or a large book waiting patiently on the shelf for when you finally have time to sit down and digest it?

Sometimes less is more. Jim Collins’ Why Business Thinking is Not the Answer: Good to Great and the Social Sectors is one of those occasions.

- Owen Phelps, Ph.D., Midwest Leadership Institute CEO

  • Good to Great....
  • Managing the Non-Profit Organization: Principles and Practices (1990) by Peter F. Drucker, 235 pages. This is the classic work for nonprofit leaders. If you’re in the field or contemplating becoming a part of it, consider this book a critical rite of passage.
  • Nonprofits On the Brink: How Nonprofits Have Lost Their Way and Some Essentials to Bring Them Back (2006) by Gary R. Snyder, 237 pages. What promises to be a exposé turns out to be a comprehensive how-to manual for nonprofit leaders and their boards. Also includes helpful lists of publications, publishers and web links to help leaders network and negotiate the complex seas in the nonprofit sector.

Copyright © 2006 Yeshua Catholic International Leadership Institute, 208 E. North St., Durand, IL 61024. Any part of this newsletter may be reproduced so long as there is full attribution, our web site is listed, and any electronic reproduction includes a link to our site:

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