Thursday, September 3, 2009

What Ordinary Enterprises Can Learn from the Third Sector

I have been asked to give a talk on this in the near future. Here is what I might say....

`How ordinary enterprises can learn from the third sector'. An interesting question as it is normally asked the other way round.

And I am perhaps the wrong person to ask on one level in that I have tended to bring learning in from the private sector to Speaking Up, rather than take my ideas from elsewhere in the third sector, much of which I think is run pretty badly.

But what can for-profit businesses learn from the way we lead and manage the Third Sector?

FIVE things come to mind.

The first is that we are excelent at securing employee commitment - that elusive `beyond contract' dedication. We do this because we are able to tap into people's deepest values. We offer people the opportunity to do paid work which resonates clearly with their personal sense of purpose. Most third sector organisations are able to do this, but particularly the smaller, more shambolic ones. These organisations are often close to the front-line and staff feel near to the issues.

Secondly, we are less hierarchical and more participative. The Third Sector CEO is not the God he is in the private sector. The culture of the heroic CEO just doesn't give. There is a stronger egalitarian ethos in most third sector organisations. As a result, there is a bigger emphasis on consensus in decision-making. People expect to be part of decision-making. Consultation is generally more widespread. This slows things down but ensures there is greater buy-in from those expected to implement decisions. The CEOs role is one of facilitator and broker more than commander.

Is this an advantage? I think it can be. Leaders in TSOs do not often go unchallenged. There is a greater check on left-field decisions. The down-side is that this can block progress, but it also means there is greater scrutiny of what is happening.

Thirdly, we are more stable, less short-termist and go bust a lot less. TSO take fewer risks. They see their mission in long-view. Seldom do they `bet the farm' on a big new idea. They seek to ensure the organisation's ability to do good is protected in perpetuity. We evolve and adapt without necessarily taking organisation-threatening risks. This is in common with many privately owned SMEs so not unique to the third sector. But it is also a result of our Governance arrangements which put the CEO and his team under a Board of Directors with legal responsibility for the mission long-term. The corrollary of this is that the third sector is undoubtedly less innovative and slower to respond to rapid change than it often needs to be- but it means fewer wasteful forays too.

Fourthly, we are trusted and values-driven. Trusted by users, by staff and by donors and commissioners. We are viewed as mission-led. Although our people earn reasonably well, we are viewed as being concerned, principally, with making the world a better place. Third sector organisations feel good to the people involved either as a user, a donor/customer, a volunteer or member of staff. We touch that part of people that wants and needs to be part of something bigger.

Fifthly, we are able to work to a variety of bottom lines. Contrary to what you might think, every third sector CEO has to make a profit. If he doesn't the organisation will quickly cease to exist as reserves are low and the banks don't help us. But we have to operate other bottom lines too, notably our social bottom-line and the interdependencies between them. Managing this balance makes a third sector CEO's task that bit more complex than than a CEO in an ordinary enterprise, I believe. This complexity finds its way into our commercial life too. While we operate in competitive markets we also have to create collaborative relationships with those same organisations we might compete with. Missions such as `Kill Caterpillar' have no place in our sector. Co-opertition is the norm.

Which brings me nicely onto mergers. There are relatively few mergers in the third sector. There just isn't the financial drivers to incentivise them compared to the private sector. While this means that opportunities to merge are often overlooked, it also means that mergers that are not a good idea - where the cultures of two organisations will not work together - don't get off the drawing board.

My own organisation is currently preparing to merge with another. While the strategic alignment has been clear from the off, it has also been critical that we stress-test the cultural fit between the two organisations. If it were wrong (and it wasn't) this would have been a deal-breaker. For the merger wouldn't ultimately have served our long-term purpose. I am personally of the view that a lot of private sector merger activity is driven by short-term goals and doesn't actually deliver much long-term value to either the holder of shares or the customer.
In this sense, the third sector I think has a more realistic view of mergers.

Overall, then, there are a number of things that ordinary enterprises can learn from the third sector:

1. Become better at securing employee commitment by making your company values and actions more consistent with the values of your employees. This means moving beyond rhetorical commitment to company action which makes employees feel they are there to do more than create shareholder value - an important and noble goal in itself, but often not enough to get people to go beyond contract.

2. Become less overtly hierarchical more consensual and participative. This means slower decisions but often better decisions and ones which people feel they own and will therefore implement with more determination. This also helps to build commitment to the company.

3. Take the long view. This is extremely hard for listed companies in which CEOs last on average less than three years.

4. Be trusted by having strong values and showing commitment to making the world a better place. This means going beyond CSR and the usual corporate Greenwash. The young in particular are very sensitised to this. A company with integrity will I believe attract the best `Generation Y and Z' talent in the future.

5. Teach your managers to work to a number of bottom-lines, not just one. We do this and it means that our organisations can account for themselves on a number of levels. I believe in time that all companies will need to account for themselves much more than they do now. Start now by training your managers to achieve and balance different types of success.

My overall view is that there is a huge infusion of learning to be had from the third sector. As part of Social Enterprise Day in November, we are inviting a range of corporate heads to job-swop for a day with a CEO of a social business. The learning of course cuts both ways. I have taken a great deal from the private sector. Your focus, your use of metrics, your professionalism and your ability to move quickly are all facets we in the third sector need to take from you.

1 comment:

Mark Griffiths 'ideally speaking...' said...

Great blog, Craig. Think it's all tremendously apt and useful. Wonder though, if you're disparaging CSR by putting it in the same sentence as 'corporate greenwash'. There is nothing 'greenwashy' about properly conducted CSR. Perhaps you didn't mean this, but it comes across that way. Good luck with the speech.