I come across this a lot – many believe that a “not for profit” (NFP) organization should not make a “profit”. I don’t get this – sure, an NFP does not have shareholders to whom they are answerable or pay a dividend to but both commercial and non-commercial organisations need money to survive. Both use human capital to sell/deliver goods and services. The name shouldn’t be linked with making or not making a profit (surplus). As the ACNC (and the legislators around the country) indicate, it’s about re-investing any of these profits into developing or delivering more services in areas that meet their objectives – others would call this money retained earnings right? So perhaps “not for dividend” would be a more appropriate way of naming these organisations.
One of the major differences between commercial and non-commercial organisations, relates to the fact that they have their major objectives based on various community-based impacts – rather than delivering a dividend to their shareholders. Take Westpac for example, the first strategy quoted to help deliver to their vision is “by providing superior returns for our shareholders”; whilst at The Alannah and Madeline Foundation (a current client), they are quoted as having their mission as “keeping children safe from violence”.
I think that a few commercial organisations could learn a bit more from the NFPs about delivering “value” not just profit to shareholders. Similarly, a few NFPs could learn more about establishing a stronger commercial culture to help them deliver to their objectives. Finding the balance is the key!