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The Business Practices Debate

October 13th, 2011

Recently mch held a poll which asked the following question:

‘Should Third Sector organisations adopt the language and practices of successful, sustainable businesses?’

The results from the 32 respondents were as follows:

• 62% agreed
• 19% disagreed
• 19% were not sure.

In addition to their vote, one voter provided some personal insights into the differences between the two sectors. Key extracts are as follows:

“The 3rd sector should have compassion at the heart of what its does rather than the pursuit of profit. This is probably and overly stereotypical view of both sectors….but what I would say is that the 3rd sector could really learn many valuable lessons from successful businesses when it comes to professionalism.

In my experience [service users’] personal files are routinely left out on desks. Curiously, low level stationery is locked up, suggesting there is a higher value placed on this than on personal information.”

During the course of the polling, I became aware of a similar debate that was administered by a former employer of mine, McKinsey & Company. The question they posed was:

‘Should social entrepreneurs adopt the language and practices of business?’

Many of the resulting comments were illuminating and you can read them all by clicking on the link at the bottom of this blog post.

One comment that particularly struck me was;

“The false dichotomy of business-model versus a social-impact model is a vestige of a dying world.”

Around the same time, I read Jim Collins’ monograph entitled:

‘Why business thinking is not the answer – Good to Great and the Social Sectors’

A key line from the book is;

“The critical distinction is not between business and social, but between great and good. We need to reject the naïve imposition of the ‘language of business’ on the social sectors, and instead jointly embrace a language of greatness.”

When I think about all the excellent organisations that I know, whether in the Third Sector or Private Sector (and dare I say it in the odd government department) I am indeed struck by how similar they are in the way they operate.

Consequently, perhaps the original poll question was the wrong one to ask! A better one may be:

‘What does it take for any organisation to become great?’

Here, I think the previously outlined resource by Jim Collins is a really useful starting point. As an outline, five of the key ingredients identified by Collins’ research include:

1. Excellent Leadership - Leaders with “a paradoxical blend of personal humility and professional will.”
2. First ‘Who’, then ‘What’ - Devote time to getting people with the right motivations into your organisation (and the wrong people out of it). Do this before spending too much time on what your organisation is going to do.
3. Confront the Brutal Facts (yet never lose faith)
4. Apply the Hedgehog Principle - Work out what lies in the overlap between: (i) What you’re passionate about (ii) What you can be the best at (iii) What drives your resources (time, money and brand)
5. Build and maintain a culture of discipline

To review all the comments from the McKinsey debate, click here.