Thursday, July 15, 2010

Do Non-Profits Have a Unique Metaphysical Structure? (Repost from September 13, 2008)

There are some obvious contrasts between for-profit and non-profit corporations. The basic philosophy of a for-profit company is clear: reduce operating costs, increase revenues, and thereby increase profits. In order to achieve these goals, most companies have three classes of individuals: the executives who set policy, the employees who do the work, and the management that ensures that the employees do their work and that the company succeeds in implementing the executives' policies. A well-run company with its unified purposes, efficient methods of implementation, and its clear system of responsibility has been one of the marvels of our age, and it explains the dominance of the corporate model throughout the world economy. Further, by focusing on profits, for-profit corporations are called upon to produce successful products and services, and this success or failure can be easy to track.

Although it is legally the case that a non-profit can have a very similar corporate structure to a for-profit company, with boards of directors, executives, managers, and employees, the philosophical structure is fundamentally different. By explicitly denying the pursuit of profit, corporations are denying the fundamental raison d'ĂȘtre of for-profit companies. As a consequence, many non-profits have goals that are less easy to define or track. For instance, a non-profit might be founded to increase awareness of an issue, but seldom are there viable ways of tracking how well it achieves this goal, or of comparing its current approach to other alternative approaches. A non-profit might be set up to pursue a religious, cultural, or charitable goal, but it may value the activity of pursuing that goal more highly than any specific product that is brought about.

And this may point to a fundamental metaphysical difference between corporations and non-profits: one tends to value an activity more than any specific product, and the other values the product more than the activity.

In both cases, however, the best run companies and non-profits can converge (See Economist July 15, 2010, "Profiting from Non-Profits"): both should be able to employ efficient means to achieving their goals, while at the same time valuing the activity highly enough that the activity itself can be a worthy goal. A corporation that provides good benefits to its employees, and that is sincere in its effort to produce a sense of responsibility and community among its employees, managers, and executives begins to converge on a non-profit model and to raise the status of activity within the organization. And a non-profit organization that is run efficiently, that offers its employees competitive wages, and has clearly defined goals and metrics, can be a lot like a for-profit corporation.

But the differences go further than this. Although this is not inevitable, anyone who has spent time working at a non-profit and a for-profit corporation may have realized that the culture can be quite different. Since for-profit companies are basically in existence for the purpose of making money, this infuses the culture of the individuals who make up that corporation, and you tend to get competition, a strong desire to advance, and basically, people are there to make money. The desire for financial gain among the individuals then transfers back to the company, and increases the drive towards profit. The reciprocal way that large-scale goals infuse small-scale actions and conversely small-scale actions lead to large-scale goals is an interesting philosophical feature of many group activities, and has been noted since antiquity. (Cf. Plato's Republic.)

Non-profits have a similar reciprocal system, but it is based on doing good. Since doing good tends to be a collaborative activity, or at least a non-hierarchical activity (i.e. each agent in the organization is capable of fulfilling the goal to a certain extent), it has the consequence that there is less competition within a non-profit, and it is less amenable to a traditional corporate hierarchy of authority and control. Now, of course, this isn't inevitable, but it does mean that there may be less emphasis on the rules and regulations that are at the heart of the success of a large for-profit corporation. People are less likely to be criticized for being late, less likely to have software on their computers that prevents surfing on the Internet or other similar security and efficiency measures, and people are probably less likely to be reprimanded or even fired for failing to produce good enough ROI. But since it can be argued that happiness is found in activity, it may very well be the case that non-profits tend to produce happier employees, especially if there is an emphasis on activity.

Does a non-profit company lose something when it aspires to be as efficient and effective as a corporation? I think it may well be the case that a non-profit would lose something under these circumstances. What do you think?