Miller on For-Profits v Not-For-Profits

Clara MillerHere’s an interesting metaphor explaining the differences between For-Profit and Not-For-Profit Organisations taken largely from a presentation by Clara Miller from the F. B. Heron Foundation.

Let’s pretend you’re the owner of a restaurant.  Your customer comes to pay the bill but before she offers her credit card, she says, “I’m going to restrict my payment to the chef’s salary.  She’s great, and I just want to make sure I’m paying for the one thing that makes the real difference here.  I don’t want any of this payment to go towards your rent, your crockery, your air-conditioning, or your accountant.  They’re just not that important.  The chef is where you should be spending your money!”

The irony is that controlling costs actually undermines efficiency and program quality.  Over time, the inability of Not-For-Profits to invest in better staff learning & development, maintaining office amenities, introducing better IT systems, and developing innovative programs means that staff burn out, offices fall into disrepair, systems are not updated, and service improvement stalls.

In the same management situation, the difference between a For-Profit Manager and their Not-For-Profit counterpart is that the former instinctively overstaffs operations for growth, while the latter understaffs.