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Non-profits must compete: Let the best ones win

By David La Piana
Published on Mon, Sep. 22, 2003 in The Mercury News

Non-profits working on the same issue, be it homelessness or environmental degradation, should all work together, sharing resources and coordinating their efforts, right?

Maybe not. Non-profits tend to see themselves as working cooperatively. Nevertheless, they do compete: The resources available to them are almost always sharply limited. It is time for non-profits and their funders to admit that competition is a central leadership concern, and to learn how to do it better.

Non-profits' reluctance to openly discuss competition stems in part from the communal social values they hold dear, reinforced by their funders' generally held belief that they can be more effective by working more closely together. In fact, better outcomes could often be achieved by letting the market decide -- encouraging non-profits to compete based upon their ability to perform, so that funders can choose the best among them. Rather than diluting their funds across too many non-profits, funders could concentrate their limited resources in those groups that can succeed, enhancing their chances for success. Identifying those high performers is not always easy, but it is wise to try. They exist in every community, and often suffer from insufficient resources to reach a scale to achieve true impact.

During tough economic times it is especially important to focus limited funds where they can make the greatest difference. During a 50-year period before the end of the century, the non-profit sector grew eightyfold, compared with a sevenfold growth of new businesses. Thus, we need not worry about competition resulting in a shortage or loss of diversity among non-profits. Rather, we should strengthen those most capable of achieving results, and expect that the number of new non-profits will continue to grow.

Competition is an ethical imperative among non-profits. Those that can make a difference must compete aggressively for the resources they need -- not doing so means accepting that they will not maximize their potential contribution to society. The purpose of the non-profit endeavor is, after all, to produce positive social change, and resources should accrue to those that can deliver, while those that cannot should fall to the wayside.

The case for increased and overt competition among non-profits is not about becoming more businesslike. We often hear that non-profits are poorly managed. The truth is that their management is terribly underfunded. No one wants to see his or her money spent on ``overhead,'' but everyone wants accountability. In fact, non-profits are often better managed than comparable-size businesses. They have to be. Non-profits start out with two strikes against them: They provide services that have been shunned by business as unprofitable; and they operate on a tightly restricted budget for both programs and management. Is it fair to criticize them for poor ``unbusinesslike'' management? They are not businesses; they serve a different social purpose and operate within far stricter resource constraints.

Competition among non-profits should help them as they strive to accomplish great things against nearly insurmountable odds, using all available strategies. We depend on non-profits to succeed in their work. They must rise to the call. Yes, non-profits do compete. May the best among them win, so that we all can.

DAVID LA PIANA is principal of La Piana Associates Inc. of Piedmont and author of “Competitive Advantage: Understanding and Using Collaborative and Competitive Strategies in the Nonprofit Sector,” which will be published in 2004. He wrote this column for the Mercury News.