The Non Nonprofit: Be Market Driven
by christopher
The third principle that Rothschild proposes is this: Be market driven. It is, he admits, a principle which nonprofits resist and resist to their own detriment and the detriment of those they serve: ”Some nonprofits don’t see the world in this way. Their antipathy, even hostility, to this view has hindered their ability to fulfill their social missions.” (p 66).
Let’s take a look, though, about the way that nonprofits don’t see the world.
What Rothschild is proposing isn’t simply being market driven. It is a particular view of who constitutes the market that a nonprofit serves. In the case of his own nonprofit – Twin Cities RISE!, which provides job training to people and helps them secure and keep jobs that are capable of lifting them out of poverty – he insists that the market is not composed of the people RISE! helps find jobs: “Employers are our customers because that’s where the jobs are. Employers are our market.” (p 66) It is, he admits, a riff on a quote from the infamous bank robber Willie Sutton. Why rob banks? Because that’s where the money is.
Rothschild has a point here. RISE! wants to put people in jobs, and it would do no good to train people for jobs that don’t exist or fail to teach people the skills and practices that employers want on their teams. It is important for RISE! to consult with employers and understand what they want.
The difficulty that Rothschild runs into, however, is that he wants an approach where the market is a single customer – or, really, a group of customers – where serving that customer group results in serving all of the stakeholders in a nonprofit:
Every nonprofit has many important stakeholders with many and varied needs. But a market-driven organization recognizes only one group as the customer. Out of all your stakeholders, your customer is the one who – more than anyone else – determines your survival and success. (p 66)
Our ability to meet the needs of the customer dictates success for all stakeholders. (p 67)
By this logic, serving the one group that is the customer for RISE! – employers – should result in service to all constituents.
Fortunately, Rothschild abandons this idea quickly when discussing a related point: markets constantly shift and change. In the case of RISE!, this was exemplified after September 11, 2001 and a subsequent tight labor market. Seventy percent of the men served by RISE! – that is, the men who are being trained and placed by RISE! – are ex-felons. In the wake of terrorism and economic difficulties, companies that were already wary of hiring ex-felons became even more risk averse.
According to the logic outlined by Rothschild above, this should have resulted in RISE! seeking to meet the needs of its now more risk averse customers: employers that no longer wanted to hire ex-felons. RISE!, however, recognized that its primary responsibility was not to this supposed customer, but to their clients. They added a blue collar training track and recruited new employers who were open to hiring ex-felons.
Rothschild phrases the change this way: “We recognized changing priorities in the market’s needs.” (p 71) This is true, but it doesn’t go nearly far enough. When RISE! recognized that it wasn’t able to meet the needs of the customers it had it didn’t respond by changing its service model – it didn’t change its focus to job training and placement for non-ex-felons - it found new customers so that it could serve the population it was created to serve: “We became better equipped to provide training and placement opportunities for participants with difficult criminal pasts, a group we are committed to serving.” (p 71)
RISE! did the right thing, but that doesn’t mean that Rothschild is wrong about being market driven. Where I think Rothschild is wrong is in thinking that the customer is where the focus should be. RISE! is not simply a job training and placement agency. Its function is not simply to provide employers with capable and reliable employees. Rather, RISE! exists to lift people out of poverty and does that by putting them in jobs that will provide adequate wages and benefits to lift them out of poverty. That means that RISE! needs positive relationships both with its poor clients and with potential employers. It needs to understand what its clients need in order to get and keep the right job and what employers need in order to select a candidate from RISE!
It other words, RISE! needs to match jobless clients with employers and make sure that both are equipped for the relationship they are about to enter. If RISE! were to focus purely on its ‘customer’, it would fail its clients. If it were to focus solely on its clients, it would fail its ‘customer’. The relationship creating system only works if both are given appropriate attention. Sometimes that attention might be directed at employers. Sometimes, it might be directed at clients.
The same is true at other nonprofits. An organization I work with provides a safe place for homeless people to go during the day and network with other social service agencies. To do so, it must broker relationships between homeless guests, social service agencies and donors so that all people get something out of the relationship. Paying attention to just one group would cause the relationship making system to fall apart.
And this is true even at for-profits. A restaurant must understand its customers, but the best restaurants create relationships between customer and chef. The chef doesn’t simply prepare whatever the customer wants, the customer also seeks to experience the passion and skill that the chef offers. It might, at its worst, be a base and money-driven relationship, but it is a relationship nonetheless.
I want to be clear about this: being market driven is a good thing. But one must understand that ‘the market’ isn’t simply a group of people out there whose needs must be satisfied. Being market driven means paying attention to the kind of relationships one is trying to build and helping people enter those relationships. At RISE! this meant building relationships between employer and employee that had a satisfied employer provide the means to lift an employee out of poverty. And that, rather than simply meeting the needs of the employer, is what it did when it faced the choice.
