The language and terminology used in for-profit companies and not-for-profits organisations is often quite different. We don’t usually think about the term ‘profit’, yet there is a ‘gain’ in the non-profit sector, but it is measured against different criteria.
Using the concept of the service-profit chain, this post translates the ideas so that excellent leadership, satisfied employees and great teams create loyal customers, that leads to ‘profit’. For you this may mean things like changed lives, improved educational outcomes, increased funding and growth.
1. What is profit?
profit: The positive gain from an investment or business operation after subtracting for all expenses. Opposite of loss.
It’s an equation that looks like this:
Business operation - expenses = profit
There is always a cost to doing business – including paying employees, goods/products and taxes and administrative fees. If the income is less than the these costs, the business runs at a loss. if higher, there is a profit – that is the purpose of doing business
2. What is ‘profit’ for non-profit organisations?
In business the concept of profit is straightforward, but in the non-profit sector it’s not so clear. Organisations such as schools, aid agencies and churches provide a service to the community that is evident in improved outcomes for those served.
Schools: Young people receive a great education that provides a foundation for the future
Aid organisations: Funds are raised that are translated into programs that improve life outcomes
Churches: Lives are positively transformed and relationships strengthened which leads to growth and increased participation.
3. How does the service-profit chain work in non-profits?
In business, the service-profit chain establishes the link between profitability and the day-to-day operation of the business.
Great LEADERSHIP results in
Satisfied EMPLOYEES, who
Become LOYAL TEAMS that
Increases PRODUCTIVITY and
Provide a VALUE-ADD so the
Customers are SATISFIED and they
Become LOYAL CUSTOMERS which results in
There is a link between the way the leaders relate to their teams, and the way teams relate to the ‘customers’. When leaders focus on their teams and create a culture that values loyalty, productivity and satisfaction, then this culture becomes translated to their teams.
4. Leaders make the difference at every level
There is an interesting link between loyal team members and loyal customers – when a leader focuses on the team they will mirror the same culture, positively or negatively to the customers. There is a direct correlation between how a leader engages with their team and how the team engages with the customer, or the people they serve.
Think about these questions:
1. What is profit in your work?
2. Who are your ‘customers’ and what makes them ‘loyal’?
3. What can you practically do to improve their satisfaction?
4. In providing service how do you add value?
5. What will increase the productivity of your team?
6. How do you recognise and reward employee loyalty?
7. As a leader what do you need to focus on to have satisfied employees?
Culture is contagious. Make sure yours is worth catching.