More mission-driven organizations are developing a sustainable business model to support their good work for society.
Over the last decade, there has been a focus on a growing sector of our economy – hybrid enterprises with a commercial business that funds a social mission. What makes them different from traditional not-for-profit and for-profit enterprises is that they are a bit of both. This ties leadership’s fiduciary responsibility to a worthy cause.
These “for-benefit” organizations are increasingly seen as a distinct fourth sector of the economy, beyond the established three: for-profit, not-for-profit and government. For-benefit companies cross over the traditional sectors and can be either for-profit or not-for-profit. The key distinction is that they commit to a mission that supports the public good through a sustainable, competitive business model, with the profits funding a mission. Some forward-thinking state governments now recognize for-benefits that are for-profit as distinct legal entities, called benefit corporations (B Corps).
While for-benefit enterprises are growing in popularity, they have been around for a long time. An academy company in this sector is Goodwill Industries International, an iconic brand and institution that was founded in 1902. The federation of Goodwills supports its mission through stores across 17 countries that generate over $4 billion in retail sales annually. The organization has expanded beyond traditional retail outlets to selling on-line – putting Goodwill in competition with Amazon, Walmart and other e-retailers.
The for-benefit model spans industries across the economy, including technology. The Public Interest Registry (PIR), for example, is the wholesale provider of .org domain names around the world. This global enterprise partners with companies like GoDaddy and Network Solutions. Its profits are invested in bringing Internet access to remote areas of the developing world and other missions of the non-profit Internet Society.
While PIR and Goodwill are not-for-profits in the fourth sector, there are also well-established for-profits in the sector. In 1987, during the farm crisis, Federal Agricultural Mortgage Corporation (Farmer Mac) was created to help rural America access sources of capital, preserving our country’s farming and ranch heritage, as well as funding rural infrastructure. Today, Farmer Mac is a publicly traded financial institution with a mission to support rural society.
There are three universal attributes that are requisite for success as an executive team member of a for-benefit enterprise.
Mission-Minded Sensibility. The executive team should have a natural, hard-wired connection to the mission. An emotional connection, born of personal values and experience, creates the sensibilities to understand the broader ecosystem supporting the societal cause, and shapes true servant-leaders. Empathetic leadership is critical to success in a for-benefit enterprise, as it allows the executive team to easily engage the broader stakeholder community around the mission.
Balanced Business Savvy. There is more than one bottom line in a for-benefit. In addition to the usual “bottom line” income metric, the board of directors measures success in other ways, quantifying it in terms of the organization’s contribution to the mission. These additional metrics result in a double or even triple bottom line. Therefore, management must balance investment in the business that funds the mission with investment in the mission itself. This constitutes fiduciary responsibility in a for-benefit.
Making strategic and day-to-day decisions with these added dimensions of success is a full-brain activity, not rooted as firmly in the left-brain thinking that the classic single bottom line, for-profit leadership tends to exercise. The enterprise must remain competitive and sustainable, while funding the mission. If management neglects to adequately invest in adapting the business model to market conditions, it risks harming the goose that lays the golden eggs.
Cultural Transparency. Even in the best run for-benefits, where an executive team is addressing a dynamic environment and disparate stakeholder views, maintaining a competitive business strategy while remaining mission-minded is challenging. The mere concept of more than one bottom line engenders a range of subjective measures of success. The executive team is continually refining the optimal path forward because of the tradeoffs. Due to the diverse perspectives and input of employees, customers and the broader community of stakeholders, management must not only communicate business decisions, but be transparent about how they are made, and impart an understanding of their implications within the ecosystem of stakeholders.
Broadly speaking, for-benefit enterprise management is for a select profile of leaders. Furthermore, only a sliver of these are likely to be compelling fits for a specific for-benefit and its unique business model and mission orientation. But they are out there, and they are making an impact in more ways than one.
Boyden consultants have a long history of serving clients in the for-benefit sector, conducting CEO and other C-level executive search assignments, including the organizations cited in this article.