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Six Business Lessons Managers Can Learn from Nonprofit Peers

Fri, 10/10/2014 - 06:30

Executives and managers don’t often think of nonprofit organizations as competing in the same marketplace as profit-based companies. But even though these groups aren’t out to turn a profit, they still have goals to accomplish, deadlines to meet, and people to manage–many of whom have moved from the private sector. Here are six lessons executives in the private sector can learn from their nonprofit counterparts.

Timing is everything

Successful nonprofit managers know that in a crisis, distribution and communication needs to be in place before supplies can be disbursed. The same philosophy holds true for training, supply, and production in the private sector. Anticipating and planning—whether it’s for a natural disaster, a major product release from a competitor, or your own announcement—is essential to being agile in the marketplace.

One CFO described his concern for timing with this anecdote: “The Red Cross upgraded its emergency help phone system after 9/11 with funds raised for the disaster; this rubbed donors the wrong way when it was reported in the media. So timing isn’t just about doing the right thing at the right time; executives need to be aware of the perceptions of that timing.”

Establishing (and maintaining) credibility

As nonprofits know, credibility is hard to establish and all too easy to lose. Executives need to build trust with suppliers, customers, and employees. In addition to the obvious marketing upsides, operating ethically can have a positive impact on the bottom line:

One nonprofit CFO at a financial literacy organization advised, “You want [your company] to be known for your positive qualities. When troubles do come, this may be what stands between you and financial ruin. Think of the hit that Toyota took over brakes, accelerators, and floor mats. Decades of being the safest, cheapest to maintain, and [having the] best-built cars meant the company didn’t collapse outright. Its hard-earned credibility on the quality issue bought it a second chance.”

Maintain a strong ethical standard to attract the best

Employees who work for an organization with high ethical standards, profit or nonprofit, are more likely to stay. Maintaining standards doesn’t just help with retention though. Word of mouth can also open the door to a higher quality pool of talent. Not only that, it’s good for business.

To give an example, certified “B Corps” (Benefit Corporations) are voluntarily meeting higher ethical standards for labor and sourcing practices to distinguish themselves in a cluttered marketplace. While the initial ramp-up costs for certification are high (up to $25,000 a year), a 2011 New York Times opinion piece found that B Corps are using the certification for old-fashioned networking: with impact for the bottom line in terms of attracting better talent, discounts from other B Corp suppliers, and customers who vote their values with their wallets.

Nothing is more expensive than “free”

The senior vice president of a major advocacy nonprofit cautioned, “Everyone thinks volunteers are great. But volunteers need training. There are labor laws—even with volunteers. They can mess up jobs, leave you in the lurch, act racist or sexist, just like a regular employee—but with less accountability.”

Remember: Volunteers must be managed, incentivized, and trained. For the private sector, this advice clearly applies to any “free labor–including internships or studentships or other kinds of relationships that look inexpensive on the outside–that may impact the bottom line through damage to credibility or public perception.

Passion motivates

Passion enthuses nonprofits, but a good manager knows the same passion can also drive a business. The executive needs to translate this passion for their services and communicate that enthusiasm to their stakeholders. If you are truly evangelical about your products and see them as filling a genuine hole in your customers’ lives, your passion will infect and inspire those around you.

The most successful example of this kind of passion from both the for-profit and nonprofit worlds is Bill Gates, who brought his early passion for computing to millions through Microsoft and earlier business efforts, and more recently his passion for improving global health through the Gates Foundation.

Trust your employees

One senior nonprofit executive noted that employees and volunteers who feel trusted perform better. This is even truer in industry. A 2008 study in The Journal of Applied Psychology found compelling evidence that employees who feel trusted have improved customer service and sales records over employees who did not.

When does the executive know when a volunteer or employee is ready to be trusted with critical or highly sensitive work? While there are few universal best practices, there are general principles: proceeding gradually with increased responsibility, having clear goals that can be measured, and perhaps most importantly, try to build “peer trust” or “horizontal trust” between employees.


Irrespective of business size and structure, management can learn from the nonprofit world by delivering the right products at the right time; growing their businesses by carefully tending their reputation; and establishing a track record of delivering on their promises and behaving responsibly. A good manager can also learn that cultivating a trusted workforce isn’t surrendering control but a way of ensuring that you never feel the need to do everything yourself.

The businesses that last focus on more than simply doing business inexpensively: They believe in their products and services and their staff.


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How to Help Employees Step Out of Their Comfort Zones

Thu, 10/09/2014 - 07:00

Helping your team members develop their skills can pay off in all sorts of ways: They’ll get better results in their work, be able to shift more and more work from your plate to theirs, will generally stick around longer and feel more fulfilled when they can see themselves growing professionally. But what do you do when staff members are nervous about taking on something they’ve never done before and don’t know if they’ll succeed at?

Here are four ways to help employees step out of their comfort zones and develop new skills.

1. Err on the side of letting your staff members make decisions whenever you can. Managers sometimes get so used to making decisions that they forget to step back and let team members make decisions when circumstances allow for it. If you’re asked to weigh in on something and you don’t feel strongly about the decision, hold your tongue and instead leave it up to your staff member. If you’re always calling the shots yourself, your staffer won’t get experience thinking through decisions – which is essential to doing higher and higher level work. So when you spot opportunities to pass that decision-making responsibility along, do it. Get comfortable with the words “It’s up to you” or “What do you think?”

2. Give people stretch assignments and tell them why you think they’ll be able to handle it. Assigning projects that require developing new skills (or using old skills at a higher level) is one of the best ways to develop employees, since most people learn by doing. But in order to make sure your employee doesn’t feel thrown to the wolves, make sure to explain why you think she can handle it – such as by pointing to great work that she’s done in a similar area, or talking about strengths you’ve observed in her that will help her tackle this new frontier. Additionally….

3. Use a gradual approach. If your staff member is daunted by the thought of taking on a whole new type of work that she’s never done before, make it more manageable by breaking it into smaller pieces. For instance, rather than just putting a staff member in charge of training new employees, start by talking with her about how you normally train people, what it looks like when it goes smoothly, and what the pitfalls are. Then let her sit in while you train someone, or jointly train someone together. Then the next time a new hire needs to be trained, you might have her manage the process, but look over her training plan and reflect with her afterwards about how it went. In other words, ease people into new areas gradually, before you expect them to do it on their own without help from you.

4. Model the skill yourself – and talk about what you’re doing and why. Often people need to see and reflect on how a skill is used before feeling comfortable doing it themselves. So if, for instance, you’re trying to help a staff member get better at running strategy meetings, you might have her watch while you lead one. Then, afterwards, meet to talk over what you did and why, such as how you got the group to agree to an agenda at the start of the meeting, why you left a particular tangent run its course while choosing to redirect another one, and how you drew out quieter members of the group. This type of watching and reflecting can help people feel much more prepared to practice the skill themselves.

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Mistakes to Avoid When Scaling a Business – Interview with Brad Feld

Wed, 10/08/2014 - 07:00

I spoke to Brad Feld, who has been an early stage investor and entrepreneur since 1987. Prior to co-founding Foundry Group, he co-founded Mobius Venture Capital and, prior to that, founded Intensity Ventures. Brad is also a co-founder of Techstars. In addition to his investing efforts, Brad has been active with several non-profit organizations and currently is chair of the National Center for Women & Information Technology, co-chair of Startup Colorado, and on the board of UP Global. Brad is a nationally recognized speaker on the topics of venture capital investing and entrepreneurship and writes the widely read blogs Feld ThoughtsStartup Revolution, and Ask the VC. In the following brief interview, Feld talks about the biggest mistakes business owners make, typical management issues that occur when entrepreneurs grow their businesses, and more.

Dan Schawbel: What do most business owners get wrong when first starting their companies?

Brad Feld: People, people, people. Picking the people you start your company with – partners, investors, and mentors – is critical. Many founders don’t spend enough – or any – time thinking about this. You are about to enter into a very long term relationship. Make sure you’ve thought hard about who you are about to enter it with, and they are the ones you want to work with.

Schawbel: What typical management issues occur when entrepreneurs grow their companies and how do they solve them?

Feld: Scaling a business is hard. There are many points at which the leadership and the management structure of the company needs to change. This often happens a lot early on, at 10 people, 20 people, 50 people, 100 people, and 200 people. You wake up as a CEO and you realize you don’t have the right people in the right roles, or the business has scaled beyond what someone is capable of, or there is a fundamental gap in the execution of the business. Great entrepreneurs are always thinking about this and building capacity and skills ahead of scale.

Schawbel: How does a successful entrepreneur hire the right people, manage them and then deal with expected turnover?

Feld: Recognize that you can’t motivate people, you can only create an environment in which people are motivated. As a result, putting effort into understanding and defining your culture and then only hiring people with high competence for the role and high culture fit is critical. It’s very hard to get this right, especially if you haven’t clearly defined your culture. In addition, when you find someone who is very competent for the role, but missed on culture fit, it’s easy to rationalize that you should hire them and then keep them around. But this is a bad idea, especially in a fast growing company. Once you start missing on culture fit, things spin out of control quickly.

Schawbel: What is the best way to scale a business or create a model that is scalable? How do you know if it’s going to scale or not?

Feld: You only know if it scales by understanding the economic drivers and then applying more capital to the things that you believe will create a scalable return. Many companies, especially those that are overfunded early on, spend too much money scaling before they’ve found product market fit. Spend money slower and really search for something that your customers and users respond to. Once you’ve found that, you can start to scale.

Schawbel: What do most entrepreneurs not know about business operations that would help them be more successful at managing their company?

Feld: It’s hard. It’s very hard. It’s messy. It can be extremely boring. As you start to scale, hire people who know what they are doing because they’ve done it before.

Schawbel: What types of qualities do you look for in the type of people you hire when your company scales? What do you try and avoid when hiring? 

Feld: Optimally, you are looking for people who have been through the scale point you are at in an equivalent role. So – if you are 100 people growing to 200, you want to bring on people who have been in companies that have gone from 50 to 250 people. This is particularly true of executive hires. For example, if you are 100 people, bringing someone in who has never been in an organization of less than 1,000 people is likely going to be a miss. Ultimately, you still have to filter heavily for culture fit and should be willing to trade off specific experience in an organization at similar scale for tight culture fit and strong competence in the role.

Schawbel: Aside from hiring the wrong people, what are a few other mistakes that entrepreneurs make in the beginning? How do their problems change after the company has a few hundred people?

Feld: Over and over I see entrepreneurs being in denial about what is going on in their business. Every day brings new problems and you have to confront them. There are times when they pile up and are overwhelming. This is a huge trap – convincing yourself that things are ok when they aren’t, or that they are unchangeable (e.g. “this is just the way it works”) is a path to despair.

Schawbel: How do you create the right type of culture that makes for a successful business? Can you give a few examples from the companies you invest in?

Feld: There is no right type of culture. The beauty of being an entrepreneur is you get to craft the culture however you like. Some companies, like Moz, have an incredibly open culture (see TAGFEE - Others have a confrontation culture. Understanding what you want your culture to be is critical – if you don’t own it, it will own you.


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