Bryce – Bryce Porter

Charities in Crisis: The Charitable Industry’s Most Pervasive Problem

Introduction

Many charities are ill-equipped to handle the growing demand for their services or to sustain their operations in a meaningful way—despite a continuous community reliance on the charitable sector to support a basic standard of living and slightly more than 22%, or 8.55 million Canadians, using charitable services annually. The National Center on Charitable Statistics predicts that more than 26,000 charities will become insolvent in Canada alone over the next 10 years, meaning one-third of charitable organizations are unlikely to continue operations. This alarming statistic highlights a crisis that extends beyond Canada, affecting charities worldwide.

At first glance, financial issues seem to be the greatest challenge for these organizations. Whether it’s the lack of consistent year-over-year revenue, highly seasonal donations, a dependence on a single large donor, or government funding, charities often cite money-related problems as their primary concern. These issues, however significant, are merely symptoms of a deeper, more pervasive problem.

The real challenge facing many charitable organisations in North America, is often self-imposed, and stems from how organizations perceive and identify themselves. Unlike for-profit businesses, charities have historically distinguished themselves from the business sector, not only out of necessity, but also due to a fundamental misunderstanding of the benefits that business principles can bring. This separation has led to a lack of business acumen within the charitable industry, undermining operational effectiveness, sustainability, and ultimately, their ability to accomplish their objectives.

The single most impactful failure of the charitable sector is not one of mission, but of identification. By rejecting business ideas and distancing themselves from the business community, charities can inadvertently hinder their ability to operate efficiently, manage finances effectively, and innovate. This article will investigate the root causes of why some charities seem unable to remain viable and contribute meaningfully to their community, the impact of this failure on the charitable sector, and potential solutions to bridge the gap between charities and business practices, ultimately aiming to empower charities to fulfil their missions more successfully.

Historical Context

Pre-1900’s

Until the mid-18th century, charity was predominantly channelled through religious institutions, almshouses, and the benevolence of the wealthy. Major world religions such as Christianity, Judaism, Islam, Hinduism, Jainism, Buddhism, and Sikhism have woven charitable principles into their core practices since their inception. Religious bodies acted as the primary agents of charity, distributing aid and relief to the needy in their communities. Despite this deep-rooted tradition of charity within religious frameworks, the 17th century sparked intense debate among scholars and philanthropists regarding the role of state intervention versus private charity in providing welfare.One notable figure in this debate was the political economist Thomas Malthus, who vehemently criticized the English government’s poor relief program. Malthus argued that state-run welfare systems were economically unsustainable and morally questionable, advocating instead that charitable activities be entirely managed by the private sector. He detailed these beliefs in his nearly 300-page essay, An Essay on the Principle of Population: A View of its Past and Present Effects on Human Happiness, published in 1803. His views resonated widely, helping to shape a prevailing laissez-faire attitude towards state involvement in charitable activities. This perspective laid the groundwork for a long-standing preference for private charity over public welfare.

The 20th Century

The 20th century marked a period of significant transformation for the charitable sector. Charities expanded their reach internationally, evolving into multinational organizations with budgets reaching hundreds of millions. This era saw the rise of iconic humanitarian organizations such as the Red Cross, Oxfam, and UNICEF, which extended their aid to the farthest corners of the globe.
However, as private industry grew exponentially during the same period, it often did so in ways that conflicted with the missions of charitable organizations. The rapid industrialization and unregulated expansion of private enterprises led to widespread social and economic disparities. Many charitable organizations were established as direct responses to the adverse conditions created by industrialization, aiming to mitigate its negative impact on the poor and working class.
This era also saw the rise of labour unions, advocacy groups, and government agencies dedicated to improving living conditions for marginalized populations. These entities often found themselves at odds with private industry, further entrenching the divide between the charitable sector and the business community.

The Modern Charitable Sector

In the contemporary landscape, charities have increasingly sought to distance themselves from the private sector. This separation has become so pronounced that even private companies with philanthropic intentions often establish separate charitable foundations or organizations to conduct their charitable activities. The charitable sector, despite its financial reliance on private industry, is frequently perceived as fundamentally independent from it.
This attitude is deeply entrenched within the sector, where the notion that charities should operate like businesses is often viewed as an affront to their core principles. Many within the charitable sector staunchly believe that their mission-driven focus should remain distinct from the profit-driven motives of businesses. This pervasive mindset has led to a widespread rejection of business practices, even when such practices could potentially enhance the efficiency and effectiveness of charitable organizations.

The Rejection of Business Principles

Modern charities are often diametrically opposed to the notion of operating as private enterprises, believing that the charitable sector exists in inherent conflict with the private sector. This divide is primarily driven by four key factors: a mistrust of private enterprise, philosophical differences, professional homogeneity, and the advent of professional charitable administrators.
By understanding and addressing these factors, the charitable sector can begin to bridge the gap between nonprofit and business practices. Embracing strategic planning, financial management, and operational efficiency from the business world means equipping charities with the tools they need to operate more effectively and sustainably, ultimately better serving their communities and achieving their missions.

Mistrust of Private Enterprise

Charities frequently harbour a deep-seated mistrust of private enterprises. This skepticism is rooted in the perception that profit motives conflict with altruistic goals. Many in the charitable sector believe that adopting business principles could compromise their mission, leading to a focus on financial gain over social impact. High-profile cases of corporate malfeasance further exacerbate this mistrust, reinforcing negative stereotypes about the business world.

Historically, this mistrust has been somewhat justified. Charitable organizations, especially those founded in the 19th and 20th centuries, were often established to combat the exploitation of the poor and working class resulting from private industry, as described in the article Women and charitable organisations in nineteenth century Ireland and the contemporaneous book The History and Objects of the Foundling Hospital by John Brownlow. This historical precedent, coupled with the growing wealth gap and the fact that many people only interact with the private sector through their work and purchases, fuels resentment. Many individuals experience stagnant wages and an increasing cost of living, reinforcing the view that private enterprise is a net negative for society.

This perspective has led the charitable sector to see itself as fundamentally distinct from the private sector, not just in mission but in function and operation. Phrases such as “We are not a business,” are core to arguments defending the status quo and are supported by historical precedence. The decision by large enterprises to found separate charities and charitable foundations, has also reinforced the belief that charities must operate independently of business principles.

Philosophical Differences

The philosophical differences between the charitable and private sectors contribute significantly to the rejection of business principles. Charities are typically mission-driven, focusing on social good and community benefit. In contrast, businesses aim to maximize shareholder value. This fundamental difference in objectives leads many charity leaders to reject business practices, fearing they may dilute or distort their organizational missions. Despite evidence that strategic business practices can enhance mission delivery and overall impact, the belief that financial efficiency and social good are mutually exclusive persists.

Although there are inherent philosophical differences between profit-driven and mission-driven organizations, these differences primarily concern the organization’s mission. In the past century, these philosophical differences have expanded to include operational and strategic aspects of charitable organizations. Philosophical differences can be broadly divided into two categories: legislated differences and experiential differences.

Legislative Differences

Countries globally have legislated elements of the charitable sector due to their tax-exempt status, ranging from financial reporting to governance. This governmental oversight aims to ensure that tax-exempt status is applied appropriately and that operations are effective. However, this oversight has cultural by-products that impact the culture of charitable organizations. Notably, all charitable organizations in Canada and the USA require an uncompensated board of directors to oversee their operations. While this provides some benefits, it also means that charities are often run by committee, diluting strong perspectives, impeding expert decision making, and stifling innovation.

Boards can inadvertently prevent their organizations from being successful by relying too much on committee work and majority-based voting systems, which can remove power from traditionally authoritative executive positions and distribute this authority to less knowledgeable, less specialized board members. It has become common for functional executives to sit as ex-officio members within functional committees, leading to situations where an experienced Chief Financial Officer, for example, has no voice in the long-term financial operations of a charity.

The extensive documentation and reporting required of small charities also contribute to their operational challenges. Regular tax filings, audit procedures, and other reports can consume significant resources, leaving little room for identifying and integrating meaningful systems that would enhance their long-term success. Rather than looking for ways to grow their community impact or improve their services, charities often overinvest in administration and overhead in a way that does not benefit their causes. The U.S. Better Business Bureau recommends that charities allocate no more than 35% of their expenditures to overhead and administration. However, as Mark Blumberg of Blumberg Segal LLP points out in his article How Much Should a Canadian Registered Charity Spend on Administration, this figure, while seemingly reasonable for many organizations, is not an absolute benchmark. When we consider the wide range of overhead costs—where some organizations spend as little as 5%—it becomes evident that approximately 27% of Canadian charities allocate 50% or more of their budget to overhead. This statistic, though approximate, is indicative of a critical issue in the charitable sector: the extensive reporting, tracking, and compliance demands placed on organizations, regardless of their size. These requirements can significantly limit a charity’s ability to maximize its impact on the community.

Despite the significant burden that extensive reporting places on the charitable and public sectors, it would be a mistake to dismiss the value of this transparency. While the cost of compliance can be high, the public benefit of having accessible, reliable information on charitable and public organizations is immense. The issue is not the existence of these reporting requirements but rather the need for them to be more proportionate to an organization’s budget and capacity. To truly serve their purpose, these reporting processes should be streamlined, making them more effective, meaningful, and objective, thereby allowing charities to focus more resources on their missions.

Experiential Differences

The requirement for oversight by an uncompensated board of directors means that these boards often do not provide similar benefits to the professionals they rely on. Board members in Canada and the USA are often retired doctors, educators, public sector employees, and lawyers. While these individuals bring valuable skills and experience, they often lack the expertise needed in marketing, sales, finance, strategy, operations, and customer experience—areas critical for charity success. This lack of relevant experience can lead to decisions that are not aligned with the financial realities and operational needs of charitable organizations.

Crucially, while the professional sectors mentioned above generally serve the public interest, they do not experience the same financial pressures as charitable organizations. For example, education, healthcare, and government employees often have regular, stable funding and limited systemic capacity or interest in innovating towards efficiency. Similarly, legal professionals, whether in public or private practice, typically benefit from higher billable rates than those affordable to charities. This situation results in a group of individuals governing the operations and priorities of a charity who may lack the knowledge or capacity to effectively manage the organization’s financial challenges.

Professional Homogeneity

The professional homogeneity within the charitable sector further perpetuates the rejection of business principles. Many nonprofit professionals come from similar educational and experiential backgrounds, often within the social sciences or humanities. This lack of diversity in professional experience can result in an echo chamber, where innovative ideas from the business world are not considered or valued. Without exposure to business practices, nonprofit leaders may lack the skills and knowledge necessary to implement effective organizational strategies.

Despite the need for long-term strategic planning, financial reporting, and revenue development, charities rarely attract board members with relevant business skills and experience. Positions like Chief Marketing Officer, Chief Revenue Officer, Chief Financial Officer, Chief Strategy Officer, Chief Operating Officer, and Chief Experience Officer (formerly Chief Customer Officer) are often replaced by committees or missing entirely. This structure dilutes the perspectives and ideas from functional leads and outside expertise, only implementing ideas that a group of inexperienced, non-experts see the value in.

It is valuable to consider why private companies—committed to operational efficiency and cost-effectiveness—invest in highly paid executives with control over different functional areas. Private companies recognize that functional executives are not only responsible for producing real value but also for maintaining the autonomy of their functions while staying aligned with the company’s values and vision. This structure enables private companies to leverage specialized expertise to drive innovation and efficiency.

In contrast, the charitable sector often relies on committees to provide a variety of insights and perspectives. While this approach can be valuable, it also tends to dilute the input from functional leads and external experts. Consequently, charities may only implement ideas that resonate with a group of inexperienced, non-expert board members. This reliance on committees rather than specialized executives often prevents charities from fully benefiting from professional expertise in areas critical to their success.

Professional Charitable Administrators

The rise of professional charitable administrators has also played a role in maintaining the divide between charities and businesses. These administrators often have backgrounds in nonprofit management rather than business, reinforcing sector-specific best practices and conventions. While they may bring expertise in areas such as fundraising, they are likely to perpetuate a culture that is resistant to business ideas. This insularity often prevents charities from adopting innovative approaches that could enhance their operational efficiency and impact. A common misconception among professional charity administrators is equating staying within budget with being efficient. For many organizations, whether in the charitable or private sector, having an annual budget of $1 million often leads to spending that entire amount, with the belief that simply not exceeding the budget is a mark of efficiency. True efficiency, however, should be a dynamic goal—where an organization either increases its community impact for the same cost or reduces the overall expenses required to run its programs. In the private sector, an organization with a $1 million budget might aim to spend only $800,000 to boost profits. While the motivation differs, charities should adopt a similar approach to efficiency. This strategy not only fosters growth and stability in fluctuating economic conditions but also demonstrates to donors that their contributions are being effectively utilized. Finally, working to be truly efficient allows organizations to set aside money for difficult years—something sorely needed in Canada’s charitable sector today.

Historically, charities were often founded and overseen by business people, executives, and aristocracy who saw a need and set about filling it. In contrast, modern charities are often run by professional administrators who spend their entire careers within the charitable sector. This rise in professional administrators results in the most experienced individuals within a charity having no knowledge or experience working to be efficient, introspective, and focused on delivering meaningful value. They often lack the skills to interact with or produce convincing narratives for fundraising efforts.

A key flaw in the concept of professional charitable executives is the lack of recognition given to the skills and expertise of successful private-sector executives. Professional charity administrators often deride business efficiency and corporate operations while simultaneously seeking corporate sponsorships and funding. This contradictory stance highlights the need for charities to embrace business principles to enhance their effectiveness and achieve their missions more efficiently.

The Impact of Missing Business Acumen

Over the past two decades, trust and respect for charities have steadily eroded. Opinion polls and national surveys show a consistent decline in the public’s confidence in charitable organizations. Despite this waning trust, the demand for charitable work has only intensified, stretching the services these organizations provide to their breaking point.

In Canada, both the Environics Institute and the Muttart Foundation have been monitoring trust in the charitable sector since before the 2000s. Their findings are poignant: The Environics Institute reports a dramatic decline, with only 8% of Canadians expressing trust in charity leaders, down from 19% in 2008. The Muttart Foundation’s data reveals a 33% drop in public confidence between 2000 and 2013 alone.

What does the public perception of charities mean?

With public confidence plummeting, charities struggle to secure funding that matches their historical averages. Large donors and institutional funders are increasingly hesitant to commit resources, leading to a fierce competition for available funds. Yet, many charities fail to communicate effectively with their donors.

Charity leaders often, out of ignorance or arrogance, assume that their mission alone should guarantee funding. Their messaging typically boils down to “fund us because we’re good.” However, both corporate and private donors are skeptical, doubting the value and efficacy of their contributions.

The Value of Expertise

The benefits of expertise are undeniable. Why, then, do charities often reject this premise? Many charity leaders believe that their mission’s success will naturally follow from the dedication of committed people. While well-intentioned, these organizations struggle to connect with potential donors and resist adopting business practices that would allow them to measure and communicate their impact effectively.

In the Arts and Culture sector, for instance, many charities make little effort to track metrics related to quality, impact, or effectiveness. They view numerical evaluations as an affront to their interpretive or artistic value. An executive director of an Ontario-based charity, when asked about metrics for program quality, responded, “Unless you are from the theatre community, you will not be able to determine whether a program is high-quality or not” and suggested that potential donors should “trust that our programs continue to be high quality.” Unfortunately, as public trust in charities declines, this expectation becomes increasingly unrealistic. This also points to a clear sense of perceived value; despite the need to foster effective donor relationships, many charities end up dismissing knowledge from outside their mission.

Beyond operational improvements, business expertise can bridge the gap between public messaging and the organization’s mission, tailoring messages to different donors. Consider the following real-world example: a small charity lacked expertise in finance, operations, and strategy, despite having a professional administrator and a long-time charity executive as its Executive Director. The board of directors, comprised of well-intentioned individuals including an accountant, several educators, and public sector administrators, oversaw a program with an annual cost of nearly $13,000 per individual.

Eighteen months after a business professional became the board chair, the charity experienced a remarkable transformation. The program’s perceived quality within the community improved, the number of individuals supported nearly tripled, and the operating cost per individual dropped to just over $2,000 annually. This expertise enabled the organization to make confident, financially sound, and data-backed public statements to their donor base.

Bridging the Gap

Despite numerous challenges, the charitable sector continues to grow in cultural significance as more individuals rely on its services. According to an Ipsos survey in 2022, 22% of Canadians anticipated needing charitable services to meet essential needs, a figure that rose to over 26% in 2023. This increase underscores the urgent need for charities to operate efficiently, especially in the face of declining funding options. However, there are tangible steps charities can take to not only remain stable but also expand their influence and ability to positively impact their communities. These steps can be broadly categorized as follows:

Recognition;
Evaluation;
Communication;
Implementation; and
Iteration.

Step One: Recognition

Charitable sector leaders must first introspectively examine their operations and leadership teams. Key questions to consider include:

Do we have leaders from non-public industries?
Do we empower our functional leaders?
Do we foster excellence and innovation?
Is our organization attractive to professionals who can contribute to our effective operations?

While asking these questions is crucial, it is equally important to accept that some, if not all, answers may be “no.” Acknowledging these gaps allows for open and transparent communication about areas needing improvement.

Step Two: Evaluation

Most charitable organizations face a range of challenges, making it essential to evaluate and identify the most critical issues. This process often requires experience, as the visible problems are rarely the root causes but symptoms of deeper issues. To identify the root cause, an organization should formulate a problem statement and conduct a thorough “Why-why” analysis, supported by evidence.

For example, one charity faced a significant turnover of formerly loyal programmatic staff in a single season. The following is a sample of the Why-why analysis conducted for them, with identifying characteristics and evidence removed:

Problem Statement: Our programmatic staff turnover was 72% year-over-year.

Why was the programmatic staff turnover 72% year-over-year?
Because the workplace was a hostile environment that did not facilitate collaboration and stifled creativity.

Why was the work environment hostile and uncreative?
Because policies implemented two years prior required excessive committee oversight, slowing down impactful changes and diluting the core intention behind new programmatic initiatives. These policies disallowed variation in core responsibilities and mid-season adjustments, requiring overtime and creating ambiguity regarding responsibility for required changes.

Why did these policies slow down or prevent changes that would have positively impacted programming?
Because the previous program committee elected to follow a Waterfall Method of programmatic development. This approach disallowed periodic adjustments and mid-season changes to facilitate larger, periodic programming changes, using seasonal operations as the verification stage.

Why did this Waterfall approach limit periodic adjustments?
Because the program committee did not have an in-depth understanding of the Waterfall Methodology and did not effectively integrate this approach into the program team’s workflow. Specifically, they did not consider the maintenance phase of the methodology and did not meaningfully evaluate alternative methods.

Why did the program committee implement a methodology they did not fully understand?
Because they believed they did. The program committee had seen a presentation from a potential project management consultant who pitched their expertise in Waterfall methodology. In an effort to reduce expenditure, the committee did not hire the consultant but attempted to implement the methodology independently.

This analysis illustrates the complex nature of problem-solution pairs. While the surface-level issue might have been dismissed as a conflict among staff, the real cause was rooted in structural policies that would persist despite new hires. The problem highlighted several well-known challenges of the Waterfall model, including:
1. Longer delivery times: The inflexible step-by-step process often extends the delivery of the final product, unlike iterative processes such as Agile or Lean.
2. Limited flexibility for innovation: Unexpected occurrences can derail a project, as the model’s rigidity can cause setbacks with even minor issues.
3. Limited opportunities for client feedback: Once the requirements phase is complete, the project proceeds without further client input.
And may require changes as foundational as adjusting the organizations operating mythology.

Completing an effective Why-why analysis is crucial in identifying root causes and developing detailed, actionable recommendations. For instance, recommendations like “Create new policies that more accurately reflect the Waterfall method” and “Remove the policy disallowing periodic adjustments and mid-season programmatic adjustments” are specific and actionable, enabling quick implementation once approved. This stage of evaluation also involves determining the most suitable project management method for the organization’s needs.

Step Three: Communication

Effective communication is crucial to ensure that both internal and external stakeholders are aware of the project. This involves providing a project description, key reasons for undertaking the project, a timeline, and expected benefits. Tailored messaging for different stakeholder groups is essential. For instance, internal stakeholders might focus on job stability and role expectations, while external stakeholders might be more concerned with program quality and community impact.

Step Four: Implementation

Careful and redundant planning is essential during the implementation phase, where the project plan is put into action. This stage may benefit from the oversight of a project manager, especially if the organization lacks project management experience or the project is complex. Identifying success indicators and separating target metrics from indicator metrics is critical.

As you implement your project, it is crucial to identify the indicators of success that will be used to evaluate both the quality of your implementation and the overall effectiveness of the solution. It is essential to distinguish between two groups of metrics: target metrics and indicator metrics. This distinction is important because using the same metrics as both indicators and targets can lead to a situation where your indicators become unreliable in assessing actual success. For example, in an educational institution, metrics should distinguish between standardized exam preparation and providing a meaningful, well-rounded education.

Step 5: Iteration

Iteration involves collecting data on indicators and target metrics and making small, incremental adjustments to improve the project. Effective iteration should follow these principles:

Regular data-collection periods are necessary.
Short data-collection periods are optimal.
Iteration is valuable only if an event occurs frequently.

The goal is to improve a project once it is 80% delivered, focusing on the continuous improvement of target metrics. If achieving the desired quality or outcome proves challenging, a “Why-why” analysis should be conducted to understand the root cause and inform further adjustments.

The Key Barrier

One of the fundamental challenges facing the charitable sector is rooted in its identity. In Canada, charities are a subset of not-for-profit corporations, but the crucial word here is “corporation.” The charitable sector has a century-long commitment to the idea of being not-for-profit, but perhaps now it should embrace elements of the business world that can enhance their capacity to support individuals and communities, while forging stronger connections with donors in compelling ways. This distinction—and the often active hostility towards the concept that charities can operate like businesses—is not only harmful but also incorrect on a technical level.

To overcome this challenge, charities must first acknowledge that many of the terms fundamental to the charity industry are essentially less corporate ways of describing business functions that exist across every sector. The National Association of Nonprofit Organizations & Executives (NANOE) described seven key reasons why nonprofits fail, including empty optimism without the elements to make success work, values vacuum or poor organizational development, competitive blinders without thought to competition, iced innovation or lack of innovation, mission creep or expansion without reality, forgetting who the real boss is, such as revenue, and fear of appropriate data information. For instance, corporate fundraising is simply a charity-specific term for sales. In the business world, charitable giving is often considered a part of marketing efforts. Thus, the ‘sales’ pitch for corporate sponsorship should highlight the possible return on investment and include information about the charity’s demographics and marketable audience.

Charitable leaders need to accept and integrate business values within their organizations. This integration is crucial for several reasons:

Efficiency: Charities that adopt business practices can streamline their operations, making them more efficient and effective in their mission.
Corporate Sponsorship: Understanding the business perspective can help charities craft compelling proposals for corporate sponsors, emphasizing mutual benefits and ROI.
Donor Relations: By valuing the professional and vocational backgrounds of potential donors, charities can avoid alienating them and instead foster stronger, more enduring relationships.

A key step in this integration is reframing the perception of businesses within the charitable sector. Many charities view for-profit businesses as soulless, unethical entities that cannot add value to charitable organizations. This perception is not only misguided but also counterproductive. Businesses, when engaged properly, can provide substantial support and resources to charities, enhancing their ability to fulfil their missions.

Before charities can grow beyond this limiting notion, they must recognize that business principles can coexist with charitable values. Many business functions are already present within the charitable sector, albeit under different names. For example, corporate fundraising involves strategies and skills similar to those used in sales and marketing. By adopting a more business-oriented approach, charities can gain a competitive edge, connecting more effectively with corporate sponsors and maximizing their impact.

A New Era

In summary, the fundamental crisis facing the charitable sector and the root cause of many financial and operational challenges lie not in a lack of funding, but in a pervasive self-imposed barrier that perpetuates funding challenges. Charities, by rejecting business principles and distancing themselves from the private sector, have hindered their ability to operate efficiently and sustainably. Historical context, philosophical differences, and the rise of professional charitable administrators have all contributed to this divide.

The reality of today’s charitable climate is that charities must embrace business acumen to thrive. By integrating strategic planning, financial management, and operational efficiency from the business world, charities can better fulfill their missions and sustain their operations. This shift does not compromise their altruistic goals but rather equips them with the tools to achieve greater impact.

As public trust in charities declines and the demand for their services increases, the sector must adapt to survive. Embracing business principles can transform charities, enabling them to communicate effectively with donors, manage resources efficiently, and innovate. This change is essential for the sector’s longevity and its ability to meet the growing needs of communities worldwide.

Charities are encouraged to seek support in adopting these ideas. Organizations can apply for consultation sponsorships to support these efforts. Even applicants that are not successful in their applications will benefit from charity pricing, ensuring that valuable expertise is accessible to all.

It is clear that the charitable sector stands at a crossroads. The choice is between maintaining the status quo, which risks continued decline and eventual societal irrelevance, or embracing change that can lead to a more effective and resilient future. Quoting Peter Drucker, “The best way to predict the future is to create it.” Charities have the opportunity to create a future where their missions are not only sustained but also amplified through strategic business practices.

There is an urgent need for the charitable sector to evolve. By adopting business acumen, charities can bridge the gap between their mission-driven focus and operational excellence, ensuring their longevity and impact. This transformation is not just a possibility but a necessity for the future of charitable work.

Comfortably Uncomfortable: The Path to Professional Excellence

This article advocates for embracing discomfort in the workplace as a catalyst for personal growth and professional success. It suggests seeking roles where individuals feel moderately uncomfortable, pushing them to expand their skills and thrive in a “growth zone.” The importance of balancing discomfort to avoid burnout or stagnation is emphasized, along with the role of organizations in fostering environments that encourage growth. Ultimately, embracing discomfort is portrayed as a pathway to fulfillment and continuous advancement in the modern workplace.

The Sector Convergence Model

In tackling the intricate challenges that often transcend sectoral boundaries and functional divisions, the Sector Convergence model has emerged as a strategic framework offering innovative solutions. Traditional problem-solving methodologies and industry practices often fall short when confronted with the complexities of modern business landscapes. The Sector Convergence model addresses this gap by providing business leaders with a holistic approach that integrates insights from diverse industries. Particularly effective for addressing multifaceted problems that defy standard practices, this model fosters collaboration and leverages the strengths of different sectors.

From Discord to Harmony: Bryce Porter’s Leadership in the Kawartha Music Foundation’s Restructuring

Throughout my extensive life as a musician, performer, youth advocate, and patron of the arts, I have developed a profound commitment to fostering the growth of young individuals. My passion particularly lies in recognizing the substantial benefits that music education contributes to the personal and professional development of youth. While initially engaged for a consultation on organizational governance, it became evident that the organization required more comprehensive support than initially anticipated. In alignment with my personal values, I chose to undertake the project pro bono. The overarching objectives of the initiative were threefold:

Establish financial sustainability for the organization.
Develop a business model that aligns seamlessly with its new scale and values.
Facilitate ongoing program expansion while concurrently reducing overall expenditures.

Background Information

The Kawartha Music Foundation, established in 2002 as a non-profit organization, oversees diverse music education programs. Its commitment to fostering the musical, professional, and personal development of numerous children aligns with the principles outlined in the Not-for-Profit Corporations Act. With a significant grant from the Ontario Trillium Foundation (OTF), the organization’s revenue more than doubled in just one year, leading to vastly increased organizational complexity.

Facing the imminent conclusion of the OTF grant, the board of directors embarked on a strategic initiative to cultivate a sustainable business model and enhance operational efficiency. This comprehensive 18-month project, coinciding with the remaining duration of the OTF grant, aimed to address the evolving size and complexity of the organization. The impending decision point marked the juncture where choices about the continuity of fully subsidized programming needed to be deliberated upon judiciously.

Objective

The Kawartha Music Foundation (KMF) underwent rapid growth, surpassing its previous scale and organizational complexity. However, the organization lacked the internal expertise to effectively manage this expanded scope. The transformation encompassed critical functional domains, including program delivery, financial management, revenue development, compliance/corporate governance, and business operations. This case study delves into the structural elements of the consultation conducted for KMF, examining the profound impact these strategic changes had on the overall organization.

Methods and Approach

In pursuit of the board of directors’ objectives, I employed two key professional methodologies: Agile and Lean Six Sigma. Agile, chosen for its rapid adaptability, proved essential due to the urgency of the transformation. Operating under fixed outcomes, agile methodologies facilitated swift adjustments based on stakeholder feedback, real-world financial considerations, and logistical factors. Complementarily, Lean Six Sigma emerged as an apt choice for nonprofit implementation, addressing the sector’s revenue challenges and the fluctuating grant landscape.

Central to this process my “Sector Convergence Model,” a business approach fostering collaboration among diverse sectors to achieve ambitious goals. This model integrates skills, knowledge, and resources from traditionally independent sectors, aiming for a unified and interconnected strategy leveraging each sector’s strengths.

In this consultancy, I drew upon expertise from the enterprise software, finance, and restaurant sectors. Key enhancements encompassed the introduction of a work-unit model, standardization, weekly Key Performance Indicator (KPI) analysis, and a prioritization of consistency. This comprehensive approach was derived from professional insights across varied industries and from my long history as a business, strategy, and operations consultant.

Contextual Analysis

The Kawartha Music Foundation, bolstered by an Ontario Trillium Foundation Grow grant, initiated the UpBeat afterschool music program, a complimentary addition to its longstanding Orchestras program. Operating for two decades, the Orchestras program featured instrumental lessons, sectional training, and ensemble work across senior, intermediate, and junior levels. Post-OTF Grow grant, the organization underwent significant expansion in budget and enrollment, coinciding with the challenges of navigating COVID, lockdowns, and a global shift in music education approaches.

Drawing on my professional background in management consulting, I conducted an extensive, in-person evaluation of the program’s strengths and weaknesses, interviewing staff to comprehend the organization’s standing. Subsequently, I presented a meticulous restructuring proposal to the board, securing a mandate as the project manager with full authority until completion. The outlined timeline aimed for the realization of most structural components within 12 weeks.

Upon board approval, the transformation journey commenced with a comprehensive overview for staff outlining the envisioned future and the core business philosophy, embracing an Agile methodology. Initial adjustments involved the reorganization of job roles into specialized contract positions, accompanied by the removal of the Executive Director and Artistic Director roles. In their stead, a General Manager position was created, appointed for a season by the board to ensure alignment with the organization’s vision and mission while mitigating burnout risks. This strategic realignment reflects a commitment to professionalism, efficient operations, and adherence to a clear organizational vision.

Adhering to the Agile methodology, the subsequent priority was the swift restructuring of business operations to offer crucial support during the ongoing transition. This effort was streamlined into three primary categories:

Legacy Technology Replacement: Immediate focus on eliminating outdated systems.
Standardization of Processes and Systems: Key to implementing a successful Lean Six Sigma operating model, standardization was achieved through discussions with staff, identifying critical failure points, and simplifying overly complex processes. Nearly one-third of the organization’s work was standardized, transitioning from specialized to more versatile staff.
Automation of Low-Value Tasks: Leveraging tools such as Zapier and Gmail routing rules, repetitive tasks were automated to ensure consistent, high-quality administrative support.

While some activities required phased implementation, critical systems like accounting, customer relationship management, payment processing, and personnel management were successfully revamped within the first month. Less impactful systems underwent upgrades as necessary, contributing to a more efficient and streamlined organizational structure.

The subsequent focus shifted to financial management, compliance, and corporate governance. Beginning with confirming the requirements for nonprofits of our size as per CRA and the Not-for-Profit Corporations Act, the restructuring included:

Board Restructuring: Aligning with legal requirements and industry best practices.

Policy Development: Drafting new by-laws and an HR policy manual.

Compliance Measures: Implementation of a new harassment policy and standardized contracts to empower non-specialized HR personnel for comprehensive HR management.

Automation played a pivotal role in facilitating weekly KPI collection and reporting. These KPIs, covering aspects like program attendance, financial turnover, labor and operating margin, and sponsorships, provided invaluable insights for data-driven decision-making throughout the transition. This systematic approach ensured compliance, enhanced operational efficiency, and generated meaningful data for informed strategic planning.

A significant hurdle during this transition stemmed from the community’s strong adherence to the existing status quo, despite its unsustainable nature. Right from the start, community members, other non-profit entities, and musicians cautioned against adopting a ‘business’ approach, leading to two resignations in response to the changes. The difficulty was exacerbated by internal turmoil resulting from an Executive Director who showed reluctance to structurally align the organization with the increased logistical and compliance demands necessitated by the organization’s growth.

This challenge continues to persist. Despite the acknowledgment of key stakeholders regarding the necessity of changes, some local entities advocate a return to the old status quo. Additionally, past partnerships no longer align with the new organization’s direction. To address this unexpected challenge, the organization prioritized transparency. This involved establishing clear terms and conditions for program use, implementing transparent pay tiers for all staff, and facilitating open sessions during board meetings for community and staff engagement. While the resolution of this challenge remains an ongoing process, considerable mitigation has been achieved. Prospects for improvement are anticipated as the organization consolidates its operational stability, transitioning from a state of organizational flux to one characterized by sustained equilibrium.

Decision-Making Process

The decision-making framework underwent a systematic delineation comprising five pivotal stages, each characterized by a nuanced and strategic approach:

Organizational Goal Setting and Operating Model Selection

Initiating a meticulous analysis of operations compared to organizational objectives, this phase involved the selection of an optimal operational model.

Identification of Key Issues (MIPs):

This critical stage involved the identification and isolation of Major Implementation Points (MIPs), encapsulating pivotal junctures demanding acute attention and strategic resolution.

Implementation of the Sector Convergence Model:

This implementation phase involved the integration of the Sector Convergence Model, a strategic framework fostering interdisciplinary collaboration. Executed in conjunction with Sector Convergence model, the organization began working within the principles of Agile and Lean Six Sigma methodologies.

Stakeholder Communication:

Serving as a linchpin in the decision-making process, this phase prioritized comprehensive communication with stakeholders, fostering transparency, and engendering support through informed dialogue.

Rebranding:

Culminating in the strategic revitalization of the organizational identity, the rebranding stage sought to align the refreshed image with the evolved operational paradigm, reinforcing the organizational narrative for resonance within the not-for-profit milieu.

The decision-making process was centred around identifying and codifying the organization’s goals, operating models, and objectives before delving into and investigating the root cause between current operations and targets. A structured engineering approach, specifically the why-why analysis, played a pivotal role in pinpointing the root causes between current operations and desired targets. This method facilitated a nuanced understanding of the issues, enabling the creation of precise and targeted solutions for key problems.

Subsequent to the identification of critical issues and areas for improvement, the implementation phase embraced the Sector Convergence Model. This strategic framework incorporated methodologies from diverse industries, with a primary focus on leveraging insights from the finance and technology sectors. The deliberate adoption of this approach prompted an immediate transition to an Agile operational paradigm. This transition allowed for the iterative implementation of new ideas, fostering a dynamic environment where feedback was rapidly obtained, real-world experience was gained expeditiously, and adjustments were made promptly in response to evolving needs. The overarching professionalism in decision-making not only upheld rigorous analysis but also prioritized adaptability and responsiveness in navigating organizational challenges.

Several pivotal design choices were made during the transformative process of the Kawartha Music Foundation (KMF). These decisions included:

The post-restructuring operational model adopted by the Board of Directors;
Identification of essential personnel specializations for roles on the Board of Directors;
Establishment of a staff-valuation matrix and corresponding remuneration considerations for distinct roles within KMF;
Implementation of a sustainable business methodology; and
Selection of a preferred operating model aligned with the new organizational philosophy.

Board of Directors Operational Model

The following options were considered:

– Carver Board Governance Model

– Traditional Model of Governance

– Consensus Board Governance Model

– Cortex Board of Governance Model

Selected Option: Carver Governance Model

Rationale: The Carver model is a policy board approach involving collaboration between the Board of Directors and the General Manager in major business functions and stakeholder communication. With minimal standing committees, it aligns well with the agile model required for swift organizational restructuring. This model empowers the board to set operational goals, values, and bylaws while delegating daily management to the General Manager and staff. Furthermore, it allows for the development of a staff-specialization model, enhancing organizational focus and efficiency. The board concentrates on the vision (akin to a CEO), while the General Manager oversees operations and goal implementation (akin to a COO).

Personnel Specializations for the Board of Directors

The following options were considered:

– None: Emphasizing general knowledge and experience, relying on or requiring specific knowledge from staff.

– Finance: Incorporating a finance professional (CA, CPA, CFP, Controller, etc.) on the board for taxation and budgetary reasons to ensure proper fiscal management.

– Legal and Finance: Opting for the broadest possible coverage of potential scenarios while minimizing the number of required board members.

– Any combination of NOC-described TEER 0 and TEER 1 professionals: Focused on highly regulated fields such as legal, HR, and finance.

Selected Option: Any combination of NOC-described TEER 0 and TEER 1 professionals: Focused on highly regulated fields such as legal, HR, and finance.

Option Selected: Any combination of NOC-described TEER 0 and TEER 1 professionals: Focused on highly regulated fields such as legal, HR, and finance.

Rationale: The chosen option involves the inclusion of TEER 0 and TEER 1 professionals, combining management expertise with specialized knowledge in legal, HR, and finance. TEER 0 professionals, holding executive and director-level roles, serve as excellent generalists for positions like General Manager, Chair of the Board, and Vice Chair of the Board. They bring familiarity with balancing organizational objectives, financial constraints, and personnel management. On the other hand, TEER 1 professionals in legal, HR, and finance possess specific training and certification, crucial for roles where legal requirements mandate certified individuals. Considering the need to compensate TEER 1 professionals for their services, this approach ensures a balanced board with a mix of skills, specializations, and diverse knowledge, enhancing overall expertise and governance capabilities for the organization.

Staff Pay Rates and Determination

The following options were considered:

– Create a payscale for the Kawartha Music Foundation, independent of other organizations.

– Adopt another non-profit organization’s pay scale and remuneration policies.

– Negotiate rates with each staff member or contractor individually.

– Use average rates across labour markets in similar geographic areas to determine remuneration rates per position.

– Use average rates from similar geographic areas labour markets to determine positional tier pay rates.

Option Selected: Use average rates from similar geographic areas labour markets to determine positional tier pay rates.

Rationale: In the pursuit of establishing an effective staff remuneration strategy for the Kawartha Music Foundation, the chosen option involves utilizing average rates from comparable geographic labour markets to determine positional tier pay rates. This decision is based on several important strategic factors.

Transparency and Simplicity

The selected option is characterized by its simplicity and transparency. By leveraging average rates from similar labour markets, the remuneration structure becomes straightforward and easy to comprehend for both staff and stakeholders. This aligns with the organization’s commitment to clear communication and operational clarity.

Reasonableness and Fairness

Ensuring that staff remuneration is both reasonable for the organization and equitable for the staff is a paramount objective. By anchoring pay rates to averages in comparable labour markets, the organization establishes a fair and just compensation structure. This approach contributes to fostering a positive work environment and supports staff satisfaction.

Community Transparency and Positive Public Relations

Maintaining transparency within the community is a strategic imperative. The chosen option positions the Kawartha Music Foundation favourably in the public eye. Transparent remuneration practices enhance the organization’s public relations profile, reinforcing its commitment to fairness and openness.

Facilitating Growth and Development

The selected option provides a scalable framework for growth. By pegging pay rates to geographic averages, the organization can effectively manage its budget while creating opportunities for growth, whether through additional fundraising initiatives or expanded programming. This flexibility positions the Kawartha Music Foundation for sustained success.

Organizational Methodology

The following options were considered:

– Agile

– Six Sigma

– Lean

– Theory of Constraints

– Waterfall

– Theory of Inventive Problem Solving (TRIZ)

Option Selected: A hybrid model combining Agile and Lean Six Sigma.

Rationale: The selection of Agile stems from its capacity to expedite project delivery through iterative development cycles, offering a more rapid alternative to methodologies like Waterfall or Theory of Constraints. This approach enables the General Manager to oversee restructuring at a high level while incorporating input and feedback from stakeholders and on-the-ground personnel. Incorporating Lean Six Sigma tackles a major issue for non-profits: dependence on unpredictable donations and grants. The plan involves an initial emphasis on Agile methods, transitioning toward Lean Six Sigma as the majority of changes are implemented. This strategic combination aims to optimize efficiency and adaptability throughout the restructuring process.

Operating Model

The following options were considered:

– Synchronous Diversification

– Synchronous Coordination

– Synchronous Replication

– Synchronous Unification

– Asynchronous Diversification

– Asynchronous Coordination

– Asynchronous Replication

– Asynchronous Unification

Option Selected: A hybrid model was selected based on asynchronous coordination.

Rationale: Opting for a hybrid, partially asynchronous coordination model ensures adaptability in programmatic situations, requiring in-person work at specific times and essential meetings. This operational approach provides the Kawartha Music Foundation with the necessary flexibility for its programs, classes, and diverse in-program teaching methods. It enables seamless communication among support and administrative staff, fostering cohesion asynchronously. Given the shift in the staffing model towards more specialized staff and contractors with reduced working hours, a streamlined system is imperative. This model facilitates effective collaboration among instructors and synchronous aspects of the business, ensuring straightforward communication. Additionally, it allows the Kawartha Music Foundation to maintain control over records and documents.

Results

The transition concluded just before the onset of a new operational season, and the initial Agile phase resulted in notable benefits. This included a substantial decrease in organizational risk, operational and administrative costs, and internal conflicts. Simultaneously, there was an enhancement in governmental compliance, personnel job satisfaction, and overall functional quality. Some key metrics demonstrating the transition’s impact include the following:

– 47% average reduction in Program Delivery Costs (with a range between 15% and 79%);

– 40% increase in Programming Hours;

– 38% rise in youth participation within KMF Programs while maintaining an 82% year-over-year retention rate;

– 92% Staff Retention rate compared to a national average of 47% for Arts and Culture non-profit organizations;

– 16% reduction in overhead costs;

– 6.25% decrease in overall budget spend; and

– 8% increase in program attendee attendance and NPS scores, reflecting improved program quality despite significant fiscal and programmatic savings.

Reflection and Evaluation

Goals and Objectives

Achieving remarkable success across various metrics, the Kawartha Music Foundation’s transition has established operational and financial stability, fostering ongoing program growth. Completed within 12 months of the 18-month timeframe, the organizational shift has created a robust business structure. This ensures that future board members and staff can consistently deliver high-quality programs, maximizing the positive impact on the youth participating in KMF initiatives. Reflecting on the initial goals outlined in the consultation—financial sustainability, alignment with a new size and values, and expanded programming while reducing overall expenses—the empirical success of the consultation is evident.

Strategies and Approaches

During the KMF transition, I predominantly applied Agile and Lean Six Sigma methodologies, along with my sector convergence model, facilitating the organization’s growth. The observed outcomes confirm the effectiveness of these methods in achieving the intended results. For future engagements with smaller organizations, I may opt for Agile Crystal, emphasizing the human aspects of projects—focusing on personnel skills, abilities, and collaboration. The current implementation of my sector convergence model has significantly enhanced organizational operations, providing staff with diverse resources and tools, resulting in heightened efficiency and elevated work quality compared to many other nonprofit organizations. This sector convergence approach holds promise for broader application, leveraging private sector innovation and efficiency to generate positive societal impact.

Team Dynamics and Collaboration

Collaboration and synergy among operational and administrative staff have flourished during this transition, fostering robust relationships within the administrative team. These individuals have undergone upskilling, training, and professional development, emerging as invaluable supporters for the organization’s future endeavours. The Kawartha Music Foundation has established a robust knowledge transfer process, utilizing resources such as shared Google Drive archives, email archives, and regular reports for seamless succession planning.

In contrast, building strong connections with instructional staff has presented challenges, as their individual needs sometimes conflict with the organization’s optimal direction. Managing issues like cost reductions, program eliminations, and changes in class sizes has been the most demanding aspect of the transition. While improvements have been made, ongoing communication remains essential, recognizing the inherent conflict between staff priorities focused on immediate compensation and the board’s long-term organizational vision.

Despite the transition’s remarkable success, it brought novel challenges. My background in finance, technology, and hospitality industry consulting facilitated swift resolution of business, technical, and strategic issues. However, unexpected pushback from the community and staff, asserting, “This is not how arts organizations run,” proved a recurring challenge. Stakeholder management emerged as the most complex aspect. For future endeavors, exploring weekly updates and status documents to enhance communication and transparency to streamline post-decision discussions may yield improved results.

Recommendations

Throughout this transformative journey, I’ve gleaned invaluable insights into the intricacies, solutions, and operational norms of not-for-profit organizations. Armed with this knowledge, I’ve discerned pathways for enhancing sustainability, aiming to guide nonprofits away from the need for extensive organizational overhauls akin to the challenges faced by the Kawartha Music Foundation. Here are key takeaways:

Establish clear expectations regarding the transition, the new business model, and the rationale behind it, communicating openly with all staff members from the outset.
Emphasize that the organization functions as a business—its charitable status is a tax classification, not an operational model. The success or failure of the organization comes from the business model that supports it’s operations, not from how warm and friendly the organization is.
Clearly define each staff member’s role in the transition, being clear which roles will be consulted with in an as-needed capacity and which will be regular. Consider designating a spokesperson for groups of staff during consultations.
Swiftly address challenges posed by problematic individuals. While acknowledging uncertainties, prioritize a respectful and no-nonsense approach to maintain a conducive environment.
Uphold your organizational philosophies without compromise. Although this will result in additional short-term complexity, the enduring value of adhering to clear expectations will greatly surpass the immediate stresses.
Recognize that no individual is indispensable. Resist the claims of indispensability—either from the person or about them—ensuring organizational resilience and adaptability.
Craft compelling pitches for donors and sponsors by ensuring reciprocal value. Structure pitches as opportunities for sponsors to receive tangible benefits in return for their support.

Conclusion

As a result of my leadership during this transition, the story of the Kawartha Music Foundation’s restructuring is one of exceptional success, growth, and community. Facing the challenges of rapid growth, financial unsustainability, and bloated operational efficiency, the foundation underwent a comprehensive 18-month transformation in order to allow it to continue supporting the youth it serves following the completion of a large grant.

In order to support this, I strategically employed Agile and Lean Six Sigma methodologies and implemented his Sector Convergence Model, drawing on expertise from a variety of sectors to support the organization. This innovative approach addressed challenges in program delivery, financial management, and compliance. The decision-making process was systematically outlined, focusing on goal setting, identification of key issues, sector convergence, stakeholder communication, and rebranding.

Critical design choices included the adoption of the Carver Governance Model, inclusion of TEER 0 and TEER 1 professionals on the Board, a transparent staff pay structure based on geographic averages, and a hybrid Agile and Lean Six Sigma operating model. The asynchronous coordination model ensures flexibility in programmatic situations while maintaining effective communication.

The outcomes of this transition were substantial, including a significant reduction in program delivery costs, increased programming hours, higher youth participation, and improved staff retention. The reflection and evaluation underscore the success in achieving financial sustainability, alignment with new values, and expanded programming while reducing expenses.

My strategies, embracing collaboration and fostering synergy among the administrative team, have laid the foundation for future success. While challenges arose, particularly in stakeholder management and unexpected community pushback, the overall success of the transition positions the Kawartha Music Foundation as a model for sustainable growth in the not-for-profit sector.

Recommendations emphasize the importance of setting clear expectations, recognizing the organization as a business, defining roles explicitly, and maintaining unwavering commitment to organizational philosophies. The case study provides valuable insights and recommendations for not-for-profit organizations seeking sustainability and successful transitions.

Rethinking the Narrative: Why a People-First Approach may not Necessarily Translate into a People-Driven Organization

In the contemporary business landscape, the term ‘people-first’ has gained popularity as a guiding principle for companies striving to establish a positive and inclusive work environment. While prioritizing employees is commendable in theory, many individuals and organizations struggle to translate these principles into tangible value. Whether due to a lack of clear comprehension, a genuine commitment to change, or the difficulty of turning a vision into reality, numerous organizations encounter a significant gap between their claim of being people-first and the actual implementation. Moreover, it is essential to recognize the potential confusion between aspiring to create a people-first culture and adopting a people-driven approach. Distinguishing between these two concepts, along with assessing the actual implementation of people-first principles, becomes pivotal in understanding whether organizations genuinely embrace employee empowerment or merely engage in superficial adherence to a trending concept.

The Role of Organizational Culture

Organizational culture plays a pivotal role in shaping the identity, behavior, and overall dynamics of a company. It encompasses the shared values, beliefs, attitudes, and practices that define how individuals within the organization interact with one another and approach their work. Serving as the unwritten guidebook for employees, organizational culture influences decision-making, communication, and problem-solving. A healthy and positive culture fosters a sense of belonging and purpose among employees, promoting engagement and motivation. It also acts as a powerful determinant of how the organization responds to challenges, embraces change, and adapts to evolving circumstances. Whether it’s a culture of innovation, collaboration, or customer-centricity, the organizational culture profoundly influences the work environment, influencing the recruitment and retention of talent, shaping the company’s reputation, and ultimately impacting its long-term success and sustainability. Recognizing and actively cultivating a positive and aligned culture is essential for organizations seeking to thrive in a competitive and dynamic business landscape.

People-First and People-Driven

Before any discussion of implementation or intention is relevant, we need to understand the difference between these two concepts. People-first and people-driven workplace cultures are often used interchangeably, but they represent distinct approaches to creating values, priorities, and relationships that are people-focused. Understanding the differences between these two concepts can help organizations shape their ethos and align their practices with their desired workplace environment.

People-First Philosophy

A people-first culture is a workplace ethos that places the well-being, growth, and overall satisfaction of its employees at the forefront of organizational priorities. In such environments, the focus extends beyond traditional business metrics, emphasizing the importance of creating a positive and inclusive atmosphere where individuals feel valued and supported. A people-first culture often manifests through policies that promote work-life balance, flexible schedules, and comprehensive employee benefits. Leadership in such organizations prioritizes open communication, active listening, and a genuine interest in the professional and personal development of each team member. Recognition programs, mentorship initiatives, and a collaborative decision-making approach contribute to fostering a sense of belonging and empowerment among employees. Ultimately, a people-first culture seeks to create a workplace where individuals not only contribute their skills but also thrive personally and professionally.

People-Driven Philosophy

A people-driven culture is characterized by a profound commitment to empowering and engaging employees at every level of an organization. In such a culture, employees are not merely regarded as resources but as active contributors to the collective success of the company. Leaders adopt a servant-leadership approach, recognizing the importance of facilitating and supporting their teams rather than dictating from the top. Collaboration and open communication are encouraged, fostering an environment where diverse perspectives are valued. Decision-making is not confined to a select few but extends throughout the organization, allowing employees to actively participate in shaping the company’s direction. Continuous learning and development are prioritized, ensuring that individuals have the tools and opportunities to grow both personally and professionally. A shared sense of purpose and values binds the workforce together, creating a collective commitment to achieving organizational objectives. In a people-driven culture, the emphasis is not only on the well-being of individual employees but also on harnessing their potential to drive innovation, productivity, and overall success.

Key Differences

Philosophy vs. Action: People-first is a philosophy that prioritizes employee well-being, while people-driven is an action-oriented approach that actively involves employees in organizational processes.

Focus on Employee vs. Employee Empowerment: People-first focuses on making employees comfortable and satisfied, while people-driven aims to empower employees to actively contribute to organizational success.

Flexible Policies vs. Collaborative Decision-Making: People-first often involves flexible policies to accommodate individual needs, whereas people-driven emphasizes collaborative decision-making and active participation in shaping the organization’s direction.

Individual Well-being vs. Collective Success: People-first is more centred on individual well-being, while people-driven is oriented toward collective success, where each employee plays a crucial role in achieving organizational objectives.

In reality, a thriving workplace culture frequently integrates aspects from both the people-first and people-driven perspectives. Achieving equilibrium between valuing employee well-being and actively involving them in organizational processes can play a pivotal role in fostering a vibrant, adaptable, and enduring workplace culture. Despite this, understanding the distinctions between these concepts enables leaders to precisely describe the workplace culture they aim to cultivate, facilitating the establishment of focused, precise, and achievable goals to attain the desired results.

Challenges of People-Focused Workplace Culture

Although the idea of being people-focused is undoubtedly good, it’s worth discussing the potential challenges that arise from attempting to implement a people first culture, and some common pitfalls that challenge the potential value of this initiative.

Tokenism

One of the pitfalls in the adoption of a ‘people-first’ approach is the risk of tokenism. Organizations may implement superficial measures to create the appearance of a people-centric environment without truly integrating the principles of empowerment into their core values. For instance, flexible work hours might be granted, but the organization still prioritizes presenteeism and places undue pressure on employees to conform to traditional working hours.

Genuine empowerment goes beyond surface-level changes and requires a fundamental shift in the organizational mindset. It involves fostering a culture where employees understand the expectations of their role and where individuals within an organization operate within a reality aligned with what is said. For example, it is worth asking, “Am I willing to change my direction?” before soliciting feedback. If the feedback you receive will not impact the outcome of the strategy implemented, then it is actually better to not solicit feedback at all in order to not come across as patronizing. Token gestures that result in no tangible changes create disillusionment and erode trust, ultimately contradicting the promise of a ‘people-driven’ organization

Institutional Inertia

The transition from a people-first approach to a truly people-driven organization often faces resistance from corporate inertia. Established structures, ingrained processes, and a resistance to change can prevent or slow the evolution of an organization toward a more inclusive and empowering workplace. Organizations will find it easier to adopt cosmetic changes rather than fundamentally alter their operational paradigms; however, these changes do not result in lasting impact.

Overcoming corporate inertia demands visionary leadership that is willing to challenge existing norms and embrace innovative practices. This includes reevaluating performance metrics, revisiting promotion criteria, and dismantling nonmeritocratic systems that impede the progress of committed, talented, and capable staff. A people-focused organization requires a commitment to continuous improvement and an openness to adapting to the evolving needs of its workforce.

Profitability versus People

The people-first approach often faces criticism for its perceived conflict with the pursuit of profitability. Critics argue that organizations, in their quest for financial success, may prioritize the bottom line, potentially neglecting employee-centric policies. While profitability is undoubtedly vital for a company’s survival, an exclusive and narrow focus on short-term gains can result in enduring losses manifested through disengaged, burnt-out, and unproductive employees.

However, the evidence suggests that organizations with engaged and fulfilled employees are more likely to surpass their competitors. Embracing a people-driven approach recognizes the symbiotic relationship between employee satisfaction and organizational success. This methodology necessitates a strategic alignment of business goals with the well-being and growth of the workforce, creating an environment where both profitability and employee empowerment not only coexist but mutually reinforce each other. In this perspective, fostering a workplace culture that values and prioritizes employees contributes not only to the company’s bottom line but also to its long-term resilience and prosperity.

Is Being People-Focused Worth it?

Being people-focused can mean a lot of things, depending on who you ask, including both people-first and people-driven. Knowing this and understanding the pitfalls that can be associated with people-focused business, is it worth investing in?

While there can certainly be challenges, organizations with people-focused business principles experience numerous benefits that contribute to the overall well-being and success of both employees and the organization, including improved retention rates, increased productivity, enhanced innovation and creativity, and an increased ability to attract top talent.

Using an example from my own career, through the implementation of people-first workplace practices in the restaurant industry, my employee turnover rate fell to only 30% of the industry standard. Affecting more than 30 restaurants and more than 700 staff, the direct costs of implementing these policies resulted in no demonstrable impact on profitability; however, these policies reduced the cost of training new employees by nearly $100,000 per year and saved nearly 7200 hours in paid training time.

Why People-First does not mean People-Driven

In many businesses, this distinction is not important. In large enterprises with established hierarchies and well-defined reporting structures, this distinction is largely unnecessary, as it becomes obvious where this line is drawn. In smaller organizations, however, the distinction can be quite unclear. The key distinction lies in the primary focus—people-first prioritizes individual well-being, while people-driven emphasizes the collective power of the workforce. While these approaches share common ground in valuing employees, it’s essential to recognize that a people-first business doesn’t necessarily mean it is entirely people-driven, and vice versa.

A people-first business may prioritize employee well-being without involving them extensively in decision-making processes, while a people-driven organization may be highly collaborative but not necessarily place as much emphasis on individual well-being. Striking the right balance between these two paradigms is the key to creating a workplace culture that is not only supportive of individuals but also harnesses the collective strength of the workforce for organizational success.

In essence, while people-first and people-driven share the overarching goal of recognizing and valuing employees, understanding the nuanced differences between these concepts is crucial. It allows organizations to tailor their approach, set clear expectations, and create a holistic workplace culture that integrates the well-being of individuals with the collective drive for innovation and success.

How to Choose: People-First or People-Driven?

Fundamentally, both approaches can work in almost any circumstance. This being said, how does one make the choice? The answer lies in a nuanced understanding of the organizational context, industry dynamics, and overarching goals. Here are key considerations for leaders grappling with this decision:

Know Your Organizational DNA:

Assess the nature of your business, industry demands, and organizational goals. A tech startup might thrive in a people-driven environment, fostering innovation through collaboration, while a healthcare organization may find success in a people-first culture to ensure the well-being of its staff.

Consider Organizational Size:

The size of your organization can influence the effectiveness of each approach. Smaller companies may find it easier to maintain a close-knit people-first culture, while larger corporations might benefit from a people-driven model that taps into the diverse skills and perspectives of a larger workforce.

Evaluate Industry Trends:

Keep a pulse on industry trends and best practices. Some sectors may inherently lend themselves to one approach over the other. Staying attuned to what works for successful organizations in your industry can guide your decision-making.

Seek Employee Input:

Employees are the heartbeat of any organization. Solicit their input on the type of culture they believe would be most effective. This not only empowers individuals but also ensures that the chosen approach resonates with the workforce.

Strive for a Hybrid Approach:

Recognize that the rigid adoption of one approach may not be the most effective strategy. A hybrid model that combines the strengths of both people-first and people-driven cultures can provide a well-rounded and adaptive organizational environment. Despite striving towards a hybrid approach, be careful to set clear expectations. This approach will never be 50/50 each way, so set expectations to align with the philosophy chosen. People are rarely upset long-term with a decision made; instead, they become frustrated and disillusioned by inconsistent or unpredictable responses.

Ultimately, the choice between being people-first or people-driven is not a binary decision but a delicate balancing act. A successful organizational culture integrates the well-being of individuals with the power of collaboration, creating a workplace that values employees as both individuals and contributors to the collective success of the company. It’s not about choosing one over the other; it’s about finding the equilibrium that aligns with the unique DNA of your organization.