What makes a good charity a great one?

Image: Jim Collins
Jim Collins: "To be a truly great nation, we need to have a great social sector. ..."Joel Grimes / Contribute Media
/ Source: Contribute Magazine

Jim Collins, 49, perhaps the most influential management expert alive today, has served as a teacher to senior executives and CEOs at more than a hundred corporations worldwide. He also has worked with social sector organizations, including the Girl Scouts of America, Johns Hopkins Medical School, and the United States Marine Corps. A self-described entrepreneur, Collins’ 2001 book, “Good to Great: Why Some Companies Make the Leap … and Others Don’t,” attained long-running positions on The New York Times, The Wall Street Journal, and BusinessWeek best-seller lists and has sold 2.5 million hardcover copies since publication. The book, which Collins says also has been popular with nonprofit executives, has been translated into 32 languages. In 2005, Collins, a former Stanford University business school professor, wrote a 36-page monograph to apply his “Good to Great” research and insights about management and leadership excellence to the social sectors. Since then, Collins says, he has been inundated with cards and letters from nonprofit executives and other civic leaders, thanking him for rejecting a commonly held view that “the primary path to greatness in the social sectors is to become ‘more like a business.” CONTRIBUTE Editor-in-Chief Marcia Stepanek, who interviewed Collins when “Good to Great” debuted, caught up with him again to talk about today’s for-profit philanthropy movement, the talent turnover in the nonprofit sector and Collins’ new thinking about the business of making a difference. What follows is an edited transcript of that interview.

All of your work during the past 15 years has focused on one simple dichotomy — the difference between good and great companies. Now you’ve extended your research to the social sector. Why? Isn’t the essence of what it means to be great universal?

Somewhere between 30 and 50 percent of those who read “Good to Great” work in the social sector. I was getting cards and letters from people in education, police chiefs, people who fly squadrons of fighter jets, and people in nonprofits and orchestras, military units, health care centers—and churches, synagogues, and seminaries. I didn’t expect these people would be readers, but these people were asking a lot of questions — how, mainly, did my ideas about what separates a great company from a good one apply to the differing realities of the social sector?

So, for the next two years, I struggled to write 36 pages. That had to be a record for slow. But I was passionate about distinguishing this, as it came from a deep belief of mine that says that to be a truly great nation, we need to have a great social sector. We have to have great companies, of course, but that’s not enough.

What can charities learn about greatness from business?

We have to reject the idea, well intentioned but dead wrong, that the primary path to greatness in the social sectors is simply to become more like a business.

The truth is that most businesses aren’t great, and so we can’t learn about greatness by just looking at what the average business does. Most businesses are just average by definition.

So the really critical difference is not between business and nonbusiness. It’s the difference between great and good: there are great social sector enterprises, there are great companies, and there are mediocre social enterprises and there are mediocre companies. The disciplines of greatness are not the disciplines of business. In fact, truly great nonprofits will share more in common with a great corporation than a great corporation will share in common with an average corporation.

It’s mediocrity you don’t like.

I’m not criticizing business. I’m criticizing average-ness. I’m also criticizing the idea that just because a business does something, that a nonprofit should do it, too.

So what, then, separates the good from the great?

Discipline — the discipline to demand results, the discipline to hold ourselves to sustained outcomes, the discipline to understand what are the inputs to produce the outputs, the discipline to build for the long term and to not succumb to expedient opportunity, the discipline to hold growth back to only what we can do better than anyone else in the world, the discipline to only put people in positions who are the right people for those positions—even if we feel pressure to do otherwise. These are the disciplines of greatness that most businesses, most nonprofits, most sports teams, most of anything lack.

Speaking to my friends in the social sectors, what is really clear is that they all felt that somehow, people in business were somehow superior. They said that business people want to tell them how to do their jobs, and they felt put off by it, and they would kind of stand back and say I’m not sure that’s correct. It’s clear that they feel a gap between themselves and their business colleagues, who are trying to help them.

My purpose in writing the monograph was not to create even more of a wedge between business and nonprofits—quite the opposite. Instead of viewing ourselves as being on two sides of a chasm, I think it’s helpful to think of us as being on the same bridge—both embracing the principles of what makes something great and both attacking mediocrity wherever it falls.

But there are differences, aren’t there? Take leadership. The best CEO might stumble badly as the executive director of a nonprofit, right? For one, social sector leaders face a more complex and diffuse power map.

Actually, I think this is a really pivotal point. I was recently at a session with city managers from around the country, and we were talking about the power map in a community. I think people often think that an elected council or a nonprofit may be more consensus-driven, more process-driven. But I think that’s actually a misunderstanding. I think what’s really going on with effective social sector groups is they are taking the steps required to align the points of power in order to get things done. It’s a legislative skillset, more like having to be a senator than a king. As a senator, you have to pull together a lot of pieces, multiple constituents, to get something done.

And that’s somewhat different than in business. If you’re Sam Walton and the company is Wal-Mart, you don’t have to go through all those steps because it’s your company. You can just decide.

But if you’re in an environment where you don’t have that power in your pocket, you have to make sure that you’re taking the right steps for the right decisions to occur. This is what great university presidents do; this is what our great city managers do, it’s what great nonprofit and congregation leaders do. I mean, if you just try to tell your congregation what to do, they may just find another congregation.

But at the end of the day, the most effective leaders in both businesses and nonprofits are those who have top-level capacity to be ambitious — for the cause, not just for themselves. And they have the humility to say it’s not about me, it’s about what we’re trying to get done, and then have the will to make good on it. The skill sets of great leaders may be different, but not their commitment to the outcomes.

What does it feel like to go from good to great?

Picture a huge, heavy flywheel, a metal disk the size of a city block and about 30 feet thick — a massive piece of metal sitting on an axle. And imagine that your task is to get that flywheel turning as fast as possible, to take it from standing still or just puttering along to truly breakthrough momentum. You start pushing on that flywheel in an intelligent, consistent direction, and you keep pushing on it, and after a whole lot of work, you finally get one giant, slow, creaky turn. Then you keep pushing on that flywheel, and you get another big giant, slow, creaky turn number two, and then four, and then eight. Eventually, you go from 8 to 16, 16 to 32, 32 to 64, 64 to 128, the thing starts to build this momentum turn upon turn upon turn, push upon push — and then at some point, bang! You can feel all that cumulative weight behind you starting to add up, and the flywheel starts to pick up more and more speed, more and more momentum, and you keep pushing in that intelligent, consistent direction, and whoosh! — that thing hits 1,000 RPMs, 10,000 RPMs, a million RPMs. And then all of a sudden, bang! You’ve hit this point of real breakthrough. That flywheel image of buildup leading to breakthrough is exactly what it feels like to take any organization from good to great. The flywheel process breaks into three basic stages. Stage one is disciplined people, stage two is disciplined thought, and stage three is disciplined action. The first step is getting the right people on the bus.

In the monograph, I use the example of Wendy Kopp. In the spring of 1989, she graduated from Princeton with an elegant idea: why not convince graduates from leading universities to spend the first two years of their careers teaching low-income kids in the public education system? She had no money, no office, no infrastructure, no name, no credibility, and no furniture, not even a bed or a dresser in which to store her clothes. In her book (“One Day, All Children: The Unlikely Triumph of Teach for America and What I Learned Along the Way”), Kopp tells of moving into a small room in New York City after graduation, plopping her sleeping bag on the floor and pulling jeans and shirts out of three garbage bags and piling them into neat stacks on the floor.

After convincing Mobil Corporation to grant $26,000 of seed capital to found Teach for America, Kopp spent the next 365 days in a juggling act — convincing top-flight people to join her bus with the promise that she would convince donors to fund the bus, while at the same time convincing donors that she would convince top-flight people to join her bus.

One year later, Kopp stood in front of 500 recent graduates from colleges like Yale, Harvard and Michigan, assembled for training and deployment into America’s underserved classrooms. And how did she convince these graduates to work for low pay in tough classrooms? First, by tapping their idealistic passions, and second, by making the process selective. As of 2005, more than 97,000 people applied to be part of Teach for America and only 14,100 made the cut, while revenues grew to nearly $40 million in annual support. What Kopp understood was that first, the more selective the process, the more attractive a position becomes — even if volunteer or low pay. Second, the social sectors have one compelling advantage: desperate craving for meaning in our lives. Purity of mission has the power to ignite passion and commitment. Third, the number one resource for a great social sector organization is having enough of the right people willing to commit themselves to the mission.

The right people can often attract money, but money by itself can never attract the right people. Money is a commodity; talent is not. Time and talent can often compensate for lack of money, but money cannot ever compensate for lack of the right people. And in the social sectors, getting the wrong people off the bus can be tougher than in a business.

Some nonprofits say they have very committed people but that some are too inexperienced to do much for the organization.

Acquiescing to a compromise in the quality of people is something endemic to almost any kind of mediocre organization, whether it is a business or a nonprofit. In a great institution, people worry a lot about whether they have the right people in key seats. Now, you may not be able to affect every seat, but not all seats are key seats. You might not be able to change all the teachers in the school, but you can decide who sits in the principal’s seat. You may not be able to change your entire faculty, but you can decide who gets to become dean. You may not be able to pick and choose every volunteer, but you can pick key staff seats.

It’s also crucial to be rigorous about results. How do we know we’re doing better? If we’re looking at education and test scores, or maybe changes in the homeless population on the streets, it’s measurable in numbers. Is the number going up or down?

You’re not always going to be able to get metrics. Consider what Tom Morris did with the Cleveland Symphony. Morris (at the time, the orchestra’s executive director) tried to measure excellence, but it wasn’t always easy. Is it just ticket sales? No. Is it the fact they’re being invited to the best music festivals? No. Are people coming to hear the classic favorites or also coming to the more difficult programs? Is the orchestra getting more standing ovations, and if it is, does that mean the audience likes Mahler, or is it more about how the orchestra plays Mahler?

It was hard to know, but Tom would say that just because we can’t measure excellence, it doesn’t mean that we stop trying. Again, I go back to that idea about discipline. It’s discipline to know what’s important and discipline to know what results are. If I look at mediocre companies, they’ll say results don’t really matter. Great organizations say results do matter, and the question is always: are we getting better, are we getting better, are we getting better? And now that we’ve gotten better, how can we get better, still?

And for nonprofits?

We need to evaluate all social sector enterprises on outputs — how effective or how excellent they are, not just how much money they have. Do they deliver on their mission? That’s the important thing. When you’re deciding which company to invest in, what matters is their return on invested capital. That’s a clear output. What’s the return for a social sector enterprise? That’s going to vary from enterprise to enterprise.

So selectivity is key.

If you’re truly in a cause you care about, your work is too important to compromise on the rigor of getting the best people you can. It really comes down to being ultra-rigorous about saying no to the things that do not fit with where you could make a distinctive contribution and yes to the things that will make your system work and sustain you.

You have to have the discipline to say “no thank you” to opportunities, to say “no thank you” to the wrong donors, the ones who are going to ask you to do a special project that is outside the realm of what you can do the best. And so one of the critical things to keep in mind when you talk about a mission statement is that we can all improve our focus by looking closely at what we don’t do well. It’s about knowing when to say no, or knowing that it’s time to stop doing some things. That’s the first puzzle piece.

Second, what is your brand? That’s not a business thing. When people are trying to decide where to put their resources to support causes they care about, there’s something to be said for a hard-won, well-earned reputation, one that gives people confidence that their resources will be well placed and well managed. Even if donors can’t put what you do as a nonprofit in the form of a price-earnings ratio or an earnings-per-share number or growth rate, they can have confidence because of your reputation.

We see it all the time in the social sectors. There are brands. Brand is helpful for turning the flywheel.

There is, though, one critical thing to worry about, and that’s restricted funding. I understand why people have it. I understand why people want it. I would just suggest that it is contrary to what builds great organizations. Great organizations — not great programs — will make us, over time, a great society.