MBAs lift non-profit sector

Wednesday, July 30, 2008

When discussing the social sector, Bill Drayton, founder and chief executive of Ashoka, a non-profit organisation that promotes social entrepreneurs, remembers the sector 25 years ago.

“Salaries were pathetic, smart people would avoid it, it was disorganised,” he says. “That’s all gone. We’ve been catching up and once you go from non-competitive to competitive, organisations have to join in the party or they’ll be eaten alive.”

As many non-profit organisations strive to make their operations more professional, a growing number of their employees are choosing to take an MBA.

“We are definitely seeing more of them in the part-time MBA programme,” says Liz Livingston Howard, associate director of the Centre for Non-profit Management at the Kellogg School of Management, at Northwestern University in the US. “There’s been a statistically significant increase in the past 10 years.”

In the past, executives seeking qualifications that would help them in the non-profit sector headed to policy schools or took programmes in education or non-profit management. “Now a lot more people are going the MBA route,” says Mel Ochoa, who graduated from the NYU Stern MBA programme in May and heads the marketing department of Achievement First, a charter school organisation in Connecticut and Brooklyn.

Mr Ochoa says this is because of the new requirements of non-profit organisations. “They’re changing their attitude towards the people they want on staff,” he says. “They want a lot of the skills you learn in business school, such as strategy and finance – and they want those applied to their non-profits.”

Lara Galinsky head of strategy at Echoing Green, a US foundation that provides seed money and support to young social entrepreneurs, agrees. “An MBA is a coveted staff person,” she says. “In the non-profit field, we’re good generalists or we come with degrees in public policy or non-profit sector management – but we’re not steeped in traditional business skills. A business school student trained in a traditional curriculum is value added for us.”

Part of the reason more non-profit organisations value business school education lies in the changing nature of the donors that fund their activities. Many of the new generation of philanthropists made their money in business, rather than inheriting it, and look for the same rigorous standards of professionalism and accountability in the charities they fund.

“When you get people with that kind of business savvy, they don’t want to just write a cheque, but they want to change the nature of public education or global health,” says Nora Silver, director and adjunct professor at the Centre for Non-profit and Public Leadership at the Haas School of Business, in Berkeley, California. “Then the philanthropy looks very different.”

As more partnerships are established between companies and charities, the non-profit sector is exposed to business techniques. And many organisations are beefing up their business skills in a number of areas, particularly as some become large enterprises.

“If you’re running a modern large-scale charity that is operating in different countries with ?100m ($200m) turnover or more and a staff of several thousand, that’s a complex management job,” says David Grayson, director of the Doughty Centre for Corporate Responsibility at Cranfield School of Management.

Demand for accountability means non-profit executives need to deploy accurate financial tools and measurement techniques. Moreover, as the sector grows rapidly, competition among organisations is intensifying. “Marketing is hugely important, as non-profits are now coming into their own as brands,” says Prof. Silver.

At the same time, many non-profit professionals see an MBA as giving them the edge over others in the recruitment market.

“Ambitious people from the non-profit sector understand that the sky’s the limit for MBAs,” says Raymond Horton, director of the Social Enterprise Programme at Columbia Business School, in New York. “So they’re flooding into our MBA and EMBA programmes and then returning to the sector with a lot more money and responsibility.”

Some choose schools with programmes tailored to non-profit executives. The Sawyer Business School at Suffolk University, for example, offers a specialised “MBA/Non-profit” degree. At Harvard Business School, students can take a course as part of the MBA programme called “Leading and Governing High Performing Non-profit Organisations”. However, for many students, the chance to participate in the core business courses is the most valuable part of the MBA education.

“I didn’t want to be in a programme where I was going to be coddled – I wanted to be in with the brightest and best in other fields,” says Mr Ochoa. “So now, when I go back to my non-profit, I am so much more well-rounded. I can have discussions that are far more strategic.”

For former MBA students such as Mr Ochoa, this new-found confidence has been acquired not just from the coursework but also from team exercises and working with fellow students, most of who have come from the corporate world.

Prof. Howard stresses the importance of learning from these peers. “As a leader in the non-profit sector, you have to deal with lots of different constituents,” she says. “So in a class of different people, they are learning how to be a part of a team with diverse perspectives.”

Of course, paying for a full-time MBA programme may be harder for someone working in the non-profit sector than for a corporate executive. Prof. Horton argues that, because of the rise in non-profit salaries in recent years, the financial challenges for these students are not as great as they once were.

An article on MBAs for the public sector was published on July 21

Source: Financial TImes (link opens in a new window)