A tangential issue: management differences across sectors

After writing two posts on what an MPA is and why I got one, I’ve been thinking about a tangentially related issue: management differences between private businesses, nonprofits/NGOs, and the public sector. This is a topic that deserves more comments later, but a few brief thoughts follow.

Many people from the world of private business world look down on the management of NGOs, nonprofits, government agencies, and other social mission organizations. Is the condescension justified? I don’t think so. Of course, there are lessons that organizations of all types can learn from one another.

However, most commentary from successful private sector leaders tends to completely miss two major points:

First, social mission organizations have different goals and face dramatically different constraints than private businesses.

Almost by definition. These differences dictate many of the inefficiencies that those in the private sector look down upon. I summarized such differences in a previous post:

These include the difficulty of determining impact when your goal is not measured in dollars (as it is for a business) and the range of stakeholders you must be accountable to when the money comes from one place (donors) and the services/products go someplace else (beneficiaries). The challenges actually are unique. Business principles are useful and the development sector can learn from multinational corporations, but simply mimicking them is not enough. The principles have to be translated. That’s the hard part.

J. made a similar point in reaction to a recent WSJ column that typifies private sector commentary on international aid and development.

Second, the private sector has more than its share of crappy management and market failures.

I’m pretty sure the movie Office Space is so popular because everyone has had a terrible job with a terrible boss at some point. They don’t make similar movies about the NGO sector. The private sector has plenty of bad managers, organizational failures and scandals. As Tobias Denskus pointed out in response to the aforementioned WSJ piece, it’s a bit surprising for a former financial executive to complain about perverse incentives in the aid industry.

Why would you group together every failure at NGOs and conclude that the whole sector is broken? Would you draw the same conclusion about the private sector based on scandals at Enron, WorldCom, Tyco, McKinsey, Adelphia, and a whole lot more? Actually, I guess some people would…