It’s Time That For-Profits Start Learning From Nonprofits: Here’s How

There’s more to success than shareholder value.

It’s Time That For-Profits Start Learning From Nonprofits: Here’s How
[Illustrations: DamienGeso/iStock]

As cofounder of a firm that helps nonprofits hire leaders, I’m frequently asked for advice on how someone with a strong private-sector track record can make a move to more mission-driven work. These “sector switchers” are frequently armed with somewhat tone-deaf pitches about how they’re ready to “give back,” both by doing socially focused work and by teaching the nonprofit sector how to operate more like the private sector. To those of us who’ve been working with nonprofits for years, however, that pitch is alienating.


In fact, I believe the opposite is true, that the nonprofit sector has plenty to teach the private sector. I’m often taken aback by capitalism’s relentless emphasis on share prices, with reporting on other aspects of business health–especially longer-term metrics–de-emphasized and de-prioritized. Fiduciary responsibility to shareholders all too often trumps other interests and obligations, such as employee engagement or customer satisfaction.

Free from the pressure of delivering shareholder value to the owners of capital, nonprofits have honed a very different approach. Typically their success is defined by mission impact, measured in any number of ways, such as carbon emission reductions that benefit communities or the number of first-generation college students making it to graduation. These metrics share a commitment to the maxim that impact matters, a focus that carries over to include all constituents.

These are a few of the reasons why corporations can and should learn from the nonprofit sector—and not just the other way around. Companies can follow the lead of nonprofits and more broadly report on, highlight, and celebrate the full range of stakeholders affected by their actions: staff, customers, and community. Here’s why–and how:


Prospective employees prefer to work for organizations that improve the lives of others, and they may require smaller salaries to do so. In his classic paper, “What Price the Moral High Ground,” Cornell University economist Robert Frank cites numerous examples of the ways in which social responsibility preferences are expressed in employment decisions. For instance, Frank describes a huge, well-documented pay gap between public interest and corporate lawyers, with no concomitant decrease in applicant quality. Frank has also conducted numerous studies to establish the pay discount prospective hires are willing to accept when working for a well-respected, socially responsible organization as opposed to one that is less so. In one study, he found that graduating seniors needed a premium of $24,000 in today’s dollars to write ad copy for a tobacco company rather than an organization such as the American Cancer Society.

My experience recruiting for the impact-investing sector supports Frank’s research. In the past three years, I’ve recruited people away from Wall Street to a number of family offices, foundations, and nonprofit organizations that focus on impact investing, and the moves were made at steep discounts—one even took an $85,000 pay cut, moving from $215,000 to $130,000. Interested in applying their skills in ways that will improve the environment and well-being of others, they prioritized the benefits of mission-driven work over the ability to maximize their own income. Corporations would do well to incorporate their social impact achievements in all recruitment literature. It just might be the top candidate’s deciding factor.


Consumers consistently prefer brands that take their impacts on others seriously. Recent research by Nielsen shows that a brand’s environmental, social, or community commitment can sway a product purchase for 40% to 45% of consumers.


The recent success of Warby Parker, the popular online eyeglasses retailer, is a great example of how a company can drive success by embedding social values into its core operations. First and foremost, by lowering the price point for prescription lenses, improved eyesight has become more accessible to a greater swath of the population. Warby Parker also runs a “Buy a Pair, Give a Pair” program that’s resulted in the distribution of more than 2 million pairs of glasses to people in need. Because the intention to improve lives is so firmly embedded in all of Warby Parker’s business activities, it’s impossible to tell how much of its success is due to its style, its pricing, or its commitment to social responsibility. I believe, however, that its recipe for success has been their desire to improve lives, which pervades all of the above.

On the opposite end of the spectrum, consumers are eager to punish corporations seen as irresponsible or taking advantage of people, communities, or the environment. The recent reaction to Mylan’s price hike for the EpiPen, a life-saving medication used as an antidote to anaphylaxis, demonstrates how consumers can now forcefully–and successfully–protest corporate greed. News outlets provided guidance on alternative products, legislators demanded an explanation, and Mylan is now likely to face increased scrutiny and regulation.

If you work in the private sector and your corporation is making a positive impact on the world, make sure your customer outreach demonstrates that, particularly if it’s the customers themselves who are helping the cause.


Historically, corporations have done little more than pay lip service to the way their operations impact the communities in which they operate. Given the preferences of both potential hires and consumers, I’m optimistic that change is in the offing. Corporations that aren’t committed to social change out of a desire to win over staff and clients ultimately will be wooed by a fear of losing money. Failing to fully consider how business practices impact communities can and will be costly. BP, for instance, has been posting losses since 2010 due to the irresponsible practices that led to the Deepwater Horizon oil spill. As of its most recent quarterly earnings report, BP’s losses totaled more than $61 billion.

So to the corporate world, I say: Don’t take shortcuts in tending to the real world. It will eventually cost you. And please, no lip service. Only real effort counts.

If empathy and integrity are not compelling enough reasons for the private sector to take a page from the nonprofit sector, hopefully the connection to hiring, sales, and risk management are. After all, strong teams, revenues, and business practices are ingredients of a great recipe for strong shareholder returns.


Have something to say about this article? You can email us and let us know. If it’s interesting and thoughtful, we may publish your response.


About the author

Michelle Kedem is co-founder and partner at On-Ramps, an executive search and human capital consulting firm that serves innovative, mission-driven organizations committed to social change, both nationally and internationally.