The Executive Meathead: Profit Status Means Nothing

TAGS: vision, The Executive Meathead: Profit Status Doesn't Mean a Thing, stereotypes, not for profit business, mission, for profit business, the executive meathead, Elitefts Legacy Log

elitefts™ Sunday Edition

During the course of my healthcare career, I have had the opportunity to sit on both sides of the "for profit" and "not for profit" (NFP) fence, and (to be candid) I have found that one is not necessarily superior to the other. If you have worked in the "for profit" world, it's common to be disgusted with the NFPs' idealistic world views and baffled by their "soft" business tactics. On the other hand, the NFPs constantly stereotype the "for profits" as greedy and ruthless entities hellbent on maximizing shareholder value at the expense of quality and ethics.  I have personally heard these convictions and, unfortunately, as a much younger executive, fostered some of these perceptions within the organizations I have worked. I now see that this was to my personal detriment simply because there are many positives and negatives to both. In turn, there is much to be learned and appreciated from both. The purpose of this article is to hopefully provide a new perspective that isn't so polarizing between the two. I would ask that readers understand that I am providing descriptions with some pretty wide brush strokes and generalities, so try not to get too offended if this doesn't apply to you or the organization you work for.

It is absolutely true that most NFP businesses are usually born out of more humanistic motivations (rather than capitalistic)—hospitals, private schools, research institutions, religious organizations, etc. These all exist for very important reasons. They support a wide variety of causes that truly benefit society as a whole, and that is why they were created. However, there are major pitfalls that can occur when serving a "higher purpose" runs amuck. This identity, when allowed to go unchecked, can lead to self-righteous and passive cultures that diminish urgency towards operations and create a destructive sense of entitlement. "We are going to be successful because we are serving the common good" is actually something that I have heard NFP leaders say. This is never a good sign because once a business of any kind believes that it has guaranteed success, it automatically shifts into victim mode and loses its survival skills. While I will always argue that a corporation must have a "heart" to achieve its potential, it must also have a head that never ceases to study its operating environment—pursuing ways to increase cash flow and working to make prudent financial decisions. As the old NFP credo says: "If there is no money, there is no mission." Once this is forgotten, you have a very well-intentioned NFP that has no choice but to close its doors...and if the business dies, its mission dies with it.

For profit organizations exist to make money, and they shouldn't have to apologize for that. We do live in a capitalistic society that allows those who are smart and motivated to create wealth for themselves and/or for their shareholders. Those who perform extremely well can and should be rewarded for their efforts; however, there can be significant problems when the bottom line becomes the only line. I absolutely believe that every organization, regardless of tax status, has a critical responsibility to be ethical in their business practices and to keep their profits responsible and, most importantly, honest. In recent history, we have been given horrifying examples (i.e. Enron and Worldcom) of corporations selling their souls for the almighty dollar. To be blunt, this behavior is always destructive and cannot in any way be condoned. The construction firm that chooses to cut costs by not providing the proper safety equipment to its employees...the manufacturer who uses defective materials to produce its products...the retailer who cheats on his taxes...all of these actions are immoral, and there is no justifiable excuse for businesses to go down these roads. However, greed can be a powerful animal that blinds some corporations in ways that allows (and even promotes) deplorable behavior. And because of this reality, the incorrect stereotype that all for profit corporations are unethical and greedy continues to grow.

So, how does this get resolved? Whether you are for profit or NFP, there are certain realities of the business world that cannot and should not ever be ignored. These transcend tax status and are necessary for basic survival. They involve taking what is best from both worlds and combining them to achieve the best possible outcomes whether your goal is to end world hunger or to hit a 20-percent margin.

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1.  Establish and Maintain Strong Financial Systems

There is never a point in time when a business should not be actively working towards gaining a firmer grasp on its financial tracking, trending, and controls. You should always know what your current cash position is. You should always know what your monthly expenses are, and you should always be calculated in your financial decisions. As a new executive, I remember a 65-year old CFO actually making his trainees recite out loud, "Cash makes the world go round" over and over again in order to get them to grasp the "No money, no mission" reality. It isn't enough to know that you spent less than you made last month. Understand where your money is going and make it work for you.

*Side note: In my experience, NFPs have always been far more vulnerable to white-collar crimes (embezzlement, fraud, etc.) than their for profit counterparts simply because they do not provide the proper financial controls and segregation of duties that are the hallmarks of the for profit sector. I have often seen NFPs provide an inordinate amount of trust in the individuals who handle their money, and this almost always creates an unsettling vulnerability. If a corporation creates financial systems that enforce integrity, then the chances that they will be taken advantage of diminishes.

2.  Never forget HOW and WHY you make money

While working in the for profit sector, I was often required to attend meetings with other execs, and I was constantly disappointed when almost every conversation started with, "how's your bottom line?" Very seldom were there any conversations regarding patient satisfaction scores, new clinical initiatives, or even employee culture. This always disturbed me simply because the mission of healthcare is very simple: to care for and serve your patients well. When a business of any kind ceases to focus on the value it creates for its customers/employees and instead spends all of its time on the balance sheet, it then starts contributing to the for profit stereotype. Corporations must have a fanatical approach towards improving their products and/or services for their consumers. They must also understand that it is through their employees' efforts that revenue is generated, and they must constantly work to create a culture that focuses on growing, supporting, and encouraging their staff. To put it simply, for a company to be exceptional, it must have a heart. In fact, I would passionately argue that in the end, having a heart for the customer and your employees are two of the best things that you can do to greatly improve your overall financial performance.

3. Lose the Superiority Complex

One is not better than the other, and it is foolish to judge the quality of a corporation based on its profit status alone. I have seen for profit corporations that are operated with impeccable missions and values, and I have also seen NFPs that are driven by greed and apathy towards the people they serve. The nobility behind the business doesn't come down to whether or not it is tax exempt. It is the behavior and the results of the organization that should form our opinion. When we start minimizing companies, especially competitors, based on superficial and oftentimes trivial details, then we become vulnerable. This is profoundly dangerous because regardless of whether or not you are a small church-based charity or a financial behemoth like General Electric, in order to be successful you must always be open to learning from any source available to you. Perceived superiority leads you down a path of getting too comfortable with your business, which, as you know, almost always puts you at a higher risk for failure.

When all is said and done, "For Profit" and "Not for Profit" are simply labels that do little to speak towards the quality, ethics, and strength of a business. We would do well to allow the actions and results of the business to be the judge and not give in to stereotypes.


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