Federation as a Business or the Business of Federation: Part I

There’s a move these days to rename the “not-for-profit” sector the “social profit” sector.

Writing in the Globe and Mail several years ago, Paul Alofs, President and CEO of The Princess Margaret Cancer Foundation asked, “what other sector of the economy refers to itself by what it’s not? Grocery stores don’t call themselves ‘not furniture stores.’ It creates an expectation that we should not be profitable. This negative naming has created a severe disadvantage for us compared with the other sectors in how money is raised, how it gets spent and who gets to “profit” from success. A better name is the ‘social profit sector.’”

The need to re-frame our business was recently brought home to me. I asked a group of young business people and professionals how they thought of Federation CJA — a not-for-profit corporation — in relation to the for-profit world. Their answers were revealing: Federation CJA doesn’t have to worry as much as real businesses do about making a profit, because your goal is “to do good”.

Actually, we do have to worry about many of the same things that for profit businesses and firms do. We need to focus relentlessly on our top line — our revenue — because that’s what allows us to do good.  Revenue for us is money raised, and the bulk of it comes from our annual campaign and corporate sponsorships.

We need to worry about our bottom line, too. In our business, “profit” means funds available to allocate — “allocable dollars” — after expenses are covered. Like a for-profit business, the equation is simple: greater revenues and lower costs mean more allocable dollars, and that translates into greater power to do good.

We need to think about competition and market share. People today can choose to donate their dollars and their time to a wide array of charities and causes, all trying to do good.

Without taking anything away from the many great organizations dotting the landscape, we need to make the case for our own, unique value proposition, that no other gift has the power to impact so many Jewish lives. The extent to which we succeed determines our market share or “penetration” rate: the number of donors who give to the annual campaign and volunteers who give of their time, both of which impact directly on our ability to do good.

And finally, just as businesses are accountable to their shareholders, we are accountable to our stakeholders. Who are these stakeholders? Well for starters, if you received this blog in an email, you’re likely a stakeholder. Anyone who makes a gift to the annual campaign is a stakeholder, just as anyone who benefits from a program or service for which we provide funding is a stakeholder. The agencies and organizations that deliver those programs and services are also stakeholders. And every single stakeholder is entitled to know what we fund and why, and how we run the business of Federation.

Federation CJA is managed and run by paid professionals like me. But we are governed by a volunteer board of directors who are responsible for: (1) fiduciary oversight — ensuring that we act and spend in compliance with the law, and (2) strategic direction — ensuring that we make the best choices and decisions to care for our community’s needs today while building for tomorrow.

The board of directors and senior lay leadership are really the trustees of our community’s (our stakeholders’) interests. It’s a sacred trust, and I can tell you from first-hand experience that it is performed with a level of talent, diligence and commitment that is truly second to none.

Federation CJA is a “social profit business” that consists of doing good in and for our Jewish community and for the Jewish people at large.