Do you have a social impact strategy in search of a customer, or a customer in search of a social impact strategy?
When you have a clear customer, the road to a clear strategy should be relatively straight and well-paved. When you have a clear strategy but no clear customer, settle in for a long and difficult ride. As a nonprofit CEO, consultant and board member, I've driven down both roads more than once.
The notion of the customer holding a crucial role in nonprofit strategy is neither new nor original. Peter Drucker made identification of the "Primary Customer" the second of his five essential questions for nonprofit strategy in his "Self Assessment Tool." For Drucker, the primary customer of the nonprofit was the client, "the person whose life is changed through your work."
Drucker called volunteers, members, partners and funders "supporting customers." The supporting customer has the power to say no, to accept or reject what you offer. "You can satisfy them by providing the opportunity for meaningful service, by directing contributions toward results you both believe in, by joining forces to meet community needs."
The dirty secret of the nonprofit sector is that mission-based organizations need paying customers in order to survive. The client is rarely the paying customer in a social sector organization. When you conflate one with the other, you run the risk of overlooking one of the keys to your organizational strategy.
The paying customer in a nonprofit is the donor, of course. Donors come in a variety of flavors--government at all levels, institutional foundations, family foundations, major individual donors, smaller donors, and sponsors are the principal archetypes. Many donors have a proxy relationship to the client, essentially buying a service on behalf of the client who consumes it. In other cases, the donor is buying something less tangible, perhaps the halo effect of participating in a movement, the opportunity for recognition by one's peers, the satisfaction of making a larger donation than a social competitor, or the chance to develop a business opportunity by supporting a cause important to a key prospect or investor.
Drucker certainly did not ignore this reality ("The primary customer is never the only customer, and to satisfy one customer without satisfying the other means there is no performance."), but he did resist the notion of putting the customer and client on equal footing:
This makes it very tempting to say there is more than one primary customer, but effective organizations resist that temptation and keep to a focus--the primary customer.
When Drucker's work was originally published in 1993, we were on the cusp of dramatic changes in American philanthropy and the operation of social sector organizations. The 15 years that have followed brought us concepts like "Venture Philanthropy," "Logic Models," "Theories of Change," "Metrics" (meaning measurement of impact, not a system of weights and measures favored by Canadians) and "Social Return On Investment." One might argue that Drucker himself played no small role in this transformation as one of the pioneering voices in applying management practices honed in the world of business to efforts to build and sustain social impact strategy.
Perhaps ironically, these changes have made Drucker's delineation of the primary and supporting customer archaic today. In the relatively genteel world of philanthropy, circa 1993, donors still primarily made grants based on a charity's aspirations for impact. While cost/benefit analysis of granting to one organization versus another certainly occurred, the process that REDF employed in the late '90s [The Roberts fund calculated that a charitable grant to a nonprofit would yield an array of monetary benefits to the newly employed (better incomes and financial stability) as well as social benefits (new tax receipts from new-employee income, lower social service costs). The fund’s charitable grant, in other words, produced ongoing “social returns” that greatly magnified the amount of the initial investment.] was still beyond the horizon of most philanthropies.
For better or for worse (some might say, and for worse), the social contract that characterized the donor-charity relationship for most of the post-War period has largely gone the way of the fax machine--still present in our minds as a salient point of reference, yet mostly a dinosaur. Few donors give grants merely to support an aspiration. Donors--whether government contractors, foundations, or wealthy individuals--expect far more in return for their largess. And on the basis of those expectations, they have become a core customer for the nonprofit, no longer relegated with the "supporting" modifier.
Upcoming Posts:
Upcoming Posts:
- Lit review on nonprofits & customers
- Case study: what happens to a business plan without a customer plan
