Previously I said that “The economic engine is the part where the core value add takes place. It’s the activity in the company that ‘pays the bills’. It’s the part of the business that creates the thing your customers come to you to get.” And I argued that the economic engine part of an organization should be maximized, while the other parts, the support structures, should exist only to the extent that they are needed by the economic engine.

What about donor-supported non-profit organizations? In this case the part that pays the bills (the fund-raising part) can appear to be separate from the part where the core value add takes place (the part where the mission happens, cancer research, for example). Are donors the customers, or are cancer patients the customers? In my time in and around not-for-profits, these questions have always bothered me.

I am not an expert on the non-profit world by any means, so take this as a thought experiment. I suggest this perspective on donor-supported organizations:

1. The donors are the customers that the organization serves. They are the ones buying what the organization delivers, even though someone else often benefits (the cancer patients).

2. The donors are paying for the core value add, successful cancer research. The organization states the mission, and donors who care about that mission pay for it.

3. Therefore, the part that carries out the mission (the research lab) is the economic engine, and fundraising is not the economic engine. It is a support structure there to maximize the output of the economic engine (effective research).

In my ideal, the organization would deliver such effective cancer research results that donors who care about cancer research would be lining up to support it, and fundraising would consume relatively few resources.

If, at the opposite extreme, the organization does not deliver well, but continues to raise funds, this compares to a business that sells a low-quality product through misleading advertising. I think there is more danger of this in the non-profit world than in business, because the donor often does not personally experience the delivery of the product (the research) and may not be in a position to evaluate the true effectiveness of the organization. It might be like buying products from a commercial and having them shipped to someone you will never talk to.

So I conclude that the rules really aren’t different in the non-profit world, but there is an extra need for donors to be deliberately well-informed so they can choose to become customers of the donor-supported organizations that deliver most effectively on the missions they care about.