"Health care is a business, I'm gonna run it like one."
I got sucked into some old episodes of House on Netflix while recovering from a cold. Figures that Vogler was at the centre of my favourite story-arc.
His obsession with running the hospital “like a business” will be familiar to anyone working in the nonprofit sector.
Now, I think there is a lot nonprofits can learn from for-profits, and vice versa. But it’s important to remember that they are different sectors.
Fundamentally, the incentives are entirely different. And, as any economist will tell you - incentives are everything.
One example that I've been ruminating over lately is the "virtuous circle."
In business, you work for the virtuous circle. You want to find production, management, marketing successes that fuel future successes (and by successes, I mean “money-makings”). It’s self-reinforcing, and it’s key to growth. Make more, sell it at a higher margin, earn more, have more to reinvest, make more, sell more, wash, rinse, repeat.
"Wash-rinse-repeat" feels ever so good.
In the nonprofit sector, there are no profit-oriented virtuous circles. By definition, if your core products or services are generating money, then they aren’t charitable. They can be noble and they can have important social aims, but they aren’t truly charitable.
The beneficiaries of charity work can’t pay for it. That means there’s no link between how much our organizations produce and how much they receive in compensation. Ergo, there is no virtuous circle.
That changes everything. Are you listening, Vogler?