For-profit organizations use the theory of profit to strategize and lead. However, not-for-profits, like Woodbury University, operate under the theories of constraints and strength.
“With the theory of constraints, the idea is to review past performances, coupled with ongoing and future goals or expectations, to identify areas that may delay or stop you from reaching goals,” says Kenneth Jones, vice president for finance and administration and CFO at Woodbury University.
That goes along with the theory of strength, which relies on engaging your total community, including your customers, to help develop your strategic plan, he says. Stakeholders help you achieve your vision.
Smart Business spoke with Jones about putting customers first to build strong loyalty and enhance your value.
What can for-profit businesses learn from the theory of strength when strategizing?
All organizations, for-profit or not-for-profit, need a strategy map that defines their mission, values and where they are headed. However, it’s important to include all stakeholders in the process of inception, implementation and assessment.
The corporate world often develops a strategy map through modeling and the experience of employees, but they don’t look at the No. 1 objective, the customer. A customer’s perspective and feedback is essential. If you don’t involve them, you’re not going to see what they see and you’re not going to react to the environment as readily.
In the education world, we have to understand our customers, the students, to do an effective job and provide a better service. As educators get older, our students stay the same age, so educators must change teaching methods as needed. Educators need to scan the environment of each new class, keeping the same core while adapting the delivery.
In the corporate world, you can create efficiencies with your basic business practice, distribution center, administrative center, etc., but you absolutely need to have a focus on your customers and get them involved.
Beyond understanding customers, how can you help clients become part of your community?
If you have value in your company, people want to share what they have to help enhance that value. By including key vendors, clients or customers in your mission and strategic plan, you show them the value of their input. When you deliver the outcome, they see that their opinions matter. They are not an offset of the community, but part of it.
As part of the community, you want to take care of all your stakeholders. For example, when the Cal Grants were cut in 2012 and scholarships for low-income students were reduced, we knew how hard it would be for our students to succeed, so Woodbury issued vouchers to make up the difference.
As another example, Woodbury has a lot of first-generation college students on financial aid. We can reach out and ask for input on how to make everything more affordable, making students part of the process. This in turns leads to former students wanting to give back. They could start a scholarship, set up a writing center or help with counseling services. You can’t build loyalty when you create an environment where you absorb the profit and customers take the loss. Stick to your word and show customers the quality they subscribed to.
Under the theory of constraints, how do not-for-profits do more with fewer resources?
One high-level constraint may be affordability. From an administrative perspective, we can accomplish that by investing in technology to shorten our operating processes, increase automated processes and eliminate processing constraints, thereby reducing the processing cost of material and labor.
The purpose isn’t just to create revenue or improve the bottom line. You want to create efficiencies, and then redirect resources elsewhere by investing in areas of strength.
Also, you don’t want to acquire something that is a constraint on your operations right away, just because you want to diversify your product line. For example, we wouldn’t bring in a dentistry school at Woodbury just because we can acquire it. It has to fit within the strategic map of the institution. Bring in something that you’re strong at, which will be a prototype for the next development. ●
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