HBR Article on the Three Rules for Making a Company Great & the Application to NPs

The April issue of the Harvard Business Review had an article on Three Rules for Making a Company Truly Great, looking at fundamental, value-based principles behind the strategies of corporations that have accomplished sustained success exceeding others (on an ROA comparison basis) over a long period of time through thick and thin times. The three rules are 1.) Better before cheaper, 2.) Revenue before cost, and 3.) There are no other rules.

In other words, the core focus and, therefore, competency of these organizations is that they first got good at building better products and successfully retaining that position. They worried about pricing second. If, as an organization, you understand and apply the improvement sciences, you will become very good a creating product (material or human service) with quality at, or below, competitors' costs, because part of the quality skills is elimination of waste (streamlining) while progressively getting better and better.

The second rule or fundamental principle is in the domain of financial strategy, paying attention first to your financial strategy and getting good at maintaining revenue over cost (creating and sustaining margin). Again, if you think about it, the core competency is understanding and applying the ability to get better and better, i.e., more savvy, but this time in the realm of  understanding what creates your margin, especially without jeopardizing sufficient revenue to assure the margin your strategy requires.

In both rules you must become a learning organization and translate that learning into getting better and better—one, in creating product or service quality, and two, in managing your financial strategy wisely with the primary focus on revenue, not cost-cutting. (A cost-cutting mentality leads to parsimony and is invariably expensive and potentially fatal.)

I believe these rules can be applied to nonprofits and ministries; except you aren’t selling product, your revenue flows from those who love your mission and your ability to achieve it. See the connection? Get good at creating the Ends, and revenue is easier. But never lose sight of how your revenue is generated. Quality (excellence) and revenue are coupled. Understand that.