Collaboration can also be expensive. I don't think most people realize how much time and money it takes to bring people together and get them to work together effectively. Add in the fact that collaborations often suffer from a lowest-common-denominator effect, where one group isn't able to perform as efficiently as the other, thereby lowering the overall effectiveness of the entire effort. It's enough to make you wonder whether, instead of issuing an RFP that insists on a collaborative approach or gives points to a collaborative group per se, it might not be better for funders to issue RFPs that frame the solution to a problem as a competitive challenge, with the funding going to the group that comes up with the best results. If an organization can do it on its own, great; if it involves a collaboration, that's great, too. But don't reward collaboration for the sake of collaboration. I can't tell you how many times I've had an executive director say to me, "My organization could accomplish this project far more effectively on its own. But we couldn't get the money to do it on our own. So now I'm spending all my time in meetings."

PND: Well, let's talk about the real focus of the book, which is competition as a competitive strategy for nonprofit organizations. How do you define those two terms?

DLP: We define competition as what happens when there are more people chasing resources — things like funding, qualified staff, potential board members, volunteers, and media attention — than there are resources. Competitive strategy is simply an organized pattern of behavior designed to secure an optimal share of those resources.

PND: Do those terms mean different things in the nonprofit sector than they do in the for-profit sector?

DLP: I don't think so. Unfortunately, when you use the word competition in the nonprofit sector, people frequently get upset; they feel it's inappropriate somehow. But the underlying concept and tactics associated with competition are pretty much the same in both sectors.

PND: Do nonprofits face certain competitive challenges that are unique to the sector?

DLP: Yes, they do. In the business world, customers pay, with their own money, for the products or services they want. In the nonprofit world, products or services are either given to customers free of charge, as in the case of a homeless person who beds down in a shelter on a cold night, or are made available at a reduced fee that doesn't come close to covering the actual cost of the product or service — think, for example, of the price of an opera ticket compared to the actual costs incurred by an opera company. In those cases, you have what I call third-party payers — foundations, corporations, individual donors, public-sector agencies — subsidizing the actual cost of the product or service, and their involvement ends up complicating things. What do I mean by that? In the for-profit world the only feedback that matters is the feedback you get from your customers: every day they vote on your products and services by spending or withholding their dollars. In the nonprofit world, you not only have to satisfy the people who receive the product or service you are providing, you also have to please the people who are subsidizing the cost of that product or service, and those are usually two very different groups of people, with very different sets of needs and expectations.

In the book I quote an article that examined the decision-making process one organization went through in trying to decide how best to deliver services to the homeless in their community. In that particular instance, it was clear the provider of those services was 99 percent interested in what the third-party payers had to say, while what the homeless in the community had to say barely registered. In the end, who is being served here? Too often, in my view, the prime constituency for a nonprofit is its funders. That's looking through the wrong end of the telescope. Nonprofits will not succeed in what they are trying to accomplish if their primary focus is on what their funders want. To be effective, nonprofits have to focus on their mission and the needs of the people they are trying to serve.

PND: What advice do you give nonprofits that are frustrated by their inability to get third-party payers to see things the same way they do?

DLP: I don't go there. For the most part, third-party payers have their own agenda, and because they have so much more power than nonprofits do, trying to persuade nonprofits to take on their funders is simply a waste of time. Instead, what I try to do is to stress the importance of keeping things in balance. By that I mean, you have third-party payers and their needs on the one hand; and, on the other, you have the needs of your clients and constituents. You have to keep both in mind. That's just part of the juggling act of being a nonprofit leader.

PND: You argue in the book that, given the scarcity of resources in the nonprofit sector, the need to compete is not only an organizational imperative, it's an ethical imperative. What do you mean?

DLP: In the nonprofit world, organizations exist in order to provide a public benefit, and the government implicitly recognizes the value of that by making nonprofits exempt from taxation. That exemption places an obligation on nonprofits to do their absolute best to accomplish whatever it was they were created to do. If a nonprofit can't or won't do that, then the resources it has managed to attract to itself should go to a nonprofit that can.

PND: Competition can also be a way to take of advantage of opportunities, can it not?

DLP: Absolutely. There are plenty of resources available to the sector that go unused, or that aren't used to their fullest extent. Talented individuals who serve on the board of an organization that doesn't accomplish much of anything, or a grant that achieves negligible results are examples of that phenomenon. In each of those scenarios, there's an opportunity for other organizations to grow by competing for and using those resources more effectively; that's the whole point. Every volunteer, every person who wants to work in a nonprofit or serve on a nonprofit board, every dollar dedicated to the sector needs to be used for its maximal benefit.

PND: Who or what decides whether a resource is being used to its "maximal benefit"?

DLP: Great question. In the final analysis each nonprofit must make a determination on its own whether it is doing a good job or not. We provide some tools for making this judgment in the book and remind people that if they are indeed weak in a critical area, their competitors will know it, and possibly their third party payers, so they should know it as well. We also appeal to the reader's higher ethical sense. Both ethically and organizationally, it makes sense only to seek resources in areas where the organization has a distinct advantage or is an outstanding performer.

PND:Most nonprofit leaders think of their organizations as mission-driven. How does mission figure into competitive strategy?

DLP: In the nonprofit world, the only justification for competition is to advance your mission. It's what I call playing to win. First, you have to look at your organization to determine whether it is truly more qualified and capable than its competitors at delivering the social benefit it has been chartered to provide. If you decide it is, then, as I've said, you have an ethical imperative to secure the resources you need to provide that benefit to as many people as possible. On the other hand, if you decide your organization is not as capable as its competitors to provide that benefit, then you need to ask whether you should be in that line of work. Maybe it would be better, and a more effective use of resources, to leave the field to those who do a better job of providing that particular benefit. Or maybe you'll decide you need to strengthen your capacity to deliver that benefit. It's not an easy conversation to have, but it's a necessary one.

PND: The flip side of the equation is the danger of mission creep. Are highly competitive organizations more prone to mission creep than less competitive ones?

DLP: I think the organizations that are most prone to mission creep are those in financial straits. If being more competitive puts you on a sounder financial footing, you are going to be less prone to running after every grant that comes along. That said, I think you have to look at your mission at every step of the way when you're making these kinds of strategic decisions. You have to constantly ask the question, "Is this going to advance our mission, or is it just going to secure us funding for a few months?"

PND: Is it possible for a nonprofit to be high performing and not be competitive?

DLP: It depends on the market. If the nonprofit happens to be the only organization in that market, sure, it's possible — although I think any organization that thinks it's not in a competitive market would, if it looked more closely, see that it actually is. Nonprofits don't just compete with their direct competitors — organizations that do what they do; they compete with nonprofits of every kind for the resources they all need. They compete for A-list board members, for example. When one of those A-listers decides to join the board of an arts organization instead of the board of the local hospital or land conservation group, the arts organization wins. Now, those three groups may not see themselves as competitors, but they are — and they're competing for more than just board members. They compete for funding, for employees, for volunteers, for media attention, and for the attention of the general public. So again, all nonprofits function in a competitive environment, to one degree or another. Some folks just happen to be in a much more overtly, in your face, competitive environment.

PND: Can a nonprofit be highly competitive and not be effective?

DLP: Absolutely. There are many, many nonprofits out there that are not particularly effective, and becoming more competitive is not the answer to their problems. We make that point pretty forcefully in the book. It's not about just trying to secure more resources; it's about really looking at what your organization does and deciding what it does more effectively than anyone else and then going out and getting the resources to do that. It's about being honest with yourself and your colleagues. Your PR messages may be positive and full of all the great things your organization is doing, but in the office of the executive director, in the boardroom, there should be no illusions about what your strengths and weaknesses are.

PND: Do nonprofits in general posses the kind of business discipline and organizational capacity necessary to compete effectively?

DLP: There are so many kinds of nonprofits out there that it's hard to generalize. But I will say that nonprofits have been criticized generally for not being particularly well-managed, and I think that's a bad rap. The average person looks at a nonprofit and says, "Boy, that thing isn't as well managed as IBM." It never occurs to that person that IBM has vast resources to devote to administration. But if you compare your average nonprofit to a similar-sized organization, say, the corner convenience store, the nonprofit probably has the more sophisticated management system.

In other words, I think nonprofits do have the capacity to learn how to pursue a competitive strategy more effectively, and most of them can figure it out without having to spend a lot of money on consultants. We have a whole section in the book on how nonprofit leaders, relying on their management teams, can do their own market research and become more aware of the competitors in their particular market. And that, inevitably, leads to decisions that are inherently more competition-aware.

PND: So organizations can be taught how to compete more effectively?

DLP: Absolutely. It's an aspect of leadership, and leaders are not born, they're made. I truly believe that. People acquire experiences that help them become leaders, and competition is just one tool in the toolkit that every nonprofit leader needs in order to be effective.

PND: Is it ever not appropriate for a nonprofit to adopt a competitive strategy? Have you found yourself offering that advice in your work as a consultant?

DLP: Never. Even nonprofits that are currently working on a collaborative effort, say a merger, still have competitive issues to attend to. I work with a lot of nonprofits that are potential merger partners for other nonprofits, usually because they provide identical or complimentary services in the same market. In that kind of situation, the best solution sometimes is to join forces; if you don't, you're going to find yourself in head-head competition. So if you can figure out a way to mesh the personalities of the executive directors involved and get the boards to work together, a merger is a great way to go. If, on the other hand, the two organizations are not interested in merging, then they're going to continue to compete for resources, and the organization with the best competitive strategy is the one that will end up with the most resources and being the most effective.

PND: Do you think nonprofit organizations are ready to hear this message?

DLP: I hope so. (Laughter.) I think there are aspects of the message that many if not most nonprofits are already comfortable with. They certainly understand that they don't have adequate resources. They understand that their staffs are overworked and underpaid. They understand that they are trying to accomplish a great many things on limited budgets. What's difficult for a lot of nonprofit leaders, I think, is the tension between what I have described as the ethical imperative to compete for scarce resources, and the consequence that if they do manage to secure more of those resources for their organizations, it means some other organization — an organization that most likely was deserving, in their minds — doesn't get them. Remember, it's not unusual in many communities for the individual who leads nonprofit A to serve on the board of nonprofit B and to be a contributor to nonprofit C. That type of individual is invested, emotionally and at times in other ways, in the entire nonprofit ecosystem in that community.

What we're trying to do — and we'll see how well the message goes over — is to shift the focus off of nonprofit organizations themselves and onto the importance of mission. This is all about doing a better job of supporting your mission, not about building a bigger organization. Competition is a means to an end. If there are only a certain amount of dollars available in a community to deal with that community's problems, and those dollars are spread among fifty organizations, some of which are very effective and some of which are much less effective, wouldn't it be better to have those dollars spread among thirty organizations, all of which are very effective?

PND: Sure, but in that scenario aren't you losing capacity, in a sector that doesn't have enough capacity? In a perfect world, wouldn't it be better to convince third-party payers to increase their funding of nonprofits of all kinds?

DLP: In a perfect world there would be no need for nonprofits because there would be no problems. In this world, where three to four thousand new nonprofits open up each month, there is never going to be enough money, board members, and qualified staff to go around. This is particularly true as the baby boomers start to retire. In terms of numbers, Generations X and Y are much smaller, and we're going to have to compete like crazy to attract and keep the best among them. Capacity is not about the quantity of organizations in the sector, it's about the ability of those organizations to accomplish their missions. I am not arguing for a Darwinian winnowing down to one or two nonprofits in each community; I am simply talking about letting the market reward those who are better performers and encourage the laggards to either improve or get out. How can one argue with that?

PND: I'm not sure I can. But we've run out of time, so we'll have to save that conversation for another day. Thank you for speaking with us today, David.

DLP: Thank you. My pleasure.

Mitch Nauffts, PND's editorial director, spoke with David La Piana earlier this year. For more information on the Newsmakers series, contact Mitch at mfn@fdncenter.org.