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MBAs: What Can They Offer Nonprofits?
As an ongoing effort to bring unique, useful information to its readers, The Sophist from time to time asks individuals to share their perspective on the nonprofit sector. The opinions represented in this article are not necessarily those of The Sophist staff or of its publisher, Isoph. The article is simply meant to represent the experiences and thoughts of our interviewees.
Although several prominent business schools, including the Haas School of Business at University of California at Berkeley, the Kellogg School of Management at Northwestern University, and the Weatherhead School of Management at Case Western Reserve University, have nonprofit concentration areas, not many graduates with a master of business administration choose the nonprofit sector as their destination post-graduation.
But quantifying exactly how many MBAs opt for nonprofit jobs proves difficult. The data isn't tracked by most of the major post-MBA surveys, and organizations that might be expected to capture the information--including the Graduate Management Admissions Council, the Association to Advance Collegiate Schools of Business, and the National Association of Colleges and Employers--do not.
At the Wharton School at the University of Pennsylvania, again, the statistics are not clear-cut. The annual MBA Career Report (http://mycareer.wharton.upenn.edu/mbacareers/CR01.html) tracks career functions, with consulting usually ranking near the top. Of the class of 2001, 38.6 percent went into consulting, 20 percent into corporate finance/banking, and 6.4 percent embarked on careers in the "other" category. "Other" includes commercial banking, law, media, entertainment, public interest, real estate, or retail. Public interest--listed with six other options--is the small piece of the pie that accounts for new Wharton MBAs headed to work in the nonprofit sector.
For Elinor Haider, 29 (graduated December 2001 from Wharton with an MBA), and Joy De Jesús, 30, and Stephen Hebert, 27 (both graduating May 2002 from Wharton with an MBA), it hasn't so much been a question of suddenly considering a nonprofit career post-MBA. They all worked for public agencies or nonprofits prior to Wharton. In fact, it was their experience in the public sector that led them to pursue business degrees.
From the Public Sector to an MBA
Elinor, Joy, and Stephen realized that an MBA could offer them the kind of knowledge and skills they needed to move forward, doing the work they enjoyed.
Elinor's pre-MBA professional experience focused on Latin American development, "specifically, leveraging private sector tools to solve public sector problems such as using microcredit and housing finance mechanisms to support the working poor in Latin America." Recognizing the importance of accounting, finance, and management in her work, Elinor began thinking of returning to school to hone those skills. "An MBA offers the technical skills," she said. "I had not always planned to get an MBA, but realized as I pursued my career goals that it would equip me with the skill set and legitimacy often lacking in the public sector."
For Joy, her two-and-a-half-year stint at the Cooper's Ferry Development Association was the turning point: "My last job before Wharton introduced me to the field of real estate development, but I knew that to move up in the industry I would need a much better understanding of finance. I was coming from a liberal arts background, and my prior experience, while good training, involved more research and writing than quantitative analytics."
"I did medical research at the UCLA Medical Center," said Stephen, "and became involved with a biotech start-up out of the university. From there I started doing venture capital work. I did technical due diligence for potential portfolio companies and met with entrepreneurs. I realized there that I needed to augment my business acumen (finance, accounting, etc.) to move forward." For Stephen, the entrepreneurial and venture-capital interests have endured: "I'm considering starting a venture philanthropy fund that focuses on the formation of social purpose businesses with a nonprofit consulting arm to assist potential 501(c)(3) clients."
Returning What They Have Learned
Elinor's answer to what an MBA offers a nonprofit is straightforward: "Technical skills in finance, accounting, strategy, and management."
Joy focuses on the management abilities MBAs bring, "I think what the sector should be seeing [in an MBA] is a general manager at a minimum. Beyond that, the person may also be trained in a specific area, such as health care or real estate, that matches the focus of the organization."
What Stephen emphasizes is evaluation: "I think the real value that somebody from the for-profit world (not just people with MBAs) can bring to nonprofit is an understanding of performance-based evaluation. On the programmatic end, there are a lot of bright and motivated people who are social workers who haven't had much exposure to performance-based evaluation," Stephen continues. "They derive satisfaction from finding a client a job for instance, but that's where the challenge begins. A key problem in the nonprofit sector is results tracking and management. We don't really know what the ultimate outcome of finding that job will be. It may be that they are not retained after six months."
Evaluation isn't necessarily about the bottom line for Stephen, although it has to be considered: "We need to understand who was not retained, why they were not retained, and what kind of changes we can make to improve the system. In that vein, we need to understand the benefits and the costs. Traditionally, nonprofits have not focused on the costs…and the true nature of the benefit."
Nonprofit/For-profit Differences and the "C" Word
When asked about the differences between nonprofits and for-profits, compensation was foremost on the minds of all three interviewees. While all acknowledged the intangible rewards offered by most nonprofits--personal satisfaction in working on a cause, making a difference, feeling good about the work they're doing--they all felt that nonprofits in general do not adequately pay their employees.
The issue of pay can be such an important subject because of the expense of an MBA and expectations fostered in the MBA environment. For the Wharton graduating class of 2001, median annual compensation, including median base salary, guaranteed bonuses, tuition reimbursement, and any additional compensation, was $159,000 (http://www.wharton.upenn.edu/whartonnow/facts_at_a_glance/grad.html).
No matter where she wants to work, Joy knows that she's going to have to pay back her student loans. "I don't think it's so much that an MBA isn't valued at a nonprofit, but oftentimes it's not in the budget to hire someone at, say, $75,000 plus who's not the executive director." Although she's enjoyed her past experience in the nonprofit sector and plans to return, financial demands are such that she's decided to work at a for-profit for three to five years post-MBA so she can pay off some debt before returning to the nonprofit world. She hopes that this arrangement will not only help her personal finances but will also mean she has that much more to offer a nonprofit organization: "After getting my MBA and working in the private sector for several years, I'd bring more back to the public sector, through the private sector, in terms of experience and training--and, ideally, after having paid down most of my student debt."
"Any venture, whether nonprofit or for profit can be mission-driven." Elinor continues, "Nonprofits clearly are more likely to have a mission fueling their operations, and potentially therefore pay less since employees receive 'psychic rewards' or the benefit of working on issues that interest and motivate them. This pay differential has historically meant that many nonprofits lack 'professional' management, i.e., management that has acquired those skills through formal training."
Steve stressed the role compensation can play in not only attracting skilled employees but making the organization as efficient as possible. "Compensation systems are not well aligned with incentives in nonprofits. We need to incent people in the organization to monitor costs and true benefits."
The issue of compensation aside, do these MBA students think nonprofits are or should be run differently than for-profits? Elinor said it most succinctly, "No. Nonprofit is a tax status, not a management philosophy."
Nonprofit Appeal
Still, something is attracting these bright, energetic, well-educated individuals to nonprofit careers. Since it's not the pay, what is it? For Elinor, Joy, and Stephen, work in the public sector seems to be a happy concurrence of personal goals and interests and a genuinely altruistic inclination.
Joy is amazed at the work done by nonprofits, and she wants to be able to bring her strong management skills to that mix. "Nonprofits do a whole lot with very little. Employees have a lot of passion for what they do." She concludes, "I think it would be really nice to be able to add strong management to that mix."
The possibilities of public sector work attract Elinor. "The nonprofit sector offers extraordinary public leadership opportunities and access to power unparalleled by the private sector," she said.
Stephen doesn't see the nonprofit sector as a long-term career choice, but as an opportunity to provide public service for a few years. "A career is a long time, and I don't plan on spending it all in nonprofit--only the first few years. This would be a 'giving back' period." He adds, "I'm attracted to nonprofits primarily because of the purpose of the work."
Conclusion
In recent years, as calls for accountability grow louder and more common, the issue of whether nonprofits should be more business-like has split the nonprofit sector, some saying nonprofits can learn well from the strengths of for-profits, others suggesting that nonprofits would be better off looking inward and becoming more nonprofit-like, rather than borrowing for-profits strategies never intended for the nonprofit arena.
While the debate continues, one of the most exciting developments may be the addition of the voices of people like Elinor, Joy, and Stephen--individuals schooled in the ways of private business but with an ear and a heart for the concerns and needs of the nonprofit world.
We invite you to share your thoughts about MBAs working in the nonprofit sector and other issues addressed in this article. Send them to sophist@isoph.com.
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