The 3 nonprofit Ms: how a program succeeds--attention to detail.

It's time for a change of focus. Nonprofit executives and writers, including yours truly, spend a lot of time on executive matters such as governance, finance, strategy, and fundraising.

Yet, corporations are composed of programs, and their collective success or failure helps determine a lot about the success or failure of the larger entity. What succeeds at the executive level is not necessarily the same as, or even related to, what succeeds at the program level. Programs need attention, too.

Programs are not miniature corporations. Their opportunities and needs look different from those of the sponsoring organization's, and as a result they require a different kind of attention to succeed. Program managers have the advantage of being able to focus more narrowly on a segment of the entire organization, without worrying about broader concerns like governance, corporate financial health, and organization-wide public accountability.

The components of program success are straightforward: Market, Model, and Management. Succeed in all three of these areas, and program managers will succeed overall. (If they're supported properly--there's more on that later.) If they fail in any one of these areas, they fail completely.

Market

Nonprofits exist to serve some sort of public purpose. Sharpen this idea of purpose by defining a distinct need and a population, and you have the basics of a market. Note that this is not about funding for the need just yet--that's part of the model. The existence of a need, unfortunately, does not necessarily correlate with the existence of funding.

Note also that the simple existence of a market, or a need for some type of service, does not presuppose anything about any particular model that might satisfy that need. Parents who both work need surrogate care. They don't necessarily need day care because that need for surrogate care could easily be satisfied by grandma on Monday-Wednesday-Friday and the upstairs neighbor on Tuesdays and Thursdays.

Program managers should regard market demand as a kind of pure force. Often that force is caused by some sort of dysfunction in society. People who have the need usually deal with it within their own circle of friends, family, and possibly professional advisors. What makes it a recognizable market is when many people have the need and attempt to satisfy it in the same general way. There are many factors that either help or hinder attempts to satisfy a need. Here are a few of the larger ones:

Behavioral: Personal behaviors are some of the biggest determinants of markets, and they operate in every way imaginable. Commuting patterns will influence the choice of child care providers. Parents of children with serious illnesses may be in denial, thereby greatly minimizing the chance that their child will be served by a wish-granting organization. Elders may accept assistance with activities of daily living, but only in their own homes, and so on.

Institutional: Other institutions in society will shape demand for a given nonprofit's services. Health insurance companies are well understood as a prime shaper of the demand for health care. Judges and legislators who took a less lenient posture toward female offenders beginning in the 1980s created a pool of ex-inmates whose drug addiction and chronic mental health issues changed the demand for women's shelter services from a social model to a more clinical one. Public schools, with their cutbacks in arts funding, are undercutting tomorrow's audiences for traditional performance art.

Personal Characteristics and Preferences: Personal factors drive a considerable amount of demand. Beyond the obvious implications for health care, personal factors also create demand for things such as the advancement of a profession, political advocacy, education, and club membership.

Geographic: Geography shapes demand in ways both overt and subtle. Geographic factors unite when they create neighborhoods or islands, and they divide when they take the form of rivers and mountains. Part of geographic market determination comes from the overlays we put on geography, such as municipal boundaries.

Model

All programs are based on some type of model. A program model is the way a program tries to provide value for its users and for society. Managers often don't spend a lot of time thinking about their program model because it is either implicit or in some way pre-determined.

For instance, the nursing home model is largely shaped by federal reimbursement regulations, as well as the needs of the acute care system. The pre-school model is shaped by the public education system and by the need for surrogate care while parents work. These and many other program models are so well-ingrained among users and providers that managers rarely question them.

For programs in stable environments with unchanging demand, a program model will probably be so well established that it can be expected to work under practically any reasonable circumstances. But for innovative managers or those in times of change, the program model is a constant work in process.

In effect, a program's model is an applied theory of change. Exactly who or what will change gets determined by each program. Programs can change people, as in health care and the social services and the arts, or they can change sociopolitical situations such as affordable housing or medical research. Either way, it is the product of that change for which consumers and philanthropists will be willing to pay.

To be successful, a program's model has to at least be perceived to be effective. Perception is important in many areas where nonprofits are active because outcome measures are so hard to develop. In many cases it's almost enough that the program have an explicit model because there is no well-established effective model available.

Society wants some way to deal with adjudicated youths, for example, but since no single model has proven predictably effective with a wide swath of that population, youth service providers tend to design program models on the basis of treatment philosophy and economics rather than effectiveness.

Finally, a streetsmart program manager with a proven market and a workable model still has to execute it properly. What makes program management so difficult even with a good market and a solid model is that there are really two levels of management that have to succeed: the program management level, and the corporate level.

Program managers typically only have a limited amount of latitude in which to make a program successful. Equally if nor more important is corporate management. Program managers cannot fairly be held responsible for corporate-level management such as cash flow, governance, policies, and overall strategy.

Some organizations recognize this duality by evaluating program managers "above the line." Think about a line drawn at the bottom of the average program manager's budget. Above it is everything for which the program manager should be held accountable: the program's market, its model, the revenue it produces, and the expenses to run the program.

Below the line are things such as overhead rates, financial management, governance matters, organizational brand management, back room systems and support, human resources, and so forth. None of those things are under the control of the program manager yet all of them must work effectively to support the program manager.

So the irony here is that what the chief executive does in his or her job may determine a program manager's effectiveness as much or more than anything that they can do.

Program management doesn't get a lot of attention because nonprofit CEOs and higher level executives attract it instead. It's easier when talking about management to assume that one has full executive responsibilities. But program managers usually have carefully drawn areas of responsibility--'above the line,' as described earlier. Mastering the three Ms will help guarantee that they'll succeed above the line.

Thomas A. McLaughlin is a national nonprofit management consultant with Grant Thornton in Boston. He is the author of Streetsmart Financial Basics for Nonprofit Managers and the forthcoming book The Art of Strategic Positioning:Decide Where to Be, Plan What to Do (John Wiley and Sons, late 2005). His e-mail address is thomas. [e-mail].