Not-for-profits sector explores business approach

A number of years ago the Rehab group was considering purchasing some nursing homes in England. Having looked at the business, the group offered £5 million (€7.3 million). The owner seemed to agree with the price, but thought he would consult his bank manager first.

The bank manager looked at the business and decided it was worth £13 million, and the owner then sought this price from Rehab. The group - which provides training and employment for people with disabilities - had a look at the numbers and decided against the deal. It never happened.

"To make the numbers work you would have had to sweat the business," says Frank Flannery, chief executive of Rehab and also a driving force behind the Not for Profit Business Association.

"What you were talking about were nursing homes for vulnerable people. To sweat the business you would have had to reduce the quality of the service."

He gives this as an example of why he believes there is a special role to be played in society by private sector not-for profit organisations. He describes them as having the values of public sector provision married to the management practices of the private sector, but without the primary motive of making profits.

Such organisations are growing all over Europe, he says. The social democratic system, whereby the state provided social services to its citizens, is in retreat because it is unable to compete in an environment that requires greater efficiency.

Also, he says, there is a difficulty with the state playing the role of funding and providing a service and, at the same time, acting as the regulator of standards for the service.

On the other hand, he does not believe the services required can all be provided by for-profit companies. The idea of quoted companies providing services to vulnerable people, while at the same time focusing on increasing their profits, makes him uneasy.

"If the State is backing off, then the not-for-profit private sector needs to get in there." He says the values that lie behind the social democratic model need to be retained, while changing the way the services are delivered.

"President Clinton has said he believes the growth of the not-for-profit private sector will be one of the great stories of this century."

The not-for-profit private sector seeks to create profits so it can re-invest and grow. It does not have the conflict that the for-profit sector has between the delivery of a quality service and the desire to create a profit.

The State - or private sector organisations - can contract such organisations to provide services while ensuring the service provided is of a high quality.

Mr Flannery says he has long had the view that private not-for-profit or voluntary service providers need to adopt a business approach rather than a philanthropic approach. For too long the word philanthropic translated as "amateurism", he says.

The Not for Profit Business Association now represents the Central Remedial Clinic, the Cheshire Foundation in Ireland, Enable Ireland and the National Association for Deaf People, among other groups. The association represents all its members in talks with the Government and facilitates the elimination of overlaps in services.

Such groups around Europe are linking up and agreeing ways in which they can work together. Deals have been negotiated with multinational companies, such as Microsoft, allowing members to get cheaper equipment while at the same time negotiating global deals.

"We need to embrace globalisation," he says. He says the not-for-profit private sector service providers also need to have the scale that allows them pay for top-quality management. He says the sector will never compete on salary with sectors such as the financial sector, but needs to be able to pay a reasonable rate for its management.

"The gradual trimming down of the social democratic model is creating massive opportunities for our sector and also for the for-profit private sector. There is a lot of capital following this trend."

While Mr Flannery is to retire from his Rehab position at the end of this year, he hopes to continue his involvement in the international development of the not-for-profit private sector.