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Profit is not a dirty word



By Yasmin Noone

The difference between the ‘not-for-profit’ and ‘for-profit’ aged and community care sectors is mostly ideological rather than real, as there are just as many discrepancies among organisations with the same kind of profit motive, as there are between sectors.

A panel of aged care experts from both not-for-profit (NFP) and for-profit (FP) organisations raised this point during a discussion about what the two traditionally opposing sectors can learn from each other, at the Aged Care Summit Australia 2012 in Sydney, yesterday.

Although different aspects of the two sectors were keenly debated, overall the aged and community care practitioners agreed that in an increasingly competitive aged care market, differences between organisations are not created by ideology but varying mindset, culture and business operations.

As the aged care sector moves closer to achieving reform and realising the market orientated system it has been requesting, members of the panel said, traditional differences between FP and NFP organisations will further erode as the laws of consumer demand and provider supply swing in to motion for both types of organisations.

General manager of development for the Regis Group, Darren Lynch, summed up the panel’s stance when he said: “There is as much disparity within the for-profit and not-for-profit sector as there is between the sectors”.

Panellist and CEO of NFP provider Care Connect, Paul Ostrowski, said the preconceptions that NFP and FPs are really different “aren’t true”.

“We have to move away from preconceptions in order to work together,” Mr Ostrowski said.

He added that the big question is not where NFPs and FPs diverge but where they converge in terms of service expectations and outcomes, and business practices.

Chair of the session, Cynthia Payne from SummitCare, commented that market segmentation, which drives organisations to meet different consumer needs, will determine how a provider is defined – not their type of profit motive.

Fellow panellist and director of finance and strategic development for UnitingCare Ageing, Chris Grover, agreed and stressed that a provider’s focus should be on achieving sustainable business practices, not on whether it is a FP or NFP.

Having a “mission doesn’t mean not seeking to be commercial in the way you operate your business”.

“We have to be,” Mr Grover said.

“[We have to have] a strong focus on commercial activities within the expectation of a mission.

“It’s an absolute must.

“Not-for-profits have been a bit of a sleeper in the past in this sense.”

However, Mr Grover said, NFPs must be cautious that they do not abandon mission in the quest for commercialisation.

“There is a move to seek to be competitive….the question is at what expense?

“For us, does that come at the expense of our mission?

“How much strain does [the mission] come under if [the organisation] seeks to be competitive and sustainable in a completely different market?

“What [services] disappear out of the organisation so that it becomes sustainable and competitive?”

Will an organisation loose residential aged care beds to provide a different kind of service, he asked?

“Does the mission become a struggle or do the other parts [of the business] become a struggle?”

Director of aged care services for Catholic Health Australia (CHA), Richard Gray, concurred but commented that achieving the right mix between commercialisation and mission is difficult for most NFPs.

“It’s a challenging area,” Mr Gray said.

Within some CHA providers, there is a “…dichotomy between the mission and commercial business reality of delivering care”.

“Some don’t use ACFI the way that other organisations would. As they say ‘we determine who we admit. If an [older] person doesn’t bring in funding [and we want to admit them], then we will just have to fund them ourselves.

“That’s because, that is their mission.

“So you [NFPs] need to make sure you are true to your mission and the stewardship of resources is very business-like.

“…That’s a challenge for the future.”

Mr Gray added that he believed not-for-profits can learn a great lesson from for-profits on how to better market themselves.

For example, he said, BUPA is great at promotion even though its parent company in the UK is a NFP.

Mr Ostrowski continued the thought by saying “we have a lot to learn from both sides” of the profit fence.

“There is a fear that competition is bad,” Mr Ostrowski said.

“But if competition equals profit …then competition means you are doing well [because that profit gets reinvested into services for people who need them].

“We need to break a perception that corporate is bad because it’s not.

“…We can’t assume that an organisation is a for-profit and therefore it’s better at commercialisation.”

Generally speaking, he said, for-profits often do better at measuring expenditure as they have to keep track of every dollar. But NFPs often become quite powerful when they align their workforce in a particular direction.

“NFPs also tend to be better, in general, at engaging the government.”

Mr Gray backed the Care Connect comments: “these are two of the most powerful things that each side can learn from each other”.



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0 Responses to Profit is not a dirty word

  1. Barbara Squires March 30, 2012 at 10:41 am #

    What’s missing from your otherwise good report of that session (which I attended) was the discussion around innovation. The panel agreed that continuous process improvement is (or should be) a given in all organisations. However, big picture innovation can be costly and in general,is not attractive to for-profits, who need look to shareholder return. If a not-for-profit is truly mission driven, it is more likely to not only invest in innovation but to be willing to share that for the good of all older people. The temptation for not-for-profits in a more competitive world will be to not share freely but to use innovation to gain market share.

  2. John Cleary March 30, 2012 at 1:22 pm #

    No money, no mission. Serve will a commitment to care and manage with a commitment to sustainability.

  3. Jeff Fiebig March 30, 2012 at 3:16 pm #

    Successful innovation brings product/service differentiation and adds value. In a competitive, de-regulated environment where consumers have an entitlement to services (ie not rationed), are in control of what they can purchase (ie not the supplying organisation) and have a co-contributing stake in what is purchased both for profit and for surplus operators will have motivation for and will be rewarded for their efforts towards innovation.

  4. mark sewell March 30, 2012 at 5:44 pm #

    Differences between the look, methods, products and outcomes of operators has been merging for a long time now. What remains fundamentally dfferent is the motive. ‘To make a profit’ leads to different decisions than ‘to provide a service’. 95% of Australia is in regional areas, but for-profit providers arent interested when the returns arent viable. Non-profits continue to invest in these areas often through cross subsidised returns from metro area services. Affordable services for people with complex needs is another area the motives lead to different decisions. For many Australians they only have non-profit services available to them. The sectors remain very different from the consumers point of view!

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