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What For-profit Businesses Can Teach Nonprofits About Customer Satisfaction

Vikas Mittal

Many nonprofit organizations have difficulty understanding the benefits of satisfying their customers.

Nonprofit organizations differentiate themselves from traditional businesses by their profit focus. Of course, businesses are customer-focused—they exist to make money from their customers. Nonprofits believe they exist to fulfill a mission and vision and to meet every stakeholder’s needs. All too often fulfilling the mission becomes a self-fulfilling prophecy that distracts nonprofits from meeting the needs of their customers. Confusing myriad stakeholders, such as employees and suppliers, with customers, nonprofits can become internally focused, dedicating themselves to costly initiatives that consume organizational resources but do not improve customer satisfaction.

Nowhere is this more evident than in one of the largest nonprofit enterprises worldwide, the U.S. K-12 public school system. The superintendent of an underperforming school district told me the district’s strategy was based on key initiatives, such as “data-driven decision-making” and “aligning cultural values.” The former initiative led millions of dollars to be dedicated to data management systems, and the latter led to extensive training and countless culture-building exercises. Proud of its investments, the district leadership remained puzzled as to why its customers—students and parents—were leaving the district for private, charter and home-schooling options.

We conducted a district-wide study to measure the state of parent satisfaction in the district. It revealed low parent satisfaction driven by low academic standards, perceptions of unsafe schools and perceived lack of parent engagement. When asked about the disconnect, the superintendent responded, “Of course we care about parents. That is why we are completely focused on data-driven decision-making and cultural alignment. These initiatives reinforce our mission to become the best school district possible.” 

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Vikas Mittal, Ph.D., is a member of the faculty at the Jones Graduate School of Business at Rice University in Houston, Texas.