Thursday, July 7, 2011

Is Wal-Mart the future of fundraising? Maybe it should be.

Can we be like them?
This is a repeat of a blog I did last year. It was very popular so for my summer vacation I'm re-issuing it. Thanks to those who sent in their comments. Send more!

When I say “Wal-Mart” people have very specific reactions, many not positive. As the world’s largest retailer it has rubbed a number of people the wrong way. For some, it is a temple of the low brow – they would never be caught dead shopping there. For others, it is a palace of low prices. And for still others it is either a testament to American-style consumerism or a Mecca of the Chinese-led global economy.

What’s Wal-Mart got to do with fundraising? Plenty, if you want to find a model of how charities should be run.

What most people don’t appreciate is just how effective and efficient an organization Wal-Mart is. The way they operate is simply beautiful (forgive me, but I am an MBA – such things are beautiful to people like me).

48 years ago, as Canadians shopped at Eatons, Wal-Mart was an unheard of retailer from Rogers, Arkansas. In short order, it revolutionized retailing. Eatons is no more, but Wal-Mart now has 300 stores in Canada and 3,900 in the US. It operates around the world and last year it made $100 billion US in sales – more than the GDP of 100 of the world’s nations.

How did it do that? The long and the short of it is because it had a winning gameplan.

First, it had the perfect operating strategy – it will not be undersold. Its strategy is simple, robust and effective. Everyone who works for Wal-Mart knows what it means and what they have to do to make the strategy work.

Second, it has a plan to dominate the marketplace. Yes, they are aggressive, but it works. They set out to be the leader and they have never looked back.

Third, they do People, Technology and Cost-control better than any of their competitors. They have a strong culture that emphasizes the wisdom and input of local staff – managers lead from the front. They have the best technology set-up of any retailer. But it spends less on technology per sale thanks to its massive scale. They can track almost every item they sell. It sells for less by being aggressive in cutting costs. It starts with tough buying. It continues with higher sales per square foot. It saves more by running 85% of it’s goods through its own warehouse system. It advertises less because of customer loyalty.

Finally, and perhaps most important, they lead change. They are not afraid to take risks, and even fail once in a while. That’s what keeps them on top.

Non-Profits need to be more like Wal-Mart. Most of us don’t have very compelling strategies – we just exist, and most of our strategies simply justify our existence. If we had a clear and compelling approach to our fundraising business we’d be a lot more focussed and likely more successful. Competition is a dirty word in the Non-Profit world, but we know that we all have competitors. If we recognized this reality and actually begun to think like competitors it would make us more efficient. Most Non-Profits are people-poor, technologically backwards and use a cleaver for cost-control rather than a scalpel. If we actually invested in our people, technology and cost control, our businesses would be a lot leaner and more successful.

And now, the biggy. What if Non-Profits actually took risks like Wal-Mart? I don’t know how many times I’ve met people in our business who were averse to change or new ideas. You can’t sugar-coat risk, it is always a gamble. Sometimes you win, sometimes you lose. But by taking risks, like Wal-Mart, we will be better organizations that are closer to our stakeholders and donors.

So, is Wal-Mart the future of fundraising? Why not?

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