You have looked at greatness primarily in the business world. How do you define it in the social sector?

For any institution to be great, whether it be a great university, a great public school, a great orchestra, it must have three things that it accomplishes. First, it must deliver great results relative to its mission and ever-increasing positive results relative to its mission. Second, it must make a distinctive impact on the communities that it touches—that if it were to disappear, it would leave an unfillable hole. And third, it has lasting endurance—it’s able to do this through multiple cycles of programs and funding and leaders.

What can donors do to encourage nonprofits to greatness?

Let’s talk first about what they should not do. It’s the wrong answer to come in and say, “As a nonprofit you should run like a business.” The key is to understand that the disciplines of greatness are not about business. There are mediocre businesses just as there are great businesses, and the critical difference is not the difference between business and nonprofits, but between great and good.

You talk about using standards to encourage greatness. Venture philanthropists have been looking for quantifiable results for years now. How would you distinguish the two approaches?

I don’t want to say that I am standing at odds with them, because I’m probably not. The critical thing is to have the discipline when you’re running a nonprofit to be able to say, “This is our output result: artistic excellence” or “It’s how well our kids are reading.” A great company expects more of itself than its investors do. A great nonprofit should expect more of itself than its outside donors do. A culture of discipline means we are so ferociously neurotic about delivering exceptional results that we’re going to measure it. A culture of discipline can only be self-imposed; if you need an external force for discipline, you will never be great.

So how should donors engage in a productive conversation with nonprofits about measuring results?

As a donor, you have to challenge them and expect evidence of results. If somebody says, “Well, we can’t measure artistic excellence,” say, “OK, I accept that we can’t measure artistic excellence, but I still need you to give me evidence.” The key is to realize that all measurements are flawed, even business measurements. But the critical thing is to ask four questions: What do we mean by great performance? Have you established a baseline? Are you improving? And how can you improve even faster? It doesn’t matter whether it is perfectly measurable; the critical term is “trajectory.”

Some philanthropists scale their gifts according to performance, and some give themselves an out if they’re not seeing progress. Is that ethical?

If you think about it like investing, you scale your investment to some extent based on performance, too. There doesn’t seem to be any inherent problem with that. As a donor, I want to be religious about results. I learned this from one of my mentors, Peter Drucker: Good intentions are no excuse for incompetence. And in the end, what matters are results and impact. And if some well-intentioned organization is not delivering, then the critical question is: Do you have the right people running it?

Is employing some type of performance-based funding
an incentive?

You can never use incentives to turn the wrong people into the right people. We didn’t find any evidence [in Good to Great] that executive compensation drives performance. The right people will do everything they can to produce great results because it’s part of their DNA.

You highlight examples of excellence in your monograph. Which organizations are succeeding, and how can donors separate the wheat from the chaff?

I’m going to do something I normally don’t do, which is deflect a question. What I want people to do is be rigorous—both the builders of nonprofits and the donors to nonprofits—around these questions: What do we mean by results? Are we improving? What is our trajectory? How do we know if we’re doing better? And how are we building a great organization that can sustain that? I don’t want to give them the answers. But that links me to one really key thing: There are dysfunctions in funding, and restricted giving that is basically for your particular program may not be the best for society.

Shouldn’t donors be able to give where they wish?
 
I don’t think we ever want to constrain that, but here’s the key distinction. The critical question is: How can we invest in building great social sector organizations that in turn will find the best way to produce great results? So what’s your donation about? Is it about you? If it’s about you, then that’s a different question than if it’s about making an impact on society. And if the question is really making an impact on society, we need great organizations to produce great impact.

Which business leadership skills translate to the nonprofit world and which don’t?

Many high-net-worth people or entrepreneurs come from an executive model, where they truly have concentrated decision power. Sometimes they find it challenging in the social sectors; they struggle with, “Why does this decision take so long? Why is there so much of this collaboration and discussion?”  The reason is because the power realities are different. As a legislative leader, your task is to use all sources of power and legitimacy to be able to create the conditions to have the right decisions happen, the decisions that you would have made if you had executive power.

What if you encounter the status quo? What if a nonprofit doesn’t want to be great?

I would ask a different question: Do they want to be and to do much better? Because greatness is an outcome of a constant striving to do better. In a way, those who become great never think they are. They just are obsessed with how we can do better, and eventually other people deem you as great.

What does your work focus on now?

I am continuing my interest in trying to understand more about the social sectors. If I do my own big study, I’m probably going to put the lens on the community. I’ll look at how entire communities make a leap from good to great, in contrast to others that don’t.

Now I’m finishing up other research. I’m very interested in the question of how great to good happens. If good to great is about the principles of health, how does the cancer of mediocrity take hold on something that was great? How does it lose it?

A criticism you received while teaching at Stanford in 1988 was that you spent too much time trying to be interesting and should have invested more in being interested. You say that changed your life. Did it bring you personally from good to great?

I want to be really clear. I do not think that I have gone from good to great. I see myself as somebody who has improved over time, but I think I’ve gone from good to better and then gotten lucky. I think constantly in terms of how much more there is to do, and I feel like I’ve just started.