Value creation and its utilization are what keep the wheels of society turning, whether in business or nonprofits. But is nonprofit work inherently more noble? The answer by seasoned CFO and business advisor Jim Johnston will surprise you.

Watch the full interview with Jim Johnston here and read an excerpt from the interview below.

Nowspeed: Welcome to this edition of In The Now with your host, David Reske, CEO of Nowspeed Marketing, a full-service digital marketing firm that provides everything from PPC advertising and SEO to Email Marketing and Web Development. Today, our guest is Jim Johnson, a veteran fractional CFO and an advisor to founders, CEOs, and boards. I’ve known Jim for more than 25 years and worked with him at my first company Onward Technologies. Jim, welcome to the show.

Jim: Thank you, David. This is going to be great.

Nowspeed: Jim, with over two decades of experience in working with dozens of management teams and helping their companies grow, I am sure we have a lot to discuss. The myth we’ll explore today revolves around the idea that business is inherently shallow, and it’s nobler to go into nonprofits for making a real-world change. What’s your take on this?

Jim: That’s an interesting one. I grew up around the notion that business was somehow a lesser endeavor. Being surrounded by intellectuals and academics, business felt like second best. But as I matured, I realized that most people are involved in business one way or another. Business is not only a creative outlet and a source of personal freedom, but it’s also where value is created.

Nowspeed: So, if I understand you correctly, you’re arguing that business contributes significantly to society and personal development, much like the nonprofit sector. But how would you equate the value created by businesses with the perceived nobility of professions like medicine or social services?

Jim: From an economic standpoint, most noble or nonprofit sectors utilize wealth created elsewhere, mainly in business. This wealth is transferred via individual philanthropy or societal mechanisms. But the question is — where is this wealth or value initially created? The answer is simple: it’s in the profit generated by businesses. Profit is essentially the creation of value.

Nowspeed: So you’re suggesting that the wealth created by businesses facilitates the workings of the nonprofit sector?

Jim: Precisely. Nonprofit activities might be worthy, but it doesn’t guarantee they are a net benefit to society just because they are nonprofit. In fact, they almost need to prove more since they use resources that might cost more than what people are willing to pay for.

Nowspeed: Interesting perspective. You’re implying that nonprofits must validate their societal value even more than businesses, despite their nonprofit nature?

Jim: Indeed. It’s critical to remember that nonprofits use up resources, and the value of what they’re producing may not be more than what’s used up. It could even be less. So, the starting point for nonprofits is already resource-intensive.

Nowspeed: So, the benefit nonprofits provide doesn’t inherently signify that they’re contributing more to society than businesses?

Jim: Correct. It all boils down to the value created and how it’s utilized. After all, value creation and its utilization are what keep the wheels of society turning, whether in business or nonprofits.

Nowspeed: Now, let’s delve into another aspect. In nonprofits, there’s a moral judgement behind the provision of services. Even when recipients are unable to pay for them, these services are given out of a belief in their necessity. How does this moral aspect align with businesses?

Jim: That’s an insightful question. The business realm also has its own moral dimensions. Consider the idea of consumer satisfaction. When a business offers a product or service, and a customer willingly pays more than the cost to create it, there’s an implicit understanding of mutual benefit. This is the core principle of a free market society.

Nowspeed: So, in essence, a successful business transaction itself is a moral act as it’s based on mutual consent and benefit?

Jim: Yes, absolutely. And another thing to note here is that businesses often invest in research and development to create products that benefit society as a whole. For example, developing a new drug or creating an innovative tech product requires significant upfront investment, often without the guarantee of success. But when these efforts do succeed, they can bring about significant societal benefits.

Nowspeed: That’s an excellent point. Businesses play a crucial role in societal advancements. Now, coming back to nonprofits, you mentioned earlier that nonprofits need to validate their societal value even more than businesses. Could you expand on this?

Jim: Yes. While nonprofits undeniably provide essential services, the resources they consume to deliver these services often outweigh the economic value they create. In other words, they might use up more than they generate. This is not a judgement of their societal worth, but an economic reality. It’s where businesses, with their profit-driven model, step in to bridge the gap.

Nowspeed: It appears there’s a delicate balance between the nonprofit and the business sectors. One can’t seem to exist without the other.

Jim: Correct. The two sectors are inherently interconnected. Nonprofits rely on the wealth generated by businesses to function, while businesses can also draw inspiration from the altruistic goals of nonprofits to drive their corporate social responsibility initiatives.

Nowspeed: This brings a whole new perspective to the interplay between businesses and nonprofits. They’re not two separate entities but rather parts of a larger system working for societal welfare.

Jim: Precisely. And the beautiful part of this interconnected system is that it allows individuals to find their own place within it. Whether they choose to create value through a business or a nonprofit, they contribute to the overall societal good.

Nowspeed: It’s clear that both business and nonprofit sectors have their unique roles and contributions.

Jim: Yes, it’s about seeing the bigger picture and understanding the inherent value of both sectors. After all, the goal is to create a balanced, thriving society.

Don’t miss the rest of this insightful interview with Jim Johnston. Make sure to tune in for the full conversation here.