Principle Based Management™ (PBM), formerly known as Market-Based Management®, provides a holistic approach to making decisions, solving problems, and creating value for individuals in your community, team members in your organization, and society at large. In this PBM 101 series, we’re unpacking mental models, ideas, and tools that can help you reach the next level in your work.
Imagine you lead a fundraising team that is tasked with raising $1 million in three months for your annual capital campaign. Your team includes people responsible for donor outreach, marketing, donor research, and project management—all necessary skills to achieve this goal. But what would you do if the person responsible for donor outreach decided to retire?
In this scenario, the obvious decision might be to hire someone new. But what will you do in the meantime? Is hiring someone even the best decision for the organization? You might be tempted to pull someone from another team to fill this role because they are “the best at” donor outreach now that the previous employee has retired. But, counterintuitively, assigning responsibilities based on what someone is best at may not always benefit the organization the way we think. Instead, we’ve found that applying comparative advantage is one way to work together more effectively as a dynamic team to achieve goals.
When we say that someone has a comparative advantage, it means that if that person works on a specific responsibility at a specific time, the team as a whole will generate the most impact. As a nonprofit leader, your goal is to maximize the impact of your organization by leveraging the unique skills and talents of your colleagues. Comparative advantage can help.
Considering the pros and cons of different scenarios is a helpful way to apply comparative advantage when assigning responsibilities. For some organizations, shifting someone from another team based on their skillset may be a wise move. For others, shifting roles could come at a significant cost—if whatever that person is responsible for is more valuable to the organization at that time.
In the scenario described above, you might discover that your marketing lead is also good at developing relationships. For that reason, you may decide to deprioritize marketing if shifting them into donor outreach creates more value. They may not be the absolute best at donor outreach, but they do have a comparative advantage—meaning, at this given time, they will generate the greatest impact for your organization.
To generate scenarios to help you apply comparative advantage, consider these important questions:
- What are we trying to achieve as a team?
- What are the necessary responsibilities to accomplish our goals? Which are most important? Which are less important?
- For each responsibility, who are the people on my team who would meet or exceed expectations?
- Without changing the members of the team, could responsibilities be rearranged to improve our likelihood of success?
By applying the concept of comparative advantage, you can position your team to achieve consistent outcomes and maximize your impact. In general, you should consider comparative advantage whenever you find yourself in a situation that necessitates a change in your team’s responsibilities, like when you’re assigned a new project, you hire a new team member, or your team is underperforming.
In the complex world of nonprofit leadership, comparative advantage won’t give you a magical solution to every challenge. But it can help you consider creative solutions as you try to set your team up for success in a dynamic work environment.