Sure, a business gets to choose purposes too. Sorta. Top management gets to decide the business that it will be in. Will it be Kmart or Nordstrom? But top management does not get to define what success will be. If the firm makes a profit, it is a success. If the firm fails to make a profit (over a long enough period of time), it fails to attract investors and goes out of business.
A firm can add other dimensions to its own definition of success. This is what Malden Mills, the maker of Polartec, did in 1995 when its plant burned down and it chose to continue paying full wages to all of its employees for 60 days. But top management still has to meet the profitability standard or it goes out of business. (And, indeed, Malden Mills recently filed for bankruptcy protection.)
The top managers of a nonprofit organization have a problem that is slightly different -- but only slightly. They are supposed to achieve some kind of social purpose -- though they again get to define the business that they are in. Then, having defined this business, they have to convince people to "invest" in their organization -- with either donations of money or time.
The managers of the nonprofit do have, however, a variety of ways that they can convince people to provide these resources of money and time. They can convince potential contributors that the nonprofit's cause is worthy and thus (using the guilt gambit) that people are morally obligated to contribute to their enterprise. They can convince potential contributors that they are brilliant, or that they are following best practice, or that they have done their accounting system right. Or they can convince potential contributors that they are actually producing results.
Nonprofits don't have a single, clear, and common measure of success, such as long-run profit. Still, if they continually run a deficit, their creditors will eventually close them down.
The executives of both for-profit firms and nonprofit agencies can directly choose the product or service to provide and indirectly choose the people to whom they will provide it. A business can choose the kind of customers to which it will attempt to appeal. A nonprofit can choose the kind of clients it will seek to serve. They don't have to provide their product or service to everyone. Michael O'Leary, the chief executive of Ryanair, the United Kingdom's low-cost airline, made that clear when he said, "If people feel they must take a lot of luggage, they can fly with our higher-fare competitors. If they want to fly round Europe with us for £5 or £10, they will have to do it Ryanair's way."
The top managers of a firm can decide that it will be a Nordstrom by developing a set of operating tactics to drive out the typical Kmart shopper. Alternatively, top management can decide to be a Kmart by choosing the products it sells and doesn't sell. And we, their potential customers, do not have to shop at Nordstrom or at Kmart. Moreover, we, their potential customers, have absolutely no right to demand that Nordstrom sell bubble gum or that Kmart sell designer clothes. If we don't like their products, we simply don't shop there.
Similarly, the top executives of a nonprofit can decide that it will provide nutritional supplements for children but not for senior citizens -- or vice versa. And, having made this decision, they can use it to attract both some kinds of clients and investors but not others. Moreover, we (unless we are major contributors) have no right to demand that, in addition to providing nutritional supplements for children, the nonprofit must also provide similar supplements for senior citizens.
The managers of for-profit firms and nonprofit agencies do not have to keep everyone happy. They don't even have to keep a majority happy. They just have to make sure that some small minority does not become aggressively unhappy.
Public managers, however, have fewer discretionary choices. They are much more constrained in the purpose they can decide to pursue. And this is because they can exclude few people or their views as irrelevant.
Every citizen can have a say. Even if he or she doesn't pay any taxes and never votes, every citizen has a constitutionally protected say. Within the United States, even people who live outside of a jurisdiction can have a constitutionally protected say. If I live in Massachusetts but don't like a policy or a elected official in California, I am entitled to do something about it. I can contribute my money or my time to a candidate's campaign. I can even take the initiative to launch a public referendum there.
For the managers of a public agency, this creates two responsibilities. The first is the management task of achieving public purposes. The second is the leadership challenge of crafting an agreement about these purposes.
Public executives, because they do not get to choose their purposes, have to exercise leadership -- real leadership. They have to listen, explain, advocate and cajole. They have to do this with a diverse and fragmented collection of stakeholders. For that is the only way to obtain an agreement (if only implicit) on the purposes to be achieved.
Public sector executives face the same management tasks as their peers in the other two sectors. In addition, they face the demanding challenge of getting an agreement about how people will decide whether or not their public agency is doing a good job. This is the demanding challenge of finding some generally acceptable replacement for the long-term profit criterion of business.
On a comparative scale, achieving a specific public purpose is the relatively simple managerial task. Getting people to agree on what specific public purpose should be pursued is the significantly bigger leadership challenge.
