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Chapter vii(d) strategic issues in not for-profit organizations
- 1. Chapter- VII(d) Strategic Issuesin Not-for- Profit Organizations 1
- 2. Not-for-Profit Organizations(NFPs) By definition,nonprofit enterprises such as government agencies, universities, and charities are not in “business” to make profits. Nevertheless, they are expected to use their performance for the betterment of society. • The performance goal for a business school might be to get its programs ranked among the best in the nation. • The performance goal for a charity might be to prevent childhood illnesses in poor countries. • The performance for a government agency might be to improve its services while not exceeding its budget. 2
- 3. Not-for-Profit Organizations The managersof non-profit need to understand that nonprofits compete with each other for scarce resources just as business do. For example, charities compete for scarce donations, and their managers must plan and develop strategies that lead to high performance and demonstrate a track record of meeting performance goals. 3
- 4. Not-for-Profit Organizations A successfulstrategy gives potential donors a compelling message as to why they should contribute additional donations. Thus, planning and thinking strategically is as important for managers in the non- profit sector as it is for managers in profit- seeking firms. 4
- 5. Not-for-Profit Organizations Not-for-Profits: – Privatenonprofit corporations • Hospitals, private colleges, charities – Public governmental agencies • Prisons, welfare departments, universities 5
- 6. Not-for-Profit Organizations Not-for-Profits Importance: –Public or collective goods • Paved roads, police protection, museums, schools – Preferred tax status • NFPs enjoy tax exempt status as a result of being organized to serve a broad public interest. 6
- 7. Not-for-Profit Organizations Nonprofits andprofits! • Nonprofit organizations are permitted to generate a profit. • However, nonprofits may not distribute their profits to their staff or directors –non-distribution constraint. • Surplus must be used to further the mission of the organization. 7
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- 10. Aspects of LifeBest Managed by Not-For-Profit Organizations • Religion • Education • Charities • Clubs, interest groups, unions • Health care • Government 10
- 11. Not-for-Profit Organizations Key Differentiator: –Source of revenue • Profit-making firm – Sale of goods and services to customers • Not-for-profit firm (NFP) – Dues or donations from membership of sponsoring agency 11
- 12. The Effects ofSources of Revenue on Patterns of Client-Organization Influence 12
- 13. Not-for-Profit Organizations Strategic DecisionMaking: – Pattern of influence • Derives from source of revenue – Key to understanding management of NFP • Who pays for the delivered services 13
- 14. Not-for-Profit Organizations Strategic ManagementConcepts: – Institutional advantage • NFP performs its tasks more effectively than other comparable organizations 14
- 15. Not-for-Profit Organizations Strategic Conceptsfor NFP: – SWOT – Mission statements – Stakeholder analysis – Corporate governance – Portfolio analysis • Strategic piggybacking 15
- 16. Not-for-Profit Organizations Constraints onStrategic Management: – Service is often intangible • Difficult to measure – Client influence may be weak • Client payments - small source of funds – Strong employee commitments • To professions • To “causes” 16
- 17. Not-for-Profit Organizations Constraints onStrategic Management: – Resource Contributors • Interruption on internal management • Fund contributors and government – Restraints on use of rewards 17
- 18. Not-for-Profit Organizations Constraints toStrategy Formulation: – Goal conflicts • Interfere with rational planning – Integrated planning focus • Shift from results to resources – Ambiguous operating objectives • Internal politics • Goal displacement – Professionalization • Simplifies detailed planning • Adds rigidity 18
- 19. Not-for-Profit Organizations Complications toImplementation: – Decentralization is complicated • Self-protective centralization – Linking Pins • External-internal integration – Job enlargement and development • Restrained by professionalism 19
- 20. Not-for-Profit Organizations Complications toEvaluation and Control: – Rewards and penalties • No relation to performance – Inputs vs. outputs • Heavily controlled 20
- 21. Not-for-Profit Organizations • NFPStrategies – Strategic Piggybacking: • Development of a new activity for the NFP that would generate the funds needed to make up the difference between revenues and expenses. * Piggybacking : To use something that someone else has made or done in order to get an advantage. 21
- 22. Not-for-Profit Organizations PiggybackingPiggybacking Something toSell Management Talent Trustee Support Entrepreneurial Spirit Venture Capital Resources 22
- 23. Not-for-Profit Organizations • NFPStrategies – Mergers • Focus on reducing costs – Strategic alliances • Developing cooperative ties with other organizations 23
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- 25. 25 Wish you everysuccess in your future endeavor . . . I’m really blessed with