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Strategic Issues in Not-for-Profit Organizations

Explore the key concepts and constraints of strategic management in not-for-profit organizations, including revenue sources, decision making, and implementation challenges.

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Strategic Issues in Not-for-Profit Organizations

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  1. Chapter 13 Strategic Issues in Not-for-Profit Organizations Dr.Vijaya Kumar Skyline College Chapter 13 Wheelen/Hunger

  2. Not-for-Profit Organizations Not-for-Profits: • Account (on average) for 1 in every 20 jobs around the world • 1990 – 1995 jobs grew by 23% • Whole economy grew by 6.2% • Employ > 25% of U.S. workforce • Own about 15% of nation’s wealth Chapter 13 Wheelen/Hunger

  3. Not-for-Profit Organizations Not-for-Profits: • Private nonprofit corporations • Hospitals, private colleges, charities • Public governmental agencies • Prisons, welfare departments, universities Chapter 13 Wheelen/Hunger

  4. Not-for-Profit Organizations Not-for-Profits Importance: • Public or collective goods • Paved roads, police protection, museums, schools • Preferred tax status • 501(c) (3) U.S. Tax Code Chapter 13 Wheelen/Hunger

  5. Aspects of Life Best Managed by Not-For-Profit Organizations • Religion • Education • Charities • Clubs, interest groups, unions • Health care • Government Chapter 13 Wheelen/Hunger

  6. 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, assessment, or donations from membership of sponsoring agency Chapter 13 Wheelen/Hunger

  7. The Effects of Sources of Revenue on Patterns of Client-Organization Influence Chapter 13 Wheelen/Hunger

  8. Not-for-Profit Organizations Strategic Decision Making: • Pattern of influence • Derives from source of revenue • Key to understanding management of NFP • Who pays for the delivered services Chapter 13 Wheelen/Hunger

  9. Not-for-Profit Organizations Strategic Management Concepts: • Institutional advantage • NFP performs its tasks more effectively than other comparable organizations Chapter 13 Wheelen/Hunger

  10. Not-for-Profit Organizations Strategic Concepts for NFP: • SWOT • Mission statements • Stakeholder analysis • Corporate governance • Portfolio analysis • Strategic piggybacking Chapter 13 Wheelen/Hunger

  11. Not-for-Profit Organizations Constraints on Strategic 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” Chapter 13 Wheelen/Hunger

  12. Not-for-Profit Organizations Constraints on Strategic Management: • Resource Contributors • Intrusion on internal management • Fund contributors and government • Restraints on use of rewards • Result from 1,3, and 4 Chapter 13 Wheelen/Hunger

  13. Not-for-Profit Organizations Constraints & Strategy 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 Chapter 13 Wheelen/Hunger

  14. Not-for-Profit Organizations Complications to Implementation: • Decentralization is complicated • Defensive centralization • Linking Pins • External-internal integration • Job enlargement and development • Restrained by professionalism Chapter 13 Wheelen/Hunger

  15. Not-for-Profit Organizations Complications to Evaluation and Control: • Rewards and penalties • No relation to performance • Inputs vs. outputs • Heavily controlled Chapter 13 Wheelen/Hunger

  16. Not-for-Profit Organizations • NFP Strategies • 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. Chapter 13 Wheelen/Hunger

  17. Not-for-Profit Organizations • NFP Strategies • Mergers • Focus on reducing costs • Strategic alliances • Developing cooperative ties with other organizations Chapter 13 Wheelen/Hunger

  18. Resources Not-for-Profit Organizations Something to Sell Management Talent Piggybacking Trustee Support Entrepreneurial Venture Capital Chapter 13 Wheelen/Hunger

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