Strategic Issues in Not ForProfit

Organizations

By Jerard Boyd Mearns and

Revi Pearl Genolos

ofearning
SectorAn
funded, an
What are Not-for-profit Organizations and what
are Public-Sector Organizations?

Not-for-Profit (NFP)An organization

that provides some service or good
with nointention ofearning a profit
Public SectorAn NFP created, funded,
and regulated by the public sector or
government

Types of Not-for-Profit Organizations

Significance of NFPs
Account for 1/20 jobs in the world
Number of jobs in the NFP sector is
growing
NFPs provide goods or services that
forprofit entities are unwilling or
unable to provide

Importance of Revenue Source

NFPs dependent on dues,
assessments or donations for their
revenue sources
May not be a direct link to the user of
the service and the source of funds
Pattern of influence is derived from
its source of revenues
Those who fund the NFP are likely to
have significant influence on its
operations

Management Challenges of the Non

Profit Enterprise
Defining and measuring
success(economic stability and
growth is a subsidiary goal).
Raising funds cannot sell the
company shares
Attracting and motivating people
given the often limited resources and
then on distribution constraint (no
profit-based incentives)

What is Strategic Planning?

The process of developing a
comprehensive document that sets
forth what and organization is working
to accomplish and how it intends to
succeed.

The Strategic Plan

Connects the mission and the
programs
Establishing performance measures
that are understandable to all
Encourages strategic thinking the
best allocation of scarce resources

Usefulness of strategic planning to

NFPs
Portfolio analysis may be more difficult
to apply to NFPs
Situation (SWOT) analysis,
missionstatements, stakeholder
analysis, and corporate governance
are all relevant to the strategic
assessment ofNFPs
May be difficult to apply where the
output of an NFP is difficult to measure

Constraints on
StrategicPlanning
Service is intangible and hard tomeasure
Client influence may be weak
Strong employee commitments to a
cause may undermine allegiance to the
employing firm
Resource contributors may intrude on the
organizations internal management.
Restraints on the use of rewards and
punishments

Popular NFP Organizations

Strategies

Strategic piggybacking
-Develop a new activity for theNFP that would generate
funds to make up the difference between revenues &expense
-Purpose is to subsidize primary service programs
- Requires the following:
Critical mass of management talent
Entrepreneurial attitude & skills
Trustee/board/sponsor support
Venture capital
Mergers
Merging with an organization with a similar missioncan help
to reduce administration costs
Strategic alliances
Developing cooperative ties with other NFPs