strategic issues in not for profit organizations
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class presentation on strategyTRANSCRIPT
Strategic Issues in Not ForProfit Organizations
What are Not-for-profit Organizationsand
What are Public-Sector Organizations?• Not-for-Profit (NFP)
– An organization that provides some service or good with no intention of earning a profit
• Public Sector
– An NFP created, funded, and regulated by the public sector or government
Types of Not-for-Profit Organizations
Not-for-ProfitOrganization
Charitable
Religious
Social Service
Public Sector
Associations
Health Service
Cultural
Cause-Related
Foundations
Educational
Types of Public-Sector Organizations
Public-SectorOrganization
GovernmentalUnits
PoliceProtection
Paved Roadsand Other
Transportation Needs
RecreationFacilities
Care and Helpfor Needy and
Disabled Citizens
Laws and Regulationsto Protect andEnhance Life
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 for profit entities are unwilling or unable to provide
NPF Trends
• Increasing privatization of government services (education, health care, social services, the arts)
• Increasing financial pressure on nonprofits• Increasing concerns about the efficacy of
nonprofits• Increasing corporate social responsibility
initiatives and funds
Nonprofits and Profits
• Nonprofit organizations are permitted to generate a profit
• However, nonprofits may not distribute their profits to their staff or directors – nondistribution constraint
• Surplus must be used to further the mission of the organization
Importance of Revenue Source
• NFPs dependant 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 Nonprofit 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 the nondistribution constraint (no profit-based incentives)
Strategy in the NFP
• Getting critical resource decisions right – allocating time, talent, and money to the activities that have the greatest impact – is what “strategy” is about.
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
Four main components of strategic planning
• Strategic clarity – Mission statement– Intended Impact – Theory of Change
• Strategic priorities: What specific actions and activities must take place to achieve the intended impact
• Resource implications: To pursue the priorities, and the plan to secure them
• Performance measures: Establishing the quantitative and qualitative milestones to measure progress
The Mission is the Centerpiece of the Nonprofit Organization
• It serves a boundary function• Serves to attract and motivate stakeholders
(donors, staff, and clients)• Should help in the process of evaluation
The challenge is to create a mission statement that is specific enough to inspire, but sufficiently
broad to allow strategic redirection
Intended Impact
• Is a statement about what the organization is trying to achieve and will hold itself accountable for within a period of time. It identifies both the benefits the organization seeks and the beneficiaries.
• Provides a bridge between mission and programs
Theory of Change
• Explains how the organization’s intended impact will actually happen.
• In other words, why will the organization’s approach bring about the desired change
To clarify a nonprofit’s Theory Of Change, ask:
1. What are the most important elements of our programs?
2. What assumptions led us to choose these particular program element?
3. Are there other ways to achieve the desired outcomes? Why are we not taking that approach?
Determining Strategic Priorities
• Looking at current programs– How do they align with mission, intended impact
and theory of change?– How much do they cost? (per outcome) – Do they play into the organization’s strengths?– How do they compare with peers?– Changes that should be made?
• Modify• Add new ones• Discontinue
Resource Implications – Human and Infrastructure
• What will it cost to implement?
• What’s the gap?
• Financial projections for new strategy– Scenario planning
Performance Measures
• Need to collect data – INDICATORS• Program milestones
– Quantity– Quality
• Operational milestones– Human resources– Infrastructure
• Financial milestones– Budget
In establishing performance measures, it is important to be clear about the timing and ownership
Usefulness of strategic planning to NFPs
• Portfolio analysis may be more difficult to apply to NFPs
• Situation (SWOT) analysis, mission statements, stakeholder analysis, and corporate governance are all relevant to the strategic assessment of NFPs
• May be difficult to apply where the output of an NFP is difficult to measure– Eg. Souls saved– May require the use of a proxy measure
Constraints on Strategic Planning
• Five constraints on strategic management– Service is intangible and hard to measure– 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
Impact of Constraints onStrategic Planning
• Impact on strategy formulation – Goal conflicts with rational planning– An integrated planning process tends to shift from
results to resources– Ambiguous objectives create opportunities for internal
politics and goal displacement– Professionalization simplifies detailed planning but
adds rigidity• Example hospitals
– Staff is well educated– Goals of the professionals or their representative bodies may
not align with organizational goals
Impact of Constraints onStrategic Planning
• Impact on implementation – Decentralization is complicated – Job enlargement and executive development
can be restrained by professionalism
• Impact on evaluation & control– Rewards & penalties have little or no relation
to performance– Inputs rather than outputs are heavily
controlled.
Specific Strategic Issues
• Misperception about the usefulness of strategic management
• Multiple stakeholders
• Unique strategies developed by NFP organizations
Popular NFP Strategies
• Strategic piggybacking– Develop a new activity for the NFP that would generate funds to
make up the difference between revenues & expenses– Purpose is to subsidize primary service programs – Requires
• Having something to sell• Critical mass of management talent• Entrepreneurial attitude & skills• Trustee/board/sponsor support• Venture capital
• Mergers– Merging with an organization with a similar mission can help to
reduce administration costs• Strategic alliances
– Developing cooperative ties with other NFPs
Unique StrategiesDeveloped by NFP Organizations
• Cause-Related Marketing– Funds a good cause– Benefits NFPs through public exposure and
corporate donations– Enhances the image of the supporting
company– Designed for the strategic advantage of the
sponsoring corporation– Benefits NFPs from the marketing link