Strategic Issues in Not-for-Profit Organizations Chapter 13 Strategic Issues in Not-for-Profit Organizations

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

Not-for-Profit Organizations Not-for-Profits: Private nonprofit corporations Hospitals, private colleges, charities Public governmental agencies Prisons, welfare departments, universities

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

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

The Effects of Sources of Revenue on Patterns of Client-Organization Influence

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”

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

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.

Not-for-Profit Organizations Something to Sell Management Talent Piggybacking Resources Trustee Support Entrepreneurial Venture Capital

Not-for-Profit Organizations NFP Strategies Mergers Focus on reducing costs Strategic alliances Developing cooperative ties with other organizations