1. Prentice Hall, 2002Chapter 13 Wheelen/Hunger 1 Chapter 13 Strategic Issues in Not-for-Profit Organizations Dr.Vijaya Kumar Skyline College

2. Prentice Hall, 2002Chapter 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

3. Prentice Hall, 2002Chapter 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

4. Prentice Hall, 2002Chapter 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

5. Prentice Hall, 2002Chapter 13 Wheelen/Hunger 5 Aspects of Life Best Managed by Not-For-Profit Organizations Religion Education Charities Clubs, interest groups, unions Health care Government

6. Prentice Hall, 2002Chapter 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

7. Prentice Hall, 2002Chapter 13 Wheelen/Hunger 7 The Effects of Sources of Revenue on Patterns of Client- Organization Influence

8. Prentice Hall, 2002Chapter 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

9. Prentice Hall, 2002Chapter 13 Wheelen/Hunger 9 Not-for-Profit Organizations Strategic Management Concepts: –Institutional advantage NFP performs its tasks more effectively than other comparable organizations

10. Prentice Hall, 2002Chapter 13 Wheelen/Hunger 10 Not-for-Profit Organizations Strategic Concepts for NFP: –SWOT –Mission statements –Stakeholder analysis –Corporate governance –Portfolio analysis Strategic piggybacking

11. Prentice Hall, 2002Chapter 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”

12. Prentice Hall, 2002Chapter 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

13. Prentice Hall, 2002Chapter 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

14. Prentice Hall, 2002Chapter 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

15. Prentice Hall, 2002Chapter 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

16. Prentice Hall, 2002Chapter 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.

17. Prentice Hall, 2002Chapter 13 Wheelen/Hunger 17 Not-for-Profit Organizations NFP Strategies –Mergers Focus on reducing costs –Strategic alliances Developing cooperative ties with other organizations

18. Prentice Hall, 2002Chapter 13 Wheelen/Hunger 18 Not-for-Profit Organizations Piggybacking Something to Sell Management Talent Trustee Support Entrepreneurial Venture Capital Resources