The document discusses strategic issues in not-for-profit organizations. It notes that while NFPs are not intended to make profits, they are expected to use their performance to better society. Their goals may include improving education programs, preventing disease, or providing government services efficiently. The managers of NFPs must understand they compete for scarce resources like donations and need to strategically plan to demonstrate high performance and meet goals. Strategic planning is thus as important for NFP managers as for profit-seeking businesses. The document outlines various types of NFPs and constraints they face in strategic decision-making and implementation due to factors like weak client influence, goal conflicts, and decentralized structures.

1. Chapter- VII(d)
Strategic Issues in Not-for-
Profit Organizations
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2. Not-for-Profit Organizations(NFPs)
By definition, nonprofit enterprises such as government
agencies, universities, and charities are not in
“business” to make profits. Nevertheless, they are
expected to use their performance for the betterment
of society.
• The performance goal for a business school might be to
get its programs ranked among the best in the nation.
• The performance goal for a charity might be to prevent
childhood illnesses in poor countries.
• The performance for a government agency might be to
improve its services while not exceeding its budget.
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3. Not-for-Profit Organizations
The managers of non-profit need to understand
that nonprofits compete with each other for
scarce resources just as business do.
 For example, charities compete for scarce
donations, and their managers must plan and
develop strategies that lead to high performance
and demonstrate a track record of meeting
performance goals.
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4. Not-for-Profit Organizations
A successful strategy gives potential donors
a compelling message as to why they
should contribute additional donations.
Thus, planning and thinking strategically is
as important for managers in the non-
profit sector as it is for managers in profit-
seeking firms.
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5. Not-for-Profit Organizations
Not-for-Profits:
– Private nonprofit corporations
• Hospitals, private colleges, charities
– Public governmental agencies
• Prisons, welfare departments, universities
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6. Not-for-Profit Organizations
Not-for-Profits Importance:
– Public or collective goods
• Paved roads, police protection,
museums, schools
– Preferred tax status
• NFPs enjoy tax exempt status as a result
of being organized to serve a broad
public interest.
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7. Not-for-Profit Organizations
Nonprofits and profits!
• Nonprofit organizations are permitted to generate a profit.
• However, nonprofits may not distribute their profits to
their staff or directors –non-distribution constraint.
• Surplus must be used to further the mission of the
organization.
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10. Aspects of Life Best Managed by
Not-For-Profit Organizations
• Religion
• Education
• Charities
• Clubs, interest groups, unions
• Health care
• Government
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11. 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 or donations from membership of sponsoring
agency
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12. The Effects of Sources of Revenue on Patterns of
Client-Organization Influence
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13. 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
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14. Not-for-Profit Organizations
Strategic Management Concepts:
– Institutional advantage
• NFP performs its tasks more effectively than
other comparable organizations
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15. Not-for-Profit Organizations
Strategic Concepts for NFP:
– SWOT
– Mission statements
– Stakeholder analysis
– Corporate governance
– Portfolio analysis
• Strategic piggybacking
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16. 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”
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17. Not-for-Profit Organizations
Constraints on Strategic Management:
– Resource Contributors
• Interruption on internal management
• Fund contributors and government
– Restraints on use of rewards
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18. Not-for-Profit Organizations
Constraints to 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
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19. Not-for-Profit Organizations
Complications to Implementation:
– Decentralization is complicated
• Self-protective centralization
– Linking Pins
• External-internal integration
– Job enlargement and development
• Restrained by professionalism
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20. Not-for-Profit Organizations
Complications to Evaluation and Control:
– Rewards and penalties
• No relation to performance
– Inputs vs. outputs
• Heavily controlled
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21. 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.
* Piggybacking : To use something that someone else has made or done in order to get an advantage.
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22. Not-for-Profit Organizations
PiggybackingPiggybacking
Something to Sell
Management Talent
Trustee Support
Entrepreneurial Spirit
Venture Capital
Resources
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23. Not-for-Profit Organizations
• NFP Strategies
– Mergers
• Focus on reducing costs
– Strategic alliances
• Developing cooperative ties with other
organizations
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