Successfully applying profit-oriented business principles to non-profit-making organisations

Abstract

If an organisation does not seek to make monetary profit, what does it do and why does it exist? A not-for-profit organisation, or non-profit organisation, exists to provide value to a particular constituency and, generally, it provides this value by offering a set of services. Examples of not-for-profit organisations are: public schools, most colleges and universities, government agencies, social and human service organisations, some hospitals, religious organisations, sports clubs, community theatres, symphony groups, charities and others. Chapter 1 is a summary of the problem statement, methodology and research in this paper. Chapter 2 will discuss definitions and strategies. Chapter 3 examines for-profit organisations, their management characteristics and the strategies they apply. Chapter 4 goes on to discuss not-for-profit organisations and how they are managed. Lastly, Chapter 5 reviews the findings in the previous chapters and makes recommendations. As the cases will reveal, the differences between not-for-profit and for-profit "business decision making" are sometimes subtle, but it is clear that not-for-profit organisations cannot blindly apply business methods and principles without appropriate adaptation. This necessary caution applies to a wide variety of decisions which include pricing, investment of funds, the outsourcing of tasks, deciding whether to undertake a commercial venture, deciding whether to collaborate with a business corporation, determining employee compensation levels and investment in fund raising operations. Conventional business principles help organisations to run efficiently and effectively, but . they are built on the underlying assumption that the purpose of the organisation is to make as much money as possible. Not-for-profit organisations must also be efficient and effective in their use of resources, but they must do so in a way that maximises the impact of their social missions, and at the same time ensures their financial survival.