Lesson 1, Topic 1
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3.3 Strategic management planning in non-profit, governmental, and business organizations Copy

Nik Shazana November 1, 2022

Every organization has a mission. The mission of a typical for-profit company is to grow the business and make money. The mission of a non-profit organization is to take care of an unmet need in the community, state, nation or world.

Strategic Management planning in Non-profit and Governmental Organizations


Non-profit organizations are basically just like for-profit companies except for two major differences that is Non-profits do not pay taxes and do not have shareholders to provide capital. In virtually all other ways, Non-profits are just like for-profits. Non-profits have competitors that want to put them out of business. Non-profits have employees, customers, creditors, suppliers, and distributors as well as financial budgets, income statements, balance sheets, cash flow statements, and so on. Non-profit organizations embrace strategic planning just as much as for-profit firms, and perhaps even more, because equity capital is not an alternative source of financing.

The strategic management process is being used effectively by countless Non-profit and governmental organizations, such as the Girl Scouts, Boy Scouts, the Red Cross, chambers of commerce, educational institutions, medical institutions, public utilities, libraries, government and agencies. Many Non-profit and governmental organizations outperform private firms and corporations on innovativeness, motivation, productivity, and strategic management. Compared to for-profit firms, Non-profit and governmental organizations may be totally dependent on outside financing. Especially for these organizations, strategic management provides an excellent                         vehicle for developing and justifying requests for needed financial support.

Educational Institutions


The world of higher education is rapidly moving to massive open online courses (MOOC), with many of the courses being free to anyone with an Internet connection. The American Council on Education, an association for higher education presidents, is considering allowing free, online courses to be eligible for credit toward a degree and eligible for transfer credit. Several companies, including edX, Udacity, Coursera, and the Jack Welch Management Institute, are most associated with MOOCs, but the list is growing weekly. Educational institutions are more frequently using strategic-management techniques and concepts. For an example, Richard Cyert, former president of Carnegie Mellon University, said, “I believe we do a far better job of strategic management than any company I know.”

Population shifts nationally from the Northeast and Midwest to the Southeast and West are but one factor causing trauma for educational institutions that have not planned for changing enrolments. Ivy League schools in the Northeast are recruiting more heavily in the Southeast and West. This trend represents a significant change in the competitive climate for attracting the best high school graduates each year.

Medical Organizations


Hospital industry is experiencing declining margins, excess capacity, bureaucratic overburdening, poorly planned and executed diversification strategies, soaring health-care costs, reduced federal support, and high administrator turnover. The seriousness of this problem is accented by a 20 percent annual decline in use by inpatients nationwide. Declining occupancy rates, deregulation, and accelerating growth of health maintenance organizations, preferred provider organizations, urgent care centres, outpatient surgery centres, diagnostic centres, specialized clinics, and group practices are other major threats facing hospitals today. Many private and state-supported medical institutions are in financial trouble as a result of traditionally taking a reactive rather than a proactive approach in dealing with their industry.



Governmental Agencies and Departments


Federal, state, county, and municipal agencies and departments, such as police departments, chambers of commerce, forestry associations, and health departments, are responsible for formulating, implementing, and evaluating strategies that use taxpayers’ dollars in the most cost-effective way to provide services and programs. Strategic-management concepts are generally required and thus widely used to enable governmental organizations to be more effective and efficient. Strategists in governmental organizations operate with less strategic autonomy than their counterparts in private firms. Public enterprises generally cannot diversify into unrelated businesses or merge with other firms.

Governmental strategists usually enjoy little freedom in altering the organizations’ missions or redirecting objectives. Legislators and politicians often have direct or indirect control over major decisions and resources. Strategic issues get discussed and debated in the media and legislatures. Issues become politicized, resulting in fewer strategic choice alternatives. There is now more predictability in the management of public sector enterprises. Government agencies and departments are finding that their employees get excited about the opportunity to participate in the strategic-management process and thereby have an effect on the organization’s mission, objectives, strategies, and policies.

Strategic Management Planning for Non-profits Vs. Profits

While Non-profit and for-profit corporations operate in similar ways, there are often subtle operational differences. One significant place they differ is strategic planning. Although both use the same kinds of processes, the way they use planning tools to establish goals is different. Boards of directors have different expectations from Non-profits than they do from commercial businesses. Also, there are different people involved in the for-profit strategic planning process as opposed to the Non-profit planning process.

Strategic Planning’s Function

A strategic plan is used by any organization for profit or Non-profit to establish goals as well as to review operations. Some organizations do them yearly, while others do them every 3-5 years. These goals are one of the first major differences in for-profit and Non-profit organizations’ strategic plans. The goal of a for-profit company is to return dividends to shareholders or profit to owners over time. The goal of a Non-profit is to further its mission, which includes making enough money to continue to operate.

Similar Planning Tools

There are many approaches that an organization might use to jumpstart its planning process. When it comes to strategic planning, for-profit and Non-profit organizations benefit from the same tools. For example, both types of organization might use a SWOT analysis to determine strengths, weaknesses, opportunities and threats and establish goals and objectives for the organization. There are many other planning tools, but both for-profits and Non-profits choose a step by step process that helps them analyse corporate operations and establish long and short-term goals and objectives.

Different Participant Makeup

One of the most striking differences between for-profit and Non-profit corporations is where each gets its input. For-profit corporations rely on employees and consultants, people in the company’s employ, to help do the analyses and create the visions. Non-profits usually invite outside stakeholders, those who support or benefit from the organization’s work, to participate in strategic planning.

Review by Board

While the participation in the strategic planning process varies by board of directors, Non-profit board members often have a different role from for-profit board members. In a for-profit corporation, the board of directors establishes general policy and the management and staff fill in the particulars along with recommendations about how the goals should be accomplished. Non-profit board members often have a larger role to play. Whether the organization is for-profit or Non-profit, the board of directors has the final say in adopting a strategic plan. The board of directors is the decision-making board or governing board for a Non-profit organization or a for-profit business formed as a corporation. Because the board of directors is heavily involved in making decisions for the organization, it also plays a vital role in the strategic planning process when putting the business and marketing plan in writing and implanting the strategic plan.

Purpose

The approach of the board of directors in the process of strategic planning differs between a for-profit and a Non-profit business. When a board is in the process of strategic planning in a for-profit business, the concern of the board of directors focuses on increasing the value or profits of the business for the interest of the shareholders of the corporation. For a Non-profit organization, the board of directors’ focus is on developing the organization and the board members, fundraising, and managing the staff and volunteers of the organization to achieve the mission of the non-profit.

Benefits

Board involvement in strategic planning can benefit the business whether it is a Non-profit or a for-profit organization. The board of directors is formed with several individuals who serve the common purpose of helping the organization achieve its goals. Because each board of director has a different background and differing opinions, each member of the board brings a different perspective to the strategic planning process. These differences help the board to collectively approach the planning process from different standpoints that can help to cover all of the bases of planning for the business from a financial, marketing, shareholder, operational and employee perspective.

Time Frame

Generally, the board of directors begins the strategic planning process when the Non-profit or corporation first begin. On a set schedule monthly, quarterly or semi-annually the board of directors comes together again to review the strategic plan and measure the success of failure rate of the carrying out of the strategic plan. If the organization is not achieving the strategies as set forth by the plan, the board may determine ways to tweak the activities to get the organization back on track.

By laws and Regulations

From a legal viewpoint, a board of directors is a requirement under the bylaws of a Non-profit organization. In the case of a corporation, the articles of incorporation must state the board of directors as well.

Liaison

The board of directors acts as a buffer or liaison. In the case of a Non-profit, the board is a liaison between the staff and the donors. The board ensures that the staff is aware of the strategic plan the board puts in place, and carries it out to meet the needs and wants of the donors. In a for-profit business, the board writes and helps to implement the strategic plan for the business by assigning tasks and activities to the appropriate employees in the business.

Self-Check Activity

Differentiate Strategic Management planning in Non-profit and Governmental Organizations.