When we look beyond the Internal Revenue Service (IRS) nonprofit status of an organization as reported on its IRS Form 990, many of the distinctions between For profit Y Nonprofit corporations lose meaning operationally. As Peter Drucker states, “The differences between running a chain of retail stores and running a Roman Catholic Diocese are surprisingly less than retail executives or bishops realize. The differences are primarily in application rather than principle.” Many of the timeless principles that produce sustained financial and non-financial performance in high-performing for-profit companies can also be applied to non-profit corporations, as described by Collins in his monograph: From good to excellent and the social sectors. In fact, contrary to what is taught in many business schools, recent studies such as that of Collins and Porras Good to excellent They have shown that profits and wealth are neither the driving force nor the primary goal of truly visionary for-profit businesses. Rather, for-profit businesses have a larger purpose in life, and this purpose becomes the focal point on the business horizon, guiding every decision they make. Income generation becomes a means to an end for truly visionary for-profit companies, not an end in itself.

There are two types of nonprofits that powerfully shape and define an organization’s culture based on how they generate the majority of their income. This includes:

  • Type 1 nonprofit organizations
  • Non-profit type 2.

While Type 1 nonprofits can generate some of their financial resources through donations, fundraising, membership dues, and donor gifts, the majority of their income comes from providing products and services to customers and from the work done for funding agencies and beneficiary organizations; for example, the results of clinical trials, applied R&D, basic research or the development of new technologies. Operationally, they function in much the same way as their for-profit counterparts: they have standard business and work processes, proposal writing functions, marketing and sales targets, vendors, inventory, customers or clients to satisfy, and competitors in both organizations. non-profit and for-profit. Profit Sands. Examples of Type 1 nonprofits include: hospitals, medical clinics, nursing homes, agricultural organizations, retail operations (Goodwill has more than 1,900 stores), some contract research organizations, research institutes conducting R&D D applied and educational organizations.

While Type 2 nonprofits can generate some of their financial resources by providing products and services to people outside of their organization, most of their income comes from grants, awards, funding agencies, donations, fundraising, membership dues and donor gifts. Operationally and culturally, these organizations are more complex than their for-profit counterparts and function very differently. For example, instead of clients or clients in the traditional sense of the words, Type 2 non-profit organizations serve two main groups: a) the needs of the public and society in general, academia and the promotion of arts and sciences as a legacy for the future. generations, and b) the demands of funding agencies, donors, sponsors, members and donors for fiscal and programmatic responsibility. Ultimate responsibility for compliance with federal, state, and local requirements, public relations, fundraising, and overall fiscal and programmatic effectiveness and management rests with the Type 2 institution and / or a Board of Directors. The administrative staff of the institution uses standard business and work processes to support a scientific, technical or artisan staff who often have joint appointments with other collaborating institutes or universities, so that the people who produce the central contribution to the purpose and the Strategic targets of the Type 2 organization may not be full-time employees of that institution. Examples of Type 2 nonprofits include: a) institutes and universities conducting research in the physical, biological, ecological, political, social, and computer sciences, b) organizations that distribute food and health care to those in need, and c) museums , art institutes and music schools that create and sustain artistic expression and culture.

Revenue for most government organizations at the federal, state, county, and municipal levels comes from appropriations given by legislative bodies (such as the U.S. Congress), and this appropriate revenue stream powerfully shapes and defines the culture of government organizations. This is because the basis for increasing or decreasing the income of the allocated funds is largely based on political issues, not on the actual performance of the government organization. One of the best ways to characterize these differences is to compare the key elements that drive for-profit businesses in the industry with government entities. More specifically, there are four drivers in for-profit organizations: a) business results, b) customer satisfaction, c) consequences for performance (good and bad), and d) the leadership and management necessary to enact and energize the former. three. Like the wind in the sails of a ship, business results and customer satisfaction are the driving forces that link for-profit businesses to the business environment outside of the organization. Performance consequences are the essential drivers that enable managers to monitor day-to-day operations within the context of the organization’s structures, systems, and culture. Consequences are the equivalent of responsibility and authority.

Field experience of working with government organizations down to the undersecretary level has shown that there are no real equivalents to business results, customer satisfaction, and consequences for performance (good or bad) in most government agencies. The notable exception is “hybrid” organizations that receive a portion of their revenue by providing products and services to customers. For example, in industry, if a company is not profitable, it closes. In government agencies, organizations and projects sometimes continue to exist long after their purpose is questionable, often for political reasons. In industry, customer satisfaction is a bulwark of business results and process improvement. If customers are dissatisfied, they buy elsewhere, the company’s profits decline, and eventually the business closes. In many government agencies, managers and staff members have endless debates about whether they even have clients other than the short-lived “taxpayer” or “future generations to be born.” In industry, if a worker’s performance is exemplary, he is rewarded, and if the performance is inadequate, the company can fire him. There are consequences for performance, good and bad. In most government agencies, the difference between raises and rewards given to high performers and those given to low performers is typically a few dollars a month. An unwritten cultural norm in many government agencies is that it is inappropriate for managers to give marginal ratings for fear that even the most incompetent workers will face retaliation for filing complaints against a manager who dares to tell the truth about their level of performance. More importantly, even the driver of leadership and management of the remaining industry type is undermined when top managers cannot openly demonstrate that there are consequences for performance because the system in which they are embedded does not provide them with responsibility or authority.

Evaluators should keep in mind that in the absence of revenue streams that are tied to the actual performance of an organization, the currency that is “traded” in government organizations is power through visibility. In other words, if a government organization or manager is involved with an “initiative” or “program” that is well received by agency leaders, the media, or the public; This creates the coin of positive visibility. If the organization or manager is associated with actions and interactions that are frowned upon by agency leaders, the media, or the public; This creates the negative visibility coin. As a general rule, all sectors of government are under increasing pressure to demonstrate the applicability and value-added results of their services to meet public needs and this scrutiny generates a positive or negative bargaining chip in visibility. But when an organizational unit within a government entity is responsible for the active enforcement of laws and regulations, its purpose, strategic objectives, goals, and daily interaction with the public are often subject to more intense scrutiny by the public and the media. Communication. so the problems associated with power through visibility are more intense because these groups function more like real customers. Government entities are also under constant pressure to demonstrate that their operations are efficient and that they are using publicly generated funds responsibly, despite the absence of the four drivers mentioned above, increasing the importance of creating the visibility currency. positive. The unspoken, unexamined, and taken for granted currency of power through visibility is one of the most powerful forces in the world of government entities, and it is important to recognize this reality and actively manage it through key performance indicators. .

Tea bottom line When it comes to creating an Intended Culture ™ in for-profit, non-profit and / or government organizations, it is to focus on their revenue streams and governance structures. Gain a clear understanding of: a) the nature, viability and sustainability of an organization’s revenue and funding streams; b) the expectations and pressures exerted on the organization by customers, competitors, suppliers, regulators, taxpayers and other forces from the external environment; and c) the nature of its governance structure are the key elements in creating an Intended Culture ™.

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