Nonprofit and For-Profit Organizations Similarities and Differences

Comparing and Differing Approaches to Nonprofit and For-Profit Organization Management

Definitions:

Nonprofits are organizations that use their surplus to further their goals rather than distributing it to their members, and this term will be used to describe these organizations throughout the article. Businesses that operate for a profit are referred to as for-profit organizations. The term “governance” refers to the procedures used by companies to ingrain their hierarchies with their rules, cultures, and laws. It will describe how a company affects the neighborhood. Management of human resources refers to the procedures set up for handling personnel.

Introduction

With a mission or purpose, nonprofits are similar to for-profit businesses. Contrary to popular belief, they are capable of making profits. This paper will examine three concepts concerning the management of Nonprofits and For-profits to identify similarities and differences (Worth, 2017).

Day to day governance in Nonprofits

is entrusted to a CEO who works under the supervision of an all-volunteer board. In most For-profits, the CEO may also be the chairman of the board. The Salvation Army, a church and non-profit spanning 109 countries, has a general as the overall leader. The high council elects and can remove him from office. For-profits typically have smaller boards, having as few as five members. Nonprofits are governed by larger boards; comprising up-to 30 members (Worth, 2017).

Strategically, Nonprofits

focus on raising funds and serving people. The Salvation Army is known for its social work around the world. Its members believe that they are doers of the word, not just hearers. They serve the needy. The organization would be among those to whom Jesus Christ in the Bible says “for I was hungry, and you gave

me food; I was thirsty, and you gave me drink ......”(Mathew 25:35). They give, expecting no return on investment. For-profits aim at improving cash flows through growing revenues and cost control while expanding their customer base. When he was CEO at General Electric, Jack Welch cut thousands of jobs at G.E to reduce costs and increase shareholder value (Worth, 2017).

Nonprofits heavily rely on volunteers

to execute their mission, though they have salaried employees. For-profits have staff and interns who, like the volunteers, do not receive remuneration. 25% of Americans are willing to work as volunteers. Nonprofits may observe some restraint before they fire a volunteer while For-profits consider dismissal of employees who do not perform satisfactorily a purely objective business decision (Worth, 2017).

Both business organizations endeavour to contribute towards the betterment of the communities around them. In 2014, Nonprofits accounted for 5.3% of U.S GDP, according to the US Bureau of Economic Analysis. They raised 878 billion dollars in revenue. 11.4 million Americans or 10.2% of all working people in the U.S work for non-profit organizations (Worth, 2017).

Similarities and differences exist between For-profits and non-profits. The three concepts of governance, human resource management and strategic planning do greatly help both as they strive to contribute more toward the social and economic well-being of communities and nations. Perhaps Nonprofits should adopt some of the strategic techniques used by For-profits in their approach to managing the social enterprise.

Reference

Worth, M. J. (2017). Non Profit Management-4th edition. Los Angeles: Sage Publications Inc.