The not-for-profit sector differs from the commercial, for-profit, sector. For a start, organisations in the nfp sector do not have to 'sell' something to earn revenue. In the majority of instances the revenue is donated from one source or another. Fee for service within the nfp sector is growing however still represents only a small amount of total revenue.
What are the management implications of the difference between the two sectors? In the commercial sector managers will be judged upon indicators such as revenue, profitability and growth. Some might suggest such indicators are not relevant for the majority of the not for profit sector. Is that true? Surely not for profit organisations are businesses, regardless of where they obtain their revenue from? Were that the case then managers within not for profits should be judged on similar indicators to those in the for-profit sector.
A possible outcome of managers not viewing their nfp organisation as a business might be that they focus on the wrong indicators, insufficient indicators or in some instances, no indicators at all. Not for profit organisations need to spend less than they earn - financial management. They need to make a surplus to remain viable - financial management. They need the right people in the right place to do the right job - people management. They need to tell consumers about themselves and how to access programs - marketing management. They need to satisfy the needs of those consumers - customer service. They need direction and strategy - governance. They share all these attributes with organisations in the for-profit sector.
Not for profit organisations have one attribute their counterparts in the commercial sector do not have. Not for profits are dependent upon the vagaries of political cycles and decision making. Unlike their commercial counterparts the not for profit organisation cannot easily change direction, implement a new strategy or introduce a new product or service - unless it does so by using its own resources - a powerful argument for making a surplus and having a mixture of funded programs and fee-for-service programs.
Not for profit organisations cannot manipulate their margins in the same manner commercial operators might. This places a greater emphasis on financial management within the not for profit, especially if the strategy is to create surpluses.
The one attribute not for profits share with those in the commercial sector is the use of people to deliver services. This is also the one attribute the not for profit has full control over. People are the key to an effective organisation. People implement strategy.
The board or governance group within not for profits are ultimately responsible for the ongoing viablity of the organisation. Their responsibility extends beyond simply setting visions and ensuring activities fit that vision. They have a responsibility to regularly review the activities and outcomes of the management team. Some of the issues the governance team might look for include; a lack of clear direction from themselves; signs the organisation is able to cope with its growth, complacency within the organisation, acceptance of poor performance, autocratic management or a lack of delegation, seemingly chaotic activity by management and poor communication.
Indicators that all or some of these issues may exist in your organisation include; a lot of activity with little in the form of clear outcomes, frustration by staff at barriers or a lack of clear understanding by management as to what it is they should be doing, an insistence on doing things they way they have always been done, people not challenging the status quo, high turnover of staff, low moral, criticism of the organisation, a lack of new ideas or new services, those patently unable to achieve the desired outcomes being protected by management, lack of trust, 'silo' mentality between departments or service areas, lack of information sharing, staff not knowing what is actually happening in their organisation or not being valued for their contribution.
Management failure is not terminal; often it can be an evolutionary process. Many managers are good at specific areas of management, for example, growth or change, and may become bored or complacent once the desired outcomes have been achieved. A good governance team would have understood this possibility when they recruited and looked to the future when a replacement might be needed.
The governance team is responsible for setting direction and strategy and they are responsible for holding the management team accountable. Effective implementation of strategy equals effective management.
Understand the stage of development for your organisation and plan ahead. In this way the resources are available and the transition will be smooth.
The management team must display leadership. Conduct an audit of your organisation, its needs and the gap between what it has and what it needs. Cut out the deadwood. Build an organisational structure that is designed to deliver the desired outcomes. Never try to make the outcomes fit the structure, that is a recipe for mediocrity.
Finally, foster and nurture the human resource. People are the key. The single most important characteristic of an effective manager is the ability to work with and get the best out of people. If your managers cannot do this then they are the wrong person in the job and they should be replaced with someone with those skills.
Saturday, January 19, 2008
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