For-Profits and Non-Profits - Similar Or Different?

Managers - For-Profits and Non-Profits - Similar Or Different?

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I often run into the perspective that non-profit businesses are very dissimilar than for-profits and therefore need a keen understanding of their situations and extra handling.  It turns out that I normally hear these thoughts from those who work for or lead non-profit organizations.  So I idea it would be useful to reconsider the typical parameters that enumerate a for-profit company and see if they apply to non-profits.  Every company or organization has its unique situations, markets or ways of doing company but I declare the similarities far outnumber the differences.

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Managers

Purpose

Each type of organization has a purpose - to sell something or to supply a service.  Manufacturing fellowships furnish products or parts that go into products.  Distributors make these products available.  Web designers create web sites.  Yogurt shops sell confections.  Restaurants sell meals and ambience.  Foundations supply endowments.  Charitable aid organizations supply maintain to their constituents.  Religious organizations supply a host of services to their communities.  Canine breed clubs bring dog fanciers together to appreciate and learn.  whatever shape the organization takes; it serves some kind of purpose and from that purpose flows the following key items.

Guiding Principles

Visions, missions, and core values are foundation elements for any organization.  Visions are images of the time to come that the organization aspires to.  Missions are the marching orders and how the foresight will be realized.  Core values are those beliefs the organization's members hold in high esteem. Ultimately these become the underpinnings of the organization's culture, which is how things authentically get done.  See the comments under Operations below.

Revenue streams

Either type of organization needs a income stream (or multiple income streams) to survive and grow.  whether these take the form of product sales, subscriptions, tuition or per-hour aid work in the for-profit arena or grants, donations, membership dues in the non-profit arena, all laid out the funds for the organization to operate and accomplish its foresight and live its mission.

Governance

Someone needs to be in payment of both day-to-day operations and setting the strategic direction of the organization.   For-profits normally have an owner, president, Ceo or person Ultimately responsible for these things.  There may also be a board of directors involved for oversight and accountability - whether a fiduciary board for publicly traded companies, advisory boards for family businesses or peer boards composed of other company owners.  Similarly, non-profits may have an administrative director reporting to a board of directors or may be created and operated by an private founder or group.

Financial

Both types of organizations have charge categories to manage.  Both have fixed costs, pro and legal fees to pay, payroll taxes to cover, financial reporting, income statements and equilibrium sheets.  Where for-profits may have retained income resulting in a taxable behalf situation and possibly dividends for shareholders, non-profits reinvest any retained income in the organization in order to declare their tax status (501(c)(3) or (c)(4) for example).  Individuals or shareholders may not benefit from non-profit earnings. 

In increasing to charge categories both types of organizations must deal with funding issues which may include loans, capital stock, personal funds as well as donations, tithing, and grants.

Staff

As long as there are population involved in the organization, there is staff to manage.  I'll exempt the sole practitioner and the truly virtual, thoroughly automated, on-line organization from this discussion.  whether we're talking about a full-time or part-time paid staff, interns or unpaid volunteers or a combination, for-profits and non-profits share this indispensable activity.  Roles and responsibilities and accepted interpersonal behavior expectations flow from the guiding law discussion.  operation management, pay scales, bonus systems, training and improvement considerations and processes are shared to one extent or an additional one by both for-profits and non-profits. Even turn-key operations (such as highly automatic factories or franchises with well-defined procedures) still have to declare with the issues of managing staff.

Operations

Every organization that delivers products or services has to define and carry on work-flow - from widget idea or aid idea establish to delivery of the done product.  This involves defining and institutionalizing processes and procedures, managing quality, coordinating supply chains, maintaining certifications and compliances, handling buyer concerns, complaints and crises, documentation and a host of associated topics.  This is truly where the organization earns its stripes.  It's where manufacturers make their money.  It's where the marathon runners caress the race, where the students caress the training, where the driver experiences the new car, the consumer experiences the new meal menu.....And does organizational culture impact operations?  Absolutely!  Aspects of culture show up in how jobs are designed, how population and teams work together, how failures are handled, how transportation flows, how innovation is supported (or not!), how friction is dealt with to name a few.  These behavioral considerations are tasteless to both types of organizations.

Marketing and Strategic

Using whatever term fits best (customer, client, member, recipient....), both for-profits and non-profits reach out to population who use their products or services.  Identifying the markets, positioning the products and services, differentiating from the competition, building a web presence, integrating new trends in group media with traditional media all need to be addressed.  The whole strategic planning process itself is often overlooked by both types of organizations and this vital function authentically needs to be moved to a more prominent position.  This is especially prominent as each organization comes to grips with the changing realities of today's economic times.  One unlikeness to highlight - where for-profits may engage lobbyists to further their agendas in Washington, Irs guidelines are specific about how non-profits may interact in the political arena, if at all.

In conclusion, I believe that for-profits and non-profits share many similarities.  whether we're talking about top line revenue/funding or bottom line operation - the items I've identified in this record apply to both.  One might argue that scale has an impact on these considerations (size or laborer count), but I declare that a similar-in-size for-profit organization operates with the same constraints as a non-profit.  Sadly, neither type of organization is immune to issues of economic downturns, scaled back benefits, layoffs and even survival.  In the long run, giving thoughtful consideration to the eight items in this record will help position your organization for success.

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