For-Profits and Non-Profits - Similar Or Totally different?

I typically run into the attitude that non-profit businesses are very totally different than for-profits and thus want a keen understanding of their situations and special handling.  It seems that I typically hear these thoughts from people who work for or lead non-profit organizations.  Thus I assumed it would be useful to consider the standard parameters that characterize a for-profit business and see if they apply to non-profits.  Every business or organization has its distinctive situations, markets or ways of doing business however I maintain the similarities way outnumber the differences.

Purpose

Every sort of organization contains a purpose - to sell something or to produce a service.  Manufacturing companies turn out product or components that go into products.  Distributors build these product available.  Internet designers create web sites.  Yogurt shops sell confections.  Restaurants sell meals and ambience.  Foundations provide endowments.  Charitable service organizations give support to their constituents.  Religious organizations offer a host of services to their communities.  Canine breed clubs bring dog fanciers along to appreciate and learn.  No matter shape the organization takes; it serves some kind of purpose and from that purpose flows the subsequent key items.

Guiding Principles

Visions, missions, and core values are foundation components for any organization.  Visions are pictures of the longer term that the organization aspires to.  Missions are the marching orders and the way the vision 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, that is how things very get done.  See the comments under Operations below.

Revenue streams

Either type of organization needs a revenue stream (or multiple revenue streams) to survive and grow.  Whether or not these take the shape of product sales, subscriptions, tuition or per-hour service work within the for-profit arena or grants, donations, membership dues within the non-profit arena, all represent the funds for the organization to control and achieve its vision and live its mission.

Governance

Somebody needs to be in command of both day-to-day operations and setting the strategic direction of the organization.   For-profits sometimes have an owner, president, CEO or someone ultimately responsible for these things.  There might also be a board of administrators concerned for oversight and accountability - whether or not a fiduciary board for publicly traded firms, advisory boards for family businesses or peer boards composed of other business owners.  Equally, non-profits may have an government director reporting to a board of directors or may be created and operated by an individual founder or group.

Monetary

Each sorts of organizations have expense classes to manage.  Both have mounted costs, professional and legal fees to pay, payroll taxes to cover, monetary reporting, income statements and balance sheets.  Where for-profits may have retained earnings resulting during a taxable profit situation and probably dividends for shareholders, non-profits reinvest any retained earnings within the organization in order to maintain their tax status (501(c)(3) or (c)(4) as an example).  Individuals or shareholders might not benefit from non-profit earnings.

In addition to expense classes each types of organizations must pander to funding problems which may include loans, capital stock, personal funds and donations, tithing, and grants.

Staff

So long as there are people involved in the organization, there's employees to manage.  I am going to exempt the only real practitioner and the truly virtual, fully automated, on-line organization from this discussion.  Whether or not we tend to're talking about a full-time or half-time paid staff, interns or unpaid volunteers or a mix, for-profits and non-profits share this vital activity.  Roles and responsibilities and accepted interpersonal behavior expectations flow from the guiding principles discussion.  Performance management, pay scales, reward systems, coaching and development issues and processes are shared to at least one extent or another by both for-profits and non-profits. Even flip-key operations (such as highly automated factories or franchises with well-defined procedures) still must contend with the issues of managing staff.

Operations

Each organization that delivers products or services has to outline and manage work-flow - from widget idea or service concept style to delivery of the finished product.  This involves defining and institutionalizing processes and procedures, managing quality, coordinating provide chains, maintaining certifications and compliances, handling client issues, complaints and crises, documentation and a host of connected topics.  This is often really where the organization earns its stripes.  It's where makers make their money.  It's where the marathon runners expertise the race, where the scholars experience the training, where the driver experiences the new automobile, the consumer experiences the new meal menu.....And does organizational culture impact operations?  Completely!  Aspects of culture show up in how jobs are designed, how individuals and groups work along, how failures are handled, how communication flows, how innovation is supported (or not!), how conflict is handled to name a few.  These behavioral concerns are common to both types of organizations.

Promoting and Strategic

Using whatever term fits best (customer, client, member, recipient....), both for-profits and non-profits reach out to people who use their products or services.  Identifying the markets, positioning the products and services, differentiating from the competition, building a net presence, integrating new trends in social media with ancient media all need to be addressed.  The entire strategic planning process itself is usually overlooked by each sorts of organizations and this important perform extremely wants to be moved to a a lot of outstanding position.  This is often particularly necessary as each organization comes to grips with the changing realities of these days's economic times.  One difference to focus on - where for-profits may have interaction lobbyists to more their agendas in Washington, IRS guidelines are specific about how non-profits could interact in the political arena, if at all.

In conclusion, I feel that for-profits and non-profits share several similarities.  Whether we're talking concerning top line revenue/funding or bottom line performance - the items I've identified in this text apply to both.  One might argue that scale has an effect on these concerns (size or employee count), but I maintain that a similar-in-size for-profit organization operates with the same constraints as a non-profit.  Sadly, neither sort of organization is resistant to problems of economic downturns, scaled back advantages, layoffs and even survival.  In the long run, giving thoughtful thought to the eight items in this article will facilitate position your organization for fulfillment

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