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Wednesday, July 28, 2010

Non-profit distinction

Non-profit distinction

Ownership is the quantitative difference between for- and not-for-profit organizations. For-profit organizations can be privately owned and may re-distribute taxable wealth to employees and shareholders. By contrast, not-for-profit organizations do not have owners. They have controlling members or boards, but these people cannot sell their shares to others or personally benefit in any taxable way.

While they are able to earn a profit, more accurately called a surplus, such earnings must be retained by the organization for its self-preservation, expansion and future plans. Earnings may not benefit individuals or stake-holders. While some nonprofit organizations put substantial funds into hiring and rewarding their internal corporate leadership, middle-management personnel and workers, others employ unpaid volunteers and even executives may work for no compensation. However, since the late 1980s there has been a growing consensus that nonprofits can achieve their corporate targets more effectively by using some of the same methods developed in for-profit enterprises. These include effective internal management, ensuring accountability for results, and monitoring the performance of different divisions or projects in order to better benefit from their capital and workers. Those require satisfied management and that, in turn, begins with the organization's mission.

Beyond quantitative differences, there are political differences. Not-for-profits often provide services that were overlooked and not otherwise provided by the government. Such political tests may be required in order to achieve tax-exempt status. Often, the non-profit distinction is not how mission relates to profits, but how mission and profits relate to public relations. Any company has to be profitable to be sustainable, and the only way to be profitable is to focus on providing the best product or service for the money. But not-for-profits also project an image having superior purpose than others. They paint a picture where every company is either not-for-profit or for-profit. The implication is that an "ordinary" company is for-profit. Ordinary companies put profits ahead of their core mission, and not-for-profits are better because they don't do that. This type of elitism is a major public relations undertaking, and can also lead to much political strife within the organization


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