The basic steps and procedures of strategic management apply to both for-profit and non-profit companies. It is important, for example, that all organizations analyze their environment, formulate their mission, goals and objectives, develop and implement the appropriate strategies and that they control the entire management process; however, in a more specific sense, there are distinctive differences between for-profit and non-profit companies that have significant strategic implications (see Figures 1 and 2).
Although nonprofits can be categorized in different ways, an internationally recognized basic classification consists of two groups:
- Private non-profit organizations (SA in the case of Cuba). They are entities that contribute to social welfare and are supported by private funds. Public non-profit organizations. They are those created and regulated by the State.
Differences between for-profit, private non-profit and for-profit public sector.
Both organizations are essential to maintain a society. Many essential needs cannot be guaranteed by for-profit organizations, for example, most citizens cannot afford a private security and / or protection service; however, they are all equally protected by the PNR bodies, that is, business products and services can only be purchased by those who have the economic solvency to pay for them, but the products or services of public non-profit organizations are at the reach of all society equally.
When examining some essential elements of strategic management in non-profit organizations, first, it should be observed how the analysis of the environment is conducted by these organizations, then determine how they determine the mission, vision and objectives, then how they formulate, implement and They control the strategies and, finally, how to achieve maximum effectiveness in the implementation of their strategies.
Internal and external analysis of the organization.
As the environment for nonprofits becomes incessantly dynamic, strategic direction becomes increasingly important and necessary to them. The same tools and techniques can be used to diagnose both one and another type of company; however, in the case of non-profit organizations the combinations or strategic position have another meaning, for example, a profit organization with a position of strengths and opportunities must propose intensive strategies, growth strategies, etc. However, a non-profit organization, with that same position, since it does not have business, then it must proceed in another way. For this type of organization the combination of strengths with opportunities is called potentialitiesThis position clearly indicates the most promising lines of action for the organization. In contrast, the position determined by the combination of weaknesses and threats is called limitations, which places a serious warning on the organization, while the position derived from the combination of threats with strengths is called risks. The position determined by the combination of weaknesses and opportunities factors is called challenges; These latter combinations are likely to require careful consideration when setting the course for the desirable future for the organization.
The identification of the different combinations is key to the process since it allows to determine the objectives of the organization and define the projects that will launch the entire process.
Another primary difference of nonprofits from for-profit organizations is the composition of their stakeholder groups.
• Sources of income / profit. See figure 1.
Although there are a number of differences between nonprofits versus for-profit organizations, perhaps the biggest distinction is sources of income / profit. The income of the profit organizations comes exclusively from a single source; the sale of their products or services to individuals or organizations, on the other hand, non-profit organizations receive income from various sources such as: taxes, debts, contributions and sometimes the sale of their services or products.
Successful businesses know their customers and their needs well enough to recognize that meeting their needs is the sole reason for their existence and progress. But nonprofits have a less direct relationship with their clients, those they serve are not necessarily those who help finance the organization's operations, that is, strategic planning in these organizations must be doubled: planning to serve their clients. and plan to guarantee financing to provide those services.
The first edge of planning, serving clients, sometimes has to be done with little or no input from the clients you serve. The second planning, acquiring financing, must become almost a policy, which means that those organizations that have the most public demand for their services or that circumstantially should be prioritized, for example, will receive greater financing; education, public health, etc.
Figure 1. Sources of income
Figure 2 Forces in non-profit companies
• External constituencies and stakeholders.
Strategic planning for business organizations, as has been stated, includes, taking into account the variety of objectives of the stakeholder groups such as the following: owners, creditors, clients, workers, etc. This is true for nonprofits as well, but the stakeholder group is significantly different. This large number and diversity of stakeholders results in less autonomy for public administrators than business administrators, because public organizations are governed by all citizens, which means that the organization's activities have millions of supervisors and that decisions are relatively public.Although public managers sometimes do not have to focus on threats and rivalry from competitors, they have to face a complicated environment in which they must meet needs effectively since they must serve clients and users who do not represent sources of income from the company. organization; however, they evaluate its management, which implies that the organization's operations must satisfy both needs, as well as face a high number of restrictions.as well as facing a high number of restrictions.as well as facing a high number of restrictions.
Goals.
Although having clearly defined objectives and mission is essential for the progress of any organization, many non-profit organizations fail in this purpose. Business organizations can easily measure their sales, market share, profits, return on investments, but non-profit organizations do not generally have such clear objectives, which is why this process is more difficult, although if it is not carried out, no organization could measure its performance, for this reason, non-profit organizations include measurement indicators for each objective, to ensure its measurability.
• Formulation, implementation and control of the strategy.
The types of strategy formulation reviewed are those proposed by MacMillan (1983), Rubin (1988) and Nutt and Backoff (1992, 1995). The criterion followed in the selection of these typologies is their clarity and the impact they have in the current literature, so they are representative of research in this field.
MacMillan's proposal is both at the business unit level and at the corporate level of the set of programs offered by the entity. Its main limitations are the scarce treatment of the internal plane as well as its lack of empirical validation.
Rubin's typology focuses on a business unit in public Non-profit Organizations through a case study. Once again, the emphasis on the external level of the entity reflected in the turbulence of the environment, which together with the planning horizon, leads to the identification of three attitudes from which different strategies are proposed.
The Nutt and Backoff typology also focuses on strategies at the business unit level proposing effective strategies. Nor is it empirically validated and emphasizes, like the previous ones, the external plane.
As for the process of implementation and control of strategies, it tends to be more complex in non-profit organizations.
Corporate and business strategies are generally the same as those recommended for profit organizations, in general every organization tends to satisfy social needs. In public administration, many decisions need to be consulted at a higher level due to the tendency to over-centralize the hierarchy of their structures. It is argued, by several authors, that public administrators tend to have less power than those of business organizations, for which they are based on the possibility that the latter have in payment, promotions and disciplinary actions on their subordinates, another argument employee, it is the little commitment that is achieved in the members of the non-profit organization as long as its workers do not receive the same rewards,These aspects cause many talented workers who work in non-profit organizations to move towards organizations with a high job attractiveness, an example of this is the exodus of education professionals for emerging sectors of the economy.
Most of the authors point out the existence of significant differences in the functional strategies of non-profit organizations, mainly based on policy restrictions to which they are subject, which is considered valid for countries with a market economy, due to the strong opposition that They oppose political groups, election periods and others, not so in our country, where the State supports and guarantees logistical assurance in the decisions of this type of organization, precisely because of their social significance.
Non-profit companies tend to develop their organizational culture around a cause, their members must have altruistic attitudes and behaviors since they serve that cause not in exchange for profit or material benefits, which implies the challenge of maintaining motivation, beliefs and the shared values of these workers in the face of the possibility that they fluctuate towards other organizations with a better economic incentive, this also negatively influences the sense of belonging and fidelity of the workers to the organizations, since there is a tendency to promote beliefs in them, loyalty to their profession more than to the organization.
Strategic control.
Control becomes difficult as long as there are no clear, measurable goals, which sometimes occurs in nonprofits.
Bibliography
1. Ronda Pupo, Guillermo A., Proposal for a model for Strategic Planning. Thesis in option to the title of Master in Management.
2. Wright, Peter., Strategic Management./ Peter Right, Charles D. Prngle, Mark J. Kroll and John Parnell, 2nd Edition. / Ed. Woodstock Publishers Service, USA, pp 4 - 101.
