Starting NPO Flashcards
Demand- Side / Failure Theories
- Government Failure Theory
- Market Failure Theory
Government Failure Theory
Demand Side (there are needs to be fulfilled) From Slide:
NPOs fill the needs of smaller groups of citizens, react faster and know better local communities
From my class notes:
Role - government priorities must match those of the majority of voters while nonprofits can focus on minorities or less common issues
Bureaucracy and hierarchy - gov’t moves slowly, nonprofits can respond more quickly
(Welfare Programs in the USA, studies show only 30 cents per dollar spent reach the poor. Rest was consumed by administrative overhead.
¾ of private charities spend at least 70 cents per dollar - higher efficiency)
Less continuity than NPOs - short term of office of elected officials make them focus on issues of CURRENT CONCERN
Less Freedom to begin experimental programs for public funds than privately financed organizations
Market Failure Theory
Demand Side (there are needs to be fulfilled)
From slides:
NPOs guarantee transparency and lower information asymmetry on the market
From my class notes:
Nonprofits work better with services that are hard to measure because they will be more transparent
Also linked to profit side
Supply-side / entrepreneurial theories
There are people that just want to act and help/engage and resources to be used
- Donative labor hypothesis
- Impure altruism and “warm glow of giving”
Donative labor hypothesis
some are motivated by intangible values rather than economic incentives
Impure Altruism and “Warm glow of giving”
working for others bring psychological benefits to the donor
Theory of the commons
some nonprofits exist to provide common goods to groups of individuals who share an interest in them
TWO MAIN FUNCTIONS OF NONPROFIT SECTOR
- To solve (social) issues - measures: goals execution, effectiveness
- To build social capital - (networks/trust/norms) - measures: representation, participation
Nonprofit Organization Definition
OPNSV
0ne Piece Not So Viel
Organized - chartered as formal organizations; have structure (charities, associations)
Private - not agencies of the government
Not profit distributing - excess revenues are reinvested in the organization; no dividends to individuals or investors
Self - governing - control lies with a board of directors or board of trustees; formally independent from other entities
Voluntary - board of directors and some service providers are volunteers
Types of Non Profit Orgs - Punnet Square
Member-Serving/Donative: orgs for minorities, for parents, patients with rare diseases
Member serving/Commercial: co-ops, industry associations, sports clubs
Community-serving/Donative: Humanitarian orgs, environmental orgs
Community-serving/Commercial: Theaters, universities, health centers
Voluntary Failure THeory
Philanthropic insufficiency - inability to generate resources on adequate scale and stable in time
Phi. paternalism - influence over the goals in the hands of those in control of the greatest resources
Phi. particularism - tendency to focus on particular subgroups of the population
Phi. amateurism - lack of professional knowledge how to solve given problem
NPO Environment
Org environment, micro, and macro
Org environment
includes actors and forces that affect organization’s ability to build and maintain successful relationships with beneficiaries and other stakeholders
Microenvironment
consists of the actors close to the organization that affect its ability to serve its beneficiaries
Macroenvironment
consists of the larger societal forces that affect the microenvironment
NPO’s Macroenvironment:
PESTLE Political Economic Social/cultural Technological Legal Environmental
Microenvironment - Porter’s Five Forces Model
Threat of New Entry
Supplier Power
Buyer Power
Threat of Substitution
four arrows go into: COMPETITIVE RIVALRY
Threat of New Entry
- Time and cost of entry
- Specialist knowledge
- Economies of scale
- Cost advantage
- Technology protection
- Barriers to entry
Competitive Rivalry
- Number of competitors
- Quality differences
- Other differences
- Switching costs
- Customer loyalty
- Costs of leaving market
Supplier Power
- Number of suppliers
- Size of suppliers
- Uniqueness of service
- Your ability to substitute
- Cost of changing
Buyer Power:
- Number of customers
- Size of each order
- Differences between competitors
- Price sensitivity
- Ability to substitute
- Cost of changing
Threat of Substitution:
- Substitute performance
- Cost of change
Microenvironment - Stakeholder
- Beneficiaries/Clients
- Members
- Publics
- Local communities
- Suppliers/partners
- Donors
Values - Vision - Mission
- Values (who you are) - internally identified core assets or “founding stories” to inspire and motivate
- Mission (what you do) - communicate the purpose of the NPO. Unique, clear, memorable, concise.
- Vision (where you want to be) - big ideas, long-term goals, what the org wants to achieve in 10-30 years
Aligning Structure to Strategy
Traditional Unitary structure (U-form)
Milti-divisional structure (M-form)
Traditional Unitary structure (U-form)
specialized around functions, such as sales and manufacturing
Milti-divisional structure (M-form)
the org is divided into several semi-autonomous units guided (strategy) and controlled (financial goals) from the center
Multi-div structure: Pros/Cons
Pro:
- Overall strategy developed in headquarters
- Distinct brand and economies of scale advantages are kept
- Flexibility of units on strategies and operations on the unit level
- More responsibility given to units; units are motivated
Cons:
- Power allocation problems - managers in units may fill they don’t participate in strategy shaping
- Units may drift out from the company core goals
- Higher costs of more management levels
- Relations between units - competition instead of cooperation
Prioritizing Stakeholders:
- Resource dependency
- Strategic significance
- Relationship interconnectivity (alignment of interests)
- Status/image benefits
Stakeholders Analysis Matrix
Resource dependency (Influence) x Strategic significance (importance)
low influence / low importance = low priority
high influence / low importance = monitor
low influence / high importance = protect
high influence / high importance = good relations
