Strategic Management: Formulation and Implementation

Strategic Planning And Control In Not-for-profit Organizations

Although not-for-profit organizations can be categorized in a number of ways, a basic classification consists of two groups: nonprofit organizations (e.g., private educational institutions, charities, health service organizations, or foundations) and public organizations (federal government agencies, state government agencies, or local agencies).

The basic principles of strategic planning are equally applicable to profit and not-for-profit- organizations. However, in a more specific sense, there are some distinct differences between profit and not-for-profit organizations that have significant strategic implications. Some of these differences are:

* The chief distinction is their source of revenue. Businesses generate income in the form of sales revenue; not-for-profit firms may receive revenue from such diverse sources as taxes, dues, contributions, or even sales. A not-for-profit's revenue often comes from individuals who may never even use the outputs of that organization.

* Planning in some no-for-profit firms, particularly public organizations, may be complicated by political considerations, which are not relevant to businesses.

* Many not-for-profit organizations have not clearly defined goals. The problem is that vague goals cannot help management measure an organization's progress or its effectiveness.

* Strategy implementation in not-for-profit organizations, particularly public agencies, is often highly visible and political.

* Strategic control is difficult to achieve when goals are not clearly defined and measurable.

However, both nonprofit and public organizations can benefit significantly by the principles of strategic planning and control. As an example, I discuss strategic planning applicability to the public sector in the following section.