WHAT IS MANAGEMENT



Bonus cases

Bonus case 12-2

SURVIVAL OF THE FINANCIALLY FITTEST

Are you the kind of person that likes to live life to the fullest? Are you looking for a career that’s challenging, with opportunities for advancement, and a large number of openings? Then welcome to the world of financial management in non-profit organizations. Non-profits are crying out for the talents of skilled financial managers who often overlook non-profits in favor of profit-seeking firms. As the availability of public funding becomes scarcer, the demand for financing expertise has soared among non-profits. The call for innovative and experienced financial managers has grown louder.

Don’t be fooled, however, into thinking that “non-profit” means “no money.” The size and scope of the non-profit sector often surprises even seasoned business professionals. Also, misconceptions abound about work in non-profits. For starters, many people assume that the non-profit sector of the economy is quite small. In reality, it is valued at approximately $665 billion per year. This makes the U.S. non-profit sector twice as large as the U.S. construction industry. Also, the term “non-profit” is sometimes deceiving, bringing to mind church-sponsored bingo games or bake sales. Unfortunately, people forget that the - sector contains such notables as the American Red Cross, Harvard University, the Smithsonian Institution, and the National Audubon Society, none of which sponsors bingo or bake sales. In the United States today, the non-profit sector includes over 1.24 million institutions, including schools, hospitals, human service organizations, religious groups, museums, and more. Over 15 million people are employed in the non-profit sector of the economy.

Work in non-profits often includes important interactions with the profit-seeking sector. For example, Sandy Boutin works as the director of Great Dane Rescue in Plymouth, Michigan. Her organization is always in need of dog food but has a very small budget. Boutin decided to invite dog food manufacturers to participate in her group’s fund-raising efforts. The companies got their name exposed to a large group of prospective customers in return for donating dog food to the rescue program. Through Boutin’s efforts, both groups got what they wanted. Often large non-profits, like the Smithsonian Institute, actively seek corporate sponsorship programs to help fund such activities as its traveling exhibitions.

Many non-profit organizations experience problems at the top of their organizations. David LaGreca, a manager with the Volunteer Consulting Group, says that top management positions at non-profits are often filled with social workers, former dancers, and musicians. These individuals have creative and artistic skills but often lack the training and business expertise of executives at profit-seeking firms. Chris Perks, president of Perks Reutter Associates, an engineering consulting firm, agrees. According to Perks, “In non-profits you are often dealing with people whose expertise is in the mission of the organization, not necessarily in administration or management. Furthermore, many employees do not come from business backgrounds. They are often hired as staffers because they are committed to what they are doing.” It’s also difficult to recruit qualified individuals to serve on non-profit boards. The corporate scandals of the early 2000s caused waves in the non-profit sector. Many prospective board members fear that the potential of scandal or poor business practices at a non-profit could damage their reputation or business standing in a community.

Non-profits have also been severely lacking in another critical aspect of 21st-century business: Most are not taking advantage of the powerful technology of the Web. Financial experts fault non-profits for not taking advantage of such technology tools as tracking software and databases. With the proper financial management and technological expertise, non-profits could use the Internet to enhance their fund-raising capabilities. Non-profits seem to be listening to this advice. The possibilities for non-profits are clearly there if they can attract qualified business and financial expertise.[i]

DISCUSSION QUESTIONS FOR BONUS CASE 12-2

1. HOW IS THE JOB OF A FINANCIAL MANAGER IN A NON-PROFIT ORGANIZATION DIFFERENT FROM THAT OF A FINANCIAL MANAGER WITH A PROFIT-SEEKING FIRM?

2. Should financial managers in non-profit organizations be compensated equally to their counterparts in profit-seeking firms? Why or why not?

3. Do you see the job of the non-profit financial manager as getting easier or more difficult in the future? Where might you get facts to support your conclusions?

4. How can a financial manager at a non-profit make better use of Web capabilities to enhance the financial position of the organization?

answers to discussion questions for BONUS case 12-2

1. HOW IS THE JOB OF A FINANCIAL MANAGER IN A NON-PROFIT ORGANIZATION DIFFERENT FROM THAT OF A FINANCIAL MANAGER WITH A PROFIT-SEEKING FIRM?

The financial management of a non-profit organization differs in many ways from that of a profit-seeking firm. The financial manager of a for-profit organization usually has a very accurate estimate of sales revenue and its timing. The non-profit financial manager does not have the same planning accuracy—inflows may be donations that cannot be anticipated accurately. The goals of the organization are also quite different. The for-profit organization is in business to make a profit. The non-profit organization’s mission is often to provide a service that cannot be stated in dollars and cents.

2. Should financial managers in non-profit organizations be compensated equally to their counterparts in profit-seeking firms? Why or why not?

Non-profit managers tend to have very different motivations those managers of profit-seeking firms. The “non-profit mindset” is well known. Often the need for achievement is high. Monetary compensation is less important than the satisfaction of doing a worthwhile job. While all good managers deserve compensation for their efforts, non-profit financial managers usually expect to receive less in monetary terms.

3. Do you see the job of the non-profit financial manager getting easier or more difficult in the future? Where might you get facts to support your conclusions?

The current trend in government is to transfer more and more social services from government to the private sector. This means that there will be increasing need for financial management. There is also growing scrutiny of the way non-profits handle their finances. The position of non-profit financial manager can only get more challenging.

4. How can a financial manager at a non-profit make better use of Web capabilities to enhance the financial position of the organization?

Many excellent websites exist for non-profit organizations. One, , features articles available to download covering such topics as developing expense categories and completing necessary tax forms.

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[i] SOURCES: JOHN CASE, “THE SURPRISE ECONOMY,” INC. MAGAZINE, SEPTEMBER 2002, P. 38; AND RACHEL BRAND, “NON-PROFITS FEEL EFFECTS OF CORPORATE SCANDALS,” DENVER ROCKY MOUNTAIN NEWS, JULY 30, 2002, P. 24B.

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