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Funtinoal Of Non Profit Orgs. Essay, Research Paper

I. Introduction: Why do Nonprofit organizations exist and what do they do.

II. Planning in Nonprofit organizations

1. The importance of planning

2. Steps in planning

a. setting goals

b. identifying the needs of those whom the goals will serve

c. developing and defining specific role and mission of organization

d. specific organizational objectives

e. setting priorities

f. measuring results

III. Budgeting Nonprofit organizations

1. Importance of budgeting

2. Steps in budget process

a.defining mission objectives

b.projecting expenditures based on available revenues

c.reporting and control

IV. Funding Nonprofit organizations

1. How Nonprofit organization get their money.

V. Managing Nonprofit organizations

1. Total Quality Management

VI. Summary

The non-profit sector is based on two philosophical concepts: voluntarism and market failure economies. Voluntarism is applied ethics, moral philosophy and action for the benefit of the public, and market failure economics explains the existence on non-profits. The government simply cannot provide or perform services for everyone.

Non-profit organizations are everywhere. Wherever there are people there are non-profit organizations. Non-profit, or Not-for-Profit organizations exist to perform or provide services. Whether provided by a public organization or agency, or a private organization or agency, they serve a purpose. Government, educational institutions, community organizations and health care facilities are all examples of non-profit organizations. They are very different in size, some are small neighborhood grassroots organizations with only a few employees and little money, and some are extremely large corporations with millions of dollars and hundreds or thousands of employees.

Nonprofit organizations have several functions, and not each one is alike. Essential to all non-profit organizations are four functions: planning, budgeting, funding and management.

Strategic planning is “a disciplined effort to produce fundamental decision and actions that shape and guide what an organization (or other entity) is, what it does, and why it does it” (Herman, The Jossey-Bass Handbook of Nonprofit Leadership and Management, 155)

A non-profit organization cannot be effectively managed if it is not effectively planned. One of the challenges facing non-profit organizations has been long range, strategic planning. Long range, strategic planning in the non-profit sector is essential to the success of an organization. Long range, strategic planning encompasses broad policy and direction setting, internal and external assessments, attention to key stakeholders, the identification of key issues, development of strategies to deal with each issue, decision making, action and the continuous monitoring of results. (Herman, The Jossey-Bass Handbook of Nonprofit Leadership and Management, 154) While it is important to deal with the short term planning and activities of non-profits, managers or directors must consider the future of their organizations. Successful planning should be comprehensive, integrating all areas of responsibility of an organization.

There are several steps involved in the planning for a non-profit. The first step, or key factor in planning for non-profit organizations is the clear definition of the goals of the organization. Who will those goals will serve, and will those goals likely remain the same in the next 5-10 years? This is important for the organization because it provides those involved (namely the board members) with a framework in which to base their decisions about the organization. The needs of those who the goals of the organization will serve is the next step in the planning process. Will the services of the organization be needed by those who they serve in the coming years? Developing and defining a specific statement of the role and mission is key. Some statements tend to be too broad in definition therefore leaving a “window” for interpretation in the future. These steps establish long term goals for an organization and should be realistic and attainable.

Specific organizational objectives should then be developed to support the long range goals of the organization. This should be specific, measurable and also attainable. The planning process also involves setting priorities of it’s stated objectives. What is going to be done first, and how is it going to be achieved? Involved in any planning process should be measurable results. The body of an organization should know what is working and what is not for the organization. If something is not working into the plan of the organization it should be re-worked or abandoned. For that reason, it is important that the long range plans are reviewed and revised annually if need be.

Outside environment effects the plans of the organization almost as much as the internal structure and environment does. The changing needs and costs of services are also major factors to be considered. A good long range plan will span about five years into the future of an organization.

Budgeting in a non-profit organization is perhaps the most essential function of the organization. It is part of the planning structure of a non-profit organization and provides the framework for reporting and control. Budgeting makes certain that the organization will have the financial resources to carry out it’s programs and plans. It involves estimations of revenues and costs, tradeoffs and decision as to the allocation of resources among competing claims. The person responsible for the budget in a non-profit organization is the Chief Administrative Officer. The fiscal year of a non-profit budget usually runs from July – June. For example, FY 1997-98 would be July 1997 – June 1998.

There are three steps in the budgeting process: defining the mission objectives, projecting expenditures based on available revenues, and reporting and control. Some organizations have several missions, and each mission should be budgeted in order to meet the goal of the mission. For example, if a mission is to provide mental health services for children, that mission (or program in a sense) should be budgeted separate from the general organization budget. That would give you access to more money from other organizations or government agencies in which to carry out the mission. The budget should take into account the relevant revenues and expenditures associated with the mission. Projecting expenditures based on available revenues is a strategy many non-profit organization use. It is common for an organization to start the budgeting process with expenditures first, then work their way back later to match revenues to the expenditures. This is probably the most exciting part of the process and will keep administrators up late at night attempting to secure funds, especially near the end of the fiscal year.

Each year, barring a major change in services or objectives of an organization, it is expected that an organization’s budget will increase. Partly due to the cost of providing services and expansion of services, but mainly due to inflation and incremental increases in expenses such as salaries.

Establishing executing and monitoring a reporting and control system in the final step in the budgeting process. This is crucial because these results make up the budget for the upcoming year. Wrong information or results in the reporting and control process could cost an organization thousands of needed dollars and put them in financial jeopardy. It also allows the administrators to analyze the services of the organization relative to the stated mission objectives to ascertain whether or not they have accomplished their goals at a minimum cost and if expected revenues were attained.

No organization can run on hope and human kindness alone. It takes money to run a non-profit organization. It is, in fact, this preoccupation with money that is the reason why our non-profit organizations are necessary. (Lee, Do or Die, 2)

Money is the life blood of an organization. Without money, there is no organization. No salaries can be paid, no furniture can be bought, supplies cannot be purchased, outside services (if needed) cannot be paid for.

Funding for non-profit organizations come from several entities. It can come in the from the Federal government, state government, city government or county government. Funding comes from private sources such as foundations, corporate foundations, gifts, and contracts for services. Some come from the public by way of fund-raisers, some from membership dues such as professional and fraternal organizations, many come from the public sector in the form of grants, contracts, and subsidies. Some funding even comes from individual citizens such as those who leave a provision in their will upon their death.

Again, as in each essential function of the non-profit organization, there are steps that one can follow to develop a funding program. Depending on the type of organization and the required amount of money need, an organizations strategy for obtaining funds from different sources should be as different as night and day.

An organization should first decide to pursue funds in an aggressive manner in order to accomplish the basic goals of the organization. Non-profit organizations should also be mindful of the areas of fundraising in which they need help. There is not always a skilled grant writer within an organization, sometimes an organization must look to outside sources. Determining the needs of the organization is important. An organization should not “short change” itself or attempt to get by on shoestring budget. It’s important to remember that planning and budget stages of the organization and the missions goals set by the members of the board. Packaging your needs is helpful because it outlines the organizations goals and needs and how much it costs to attain them. Donors can also decide if they would like to fully support the overall goals of the organization, or just one aspect of it’s operation.

Knowing and identifying potential supporters is a key step in developing a solid funding program. The sixth step is equally important. An organization should have a strategy for raising money. It’s just like planning for the organization. It makes sense to plan to have money to provide services to those who need them. Strategy involves knowing who to go to for how much, and the proper way to ask for it. Raising money is job of everyone at the organization. The final step in developing a solid funding program is to remember to acknowledge support from a donor, it could mean the difference between five hundred thousand dollars ($500,000) and zero ($0) dollars.

Fulfilling an organization’s mission and long range planning goals is a function known as management. Effective management begins in the planning stage for non-profit organizations. If a Chief Executive does not have a solid plan of how they will manage their organization, they will encounter several problems along the way. Since every non-profit is different, each requires a different managerial technique. It is the responsibility of the Chief Executive to implement management plans throughout the organization.

The different types of services performed and how organizations receive their funding all influence the managerial needs of the organization and the way in which the organization is managed by a manager.

Within the overall management function of a non-profit are several smaller, no less important, functions of an organization such as financial management, staff management, case management, and the managing of volunteers.

One aspect or technique of managing suggested to be used by all non-profit organizations is Total Quality Management (TQM). Total Quality Management is based on effectively servicing the needs of the customers with maximum efficiency. The goal of TQM is to eliminate the problems in standard examining procedures and evaluate the effectiveness of the procedures in relation to the customer.

An important part in TQM is measurement. Measuring performance before and after will determine if TQM has worked for an organization. TQM is geared toward improving the quality of services of an organization and can only be effective if supported by all involved in managing an organization.

Although all non-profits organizations differ in many ways, in order for each one to be successful they must have proper planning, adequate funding, a sound budget and effective management. These four functions of non-profit organizations are extremely important for the survival and future of an organization, and for the quality of services to be provided by an organization.



1. Gies, David L., Ott, J. Stephen, Shafritz, Jay M. The Nonprofit Organization: Essential Readings. California: Brooks/Cole, 1990.

2. Grayson, Leslie E., Tompkins, Curtis J.. Management of Public Sector and Nonprofit Organizations. Reston, Virginia: Reston Publishing Co., 1984.

3. Herman, Robert D. The Jossey-Bass Handbook of Nonprofit Leadership and Management. San Francisco: Jossey-Bass publishers, 1994.

4. Lee, James C. Do or Die: Survival for Nonprofits. Washington D.C.: Taft Products, Inc. 1974

5. Powell, James Lawrence. Pathways to Leadership: How to Achieve and Sustain Success. San Francisco: Jossey-Bass publishers, 1995


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