Executive Summary
This report covers the concept of Stakeholder management, which is quite an essential concept in any organization. Nonetheless, one thing that should be noted is that both profits and not-for-profit organizations usually take different approaches to stakeholder management. Furthermore, Understanding and knowing the difference in stakeholder management between for-profit and not-for-profit has various benefits as it plays a crucial role in determining the value, objectives, and decision-making within an organization. However, several issues arise from having a comprehensive understanding of stakeholder management differences between for-profit and not-for-profit organizations present numerous. Some common issues they face are different Stakeholders, objectives, approaches to measuring success, and Regulations and Compliance. Besides the above issues, several factors cause the issues, including different decision-making processes and limited resources. The report will then finalize by providing recommendations and implications for the policy so that they can efficiently manage the difference in stakeholder management. Some of the main recommendations are to encourage collaboration and also encourage innovation.
Introduction
One of the common concepts that must be given necessary attention within a for-profit or not-for-profit is stakeholder management. Stakeholder management is simply the process used to balance the different interests of the stakeholders within an organization. Nonetheless, one thing that should be noted is that both profits and not-for-profit organizations usually take different approaches to stakeholder management due to their differing priorities and goals (Viader & Espina, 2014). To better understand stakeholder management, this report will analyze each organization’s various concepts and how they relate to stakeholder management. For instance, when it comes in the not for profit organizations, the customers are unique in that, in this scenario, they are the ones that benefit from the organizations. Furthermore, this organization’s market, product, stakeholder, and organization categories differ from those in the for-profit. For instance, when it comes to the concept of the not-for-profit, the product market is more focused on the efficiency and the quality of the services that will be provided.
Moreover, the market stakeholders in the not-for-profit are concerned with the organization’s reputation. Contrary to the not-for-profit organization, the for-profit organization is quite different in that its primary focus and interest is to ensure that they maximize the profits and shareholder values (George et al., 2021). In such organizations, any decision that is made is to increase the value of the shareholder and also increase the organization’s revenue. Nonetheless, this is usually not the case for the not-for-profit, as they have many stakeholders. Some familiar stakeholders are the beneficiaries, donors, volunteers, and employees. All of the above, in conjunction with organizations, work jointly to serve the needs of different people as their goals are pretty different, and they are not financially motivated (Viader & Espina, 2014). Hence based on the above explanation, it is evident that the differences between for-profit and not-for-profit organizations are based on their priorities and goals.
Importance
Understanding and knowing the difference in stakeholder management between for-profit and not-for-profit has various benefits as it plays a crucial role in determining the value, objectives, and decision-making within an organization. This is such that the main objective of the for-profit organization is usually increasing revenue and maximizing shareholder value which means that all the strategies within such organizations only aim at elevating the revenue (George et al., 2021). However, the not for profit they have numerous shareholders, with the primary aim being to serve people in need. Hence, the not-for-profit strategies emphasize attaining the mission and enhancing their reputation and credibility, which is vital as it helps prevent resistance they might encounter as they look for funds.
Therefore, a detailed understanding of the difference is vital as it will help the management to be well informed on the decision-making procedure and the guidelines on which strategies will be appropriate for each organization. For instance, a not-for-profit organization will prefer maintaining most of its services in-house to ensure it provides quality services and establishes a close relationship with the beneficiaries. However, on the other hand, the for-profit can take a different approach. This is such that it can decide to outsource some of the functions of the services to ensure efficiency and lower the costs, as its sole purpose is usually to increase revenues while the not-for-profit focus is to serve the needs of individuals.
Also, knowing how the two organizations differ in stakeholder management will help understand how resource allocation is carried out in the toe organizations. This is such that the difference will help in knowing why most for-profit organizations will be willing to invest heavily in high-yield projects, even if it comes at the expense of reducing worker benefits. On the other hand, knowing the difference will help understand why the not-for-profit takes a different approach than the for-profit. This is such that the not-for-profit usually allocates resources based on its stakeholder needs and the organization’s mission. In doing so, the not profit will likely prioritize investing in services and programs that directly impact the community regardless of the financial returns.
Issues
Several issues can be revealed from knowing the stakeholder management difference between for-profit and not-for-profit organizations. Some common issues are different stakeholders, objectives, approaches to measuring success, and regulations and compliance.
Different stakeholders
Different stakeholders are among the main problems that policy practitioners face as they attempt to understand stakeholders’ differences between not-for-profit and for-profit organizations. This is such that in not-for-profit organizations, multiple stakeholders exist, such as volunteers and donors. Each has different needs, so the board and the executive must ensure they account for all their needs (Viader & Espina, 2014). Having numerous stakeholders becomes a significant issue for policy practitioners since they have to consider various perspectives and needs as they make strategic decisions.
Different Objectives
Another major issue that policy practitioners face is the different objectives between for-profit and not-for-profit organizations. This is such that the main objective of the for-profit organization is to increase revenues and maximize shareholder value (George et al., 2021). On the other hand, the not-for-profit mainly exists to serve the needs of people and also ensure that they attend to the different needs of various stakeholders such as donors (Viader & Espina, 2014). Due to the differences in the organization’s objectives will result in different strategic goals, decision-making processes, and priorities, which eventually make it challenging for policy practitioners to comprehend and align with either organization’s objective.
Different Approaches of Measuring Success
Another major issue arises from how the two organization measures their success. This is such that both two-measure successes differ in that for-profit success is measured in terms of financial performance, such as shareholder value, profits, and revenue. However, when it comes to the not-for-profit, they take a different approach as they usually measure the success in terms of the quality of services rendered and achieving their mission (Viader & Espina, 2014). They also measure their success based on their credibility and reputation, which usually helps them with funding (Roloff, 2008). Since the two usually measure success differently, it becomes problematic for policy practitioners to compare not-for-profit and for-profit organizations.
Regulations and Compliance
Another major issue in knowing the difference in stakeholder management between the not-for and for-profit organizations concerns the difference in regulations. This is such that the not-for-profit organizations are usually subjected to different regulations as their lien of business allows them o be exempted from some taxation. Hence, whenever policy practitioners are engaged in the strategic decision-making process, they have to factor in the difference in regulations and compliance of each organization which is usually complicated and time-consuming.
Factors
Different Decision making
One of the barriers revolves around the decision-making process. This is such that the two organizations usually take different approaches to make decisions. This can be challenging, especially for policy practitioners who are used to working in a particular organization. However, when dealing with multiple stakeholders, such as in a not-for-profit organization, the policy practitioner will have to address the concerns of all the stakeholder’s concerns in a non-hierarchal manner (Roloff, 2008). For instance, a policy practitioner may be familiar with hierarchal decision-making, which is usually common in for-profit organizations. However, this will not be the case whenever the policy practitioner works with the not-for-profit, as the decision-making in a not-for-profit is different, and they will have to participate in shareholder engagement before making a decision.
Limited Resource
Another factor that can be described as a cause for the above issues is the limitation of resources. This is such that in most cases, the not-for-profit organization faces the problem of having limited human resources, funding, and infrastructure, making it challenging to implement a strategic initiative. This is such that there is increased demand for the services from Not for profit organizations, yet they have little support from private and government (Ridder & McCandless, 2010). However, practitioners used to working in resourceful for-profit organizations will find it challenging to work with the limited resources in the not-for-profit organizations.
The difference in Regulation and compliance
Another major factor that can cause the above issues concerns regulations and compliance. This is such that the regulations in for and not-for-profit organizations tend to be different, creating barriers for policy practitioners to work efficiently. For instance, in not-for-profit, there is increased pressure for more transparency and accountability from stakeholders as they want to know the influence of the organization’s service (Costa et al., 2011). For instance, the policy practitioner might be used to working in a less restrictive environment which is common in for-profit organizations as the accountability and performance systems for not-for-profit are more complex than those of the for profit.
Recommendations and Implications
Based on the above issues, there are several recommendations for policy practitioners and how they can effectively engage in strategic management. The recommendations encourage both collaboration and innovation.
Encourage Collaboration
One of the ways that strategic differences can be managed is by ensuring that policymakers and practitioners should encourage collaboration between not-for-profit and for-profit organizations. Collaboration is vital, especially for larger organizations, as they sometimes require what another organization offers (Proulx et al., 2014). For instance, a nonprofit organization like those in that ion healthcare and human resource will have to collaborate with other businesses to access program partners and resources (Proulx et al., 2014). The collaboration will help in having an in-depth understanding of each other’s objectives, decision-making process, and priorities as they have significant differences. Therefore, by having a detailed understanding, policymakers might find it easy to implement efficient strategies that align with the goals, priorities, and decision-making process of both organizations.
Encourage innovation
Another recommendation to policy practitioners is to encourage innovation. This is such that they should advocate for innovation in their strategies and approaches, especially in not-for-profit organizations, as they usually have limited resources and rely heavily on donors and other interested parties. For this to succeed, the policy practitioners should be willing and ready to try new technology or approaches to help implement some of the strategic imitative they might have devised.
Conclusion
From the above, it can be seen that stakeholder management is quite different in both for-profit and not-for-profit organizations. In profit, the priorities are usually to maximize shareholder value and increase profits. During ion not for profit organizations, the focus is mainly on serving the needs of the community and individuals through charity organizations. Furthermore, knowing the stakeholder management differences between the for and not-for-profit has various significance, issues, and challenges. Understanding how stakeholder management differs between for-profit and not-for-profit is vital as it will help in the section on guides, strategies, and resource allocations for efficient stratagem management. Ultimately the differences help in knowing whether the organization’s activities are aligned with its objectives, missions, and priorities. As for the issues, Some of the common issues they face are different Stakeholders, different Objectives, different approaches to measuring success, and Regulations and Compliance. Also, for the factor, several factors can be deemed to cause the above issue that policy practitioners face, and they are different decision-making processes and limited resources. Based on the above issues, Some of the main recommendations encourage collaboration and innovation.
References
Costa, E., Ramus, T., & Andreaus, M. (2011). Accountability as a managerial tool in non-profit organizations: Evidence from Italian CSVs. VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations, pp. 22, 470–493.
Proulx, K., A. Hager, M., & C. Klein, K. (2014). Models of collaboration between nonprofit organizations. International Journal of Productivity and Performance Management, 63(6), 746-765.
George, G., Haas, M. R., McGahan, A. M., Schillebeeckx, S. J. D., & Tracey, P. (2021). Purpose in the For-Profit Firm: A Review and Framework for Management Research. Journal of Management, 0(0). https://doi.org/10.1177/01492063211006450
Viader, A., & I. Espina, M. (2014). Are not-for-profits learning from for-profit-organizations? A look into governance. Corporate Governance, 14(1), 1-14.
Ridder, H. G., & McCandless, A. (2010). Influences on the architecture of human resource management in nonprofit organizations: An analytical framework. Nonprofit and Voluntary Sector Quarterly, 39(1), 124–141.
Roloff, J. (2008). Learning from multi-stakeholder networks: Issue-focussed stakeholder management. Journal of business ethics, pp. 82, 233–250.
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