Managing the Non-Profit Organization - Assignment Example

Question one There are several ethical issues facing not for profit organization today. In economic circumstances that are uncertain, nonprofit organization go through an increase of unethical issues that are similar with what goes on in profit making organizations. However there are some ethical issues that perpetually nonprofit organizations face that result in financial abuse and fraud. Misconduct in nonprofits occasions a dip in public confidence which later affect the organization capacity for funding. One of the areas that raise ethical concerns is salaries and perks (Landskroner 118). It is normal and generally acceptable for CEOs in private sector to earn inflated salaries, nevertheless, it raises ethical concerns when a nonprofit leader earns very high salary when the organization is underfunded. Large travel budgets and perks extended to nonprofit workers and board members more often than not raise issues about ethics of such generous compensation when the social needs of the organization have not been met. Another issue is accountability. Nonprofit organizations are given some tax incentives and are not burdened oversight checks and balances on funds’ spending (Hartigan 17). Many not for profit organizations have no effective strategic plans that can ensure the funding is used in the best manner possible. Consequently some programs are not successful as compared to when the organization applied more diligence to its budgeting practices. Conflicts of interest are another area of concern. When the board members use their position for their own personal gain, there is a conflict of interest. This puts nonprofit organization at a very tenuous position. Offering lucrative contracts or preferential treatment to major donors brings about conflict of interest in many not for profit organizations. Absence of transparency is a common feature in not for profit organizations which permit them to cover up services and contracts provided to those with personal relationships held by officers of the not for profit organizations, family members and their employees (Sundstrom 36). There are also cases of fraud in not for profit organizations. Not for profit organizations majorly do not have the budget that requires an external auditor to review their funds on a regular basis that brings about absence of foresight to arrest abuse of funds and financial fraud. When the board or internal accounting department is in charge of auditing of books without external assistance, it is very easy to overlook or change numbers fraudulently in support of ongoing negligence or theft of funds (Drucker 87). Tax evasion is a common ethical issue facing not for profit organizations. Some not for profit organization use their status to advance political issues, act in a manner that are contrary to their mission and conceal unrelated business profit in their returns. Not for profit organizations have to pay taxes on any income on purchases as well as services that are not related to the mission of their conception. Question two There clear differences between a profit making organization and not for profit making organizations. Working for Pepsi as a marketing manager will not be the same as taking up a senior marketing position in not profit making organization since the environments are different. The two types of organizations differ in areas such as decision-making, mission, style of operation, source of revenue and use of profits, among others. Not profit organizations are created to offer service for the benefit of the society but profit making organizations are for making profit and not for public good. Through their work not for profit organizations gain public trust and confidence that make them to be exempted from paying taxes and get more funding (Alvarado 6). These are the differences that can be encountered in terms of purpose of operation between profit-making organizations and not for profit ones. Not for profit organizations get their revenues from in-kind gifts of physical property or service, individual cash donations, grants from corporations or foundation where the donors get a tax deduction. Any profits realized do not befit directors and are not disbursed to stakeholders in terms of dividends. Any funds that are over the budget are reserved for the purpose of other additional programs and activities in line with the not for profit mission. Profit-making organizations get their revenue from stakeholders or investors and payment of goods and services sold in the market. Profits that are not reinvested in the business are disbursed to stakeholders as dividends (Zietlow 8). The motivation for profit making organization is profits while for not for profit making organization is to provide service and programs for the public good. Board of directors for not for profit organizations are referred to as board of trustees which is to that of profit making organizations. The role of board of directors in a profit making organization is to maximize profits and protect the assets of the company. Board of trustees for not for profit organizations is responsible to the organization’s donors, members, funding agencies, tax-payers and the government. They ensure that the organization has adequate resources to perform is functions and achieves is purpose of its creation. Decision making in profit making organizations is very clear. When a decision has been arrived, it has to be carried out. The management has the role of solving any problem that may come up from the decision made. Decisions are solely on loss and profit of the organization. On the other hand, the decision making in not for profit organizations is broad (Sundstrom 36). Many things come into play such as the donors, the target beneficiaries, the state and public at large. Normally cost-effectiveness is checked against the societal values and public benefit. The style of operations between the not for profit organizations and profit-making organization is very different. Profit making organizations are equipped and staffed at a higher level that not for profit organizations. Supervisory and management staff often has specified training and education in technical areas and management. Efficiencies are pursued to increase productivity and streamline systems. Not for profit organizations operate in less than optimal setting owing to inadequate funding. Such issues include understaffing, use of volunteers, outdated or inefficient equipment and systems, inadequate facilities resources that serve an ever increasing population of beneficiaries (Simpson & Taylor 243) Someone from the profit making organization will encounter many differences when he crosses over to not for profit organization in any position. Question three As a CEO of not for profit organization has an obligation to protect the interest of the organization and ensure the achievement of the purpose of its existence. I have to acknowledge the challenge of ethical dilemmas when it comes to people who are closer to me but I have to be strong not to be compromised. If a friend wants to join the board just for prestige, I think I have a right to explain the purpose of the organization to him and the public trust and goodwill that it has to gain in order more funding as well as volunteers. I will begin by explaining the concept of conflict of interest to the friend. Since the person donates funds to the organization it would not be prudent for him to join the board of directors. Making decisions that even affect donors will be difficult since one of the donors sits in the board of trustees (GIBC 18). I will emphasize that it is not my own personal decision to decide who to join the board without adequate consultations with other members. It will be unfair to allow someone to join the board because he is a friend and donor. There many people who will question the move that can affect the public confidence in the organization. There should be a clear criterion to be followed and a stipulation between the minimum members of the board that are desired by the organization for effectiveness. It will be unethical to show preferential treatment to a friend and it will be chaos when many more friends of other senior members request for the same favor. As a CEO I have to set a good example that can be emulated by others. If I become the author of cronyism, then I will be setting a bad precedent for other CEOs who will come after me. The board of trustees has to carry out its functions with authority as well as in an ethical and professional manner. Set standards about admission have to be adhered to without favor. The friend has to join the board because he has the necessary qualifications and the interest of the not for profit organization at heart. The point is that the friend does not have desired qualifications that are needed in the qualification (Allwood & Selart 221). I will talk to him on the importance having some skills that are necessary for the organization. I cannot be the propagator of favoritism when I am looked up to steer the mission and purpose of the not for profit organization. The role of the friend as a donor is appreciated and he does not have to join the board of directors in order for his presence to be felt. I will try as much as possible to politely, and with reason, decline the request of the friend to join the board. Work cited Allwood, C.M, & Selart, Marcus, Decision Making: Social and Creative Dimensions, Springer, 2001, p.221.  Alvarado, Elliott I.: "Nonprofit or Not-for-profit -- Which Are You?” Nonprofit World 18, 6, (2000) 6-7 Drucker, Peter, Managing the Non-Profit Organization, Routledge, 2012, p.87. Global Investment and Business Center, Inc (GIBC), International Humanitarian Organizations Directory, Int'l Business Publications, 1999. p.18 Hartigan, P., 'It's about people, not profits', Business Strategy Review, Winter 2006. Landskroner, Ronaldo, A, The Nonprofit Manager's Resource Directory, John Wiley & Sons, 2002, 118 Sundstrom, Linda-Marie, Nonprofit Accountability: Board Decision-making Processes Related to IRS Regulations, ProQuest, 2008, p.36. Zietlow, John, Financial Management for Nonprofit Organizations, John Wiley & Sons, 1998, p6-8. Simpson, Justice and Taylor, John, R, Corporate Governance Ethics and CSR, Kogan Page Publishers, 2013, p.243. Read More