Purpose in Not-for-profit organisations…

Purpose of trust or benefit for others. Legislative objectives can determine existence. Their return involves personal fulfilment. Political influence? Reporting back to donors may be as important as fulfilling their wishes.

Measuring Performance:

cost benefit analysis. Comparison of transport services compared to others (bus vs rail etc). And Efficiency and effectiveness. Also target setting – but who do you focus on; owners or users? When setting targets.

Resources?? Taxation funding vs right for public to decide how they spend their money. Increase in charitable and private donations to public service organisations.

The Market?? Would a business approach to public services help? Might be good for efficiency and effective use of resources but may take away from the ‘service’ and primary purpose of the organisation – lose the personal touch?

Profit maximising or Satisficing?

Profit maximising…. Sole purpose to increase profits. Shareholder focus. Implications for other stakeholders.

Satisficing…. Satisfy and suffice all in one. Doing only what is needed, and no more.

BMW – purpose is in mission statement but seems to be able to hit both areas. Maximising profit for the Quant’s, through engineering mastery, whilst portraying needs of other stakeholders. Difficult balance in maintaining engineering excellence and meeting customer price expectations.

Timescales and expectations….

Anglosaxon model: unfettered free market with perhaps a short term focus. Pre cursor to the economic downturn!

Rhine model: Regulated free market with longer term focus. Eg. 2008 financial crisis pre-cursor. And other stakeholder influence on this – regulation restrictions, profit caps…. Energy. Monopolies.

Importance of risk – shareholder owns lawnmower, might consult gardener but final decisions on use and associated risk lie with the owner. Competes with the stakeholder approach to purpose.

Agency theory – managers run organisations for their own interests when their common interests diverge (Dalton, 2007). Managerial mischief. Creates reward for managers auto detriment of owners. Mergers and acquisitions – rarely create more value for owners but elevate and reward (status and reputation) managers more often. Challenge ‘moral’ obligation.

Survival – often the case. General change and competition. The end of a ‘profitability continuum’. US newspaper industry – finding new ways to maximise profit. Online versions, mobile e-readers….

Start-up organisations – survival focused on gaining a foothold. Longer term focus needs to be developed though. Entrepreneur: low entry costs in already established industry or ground breaking new products/services that reorganise an industry? A new combination! leading to short monopoly gains. Creative Destruction.

Example: Machiatto’s. Family owned coffee shop. European culture plus hot beverages and food. A rarity in its location. Facing challenges with austerity and diversified into live music/themed dinner nights, free internet access, a second shop specialising in waffles and ice cream. Still maintaining coffee and food focus and existing to maximise profit for the family owners, but having to meet wider stakeholder needs more increasingly.

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Organisational Purpose…

Purposes – portray values and beliefs. Recognise the dominant culture. Reflect the politics of stakeholder relationships. Often seen in Public statements (vision and mission). Tend to be longer term in focus and generalise about success or failure.

Objectives – are specific and more measurable than purposes, in terms of success and failure. Often express particular expectations of stakeholder groups. They bridge strategic thought and implementation.

Shareholder and Stakeholder Views of Organisational Purpose…

There are two mains approaches to Organisational purpose: the shareholder and the stakeholder view.

Basically the shareholder view focusses on the organisation existing to maximise profit, whilst the shareholder view focusses on aiming to satisfy those who are affected or have an affect on the organisations goals.

There are are few areas for discussion here….

– Shareholder Theory approach argues that by maximising profit an organisation can subsequently look after its shareholders (employees as an example) better.  It a bit chicken and egg isn’t it – make money to look after people better, or look after people so that they can make you money is how I view this.

– stakeholder theory I’m not convinced that  focussing on shareholder needs and maximising profit ensures that a company will survive.  Social media is a good example where stakeholders (perhaps the public) can have a huge affect on an organisations ability to survive.  News of coffee shop non payment of tax spread like wildfire and consumers boycotted their products as a result (not that this ruined the firms but it had an impact on its ROI for sure) – if the organisations understood that financial responsibility was an important value of its consumers, particularly in times of austerity, then it may have been able to rectify the issue before any damage was done.

Here is a comparison of the two approaches:

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Organisational purpose and who’s interest?

Not for profit:

The obvious one here is the Armed Forces. Whose purpose is clearly defence of the nation – although this has become more diverse with activities such as disaster relief and aid to the civil communities.

Clearly they operate in the interest of the public, the government, supranational organisations such as NATO and the UN, it’s employees, their families, more recently charities due to large donations, other nation’s governments, other nations public, the other public services, past leaders (retired staff), …….

For profit:

Here I’m choosing Starbucks. Who’s primary purpose is to provide hot beverages to consumers. Thinking about this though you could argue that it’s purpose is to provide profit for its shareholders. A bit of a mix of purposes here depending on which lenses you look through.

They operate in the interest of shareholders and the board, the public, other businesses, recently financial regulators have taken considerable interest I their activities as do environmental groups, coffee growers, distributors, …….

Not an exhaustive list yet I’m sure. what has been interesting in doing this activity is that defining the purpose of an organisation, especially profit making ones, can be quite difficult or ambiguous depending on how you view the organisation yourself.

Only the other day I was discussing a service providing NFP with someone – they were concerned about the new bosses approach which took the shape of purposefully reducing their service offerings. We both thought that this was completely opposed to what the organisation was there to do – provide as best a service that it can whilst trying to meet the demand. It may be however that this new boss sees things differently. Perhaps they see its purpose as satisfying the staff so that what service they do provide – although not at the volume demanded of it – their quality is improved???

This line of thinking makes it difficult because there are knock on affects on who you might them see as a stakeholder.

Mmmmmm, interesting….

Stakeholders – Unit 4…

It is never ending!

This unit is about stakeholders and how they are both influenced and can influence an organisations activities (Freeman).

It is important that organisations focus on the concerns of stakeholders and not just their own – particularly when stakeholders may be interested in social responsibility, or shareholders interested in profit…..

Managing stakeholders closely links to managing RISK.

Many definitions exist some broad and some narrow in scope. ‘Anyone’ to ‘Groups and Individuals’ – ‘interest’ to ‘Influenced or can influence’ – ‘Organisational goals to Organisational activities’. All similar on the surface but with much more specificity when looked at underneath.

We covered a fair amount on stakeholders in year 1 including; identification, mapping, relationships. From simple internal and external models to directly and indirectly affected ones, through to relationship maps and power vs influence.

Some stakeholders are not even involved in the delivery of the firms business at all – campaigners, governments etc….

Some may make demands that the organisation may not even agree with.

Questioning Stakeholder Assumptions:

– don’t assume stakeholder groups are homogenous. There may be sub groups.

– don’t assume stakeholder expectations remain constant. Discontent with an individual stakeholder can soon become a large negative issue for the organisation, especially due to social media now.

– stakeholders do not necessarily share the same values as the organisation, nor interpret situations in the same way.

Over simplifying a very complex issue???

It’s a fine balance – too much time analysing and not doing is a risk to the business but, not analysing stakeholders and not considering their needs and expectations runs the risk of unexpected circumstances raising their head!

Tma02 – Summary of Unit 3 Concepts… A tool kit