ADMS 1000 Chapter Notes - Chapter Course Kit Reading 3: Chief Executive Officer, Non-Governmental Organization, Independent Sector
12 Dec 2016
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The Non-Profit Organization
The Third Sector: Non-Profit
A non-profit organization is defined as a club, society, or association that is organized and operated for: social
welfare, civic improvement, pleasure or recreation, or any other purpose except profit.
All NPOs must return any additional revenue (beyond that are required to cover operating costs) back into the
organization.
Nongovernmental organization (NGO) are established in order to contribute to the public good. NPOs/NGOs
pefo a ide age of seies that at e adeuatel poided dietl though the piate o the puli
sector.
The Thid “eto o Voluta “eto o No-pofit “eto o Idepedet “eto, is defined as
constitution all those organizations that are:
- Private, non-governmental
- Formally incorporated
- Independent of government coercion
- Prohibited from distributing profits to their stakeholders
- Governed by a board made up of volunteers
Composition and Funding
The oe o-pofit seto efes to haitale ad o-profit organizations that are not hospitals and
universities. A subset of non-profit organizations is registered charities. Registered charities differ from non-
profit organizations in that they have the ability to provide donors with tax receipts. They are subjected to
more stringent regulations.
Their main source of funding is from governments, foundations, user fees and commercial activities. Non-
governmental organizations deliver crucial social, health, educational, economic, cultural, research, funding
and advocacy services to all segments of the Canadian population.
Charities and non-profits may obtain funding from a range of sources including: earned income from the sale
of products or services, individual or corporate donations, government funding and foundation grants.
Need for non-profit organizations
Failure of the market and public sector
It provides people with services that they are unable to get from public institutions or private companies.
Private, for-profit companies provide goods and services that enough people are willing and able to pay for,
which leaves many people wanting for services because of their inability to pay. Public institutions provide
some of these services, but they are limited to services that are deemed to be for the common good.
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Non-profit organizations can deliver services that the government cannot provide as effectively or efficiently
ad that the piate seto at e epeted to poide. It delies pogas o seies that ae tailoed to
local communities. It can also help develop social capital and a shared sense of citizenship and contribute to
the working of a healthy and vital democracy in Canada.
Instruments of Political and Social Action
Voluntary associations give voice to groups of people who may be in opposition to the government of the
day, or its policies. They provide people whose interests are not represented by the ruling establishment with
a vehicle for collective expression and advocacy.
Response to Impersonal Market Forces
In situations where there are no clear measures of service quality, such as in human and social services, non-
profits will be seen as more trustworthy delivers of care and service. Non-profit organizations represent
soial apital that geeate iil soiet ad itigates the ipesoal foes of the aketplae.
Non-profits as open systems
Their mission is what they state. There is no profit motive underlying the organizational activity. If there is an
underlying goal, it is to make the world a better place.
They differ from profit organizations in the focus of their competition. Most of the competition is on the input
side. The most important resource for non-profits is financial support for their operations. There is usually far
less competition on the output side, since non-profit organizations are niche players, concentrating on
providing services to a particular group in need.
To ensure their survival, non-profits have to compete successfully for their financial resources in the form of
grants and donations.
Governance of Non-Profit Organizations
There is a board of directors responsible to the owners, a chief executive officer (CEO) or executive director
(ED) responsible to the board, and different levels of staff members who are ultimately accountable to the CEO
or ED.
In non-profits, there are now clear owners. This is why the board of directors are responsible to a broader
group of stakeholders- the oo good. Thei deisio ust aide legal egulatios, ad adhee to the
moral and ethical standards of the community/society that they serve.
The governing boards of non-profits are made up of volunteer members who are legally prohibited from
obtaining any financial gain from their membership on the board. This means that the ED, who is a paid staff
member of the organization, cannot be a member of the board, and has no vote or authority on the board.
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Functions of boards
The main function of the board is to manage the affairs of the organization by providing direction and ensuring
that the organization meets its legal obligations. In order to do this, an effective board must perform a number
of functions, including:
- Keeping the mission of the organization as the central focus of activities by judging all functions and
decisions against it
- Guarding the values of the organization through explicit deliberation and discussion.
- Keeping the organization focused externally on the needs of its stakeholders
- Assuring the performance of the staff and the continuous quality improvement of the organization
- Concentrating on the future by providing strategic leadership for the organization and defining its
vision.
Types of governing boards
Working Boards
This is hee oad ees do the ogaizatios ok o ok losel ith the staff to a out the
operations of the organization. Working boards are characteristic of newly created organizations where:
- Board members are the founders of the organizations and have a passion for the mission of the
organization, so that they wish to be a part of the day-to-day operations of the organizations; and/or
- The organization has insufficient resources for paid staff persons to carry out the operations of the
organization.
Policy Boards
They focus on strategic planning and decision making, rather than on the day-to-day operations of the
organization. They set limits for their executive directors and paid staff.
This type of board is more characteristic of mature organizations, where board members are solicited for their
expertise in different areas of importance for the organization.
Mixed Boards
They are characteristic of many non-profit organizations, especially smaller ones. Board members are
responsible for the strategic direction of the organization, but they also participate in the day to day operations
of the organization.
It can result in considerable role confusions and conflict. However, if the board members and the staff are
comfortable with ambiguity and are conscious of when a mixed board is performing operational duties and
when it is performing governance duties, this contingence model can be quite successful.
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Document Summary
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