Similarities and Differences in Strategy: NonProfits vs. Businesses

a strategic planning seminar UPAAA and UPAAAz sponsored

 

Strategy is a plan of action for achieving an overall aim. An obvious example is how a good strategy is crucial to winning a war. So is winning in business. And it’s no different from achieving an association’s goals to serve a specific sector.

All organizations, non-profits, or business entities, require strategic planning. Their approaches, however, often differ due to fundamental differences, as illustrated below.

                                            NonProfits                Businesses

Primary Goal                  societal good                  profits

Revenues                         donations                         sales

                                         grants

                                         fees

Stakeholders                   donors                              shareholders

                                         beneficiaries                     employees

                                         volunteers                         customers

                                         community                       suppliers

Metrics                            social outcomes               financial performance

                                         sustainability                    market share

                                                                                  customer satisfaction

The strategic planning process is essentially the same between non-profits and businesses. Both organizations conduct SWOT analyses to identify strengths, weaknesses, opportunities, and threats.

The ability to analyze each of these four factors in depth determines the success of the planning process. I have participated in (and even led) some, and it has been amazing to see the strategy emerge clearly when those analyses are thorough.

However, before going through the SWOT analysis, we should consider the nuances in strategic planning between non-profits and businesses. Precisely because of these fundamental differences, there are factors to consider.

Primary Considerations.                                                                          

A non-profit must prioritize its reputation for ethical conduct. If a nonprofit becomes viewed as unethical, it will never survive as an organization working for some societal good. In other words, the nonprofit must focus on building social equity and, in doing so, further the sustainability of its mission.

A Board of Directors is crucial to this consideration (please see the previous article on "Governance vs. Management"). If the Board of Directors is identified as one of the weaknesses,  strengthening the Board is the primary step.

On the other hand, a business that loses its competitive advantage will soon be wiped out from the market. That is why some for-profit organizations do not emphasize building social equity or working for sustainability. Some may even state its aim of financial success only in the short term.

A business may also aim for long-term survival. In such a case, social equity and sustainability must also be primary considerations.

Mission, Vision, Values, and Goals

 Non-profits emphasize goals that achieve societal or environmental good. In the UP Alumni Association in Arizona, for example, we strive to provide scholarships to deserving but disadvantaged UP students.

The other goal is for the members to enjoy themselves in the process. Thus, events that address both goals are prioritized. We have sponsored in-person Bingo and Other Games Socials before the pandemic, virtual ones during the lockdowns, a hybrid Mini-Conference on the Filipino, and in November this year, we organized a Fil-Am Gala Event.

Businesses prioritize financial success. In MegaLink, for example, our goal was to increase the transactions that go through the ATM switching facility we were operating. Our revenues came solely from the fees we charged for those transactions. Of course, we also had to control expenses.

Implementation and Evaluation

Since there are fundamental differences between both types of organizations, the metrics used to measure success are also different.

For example, the UP Alumni Association in America used to keep track of the number of members and scholarships. After our strategic planning exercise, we identified the creation of chapters as a key goal to find and serve more members, especially in underserved areas.

Both numbers, of members and chapters, will lead directly to more funds available for scholarships. The strategy to organize more chapters will deliver larger numbers faster.

Activities that engage more members are keys to our success. The biennial Grand Reunion and Convention is one major activity members always look forward to joining. But enjoyable charter activities closer to members’ homes would probably reach more members.

Businesses are focused on financials. MegaLink earns from switch transaction fees. The number of member banks, cardholders, and ATM locations was key to increasing that activity. To ensure growth, we focused on all three metrics.

In addition, to avoid attrition, employees and the representatives of the member banks had to feel like they belonged to one big happy family.  To this end, we designed active enjoyable committees, sponsored frequent well-attended socials, and organized joint foreign trips for technology advancement.

In conclusion, while the strategic planning process is similar for non-profits and businesses, the primary considerations, goals, and performance metrics differ. This is due to their fundamental differences as organizations. Understanding these differences will prove crucial for developing effective strategies.