08 Jul HOW MUCH INFLUENCE SHOULD STAKEHOLDER INTERESTS EXERT OVER A NON-PROFIT COMPANY? WHY?
How much influence should stakeholder interests exert over a non-profit company? Why?
DQ 1
Like their for-profit counterparts, non-profit companies are paying close attention to stakeholder interests. How much influence should stakeholder interests exert over a non-profit company? Why?
DQ 2
To remain viable and effective, a non-profit organization (NPO) needs to generate funding. The amount of funding generated by an NPO depends on the organization being viable and effective as measured by the extent to which the organization’s mission is being achieved. What is the most effective way for an NPO to manage the diverse and potentially conflicting needs of stakeholders to assure that the funding-effectiveness cycle is not disrupted? Why?
Stakeholders in Nonprofit Corporations
Introduction
Lewis, Hamel, & Richardson (2001) described nonprofits as groups of individuals who associate to perform public tasks delegated to them by the state; provide services for which there is a demand that state and for-profit organizations will not fulfill; or influence policy in the state, the for-profit sector, or other nonprofits. As such, the goal of a nonprofit organization could be described as one that provides an educational or charitable service. Emphasis is often placed on helping a certain population or community. For this reason, a variety of people and entities have an interest in seeing this nonprofit succeed and to direct the progress or direction of the organization. This desire to influence outcomes is typically based on the needs or desires of each of these stakeholders. These individuals, groups, or organizations are vital to the development and sustainment of a nonprofit organization. As such, it is critical for the organization to become familiar with the identity of these stakeholders and the influences they may have on the success or failure of the organization.
Types of Nonprofit Organizations
Lewis et al. (2001) describe three types of nonprofits: philanthropic organizations, mutual benefit organizations, and advocacy organizations. Philanthropic organizations are typically those whose mission focuses on health, education, religion, cultural concerns, and social services. Because they are privately controlled and tax-exempt, donors can make tax-deductible contributions to this type of nonprofit. Mutual benefit organizations include those organizations such as chambers of commerce, professional associations, labor unions, and social clubs that exist for the benefit and interests of their members rather than the delivery of services to the public at large. Advocacy organizations promote social, economic, and/or political causes and include political parties, citizen groups, and lobbying groups among others (Lewis et al., 2001).
Managing Stakeholder Support in the Nonprofit Organization
Strategic management in any of the three primary types of nonprofits involves satisfying stakeholders either as individuals or groups who are essential to the success of the nonprofit organization. Internal management must take into consideration the skills and level of involvement of each group when making strategic decisions. Often questions are asked such as what are the key skills this project requires, who will be most interested in funding this project, and what specific support will the organization be able to generate on a long-term basis to sustain the project (Herman &Rentz, 1999).Because stakeholders support the overall movement of a nonprofit organization, the answers to these questions are critical to the successful planning of any endeavor. Based on the strategic plans, organizations generate involvement from specifically targeted groups, who, in turn, may be able to contribute to the overall movement of a nonprofit organization by spearheading or supporting publicity and marketing campaigns, by contributing to specific projects, by volunteering time and energy to supplement staff or a myriad of other positions and functions necessary to keep the wheels turning.
Each nonprofit is only as good as the stakeholders who participate. Understanding their drivers and needs becomes a critical part of not only the planning process but also the generation of sustained involvement. Often stakeholder analysis is the best and easiest way to identify both the stakeholders and their needs. When generating this data, the danger lies in not discovering hidden agendas and in not recognizing or managing stakeholder attempts to control the direction of the organization. Herman and Rentz (1999) assert that the level of involvement and length of commitment of specific groups typically drive the organization to succeed in the areas most desired by specific individuals. Further, Shea (2012), in his study of multiple nonprofit organizations, finds that nonprofit performance is driven by the interests of the most salient stakeholders. Furthermore, his analysis indicates nonprofit stakeholders have the ability to control in managers those behaviors that are not necessarily aligned with mission statements. In addition, he states that evidence suggests salient stakeholders with shared interests collaborate for mutual benefit. Based on this, it follows that it is in the best interest of the organization to guard and guide the involvement of specific stakeholders.
Knox and Gruar (2012) suggest that relationship marketing theory may contain answers to managing stakeholder involvement. According to these authors, the theory involves creating exchanges across salient stakeholder groups in which all find value, fostering interactions through direct relationships and existing networks, and in fostering mutual commitment and trust through the support of building strong stakeholder interrelationships. These interrelationships and cross-functional stakeholder networks may in fact guard against one-sided involvement and prevent any one stakeholder from hijacking the organization to meet their specific agenda.
Abzig and Webb (1999) have also determined that there is a multitude of literature supporting the belief that places nonprofit organizations in the center of multiple bilateral relationships with stakeholder groups. For instance, Ben-Ner and Van Hoomissen (1991) used stakeholder concepts to theorize that nonprofit organizations are founded and controlled primarily by those interested in the provision of some services for themselves as consumers and/or for the benefit of others as donors or sponsors.
Stakeholders
Different sources of nonprofit income and labor are associated with alternative stakeholders. Viewing these constituencies as beneficiary groups, it is strategically necessary to consider how the particular mix of income sources and involvement influences the capacity of nonprofits to generate resources and to supply services, especially if there is competition among stakeholder groups for control of the policies and practices of the organization. Some of the stakeholders most recognized by nonprofit organizations are discussed below.
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