Organizational Resilience: non-profit versus for-profit organizations

The purpose of this blog is to compare and contrast non-profit and for-profit organizations on organizational resilience, which is the ability of the organization to respond to changes effectively and transform challenges into opportunities. The concept of resiliency is not a system capacity to withstand disruptive change, but also to adapt and transform to the market conditions.

Resilience of organizations are influenced by governance, leadership practices, organizational culture, human capital, social networks, collaboration, planning and information management (Barasa, Mbau, & Gilson, 2018). Frontline leadership often leads the organization to endure resilience by adhering to the organization’s mission (Everly Jr., 2011). This is critical for non-profit organizations as mission is the purpose of the organization’s existence.     

Witmer and Millenger (2016) studied resilience characteristics of non-profit behavioral healthcare organizations and discovered six emerging themes supported general non-profit organizational resilience:

  1. Mission
  2. Improvisation
  3. Community reciprocity
  4. Servant and transformational leadership
  5. Fiscal transparency
  6. Hope and optimism

Leadership, organizational culture, and social network are common elements to support resiliency in both for-profit and non-profit organizations. Leadership nurtures resilience of organizations in day-to-day challenges and abnormal shocks by building trust, creating commitment, pursuing empowerment and promoting inclusiveness among the staff and stakeholders (Barasa, Mbau, & Gilson, 2018). The leadership principles remain the same, but the leadership styles must be aligned to the organizational needs. The attitudes of the staff towards challenges define the organizational resilience. Resilient organizations promote entrepreneurial spirit among the staff to turn the challenges to opportunities in line with the organization’s mission. Community involvement and social network increase social values of the organizations. For-profit organizations pursue social value by implementing corporate social responsibility programs. Non-profit organization’s mission supports social networks (Witmer & Millenger, 2016).      

The major distinctive feature of non-profit organizations is external impact on sustained or increased service to the community rather than profit generation. The difference in non-profit and for-profit missions cascades down to organizations’ governance, operation and finance. Non-profit organizations usually have larger boards comprised of volunteers and many committees specialized in a segment. This level of diversification contributes to organizations resilience. In contrast, for-profit organizations have smaller and paid boards with few committees (Epstein & McFarlan, 2011). The leadership can formulate a resilient approach per organization’s mission by utilizing internal resources or employing third party consultants.

Profit is a parameter for-profit organization to measure and evaluate. Financial management standards, tools and approaches that are used to plan, monitor and control for-profit organizations can be utilized to some extent in managing and monitoring of non-profit budget, cash flow, and revenue sources. Financial analysis, including ratio analysis, will enable the board of directors and management to monitor non-profit organizations’ effectiveness in using the resources to support the mission (Cashwell, Copley, & Dugan, 2019).

Organizational resilience characteristics are common in both for-profit and non-profit organizations. However, there are differences in details in line with the mission of the organization. Leadership of organizations is the most influential stakeholder in formulating resilience strategy and its implementation in the organization.

References:

Barasa, E., Mbau, R., & Gilson, L. (2018). What Is Resilience and How Can It Be Nurtured? A Systematic Review of Empirical Literature on Organizational Resilience. International Journal of health Policy and Management, 7(6), 491-503.

Cashwell, K., Copley, P., & Dugan, M. (2019). Using Ratio Analysis to Manage Non-for-profit Organizations. The CPA Journal, 52-57.

Epstein, M. J., & McFarlan, F. W. (2011). Measuring the Efficiency and Effectiveness of a Nonprofit’s Performance. Strategic Management, 27-34.

Everly Jr., G. S. (2011). Building a Resilient Organizational. Harvard Business Review.

Witmer, H., & Millenger, M. S. (2016). Organizational resilience:Nonprofit organizations’ response to change. Work, 54, 255-256.

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