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Mar 12, 2019 in Analysis

Non-profit organizations

Introduction

The United States is said to have the largest Non-profit organizations in record globally that is growing rapidly. To date, the sector holds a 1.6million tax-free organization that has 2.4 trillion dollars in assets. The sector has, however, faced problems due to mismanagement by the stakeholders. This has resulted in the formulation of numerous state and federal for the purpose of protecting the public from deceptive and unfair practices in the corporate world by governing the operations of these organizations. The Sarbanes-Oxley Act is one of those laws. These proposals require the organizations to have among others, authority mandates, audit committees, and some auditing requirements. These requirements state that the audits of the organizations should be done freely in order to promote organization integrity. The limitations imposed by such laws have, therefore, served a great purpose in ensuring that organizations meet their objectives effectively as stated in their memorandum of association.

The Legal Requirements for a Non-Profit Organization

There are several operational requirements that should be met by the non-profit organizations. To start with; the role of the board of directors is clearly spelled out in the Sarbanes-Oxley act. Unlike for- profit organizations, the nonprofit corporation is governed by a board of directors. Its role in the organization is to supervise administration, make resolutions for high performance of the organizations and also endorse its key activities. In addition, these directors are supposed to be loyal and take care of the organization. This mandate is implemented by the law similar to for-profit organizations. Moreover, the directors are required to be submissive to the institution so as to comply with the mission of the organization. On the other hand, the non-profit organizations have some limits in their operations. Firstly, the nonprofit organizations are subject to a non-distributional restriction. In essence, the organization may have net earnings but these earnings cannot be divided to individuals who have authority over the organization. Such individuals include; the directors, the staff and other stakeholders of the organization. Due to this drawback, the directors of a non-profit organization are faced with the challenge of assessing the performance of the organization.

Another operational limitation for the non-profit organization is the lack of voting members. There are no members to vote in non-profit organization and, as a result, the board in this case is independent to appoint new members that in return creates liability gap that affects nonprofit boards. The lack of accountability by board members results in hardship in identifying the associate groups that are responsible.

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The board directors in non-profit organization lack adequate information to make sound decisions for the organization. This is brought about by numerous tasks that the board directors are mandated to carry out. This in turn impacts on the performance of the board. Most of the non-profit corporations rely on volunteer dominated boards that do not have sound measures of achievement and responsibility, resulting to board members relying heavily on the workers.

The non-profit organizations, furthermore, do not have market-based regulatory administration.  There is no effectual way of monitoring non-profit organizations by non-governmental agencies in a legislative way. In most of the states, it’s only the members of the board themselves that can stand to sue the organizations for mismanagement and misappropriation of funds. Moreover, the non-profit organizations have no clear aspects of law that can stand to sue in case of mismanagement or lack to satisfy public interest.

Role of Board versus the C.E.O in Non-Profit Organizations

The board members of the non-profit organizations are charged with various responsibilities within the organization as compared to the chief executive officers of non-profit organizations. Firstly, the board members are charged with the duty of making sound decisions for the organizations. They make sure that the mission of the organization is met. This is done by ensuring that the organizations governance matters such as funding, hiring of skilled staff, and running the organization in accordance with the law are tasks that are adhered to. The board members also appoint the chief execute officer from within themselves and also come to his or her defense when problems within or without the company arises. In addition, the board members prove or disapprove proposals made by the chief executive officer regarding the organization.

The board is also charged with the role of commitment to the organization where they should carry out their duties diligently by being responsible and accountable. Accountability roles include allocating funds for the organization’s growth and training of staff. The board also acts as mentors for newly employed staff, organizing for annual general meetings for the organization to review its performance as well as the performance of the organization. Chief executive officers, on the other hand, serve other diverse roles. They are charged with the mandate of proposing ideas and way forward of the organization to the board. 

The chief executive officer also shares the board meetings and also makes decision pertaining to the organizations though they have to be proved by the board. He or she also act as a link between the organization and other parties.

The Role of Volunteers versus and the Link between Managerial Practices

Volunteers are people who work or give services not to generate personal income or benefit personally out of a project, but to benefit the society at large. The volunteers in the non-profit organizations’ play key roles in ensuring the wellbeing of the organizations. Firstly, they fund the organization through funds from their own pockets. They also try to look for donors to fund an organization, and work to their level best towards an excellent performance of the organization. 

 
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While an executive director serves the daily operations of an organization, a volunteer director takes the duty of regulation making, and they ensure that the organization has countered strongly with any legal disputes that might arise. Addition, they are helpful in terms of programming. Skilled volunteers can be helpful in offering services to clients. They bring down the cost of offering services through their commitment, and they can provide excellent services to clients since they do their work out of passion. They bring proficiency and experience to the organization. For example, some volunteers interact with the society while the organization, in general, does not. In this context, volunteers will talk about the organization with their allies and help them understand it better. If they are given direction in the best way, volunteers are a significant asset, and of important help in giving services to those that requires them.

Besides being good and efficient workers, volunteers help in fund development. While getting of money to run an organization is the chief duty of the board, there other means that volunteers can help to develop the organization. As part of the progress committee, volunteers can work as prospectors; they dig deeper in their pockets to fund the organization. The volunteers can also be innovative people who will organize for events to raise funds. For instance, they can organize ruffles, public auctions and festivals while others will look for better media coverage of the organization. For best outcome, it is basic for the board to think through an enrollment strategy to acquire the right volunteers serving the organization. This is done with a precise plan of what needs should be accomplished to comply with the mission of the organization.

Managerial Practices and Perceived Organizational Effectiveness

There are managerial practices that are used to evaluate the effectiveness of the organization. It is common that governments in the United States of America have for many years relayed with the non-profit organizations where many of them depend on the government for funding. The effectiveness of a non-profit organization, therefore, is a fear for public policy makers and directors as well. In analyzing non-profit organizational effectiveness, a host of intangible challenges is addressed. An organization’s effectiveness is the power to make use of its surroundings and get hold of limited and valuable resources. 

This approach gives explanation for the use of measures in acquiring resources. In addition, a non-profit organization has many constituencies such as customers, staff, sponsors, the board and vendors that also measure the effectiveness of the organization. These parties in most cases use diverse methods in evaluating the non-profit organization effectiveness. For example, the customers of the organization may pay notice to their situation and evaluate whether the circumstance is gaining anything in a relationship. The funders of the organization, similarly, may want to evaluate financial statement and following the right administration procedures. Individuals in the organization as well in most cases communicate with one another about the well fare of the organization and its progress. They also get information from people within the constituents of the organization about how they are faring and also their wellbeing with the organization. In this way, the decisions of the organizations are developed and diverted.

Another way of achieving the effectiveness of the board is through the board of the non- profit organization. The directors in the board are responsible for the issues and behavior of the organizations they head. It is universally agreed that non-profit organizations are expected to carry out important and difficult tasks and that many boards do not comply with these expectations. In order to achieve effectiveness of board involvement in strategic management, the use of proper meeting administration techniques and minimal conflicts with the board of directors were accredited to nonprofit executives’ affirmative evaluation of boards’ performance.

The board’s effectiveness by the use of ranging board practices and the inclusion of triple means of evaluating organizational effectiveness can be done through various means. These include grading based on official recognition reports and by government officials whose agency contracted with the sample non-profit organizations. For the case of the chief executive officers, organizational efficiency relates to board participation in planning, strategy formulation and raising money for the organization. This includes board members donation, some features of financial management and some board expansion practices. 

There is a relationship between various administration issues that leads to the effectiveness of the board. For instance, aim setting, monetary analysis, stakeholders’ analysis, the environmental tendency analysis, competitive evaluation and action management could lead to effectual success in non-profit organizations. The number of memberships, intensification of membership, development in donations and the relative amount of total income may be attributed to the effectiveness in an organization.

Organizational Capacity

Organizational capacity can also be called organizational capability. It is the capability of an organization to meet the clients’ expectations. It also includes the creation of organization-specific competencies that provide competitive merit as they are exceptional. It also makes sure that the staff skills and hard work are geared toward achieving organizational aims and targets. There are strategies used to be able to achieve organizational capacity. Such strategies include: 

Economic capability: In this issue the organization should be able to produce services and goods at subsided cost as compared to the competitors. These goods and services should meet the clients’ expectations.

Marketing capacity: The services that are offered by the organization should make a difference in the lives of its clients and distinguish it from its competitors. Realistically these services and goods offered by the organization should add value to the lives of its clients.

There should also be technological capacity: The services and good customers receive from the organization should be different from similar products being offered by another organization. Hence, they should be inventive; of good and satisfying quality in the way they are made and distributed.

Typically, organizational capacities develop perceived customer value in three dimensions. Firstly, Responsiveness; this is the capacity of the organization to satisfy the client’s needs in the right time. Secondly, Relationship: This is the power of the organization to be able to develop a good relationship with the clients and the staff. In the third aspect is the service quality: This is where the organization can design and develop and distribute that satisfy or exceeds the client's expectation.

Four Crucial Elements of Capable Organizations

These include split mindset that entails a correspondence between the clients and staff expectations. Secondly, there are management practices including regulations, procedure and norms that guide the activities of the organization that are clearly explained. There is also the capability for change. In this aspect there is the capacity to decrease the time for all activities and manage the available time in the best way. Personal behavior is changed if it does not satisfy the consistency in how the client is treated. There should also be a complement and integration with one another to come up with common expectations, mannerism and goals.

How Ethical Fundraising Practices Contribute to Overall Organizational Capacity

Ethics is a structure of good principles that defines what is good and right for the society. Ethical fundraising contributes to the capacity of the organization. Such ethics in non-profit organizations include transparency, reliability, and confidentiality.

These organizations need to have a code of ethics since they depend on the society trust to carry out their work. In this case, it is crucial for non-profit organizations to gain the public trust through their commitment to their code of conduct. The significance of  having ethics in anon-profit organization is to give the staff, volunteers and board members the guidelines and way forward for making ethical decisions and making sure that there is accountability for these decisions. When board members of a nonprofit organization embrace a code of ethics, they show their commitment to ethical behavior. Such a commitment helps a big deal in earning the public trust. The council of nonprofit supports all nonprofit organizations to come up with the right code of ethics for their organization. The council argues that having the code of ethics earns the non-profit organization attraction for skilled and qualified staff, employs board members. It helps to preserve donors and make sure that all the activities of the organization comply with the codes of the organization. Most of the nonprofit organizations have databases online to show transparency and accountability to members of the public.

Donors who fund the organization, moreover, expect feedback as a result of their donations. It is also ethical for the non-profit organization to give yearly reviews about their financial statements. This helps a big way in reserving funder of the organization since they expect to know how their funds are put in use.

Features of Most Effective Non-Profit Organizations

An effective nonprofit organization is said to be effectual if it can satisfy the mission of the organization. This is achieved through the integration of sound administration, strong and reasonable governance and a determined rededication to achieving the outcomes. The sound features that stand out in effective nonprofit organizations include: 

  • Sound management structure: These organizations have management practices that meet the legal standards. 
  • Secondly, Brand Name awareness: Organizations that are effectual have brand names that become household names that in turn attract attention from different quotas.
  • Thirdly, effective organizations have breakthrough of new ideas. Some of the non-profit organizations take in old plans and use them to achieve success in their organizations.

Finally, there is good governance that results in a good relationship within the organization and outside the organization. Good governance here can be achieved through; setting of goals, working towards satisfying the mission of the organization and seeking ways to improve situations in an organization. There is also an aspect of 'serve and advocate'. In this aspect, effective nonprofit corporations find out that it is not possible for them to achieve their aims through large-scale advocacy and hence they change their legislation. Eventually, all nonprofit organizations connect the division between service and sponsorship. They make sure they achieve the best in both aspects.

Another great feature of a nonprofit organization is the capacity of making markets work. Effective nonprofit organizations understand that having self-interest and the regulations of finances is away from effective than a petition to clean self-sacrifice. These nonprofits look for ways to work hand in hand with markets and assist companies where they can. They do this by swaying business practice, put together corporate partnerships, and come up with ways that help them a public diversity and grander scale to be able to achieve this. Effective nonprofits used the environmental defense mechanism to become conscious of controlling market forces for social change. On top of this, effective nonprofits inspire evangelist: Effective nonprofits put up strong communities of supporters who assist them realize their larger goals. They value volunteers, supporters, and the consultants not just for their time to the organization but also for their evangelism. In order to motivate the donors, commitment in these non-profit make touching experiences that assist in connecting the donors to the organization’s mission and important values.

Effective non-profit organizations, additionally, cultivate nonprofit networks. Even though a good number of nonprofits pay edge service to partnership, most of them value other groups as competitors for limited possessions.  Effective nonprofit organizations, on the contrary, help their peers succeed, making networks of nonprofits friends and dedicating outstanding time and energy to improving their field.  They freely distribute wealth, proficiency, talent and power with other nonprofits not because they have excess but because they want success, and it is within their interest to take such an action. In essence, even if the nonprofit apply the above-mentioned practices they still will not solve most the global problems. Other sectors should follow the same trend. For great impact to occur, government sectors and for-profit business influential must find out resolutions from this.

Effectiveness, in this sense, is the performance of the activities of a nonprofit organization in line with the organizations strategies and policies. It calls for the use of the organization’s surroundings and getting hold of limited and valuable resources. This is in order to meet the set objectives. 

Conclusion

Nonprofit organizations are faced with various requirements such as legal, managerial and ethical issues that require ardent compliance in order to achieve their objectives. The Sarbanes-Oxley Act has come a long way the compliance with these requirements. The Act provides for various requirements to make sure these organizations are run as required. This Act created a complete revision of the regulatory framework for auditing profession and public accounting and laid down guidelines for ensuring that corporate governance was strengthened. Some of these provisions include the requirement of a code of ethics to senior financial officers and enhancing of internal regulation in relation to financial matters and professionalism. The visibility of ethics and strong culture of ethics have been elevated by all these requirements in all organizations. The strategies for achieving various objectives of nonprofit organizations need to be formulated in accordance with the capabilities of the organization. To motivate the donors and to show their commitment to the organization, non-profit organizations have to operate in a way that assist in connecting the donors to the organization’s mission and important values.

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