A STRATEGIC APPROACH FOR NOT-FOR-PROFIT ORGANISATIONS
Dissertation by
ANTHONY EDWARD RIPPON
[87/1845/0] submitted in fulfilment of the requirements for the degree
Magister Commercii
in
Strategic Management
in the Faculty of Economic and Management Sciences at the Rand Afrikaans University JOHANNESBURG October 2002 Supervisor: Prof. N Lessing
ACKNOWLEDGEMENTS
“What lies behind us and what lies before us are tiny matters compared to what lies within us.” - OLIVER WENDELL JONES “We have inherited the world from our forefathers; we have borrowed it from our children.” - JESSE JACKSON To the Lord for the provision of the necessary motivation, peace of mind, creative inspirations, abilities, and carrying myself in the palm of his hand at all times. To mother and father, daughters Alechia and Marique, friends for their love spiritual guidance moral and varied other support during the past few years. Special thanks to: • My supervisor, Prof. Nic Lessing, for his faith in me, patience in busy periods, as mentor and encouragement and his support at various presentations, whilst preparing for this further field of study. • To Rand Afrikaans University for providing support systems, the necessary infrastructure, and academic facilities. • To Roelf de Beer, Francois van Aswegen, Madeleine Burger, Teresa John, Marian Manellis, Aneza Manellis, Eva Evans, Gwen Watkins, Pam Bedford-Owen and Jenny de Bruin for providing support, editing, artwork and graphics provided in this study. • To those executive committees, management, office personnel, and members of not-for-profit (non-profit) organisations who were willing to provide time and assistance with their practical knowledge and information required for this study.
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A STRATEGIC APPROACH FOR NOT-FOR-PROFIT ORGANISATIONS
CHAPTERS
Page Chapter 1: Orientation PART ONE: STRATEGIC MANAGEMENT Chapter 2: The essence of a strategic approach PART TWO: TRANSFORMATION AND BEST PRACTICE Chapter 3: Environmental scanning for not-for-profit organisations Chapter 4: Strategy formulation for not-for-profit organisations PART THREE: MANAGING STRATEGIC CHANGE Chapter 5: Strategy implementation for not-for-profit organisations Chapter 6: Evaluation and control for not-for-profit organisations PART FOUR: TRANSLATING THEORY INTO PRACTICE Chapter 7: A not-for-profit organisation model for best Strategic Management practices CONCLUSION Chapter 8: Not-for-profit not necessarily not-for-gain Annexure A: WECF project - Clean up of Celeste park in Roodepoort Annexure B: Conference: A strategic approach for entering the millennium Annexure C: Conference: The MEMO model BIBLIOGRAPHY 8-229 247 249 253 254 7-204 5-138 6-173 3-58 4-97 2-28 1-2
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SYNOPSIS
NAME: DEGREE: TITLE: UNIVERSITY: PROMOTER: DATE: RIPPON A E M Com (Strategic Management) [Dissertation] A strategic approach for not-for-profit organisations Rand Afrikaans University Prof. N Lessing October 2002
Non-profit organisations are of great importance in community development. These organisations often take up those issues of concern in communities, which profit making organisations are not interested in pursuing. Many South African non-profit organisations remain dependent on sources of revenue such as subsidies, donations or grants (if available) from the government or the private sector. As times have changed in the country whereby such revenue sources are limited, non-profit organisations focus on becoming more efficient in the management of these organisations. Managing non-profit organisations is in many cases carried out by participants on a voluntary basis. Projects and programmes can ensure meaningful outcomes if Strategic Management principles and processes are applied efficiently in the initial phases of development. Some examples of non-profit organisations in communities are evident in the form of educational institutions, social and welfare organisations, environmental community forums and organisations representing the business sector. Strategic Management practices in the South African corporate environment are well established, while in South African non-profit organisations the application of Strategic Management has been in many instances overlooked.
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Strategic Management can assist with realising the vision, goals, and objectives of a non-profit organisation. To achieve the desired results for meeting these goals and objectives more efficiently, this study concentrates on the best Strategic Management practices needed to assist developing and existing not-for-profit (non-profit) organisations in South Africa. Best practices applied to profit and non-profit organisations can enhance the developing of an overall balanced quality of life in a community. preservation of depleting scarce resources in a community. By managing non-profit organisations in a business-like manner and applying a strategic approach to managing these organisations efficiently, greater performance will emerge. Success in the future for non-profit organisations depends on the ability to adopt a strategic focus. sustainability. Non-profit organisations decision-makers need to be flexible by adapting to change. The research mission is to provide non-profit organisations with Strategic Management principles and processes and to provide a tool for translating Strategic Management theory into practise. This study concentrates on developing a strategic approach for non-profit organisations. The result is to translate the relevant theory into best Strategic Management practices for successfully managing non-profit organisations. Realigning a non-profit organisation’s strategies and objectives by adapting to changes occurring in the environment is important for future long-term Furthermore managing non-profit organisations resources efficiently can assist with the future
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SINOPSIS
NAAM GRAAD TITEL UNIVERSITEIT STUDIELEIER DATUM : : : : : : RIPPON A E M Com (Strategiese Bestuur) [Verhandeling] ‘n Strategiese benadering vir nie-winsgewende organisasies (uit Engels vertaal) Randse Afrikaanse Universiteit Prof. N Lessing Oktober 2002
Organisasies sonder winsoogmerk is van groot belang in gemeenskapsontwikkeling. Hierdie organisasies neem gereeld verantwoordelikheid vir sake van belang in die gemeenskap, waarin winsgewende organisasies nie belangstel om na te streef nie. Baie Suid-Afrikaanse nie-winsgewende organisasies bly staatmaak op bronne van inkomste soos subsidies, donasies of toelaes (indien beskikbaar) van die regering of die privaatsektor. As gevolg van die veranderende tye in die land het sulke bronne van inkomste beperk geword en is die fokus van nie-winsgewende organisasies om sulke organisasies meer doelmatig te bestuur. Die bestuur van nie-winsgewende organisasies word meestal deur deelnemers op ‘n vrywillige basis uitvoer. Projekte en programme kan van sinvolle uitkomste verseker wees as strategiese bestuursbeginsels en -prosesse doelmatig in die aanvangsfases van ontwikkeling toegepas word. Sommige voorbeelde van nie-winsgewende organisasies in gemeenskappe word aangetref in die vorm van opvoedkundige instansies, sosiale en welsynsorganisasies, omgewingsgemeenskapsforums verteenwoordig. Strategiese bestuurspraktyke in die Suid-Afrikaanse korporatiewe omgewing is goed gevestig, maar by Suid Afrikaanse nie-winsgewende organisasies word die toepassing van strategiese bestuur in baie gevalle oor die hoof gesien.
vi
en
organisasies
wat
die
besigheidsektor
Strategiese bestuur kan bydra tot die realisering van die visie, doelwitte en mikpunte van ‘n nie-winsgewende organisasie. Om die gewenste resultate te bereik vir meer doeltreffende behaling van hierdie doelwitte en mikpunte, konsentreer hierdie studie op die beste strategiese bestuurspraktyke wat nodig is om die ontwikkeling van bestaande sonder winsdoel (nie-winsgewende) organisasies in Suid-Afrika te help. Beste praktyke wat toegepas word op winsgewende en nie-winsgewende organisasies kan die ontwikkeling van ‘n oorhoofse gebalanseerde kwaliteit van lewe in ‘n gemeenskap verhoog. Verder kan die doelmatige bestuur van nie-winsgewende organisasie se hulpbronne bydra tot die toekomstige voorkoming van uitputting van skaars hulpbronne in die gemeenskap. Deur nie-winsgewende organisasies op ‘n besigheidsgrondslag te bestuur en toepassing van ‘n strategiese benadering om hierdie organisasies doelmatig te bestuur, sal tot groter prestasie lei. Sukses in die toekoms vir nie-winsgewende organisasies hang af van die vermoë om ‘n strategiese fokus aan te neem. Herskikking van ‘n nie-winsgewende organisasie se strategieë en mikpunte om by veranderinge wat plaasvind in die omgewing aan te pas, is belangrik vir toekomstige langtermyn volhoubaarheid. Nie-winsgewende veranderinge. organisasies se besluitnemers moet aanpasbaar wees by
Die navorsingsdoelwit is om nie-winsgewende organisasies met
strategiese bestuursbeginsels en -prosesse te voorsien en om ‘n metodiek te voorsien om strategiese bestuur teorie in die praktyk toe te pas. Hierdie literatuur studie konsentreer op die ontwikkeling van ‘n strategiese benadering vir nie-winsgewende organisasies. Die mikpunt is om die relevante teorie te omskep in die beste strategiese praktyke vir die suksesvolle bestuur van nie-winsgewende organisasies.
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CURRICULUM VITAE:
Anthony Edward Rippon was born on 16 April 1959 in Pietermaritzburg and matriculated in 1976 (Alexandra Boys High). After working for several years in the transport industry, completed part-time a B. Com and B. Com (Honours) degrees at RAU. He has held a number of management related posts, including Research Manager for various associations in the road transport industry, Strategic Marketing Manager for Autonet (a division of Transnet Ltd), Managing Director for Business 2 Business (Pty) Ltd and CEO, A. E. Strategic Community Development. He has initiated a number of successful businesses from a property development in Knysna, franchise outlets in various Gauteng regional shopping centres, to a business consulting company offering business, marketing and Strategic Management services and solutions to a wide variety of industries. . He has voluntary participated in managing of a number of community based nonprofit organisations. Activities included, chairing the board for the Community Chest in the Westrand in 1997 & 1998, board member for the Roodepoort Chamber of Commerce & Industry (ROCCI) in 1999 and Treasurer for the steering committee of the Western Environmental Community Forum (WECF) in 2000 & 2001. He has developed a passion for strategic community development focusing in the environmental industry. His interest in Strategic Management led to further studying civil society organisations for further contributing to the non-profit sector in South Africa.
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LAUDATIO:
The study is based on assisting managers and decision-makers (in many cases volunteers) of non-profit organisations (NPOs), with the task of managing these organisations more efficiently. Non-profit organisations are in many cases mismanaged and misrepresented by participants that manipulate and exploit these organisations for power and personal gain. The study provides for a management model to assist decision-makers with the correct structuring of these organisations. Encouraging a sound value system, culture and climate for best businesslike practices and ultimately contribute to future strategic community development. The study indicates a need for a framework to assist decision-makers and managers of these organisations with a tool for transforming Strategic Management principles and processes into practice. Furthermore, the study contributes to the importance of further research, sustainable development and future growth of the non-profit sector in South Africa.
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A STRATEGIC APPROACH FOR NOT-FOR-PROFIT ORGANISATIONS
CONTENTS
List of figures List of acronyms CHAPTER 1: ORIENTATION 1.1 1.2 1.3 1.4 1.5 Background Research problem Study objectives and nature of the report Research methodology and constraints Closure 1-2 1-4 1-6 1-13 1-16 xv xvi
PART ONE: STRATEGIC MANAGEMENT CHAPTER 2: THE ESSENCE OF A ST RATEGIC APPROACH 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 Introduction A Non-Profit Organisation (NPO) Classification of organisations Profit versus non-profit organisations Types of non-profit organisations The essence of a strategic approach Strategic decision-making and non-profit organisations Closure 2-28 2-29 2-32 2-33 2-36 2-41 2-50 2-53
Strategic Management model adapted for non-profit organisations 2-51
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PART TWO: TRANSFORMATION AND BEST PRACTICE CHAPTER 3: ENVIRONMENTAL SCANNING FOR NOT-FOR-PROFIT ORGANISATIONS 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 Introduction A holistic systems approach A strategic organisational change management model A strategic community environment Environmental variables External environment Internal environment Strategic managers and decision-makers Closure 3-58 3-59 3-62 3-67 3-78 3-80 3-84 3-88 3-92
CHAPTER 4: STRATEGY FORMULATION FOR NOT-FOR-PROFIT ORGANISATIONS 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 Introduction Strategy formulation and non-profit organisations Strategy formulation and strategic decision making process Strategy formulation and the Strategic Management model Some non-profit organisation strategies Popular non-profit organisation strategies Selecting the best strategy Strategy formulation of policies and constitution Closure 4-97 4-98 4-111 4-116 4-119 4-126 4-133 4-133 4-134
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PART THREE: MANAGING STRATEGIC CHANGE CHAPTER 5: STRATEGY IMPLEMENTATION FOR NOT-FOR-PROFIT ORGANISATIONS 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 Introduction Strategy implementation and Strategic Management model Business plans and non-profit organisations Actions needed to implement these plans Action steps for formulation of business plans Who carries out strategic plans for non-profit organisations Implementing these plans for non-profit organisations Closure 5-138 5-139 5-144 5-148 5-151 5-157 5-166 5-168
CHAPTER 6: EVALUATION AND CONTROL FOR NOT-FOR-PROFIT ORGANISATIONS 6.1 6.2 6.3 6.4 6.5 6.6 6.7 Introduction Planning and evaluation and control cycle The strategic control process The evaluation and control process Some guidelines for proper control of non-profit organisations Managing strategic organisational change for non-profit organisations Closure 6-173 6-175 6-182 6-187 6-193 6-194 6-199
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PART FOUR: TRANSLATING THEORY INTO PRACTICE CHAPTER 7: A NOT-FOR-PROFIT ORGANISATION MODEL FOR BEST STRATEGIC MANAGEMENT PRACTICES 7.1 7.2 7.3 7.4 7.5 7.6 Introduction Choice of business form for the model Some company models in terms of the Companies Act Proposed non-profit organisational Model Introducing environmental community forums Closure 7-204 7-205 7-205 7-211 7-219 7-224
CONCLUSION CHAPTER 8: NOT-FOR-PROFIT NOT NECESSARILY NOT-FOR-GAIN 8.1 8.2 8.3 Introduction Strategic Management and non-profit organisations Closure 8-229 8-233 8-238 247 249 253 254
Annexure A: WECF project - Clean up of Celeste park in Roodepoort Annexure B: Conference: A strategic approach for entering the millennium Annexure C: Conference: The MEMO model BIBLIOGRAPHY
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A STRATEGIC APPROACH FOR NOT-FOR-PROFIT ORGANISATIONS
LIST OF FIGURES
Page Figure 1-1 Figure 2-1 Figure 2-2 Figure 2-3 Figure 2-4 Figure 2-5 Figure 2-6 Figure 2-5 Figure 2-6 Figure 3-1 Figure 3-2 Figure 3-3 Figure 3-4 Figure 3-5 Figure 3-6 Figure 3-7 Figure 3-8 Figure 3-9 Figure 4-1 Figure 4-2 Figure 4-3 Figure 4-4 Figure 4-5 Figure 4-6 The seven habits paradigm The effect of sources of revenue on patterns of client organisation Phases in the evolution of strategic planning An analytical framework A broad perspective of the strategic process The five ever present tasks of Strategic Management The strategy-making hierarchy Strategic decision-making process Strategic Management model for non-profit organisations Some changes for managers 2-41 2-43 2-45 2-46 2-48 2-49 2-50 2-52 3-61 1-5
An organisational development change management model 3-63 Normal distribution curve: scanning of a non-profit organisation operating in a region or community circular zone Greater Johannesburg Unicity with eleven regions Environmental variables From situational analysis to strategic choices Scanning of the external environment The Mc Kinsey 7-S framework Board of directors continuum Non-profit organisation strategy formulation process Effective habits: Internalised principles and patterns of Behaviour The seven habits paradigm Strategic decision-making process Strategic Management model for non-profit organisations Forces driving industry competition 4-107 4-110 4-111 4-115 4-120 3-70 3-73 3-79 3-80 3-81 3-89 3-91 4-98
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Page Figure 4-7 Figure 4-8 Figure 4-9 Figure 5-1 Figure 5-2 Figure 5-3 Figure 5-4 Figure 5-5 Figure 5-6 Figure 5-7 Figure 5-8 Figure 5-9 Requirements for generic competitive strategies Functional strategy decision tree Membership benefits portfolio Strategic Management model Business plans: a frame of reference Business plans: a component of the Strategic Management process Assessing of strategic partners to implement joint ventures Projected profit (surplus) and loss statement Balance sheet Cash flow projections Organisational growth or decline: a management paradox 5-147 5-150 5-153 5-154 5-155 5-157 5-163 5-164 5-166 5-167 6-174 6-176 6-183 6-187 6-191 7-215 7-223 8-230 4-122 4-124 4-129 5-140 5-146
The administrative components of strategy implementation 5-144
Figure 5-10 Problem solving process Figure 5-11 Service improvement process Figure 5-12 Management functions in relation to other managerial processes Figure 5-13 The management control system as related to the management process Figure 6-1 Figure 6-2 Figure 6-3 Figure 6-4 Figure 6-5 Figure 7-1 Figure 7-2 Figure 8-1 Figure 8-2 Strategic Management model Planning and the evaluation and control cycle The strategic control process The evaluation and control process Strategic control model for non-profit organisations A schematic framework of non-profit organisational model The Greater Johannesburg Unicity The differences between non-profit and for-profit organisations
Legal structures for non-profit organisations in South Africa 8-231
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A STRATEGIC APPROACH FOR NOT-FOR-PROFIT ORGANISATIONS
LIST OF ACRONYMS
AIDA BCG CBO CO CEO CPPP ECF GE GO KRA KRD KSF N-F-P NGO NPO NPP MEMO PC/ P PPP RPA SBU SWOT Section 21 Trust Attention, Interest, Desire, Action Boston Consulting Group Community-Based Organisation Company Chief Executive Officer Community Public Private Partnership Environmental Community Forum General Electric Governmental Organisation Key Result Areas Key Result Document Key Success Factor Not-For-Profit Non Governmental Organisation Non-profit organisation Non-Profit Partnership Mega Environmental Management Organisation Production Capacity / Production Public Private Partnership Rate Payers Association Strategic Business Unit Strengths, Weaknesses, Opportunities & Threats Section 21 Company registered in terms of the South African Companies Act, Act No. 61 of 1973 Trust registered under South African common law and Trust and Property Control Act No. 57 of 1988
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TQM VA VAT WECF
Total Quality Management Voluntary Association incorporated under South African common law Value Added Tax Western Environmental Community Forum
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