There are unique advantages to operating a nonprofit organization instead of a for-profit firm. Aside from the competitive advantages that result from having access to volunteer labor and tax deductible private funds, nonprofits also tend to be limited in size. This gives them the distinct advantage over large corporations to be flexible and adapt to market conditions quickly. Nonprofits also enjoy freedom of direction and purpose. Whereas a privately or publicly held for-profit business has an obligation to its owners to operate in a manner that produces the most revenue at the least cost, nonprofits have an obligation to operate in a manner that aids the most people, regardless of profit. This allows nonprofits to approach common social problems in a variety of ways, encouraging social progress, experimentation and continuity. Nonprofits are free to use methods that might seem too risky, controversial or simply too unprofitable to the first sector.
Nonprofits also enjoy a strategic and sheltered position between government and the first sector. Nonprofits are “forbidden access to the corruptingly comfortable seat of power” (Setterberg and Schulman, 2001, 5) that so often confronts government officials and CEO’s. Media coverage of events such as the recent Enron and Haliburton scandals taints the public image of the first and second sector. This serves to improve the public image of the third sector, especially since the media does not tend to be aware of or get as involved with third sector issues. Although the third sector is not always free from corruption, without media intervention, the public is generally unaware of third sector problems.
There are also intangible advantages for nonprofit owners and employees. There are two key requirements to achieving a level of job satisfaction in the nonprofit sector that is not achievable in the corporate world. First is a deep commitment to the organization for which you work. Second is an absolute certainty that your primary goal is not for money. Interviews of eleven individuals involved in a variety of nonprofit organizations note the comfortable atmosphere and reduced stress environment in their nonprofit organization. Increased schedule flexibility and vacation benefits also were cited frequently (Lewis and Milano, 1987). Several people recalled that their previous jobs required intense specialization in order to compete with other employees in a large firm. However, the nature of nonprofits promotes a generalization of work that allows for refreshing and exciting diversity and autonomy for the employees. Steve Bajardi, a former banker now working for a charitable foundation, sums up many of the interviewees feelings on the rewards of nonprofit employment.
“Nonprofit is more diverse. The variety of things to do and experiences you have is much broader. Large corporations tend to specialize. You do one thing. Nonprofit requires you to be a generalist, rather than a specialist. The diversity is exciting.” (Lewis and Milano, 1987, 19).
The generalization Bajardi describes does not always lead to satisfied employees. A lack of a supporting staff and specialized professionals can lead to frustration among co-workers. Bajardi also notes “a lack of organizational discipline” that he suspects may be the eventual downfall of his foundation. In addition, many nonprofits feel the strain of tight budgets when confronted with aging computers, inadequate equipment and lack of space. Although the world of nonprofits can be rewarding, both to its employees and to the public it serves, it should not be idealized or romanticized. Aside from the employee complaints, there are several more serious flaws and shortcomings within the sector.
The primary problem facing nonprofits is management’s lack of ability to form clear objectives to solve social problems (Setterberg and Schulman, 1985). Some organizations simply do not know exactly why they exist, in spite of their mission statements. Nonprofits are currently experiencing increased competition for funds, increased consumer demand for their services and shrinking public resources. Enormous cuts in government funding are partially to blame, but the very nature of being dependent on public and private funding is systematically problematic. Insufficient funding leads to employee dissatisfaction, as shown above, which can cause key individuals to leave the organization in search of better jobs, within and outside the third sector. This, in addition to the tendency to generalize all employee work, can lead to ineffective and unqualified managers. Quality management is the key to preventing crisis within the organization. “Crisis is most often precipitated by not knowing where you stand today and having little idea of where you’ll be tomorrow…it fills the void left by the abdication of leadership and management” (Setterberg and Schulman, 1985, 8).