Introduction
Nonprofit organizations are an essential part of society’s economic processes, as they contribute to the solution of various problems of people. Different population groups have some features manifested in social security, material security, and general well-being. Nonprofit organizations often have a charitable focus while helping those in need. However, companies of this kind may not be successful because they do not benefit from the work and are entirely dependent on donations or large sponsors. Thus, Stephen Block, in his book, reveals the main reasons for the failure of these organizations, which is vital for understanding how one can organize a company that will be more sustainable.
Important Information from the First Chapters
The first four chapters of the book deal with the central theme of the author’s work, revealing the reasons for the failure of nonprofit organizations. Nonprofit organizations are exposed to many risks, which primarily consist of gaining sustainability. Thus, Block (2004) argues that the main reason for the failure of nonprofit organizations is leaders who act insufficiently professionally. The first four chapters examine top managers’ roles in nonprofit organizations (Block, 2013). They are responsible for providing reliability and consistency to companies that do not profit from their activities. According to the author, leadership is the central aspect that must be configured correctly for organizations to remain functioning.
The first chapter considers how important it is to preserve the functioning of nonprofit organizations to carry out changes in a timely and qualified manner. Traditional management methods are often ineffective when applied. This is because they are sharpened to regulate a business that is aimed at profit. At the beginning of the book, the author emphasizes that proactive change management can serve as a much more profitable strategy for nonprofit organizations (Block, 2013). Reactive response to ongoing events is not effective enough for nonprofit organizations. Crises are complex for nonprofit organizations because they do not have financial reserves that could be used to resolve the situations that have arisen.
The purpose of the first chapter is to provide leaders of nonprofit organizations with instructions and mechanisms that could improve the work of organizations. Proactive change and risk management can be essential aspects that can enhance a constructive approach to managing companies (Block, 2013). One of the key concepts covered in these chapters is the responsibility of the managers of nonprofit organizations. Executive directors should promote positive changes that can be embodied in the organization to prevent possible risks arising during organizational activities (Block, 2013).
Another important aspect is the acceptance of risks and the possibility of their relief. Proactive change management can be a necessary element to address all critical organizations on time (Block, 2013). The author also emphasizes developing alternative strategies to solve problems in this context. The concept of “second-order” approaches requires a change in the original point of view. Thus, the main task for leaders is to adapt and constantly monitor the external situation.
Seven Tough Problems
The seven complex issues Stephen Block discusses in his book can change their position depending on circumstances. However, the general concepts and relationships are pretty constant and stable. Thus, it can be said that the most critical problem highlighted by the author concerns fiscal instability. The financial component is the weakest point in the activities of nonprofit organizations and creates additional threats to their stable activities.
The lack of a stable and traceable financial flow can lead to a shortage of funds that the nonprofit organization cannot compensate for (Block, 2013). The next most crucial point is organizational culture, which helps shape the team’s attitude toward the organization’s goals and mission. In addition, this aspect helps all employees communicate correctly to set up corporate ethics. Thus, this aspect is imperative in nonprofit organizations to contribute to the most excellent efficiency.
Another significant aspect is the founder’s syndrome, which can prevent the organization’s leaders from making important decisions that will direct the company in the right direction. Problems associated with leadership and the unwillingness of directors to delegate or change people, including in managerial positions, can cause significant problems. With the concentration of power in the organization in the hands of one person, there is a risk of preventing new approaches and innovations (Block, 2013).
This can significantly damage the development of an organization in the nonprofit sector, as limiting the ability of the firm to develop will generate constant risks and ultimately lead to failure. Next in line is the practice of recruiting, which, if done incorrectly, can harm an organization. People not interested in activities without financial gain will not be able to fully get used to the atmosphere of nonprofit activities(Block, 2013). Thus, recruitment is imperative to adequately perform so that the hired employees are qualified enough to perform work in the nonprofit sector.
The next major problem in nonprofit organizations is the incorrect distribution of roles and their ambiguous obligations. Lack of clarity in appointing employees in an organization can lead to confusion because employees do not understand how to act in certain conditions (Block, 2013). This can often occur because companies lack established corporate ethics and communication that should improve employee relationships. At the same time, the problems included in this category are insufficient interaction and the lack of a well-established means of communication with management. This can lead to the director of a nonprofit organization not being aware of and not considering the problems that may develop in the company.
Organizational politics and the balance of power can create a hostile environment that will hinder decision-making. Poor policies not appropriately implemented in a company or inappropriate for a particular area of the nonprofit’s work can lead to diverging strategic views (Block, 2013). The inability to make decisions quickly and efficiently can affect an organization’s ability to make decisions quickly and effectively. In an organization’s unforeseen situations, responsiveness is a critical component that can play an essential role in the company’s performance. Organizational policies must be fully aligned and mission-focused for the team to unite.
Fundphobia and Board Participation in Fundraising are the least critical issues that should be fixed once the rest of the components are in order. Fundraising is an essential component since the nonprofit component is the aspect that keeps firms running (Block, 2013). Since companies do not receive profit directly from their activities, the attraction of capital should be planned and using a developed strategy. Some organizations may have diversified sources of income, which helps reduce the occurrence of fundphobia.
Top Three Problems
The first problem is the organizational culture, which should contribute to employees’ development and professional enrichment. Without this element, it will not be able to correctly and effectively influence problems and crises in the organization. For nonprofit companies, this element is just as crucial as for ordinary businesses (Lu et al., 2020). Improper communication between employees can lead to decreased motivation and a lack of understanding of what the organization requires of them.
A strong sense of mission should create passionate and dedicated employees and can also influence the development of an organizational culture. However, an unhealthy culture can lead to frequent conflicts, creating increased organizational turnover risk. Thus, the firm cannot set the right pace for working with the audience to help fulfill the organization’s mission.
Employee satisfaction is a priority that management will not be able to organize without creating a correct and effective ethical system in the company. Rules and regulations should also be introduced so that all employees, regardless of race, preferences, and views, can find common topics and work together (Block, 2013). A positive organizational culture can also be essential in attracting new talented employees who will choose a company to practice. Incompetent management of human resources in nonprofit organizations can lead to risks that will affect work in the future.
The second problem is the founder’s syndrome, which can destroy a company without changes. This risk manifests itself if the organization’s founder has ceased to be a qualified leader and cannot leave a leadership position due to a strong emotional attachment. Adaptations and significant organizational changes can be intimidating to a leader, even when needed. Thus, it can affect how the company overcomes emerging crises. The environment is constantly changing, and because of these developments, leaders must innovate in companies. Without timely intervention, stopping emerging risks that can devastate the organization’s development will be impossible.
Fiscal instability is the third issue that can affect how an organization copes with a crisis and how it can function. Nonprofits rely on funding from outside investors to pay for their needs and keep them running. Funding from third-party sponsors is one of the few ways firms can operate non-commercial, as they must pay bills and services(Lu et al., 2020). Fiscal instability can also manifest if leaders want to embezzle grants and sponsorship money. In this case, it will also harm the company’s reputation and make further development impossible.
Conclusion
Stephen Block’s book Why Nonprofits Fail provides a comprehensive understanding of why nonprofits may not be effective. The main problems are the mismanagement of funds, the lack of organizational culture, the founder’s syndrome, personnel management, ambiguity of goals, and organizational policies. They can lead to negative consequences that will destroy the company’s achievements and destroy it. Making timely changes is necessary to maintain the quality of work of companies at the required level.
References
Block, S. (2013). Why nonprofits fail. Jossey-Bass.
Lu, J., Shon, J., & Zhang, P. (2020). Understanding the dissolution of nonprofit organizations: A financial management perspective. Nonprofit and Voluntary Sector Quarterly, 49(1), 29-52. Web.