Managing in Small Businesses and Non Profit Organizations

Small businesses are growing in importance. Hundreds of small businesses are opened every month by people who have found themselves squeezed out of the corporation due to downsizing or who voluntarily leave the corporate world to be their own bosses or to seek a slower pace and a healthier balance between work and family life. Many small businesses are opened by women or minorities who find limited opportunities for advancement in large corporations. In addition, the Internet has opened new avenues for small business formation. The huge wave of dot-com start ups in the late 1990s was driven not just by dreams of wealth but also by the desire of people to get out of big corporations and start something new and exciting.

Today’s environment for small business is highly complicated. Advances in technology, globalization, new government regulations and increasing customer demands require that even the smallest of businesses have solid management expertise. However, small companies sometimes have difficulty developing the managerial dexterity needed to survive in a turbulent environment. One survey on trends and future developments is that small business found that nearly half of the respondents saw inadequate management skills as a threat to their companies as compared to less then 25 per cent of larger organizations.

One interesting finding is that managers in small businesses tend to emphasize roles different from those of managers in large corporations. Managers in small companies often see their most important roles spoken persons, because they must promote the small, growing company to the outside world. The entrepreneur role is also very important in small businesses because managers have to be creative and help their organizations develop new ideas to remain competitive. Small business managers tend to rate lower on the leader role and on information processing roles, compared with their counterparts in large corporations.

Non profit organizations also represent a major application of management talent. The American Red Cross, the Girl scouts, Good Samaritan Ministers, Berea College, Parkland Memorial Hospital, the Boston Public Library and the Nashville Symphony requires excellent management. The functions of planning, organizing leading and managers in non-profit organizations use similar skills and perform similar activities. The primary difference is that managers in businesses direct their activities toward earning money for the company, while managers in nonprofit direct their efforts towards generating some kind of social impact. These unique characteristics and needs of non-profit organizations created present unique challenges for managers.

Financial resources for nonprofit organizations typically come from government appropriates grants, and donations rather than from the sale of products or services to customers. In business, managers focus in improving the organization’s products and services to increase sales revenues. In nonprofits however, services are typically provided to non-paying clients, and a major problem for many organizations committed to serving clients with limited resources must focus on keeping organizational costs as low as possible. Donors generally want their money to go directly to helping clients rather than for overhead costs. If non profit managers can’t demonstrate a highly efficient use of resources, they might have a hard time ensuring additional donations or government appropriators.

In addition since nonprofit organizations do not have a conventional bottom line, managers may struggle with the question of what constitutes results and effectiveness. Whereas its easy to measure dollars and cents nonprofit managers have to measure intangibles such as in more public health or make a difference in the lives of the disfranchised. It is more difficult to gauge performance of employees and managers when the goal is providing a public service rather than increasing sales and profits. Managers of nonprofit organization must also market their services to attract not only clients but the volunteers and donors on whom they depend. An added complication is that volunteers and donors cannot be surprised controlled in the same way a business manager deal with employees.