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«Comparing The Affects Of Management Practices On Organizational Performance Between For-Profit And Not-For-Profit Corporations In Southeast Wisconsin ...»

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Most respondents to Keller’s 2008 survey indicated that they had adequate access to capital. The importance of financial resources receiving a relatively low grade (number 1 or low) for its significance to the firm’s success may be explained by the response to Question 14 (Does the firm have access to capital?) where 93% of respondents stated they had access to capital. In essence respondents may take for granted their ability to secure adequate amounts of capital to operate their firms. Respondents may take for granted that their firm either has accumulated a sufficient amount of saved capital or have relatively easy access to it. There was agreement regarding the top two vital success factors (technology and materials). One of the reasons firms graded technology and materials as the top factors may be related to the fact that key business decisions are made at a distant corporate headquarters which delegates strategic decisions to local managers for implementation. The impact of employees on firm performance received a mixed response from respondents to the study’s survey. Of the respondents ranking employees as vital to the success of their firms, 55% ranked it high (3-5) while a slightly lower number 47% considered employees as being a low success factor for their firms’ success. Clearly, the role that employees play in the performance of firms in southeast Wisconsin is somewhat split due to the difference in firm ownership. The final vital success factor that was ranked was technology. Of the respondents ranking technology as vital to the success of their firms, 77% ranked technology high (3-4-5) while 23% considered technology low. Respondents’ rankings of the importance of materials and technology to their firms’ success was quite high indicating that most firms desire to stay abreast of tools and techniques that will keep their firms efficient and productive. Management practices, the independent variable in this study, was selected by for-profit firms as the most vital factor to their enterprises’ success. This high ranking was revealing. Four of the five vital success factors (sans management practices) are the fundamental components that economists use to assess the performance of a firm. The respondents to the 2008 survey affirmed Greenwald, Bloom and Van Reenan’s thesis that management choices (the effect of management) are measureable and can be directly linked to the economic performance of a company.

© 2011 The Clute Institute 35 Journal of Business & Economics Research – March, 2011 Volume 9, Number 3

ANALYSIS OF NOT-FOR-PROFITS’ RANKINGS

At first glance, the not-for-profit respondents’ ranking of the success factors was somewhat surprising considering the missions of NPO. One explanation for the curious ordering of materials being the most important success factor may reflect the diversity of organizations in the survey sample (from an adult literacy group to a municipal zoo) and a growing trend in NPO agencies, social entrepreneurship. Many NPOs are attempting to generate earned revenue via creation of products/services that provide a new revenue stream to diversify away from dependence on contributions, funding from United Way type funding agencies and fees for services which oftentimes do not fully recover the services’ costs. The ranking of management practices by respondents as the third most vital success factor is curious given the strongly significant correlation of management practices and organizational performance. One explanation for this ranking may be an increasing managerial skill level and sophistication of not-for-profit corporate leadership. This phenomenon may be a result of the inclusion of talented for-profit leaders serving on the boards of directors of NPOs and the growing trend of NPO executives securing management degrees and ongoing training.

IMPLICATIONS

This research study sought to determine if there are significant differences between the management practices and enterprise performance between for-profit firms and NPOs located in southeast Wisconsin. It was found that on the whole there was no statistically significant difference between the management practices and firm performance among the for-profit population, with the exception of one key ownership group (family and privately owned firms). Additionally, it was found that for-profit firms ranked management practices as the top corporate vital success factor.

A review of the data for not-for-profit organizations showed that management practices were correlated to organizational performance. Despite the strongly significant statistical correlation between management practices and organizational performance, NPO respondents did not rank management practices as the number one success factor for their agencies. As mentioned previously, this disparity may represent a growing trend in the evolution of the management practices of NPOs.

Both components of this study were conducted while the American economy was in the worst part of recession of 2008-2010. While some for-profit firms added employees, most were decreasing head counts. NPOs also reported mixed results in terms of significant declines in revenue derived from operations; however what greatly stabilized their operations was the increase in donations.

In the final analysis, this study needs to be repeated on a semi-annual basis to achieve two important results; generating a larger number of responses and creating a base line to compare and improve the robustness of the research design and the practical use of the results. As noted several times, the requirement to generate “numbers” that demonstrate the quality of an enterprise has taken a life onto itself in both the for-profit and not-forprofit sectors. Management practices are frequently considered “soft skills” and therefore not a reliable, countable and important “asset.” It is refreshing to discover that the NPO sector and family and privately held corporations in this study demonstrated that management practices have a “hard impact” on the bottom line.





AUTHOR INFORMATION

Gary Keller earned his Ph.D. in Business with a specialty in Management from Northcentral University. Keller also possesses Masters degrees in History and Management. Keller is a tenured Associate Professor in the College of Business and Management (specializing in adult degree completion programs ASB – MBA) at Cardinal Stritch University in Milwaukee, Wisconsin.

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REFERENCES

1. Bloom, N and Van Reenen, J 2006, Measuring and explaining management practices across firms and countries. Retrieved February 1, 2008 from http:cep.lse.ac.uk/textonly/people/bloom/papers/BloomVanReenen2.pdf.

Bloom, N and Van Reenen, J, Dorgan, S, Dowdy, J 2007, July, “Management practice and productivity:

2.

Why they matter”, Management Matters, McKinsey & Company and the Centre for Economic Research.

3. Bloom, N and Van Reenen, J, 2007, November, Measuring and explaining management practices across firms and countries. Quarterly Journal of Economics, vol. 122, no. 4, pp. 1351-1408.

4. Buckmaster, N, 1999, Benchmarking as a learning tool in voluntary non-profit organizations. An exploratory study. Public Management (1461667X), vol. 1, no. 4, pp. 603-616.

5. Deming, WE, 1986, Out of the crisis: quality, productivity, and competitive position. New York:

Cambridge University Press.

6. Drucker, P, 1990, Managing the non-profit organization; practices and principles. New York, NY:

HarperCollins.

7. Field, C, 2009, Performance management. Financial Management (14719185), pp. 40-41.

8. Folan, P, Browne, J, & Jagdev, H, 2007, September, Performance: Its meaning and content for today's business research. Computers in Industry, vol. 58, no. 7, pp. 605-620.

9. Furnham, A, 2005, The psychology of behaviour at work. London: Psychology Press.

Greenwald, B. 2004, Winter. “The good life: How managers made the modern world”, Hermes, Retrieved 10.

January 8, 2008 from http://www2.gsb.columbia.edu/hermes/winter2004/article_greenwald.cfm.

11. Herman, R, & Renz, D, 2004, Doing things right: Effectiveness in local nonprofit organizations, a panel study. Public Administration Review, vol. 64, no. 6, pp. 694-704.

12. Herman, R, & Renz, D, 2008, Advancing nonprofit organizational effectiveness research and theory: Nine theses. Nonprofit Management & Leadership, vol. 18, no. 4, pp. 399-415.

13. Hubbard, G, 2006, The productivity riddle. Strategy and Business, vol. 45, pp. 28-33.

14. IRS, 2010, Publication 557, 3., Section 501(c)(3) Organizations. Retrieved from http://www.irs.gov/publications/p557/ch03.html#d0e3190

15. Kaplan, R, 2001, Strategic performance measurement and management in nonprofit organizations.

Nonprofit Management & Leadership, 11(3), 354.

16. Keller, G, 2009, Do management practices affect the economic performance of

17. firms located in southeast Wisconsin, USA? International Review of Business Research Papers, vol. 5, no.

6, pp. 79-89.

18. Lewis, D, 2003, Theorizing the organization and management of non-governmental development organizations. Public Management Review, vol. 5, no. 3, pp. 325-344.

19. McConkey, D (1973). Applying management by objectives to non-profit organizations. SAM Advanced Management Journal (00360805), vol. 38, no. 1, p. 10.

20. National Center for Charitable Statistics, 2010, Quick facts about nonprofits. Retrieved May 1, 2010, from http://nccs.urban.org/statistics/quickfacts.cfm

21. National Center for Charitable Statistics, 2010, National taxonomy of exempt entities. Retrieved May 2, 2010 from http://nccs.urban.org/classification/NTEE.cfm

22. Norse, H,1968, Regional economics: A study in the economic structure, stability and growth of regions.

New York: Mc-Graw-Hill.

23. Ritchie, W, & Kolodinsky, R, 2003, Nonprofit organization financial performance measurement: An evaluation of new and existing financial performance measures. Nonprofit Management & Leadership, vol.

13, no. 4, p. 367.

24. Rojas, R, 2000, A review of models for measuring organizational effectiveness among for-profit and nonprofit managers. Nonprofit Management & Leadership, 11(1), 97.

25. Sanger, M, 2008, From Measurement to management: Breaking through the barriers to state and local performance. Public Administration Review, vol. 68, no. 6, pp. S70-S85.

26. Speckbacher, G, 2003, The economics of performance management in nonprofit organizations. Nonprofit Management & Leadership, vol. 13, no. 3, p. 267.

27. Young, D, 2007, Financing nonprofits, putting theory into practice. Lanham, MD: Alta Mira Press.

28. Zikmund, W, 2003, Business research methods. Mason, OH: South-Western.

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