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A profit for not-for-profit public organizations

The survival of profit-seeking entities depends on their being able to identify the needs and to offer them an adequate financial return. Adequate return means a situation in which value of outputs exceeds the value of inputs of all kinds. All parties such as investors, employees, customers, suppliers, and many others should get a good return for their price or efforts.

That’s about profit-seeking entities like privately owned companies. But what about the not-for-profit entities?

When we think about not-for-profit entities, you might think of:

  • Government organizations like public schools, hospitals and other public sector organizations
  • Trade associations, trade unions, employers’ federations
  • Professional organizations
  • Housing associations, clubs, societies, cooperatives
  • Charity organizations
  • Religious organizations

Not-for-profit entities do not expect profits. They are established not for profits but to achieve different objectives of the society. But, can these organizations operate without identifying and satisfying the needs? Can they operate without adequate investments in resources and therefore can they refrain from attracting funds? Can they continue if the value of their outputs is less than the value of their inputs? No. Certainly not. So, is the expression not-for-profit somewhat misleading? Profit is the legitimate reward for the commitment of funds. Then, why should all these organizations not seek a profit may be in a different name? 

So, activities of not-for-profit sector should not be isolated from the application of financial disciplines. Therefore for an example, it would not seem right for a public sector hospital to use a different criterion from a private hospital. The value of outputs should exceed the value of input in both types of entities. The criterion used in resource allocation should be the same for all sectors.

Professional organizations use funds supplied by their members to develop their specialism for the benefit of employers and the public. Charities and religious organizations use the cash received from donors for charitable work or to promote a belief. The government takes money from those in employment to give it to those out of work or from healthy to give to the sick. But these redistribution of wealth lack the direct link between consumption and price.  

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  • A profit for the not-for-profit organizations

    Not-for-profit entities do not expect profits. They are established not for profits but to achieve different objectives of the society. But, can these organizations operate without identifying and satisfying the needs?


Rami on July 29, 2013:

Basically to follow up on the up-date of this topic on your wbteise and would wish to let you know how much I prized the time you took to generate this helpful post. Within the post, you spoke on how to actually handle this issue with all comfort. It would be my personal pleasure to get together some more ideas from your blog and come as much as offer others what I have benefited from you. Many thanks for your usual great effort.

McDonald on February 07, 2012:

Thanks (to the author)..the information about non-profitable organisations you gave,is much clear and understandable.

Lasantha Wijesekera (author) from Sri Lanka on August 06, 2010:

Yeah, Shawn what I said is that non-profit organizations too need a profit to survive and continue. But it may be called in a different name instead "profit".

Thanks for you comments.

Shawn Scarborough from The Lone Star State on August 05, 2010:

Nice hub, it is very informative about non-profit organizations. Voted up and useful.

Lasantha Wijesekera (author) from Sri Lanka on July 28, 2010:

Thanks Lovekv for your appreciations.

lovekv on July 28, 2010:

wow u r great

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