1. Should nonprofit groups operate like businesses? What are some of the potential benefits of doing so? The potential dangers? According to Dr. Johnson, “no matter what particular type of organization we work in, we can learn from the experiences of others in different settings” (Johnson, 2007, p. xxiii). Nonprofit groups can, for instance, learn from businesses how to operate more efficiently by maximizing the use of available resources. Dr.
Johnson provides the example in his book that knowing how corporate managers communicate important values can be useful to employees working in the federal government (Johnson, 2007, p. xxiii). For these reasons, nonprofit groups should operate more like businesses by incorporating best practices that will make them more effective in carrying out their mission. The greatest potential benefit of nonprofit groups operating like businesses is operational efficiency and less dependency on public funding.
As described in the case study, “Blurring the Line Between Profits and Nonprofits,” when Michael Miller became President of Portland Goodwill in the mid-1980s, he adopted a corporate approach to running the charity that increased total sales tenfold (Johnson, 2007, p. xxiii). By adopting business best practices, this nonprofit group became very successful and was able to reduce its reliance on government funding. The greatest potential danger of nonprofit groups operating like businesses is greed. Businesses are in business to make money for their owners and shareholders.
Nonprofit groups could potentially develop a conflict of interest and lose sight of their mission. In the case study above, Miller received over a half million dollars a year in pay as President of the nonprofit group that was subsequently reduced by 24 percent after the Oregon attorney general ruled that his salary was “unreasonable” (Johnson, 2007, p. xxiii). 2. Should businesses operate more like nonprofits? What are some of the potential benefits of doing so? The potential dangers? Just as nonprofits can learn from businesses how to operate more efficiently, businesses can also learn from nonprofits.
For example, businesses can “… gain important insights into how to empower employees from watching how nonprofit executives recruit and motivate volunteers” (Johnson, 2007, p. xxiii). Businesses should operate more like nonprofits by learning how to more effectively inspire and motivate employees under a common mission or goal. The greatest potential benefit of businesses operating like nonprofits is a greater commitment to social responsibility and community service. In the case study, after adopting a corporate approach to running Goodwill Industries, Miller closed a money-losing location (Johnson, 2007, p. xiii). Prior to Goodwill adopting Miller’s business-like focus on profits, this location arguably remained in operation, at least in part, to employ disabled and disadvantaged workers even though it was not profitable. The greatest potential danger of businesses operating like nonprofits is a loss of economic viability. According to the case study, prior to Miller adopting a corporate approach to running Goodwill, the charity was not nearly as profitable and relied more on government funding. 3. Should charities that compete against businesses be forced to pay taxes?
Charities that compete against businesses should be forced to pay taxes. Simply put, if a charity acts like a business by selling products or services for a profit to compete with another business, it should be treated like a business for tax purposes. According to the case study about Goodwill Industries in Dr. Johnson’s book, “clothing retailers complain that the charity’s tax-exempt status gives it an unfair advantage (Johnson, 2007, p. xxiv). ” Although Goodwill competes with other clothing retailers and makes a considerable profit, it is still considered a tax exempt charity.
This gives Goodwill an unfair advantage over the competition, especially considering the generous compensation packages the charity’s executives received that “were similar to those given to business executives running companies with comparable sales” (Johnson, 2007, p. xxiv). 4. Should managers at charities be expected to work for less than their colleagues in corporations? Why or why not? Managers at charities should be reasonably expected to work for the same amount of money as their colleagues at orporations because “charities that adopt a corporate model pit themselves against businesses when recruiting talented executives” (Johnson, 2007, p. xxiv). While this may be true to a point, tax-exempt charities must be compliant with the rules regarding excessive compensation for nonprofit administrators established by the United States Internal Revenue Service (IRS). 5. Is Miller’s compensation package immoral? Why or why not? Miller’s compensation package is immoral because it is unreasonable and exploits the nonprofit organization’s mission to serve the community and help the disadvantaged of society.
According to Patt Libby, director of the Nonprofit Leadership and Management Program at the University of San Diego, “There is a moral obligation for nonprofits to compensate their top staff in a way that is respectful of their mission” (Johnson, 2007, p. xxiv). Miller’s compensation package is also immoral because it is significantly disproportionate to the compensation packages provided to the rank-and-file employees within the organization, some of whom make subminimum wages according to the case study. 6.
What standards should be used to determine if a nonprofit administrator is receiving excessive compensation? Compensation packages provided to nonprofit administrators should comply with the rules regarding excessive compensation established by the IRS. These administrators should not receive compensation in excess of the market value of the position as indicated by a market analysis of similar positions. In fact, “the IRS is beginning to investigate more cases of excessive compensation for nonprofit administrators” (Johnson, 2007, p. xiv). 7. Would you donate your used items to Portland, Oregon, Goodwill? I would not donate my used items to Portland, Oregon, Goodwill because I believe the compensation provided to the charity’s executives is immoral. For example, The CEO “earns over a half million a year in pay and such additional perks as a Lincoln Navigator and a $400,000 severance package” (Johnson, 2007, p. xxiv). Furthermore, I believe Goodwill is abusing its tax-exempt status by operating as a profit driven business.
Johnson, C. (2007). Ethics in the Workplace, Tools and Tactics for OrganizationalTransformation.
Thousand Oaks, CA: Sage Publications, Inc.