by
Charles Lamson
Although most organizations have many things in common, they definitely are not all alike. There are basically two types of organizations, profit and nonprofit. Profit-based organizations have a bottom line, that is concerned with how much money the company nets in a given period of time. You probably are familiar with some of the larger profit-based organizations in the United States, such as General Motors, IBM, Ford, United Airlines, General Mills and General Electric. You have seen their advertisements since you were a child. Profit-based organizations must make a profit from selling the goods or services they provide, or they will cease to exist. They must have a profit margin that keeps them "out of the red," or they will be bankrupt, or be swallowed by some larger corporation. Although they have many goals, the overall goals of these organizations has to be to make money, or they will be in big trouble. Corporations such as Robert Hall Clothiers, Eastern Airlines, Studebaker and Underwood Typewriters (very large corporations that prospered in the past, that you may never even have heard of) ceased to make the profits necessary to maintain themselves. Hence, they ceased to exist.
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Non-profit organizations have goals that are concerned with providing products or services also, but they do not have to make a profit while doing so. In fact, many non-profit organizations are specifically designed to provide products or services for free, or at a price below the actual cost of providing those products or services. Some common non-profit groups are organizations such as churches, most educational institutions, the Postal Service, the Social Security Administration, public hospitals, government-owned utilities, the military and many charitable groups. The economic foundation of these organizations is drawn from taxes, fees, and/or contributions. These organizations survive based on the number of persons they serve and the quality of the service provided. If a college has a continuing decline in enrollment, it will have to cut back on the number of personnel it employs. Eventually, if the decline continues, the college may cease to exist (as many did across the united states in the 1970s and the 1980s). If the product or service is no longer needed, the organization providing that product or service is no longer needed.
Non-profit organizations perpetuate themselves much like profit-based organizations do. They try to create or define a need among people, and provide the means that satisfy that need. Why are some branches of the government so large? Because they have managed to convince government officials, and/or the general public, that they are necessary to satisfy some needs of the people. Further, they continue to convince those same people, that they are satisfying those needs.
In recent years, a new type of organization has developed in the United States, primarily as a function of tax laws and regulations. This type is known as not-for-profit organizations. This type of organization often is a spin-off from a non-profit organization. When a non-profit organization is able to provide services or products, for which people are willing to pay amounts well beyond the needs of the non-profit organization for survival, it can run afoul of the tax regulations, which do not permit making such profits without paying taxes.
When these organizations reorganize as not-for-profit organizations, they can avoid the taxes. They can donate their profits to non-profit organizations of their choice. They can also pay members of their Board of Directors, and other employees, very high salaries and bonuses, if they choose. Many of these organizations function essentially like for-profit organizations. They can buy property, including other similar organizations, and expand into extremely large organizations. Many medical systems have followed this pattern. Although, these organizations are considered not-for-profit organizations by the Internal Revenue Service (IRS), what matters to the "feds" is the income (what people other than the IRS would call "profits") stops coming in the organization, or will cease to exist. Hence, for our purposes here, we will consider not-for-profit organizations as just a special case of for-profit organizations. They are very much like one another, and very different than truly non-profit organizations.
*SOURCE: ORGANIZATIONAL COMMUNICATION FOR SURVIVAL: MAKING WORK, WORK BY VIRGINIA P. RICHMOND, JAMES C. MCCROSKEY AND LINDA L. MCROSKEY; PGS. 2-3*
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