From an entrepreneurial perspective, nonprofit organizations cannot bring any substantial income because they carry out socially-oriented activities designed to address urgent problems for the benefit of people. The opinion that such organizations should operate as businesses is not well-reasoned. Moreover, from a legal perspective, profit accumulation can be viewed as a fraudulent activity. According to Renz (2007), an enterprise is nonprofit if it does not pay business taxes and does not pursue the interests of individual representatives to the detriment of others. By trying to capitalize on some activities, for instance, by signing contracts for the provision of paid services, nonprofit organizations can face serious legal liability. Therefore, such enterprises cannot be considered businesses because their key focus is to represent the target audience but not to enter into trade and monetary relations.
At the same time, when taking into account all legislative provisions and keeping strict records of financial flows, nonprofit organizations operating as businesses can achieve some positive results. For instance, as Renz (2007) notes, by following specific duties (care, loyalty, and obedience), nonprofit companies may gain some freedoms in making decisions regarding their internal work. By operating more like businesses and not violating legal conditions, they can ensure a stable inflow of investments aimed at addressing specific social issues. Moreover, in case of constant budget revenues, the authorities can expand the powers of nonprofit organizations, thereby providing them with more opportunities. Legally, this is not prohibited, and the benefits of being involved in economic processes can be reciprocal. Thus, despite potential problems and barriers, nonprofit organizations can operate as businesses, although, unlike private companies, their entrepreneurial work is associated with several constraints.
Active work aimed not only at capitalizing on profits but also at addressing pressing problems distinguishes social entrepreneurship from traditional forms of business practices. When considering this concept, Nash (2016) argues that this type of entrepreneurship blurs the usual boundaries between the private and public sectors and targets relevant social issues that deserve attention. By comparing this approach with strategic planning as a relevant business framework, one can highlight visible differences. For instance, according to Andersson (n.d.), a strategic plan is a set of decisions that, as a result of careful assessment, cover specific objectives to maximize profit. Social entrepreneurship, in turn, does not set itself the goal of financial enrichment and cannot be based on clearly formulated stages. Global problems affecting different people cannot be addressed in stages, which forms the main difference between social entrepreneurship and strategic planning.
During my work, I have operated more in the camp of the social innovation school rather than the social enterprise school. Modern market relations dictate tough conditions, and to withstand competition, dynamic regimes and optimization courses are imperative. At the same time, the idea of social entrepreneurship finds a response in modern realities, as evidenced by the trend of corporate social responsibility in large and small companies. Andersson (n.d.) notes that managers of different organizations pursue the idea of such a concept and allocate funds for the implementation of programs falling within its scope. While analyzing Nash’s (2016) arguments, I have concluded that social entrepreneurship is not charity but an important activity that helps eliminate the problems that society has come to during its development. The analysis of implications on different businesses and types of commercial assistance has allowed me to take a broader look at the concept under consideration and get valuable insights highlighting its relevance in modern businesses.
A strong connection between financial leadership, executive leadership, and strategic management is the key to sustainable business performance and competent control over the resource base. According to Renz (2007), the interaction between strategic and financial management is based on economic activities – compiling budget plans, setting development goals, and allocating resources. For the successful implementation of these tasks, executive leadership is called upon to control such important aspects as corporate culture, work with personnel, and other nuances that influence productivity. As Renz (2007) argues, one of the board’s responsibilities is to “ensure that the organization has financial and other resources adequate to implement its plans” (p. 4). This means that the areas discussed are interrelated because to achieve optimal productivity outcomes, the company cannot ignore specific fields of work, such as financial objectives, to strengthen other aspects, such as strategic planning. Therefore, financial leadership, executive leadership, and strategic management are frameworks that cannot be separated; otherwise, the threats of losses or poor performance may be unavoidable.
Financial leadership requires careful assessment, and strategic planning, as a business framework, is an essential methodology to apply to adequately control the available budget. Renz (2007) suggests paying attention to the development of policies governing financial resources, the establishment of programs that meet organizational goals, mission, and vision, the design of monitoring systems, and some other initiatives. These ways of linking financial leadership with strategic planning can help establish effective control over the budget and avoid wasted resources. In addition, strategic planning, which includes the stages of assessing the sustainability of projects, allows tracking specific changes continuously, which contributes to obtaining objective data on the state of the company’s budget.
Andersson, F. O. (n.d.). Social entrepreneurship as a relational concept: Testing an interactive model. Midwest Center for Nonprofit Leadership & Institute for Entrepreneurship and Innovation, 1-18.
Nash, M. T. A. (2016). Social entrepreneurship and social innovation. In D. O. Renz & R. D. Herman (Eds.), The Jossey-Bass handbook of nonprofit leadership and management (pp. 295-333). Jossey-Bass & Pfeiffer Imprints.
Renz, D. O. (2007). Nonprofit governance and the work of the board. Midwest Center for Nonprofit Leadership, 1-11.