Q1. Describe the major and minor pitfalls for nonprofits embarking on for-profit endeavors. How might mission, message, personnel, image, and organizational structure be affected by such an endeavor? Why should these considerations be discussed before embarking such a move?
Despite their designation as a nonprofit, many such altruistic organizations have sought out ways to finance their operations using for-profit endeavors. The reason for creating a for-profit subsidiary is relatively straightforward—it can be a more stable and sustainable source of donations. For example, “a not-for-profit health maintenance organization (HMO) creates a for-profit subsidiary to offer health insurance unavailable through HMOs” or “a university business school starts a venture capital company to fund worthy startups and give students a first-hand look at what makes businesses tick” (“The Lure of the Nonprofit Subsidy,” 2017, par.1). In the wake of the 2008 recession, such endeavors became more and more popular, as organizations sought to make up for the loss of revenue due to the downturn in the stock market and the fact that many donors no longer had the funds to keep charitable organizations solvent.
The problem, however, is that for-profit entities are primarily designed...
References
The lure of the for-profit subsidy. (2017). Maxwell Locke & Ritter. Retrieved from: https://www.mlrpc.com/articles/lure-profit-subsidiary/
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