Dynamic Modelling of Governance in Non-Profit Organizations: Case of Community Social Services Jaroslava Sedlakova, Jan Voracek, Pavel Pudil and Petr Somol University of Economics Prague, Faculty of Management, Jindrichuv Hradec, Czech Republic sedlakov@fm.vse.cz voracekj@fm.vse.cz pudil@fm.vse.cz somp01@fm.vse.cz Abstract: Specific mission of small and locally operating non-profit organizations (NPOs) cannot be straightforwardly achieved through standard managerial frameworks, processes and tools, which are common in industry. Generic managerial structures of for profit firms are based on standardized and replicable flows of internal resources with explicit financial background. On the other hand, fragile organizational models of NPOs, system of their internal values, soft factors based motivational mechanisms, significant imprint of inheritance and traditions on governance procedures or unique staffing policy make these institutions both hard to systemize and scientifically manage. Thus, the initial advantage of tight individual relations in friendly, informal and altruistic environment turns gradually into a mission critical risk factor. Although the board members of NPOs are continuously aware of this threat, they don’t have any applicable and appropriately complex solution in hand. Consequently, the main goal of our research was to propose viable method for well-established NPOs, allowing smooth modification of their existing governance infrastructures into more systemic, accountable and sustainable way. Moreover, the resultant methodology should reuse positive features from the both worlds, i.e. combine applicable artefacts of industrial standards with traditional behavioural patterns of NPOs. Formally said, we want to merge a generic model of strategic architecture with mostly tacit organizational know how by means of dynamic balanced scorecard (BSC) and knowledge based modelling. The paper describes single analysis and design stages of such procedure, i.e. why we consider organizational learning as important key success factors for NPOs, what is our understanding of representation and applicability of knowledge based model or which parts of BSC are suitable NPOs planning and management. Finally we outline a prototype of such model and discuss its dynamic behaviour for one service cycle of single NPO’s program and then show temporal behaviour of properly managed portfolio of such programs. All presented conclusions are based on real data and validated by experts’ opinions. Keywords: Governance prototyping model, system dynamics, performance of non-profit organizations
1. Introduction The main goal of NPOs is reliable provisioning of publicly requested kinds of services. Basic lifecycle of their internal programs includes monitoring of local needs, searching for operational funding and development of appropriate capacities. NPOs’ managers have usually enough routine experience to keep these activities running from day to day, but frequently fight both with strategic and external dimensions of their duties. Situation is complicated especially in small, locally focused organizations, where the amount of tangible factors, directly applicable for managerial purposes is negligible and tight interpersonal relations and subjectively motivated leadership play significant executive role. Consequently, such institutions may have fundamental problems with competitiveness, sustainability or efficient utilization of resources. All these aspects, multiplied with permanent fight for finances and generally stressing nature of social work, contribute to overall dissatisfaction, which can result to individual burnouts or even organizational collapses. Our experience, confirmed with literature review shows that there are many different and sometimes even contradictory opinions concerning a generally applicable and at the same time also optimal way of governing of non-profit organizations. Disregarding their unexceptionable specifics, there are still numerous commonalities with regular for-profit companies. The both types of institutions must monitor and improve own performance, i.e. complex measure of efficiency and effectiveness. In commercial domain, however, financial and other tangible indicators are accessible more easily than corresponding fundamental metrics in social value creating public services. Logically, the applicable proposal of a methodological framework for NPOs’ managers, capable to compensate their current unfavourable position was the main motivation for our research. To fulfil this assignment, we set the following goals, discussed in detail the subsequent parts of this paper:
Analyse performance factors of NPOs and design its convenient generic architecture, close to industry-wide standard of balanced scorecard,
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