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Managing a Nonprofit Organization in the Twenty-First Century

Since this classic work was originally published in 1984, there have been major shifts in the nonprofit world — the growth of more profit-oriented ventures, the overhaul of accounting rules, new partnerships, and an emphasis on customer-oriented service and leadership. In easy-to-understand language, Thomas Wolf explains how to cope with these changes and deal with the traditional challenges of managing staff, trustees, and volunteers.

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As per wikipedia, Profit Maximisation can be defined as “…. the process by which a firm determines the price and output level that returns the greatest profit. There are several approaches to this problem. The total revenue — total cost method relies on the fact that profit equals revenue minus cost, and the marginal revenue — marginal cost method is based on the fact that total profit in a perfectly competitive market reaches its maximum point where marginal revenue equals marginal cost.” Untill recently , it was generally assumed that the rational beheaviour of a firm or an entreprenuer was to maximize profits. And definitely that profit was money profit.

However , the profit maximisation hypothesis has been challenged recently and other than profit maximisation, various alternative optimization procedures have been proposed. Following are a couple of those variants:

1.Sales Maximisation Hypothesis

2.Constrained Revenue Maximisation Hypothesis

3.Secure Profit Maximisation Hypothsis

4.Growth Maximisation Hypothesis

5.Staff Maximisation Hypothesis

6.Profit Maximisation ( Through Mark-Up Price Approach)

7.Utility Maximisation Hypothesis of a Firm.

Before going further deep into those tough words , lets take some fresh oxygen and get an overall idea of the challenges against the age old Profit Maximisation Hypothesis. In the analysis of the equilibrium of a firm, the major assumption is that the entreprenuer aims at maximisation of his profits. So it’s nothing but a rational beheaviour and its just like the rationality of a consumer is to maximisation of his utility or satisfaction.

At this point, you may ask , “ If Profit Maximisation is a rational beheaviour of the entreprenuer , then why should one find out the other alternative ways to maximise Sales, Growth , Utility…and all other craps???” Yes , you are right. But partially. Why ? Lets take a closer look around.

It should be carefully seen , what does the entreprenuer suppose to maximise under Profit Maximisation principle. An entreprenuer’s income consists of two elements.

A. He gets wages for his job of routine management and overall supervision which he is supposed to pay himself.

B. He gets what is left after meeting all the explicit and implicit costs( even including his own wages).

The great economist , Marshall described the business owner’s wages of management and supervision as normal profit and the residual income as super normal profit. This means normal profits are the minimum income which the business owner must get in order to stay in a business. So , from another angle, normal profits are nothing but a kind of cost to the firm or may be a special kind of wages , which entrepreneur pays himself. Now, if we want to maximise the profit of the firm , its not the normal profit ( as its nothing but a cost) but the super normal profit.

Okies, now it has become a bit complicated . What does the owner maximise ? Normal profit? No.. its Super normal profit. Agreed.

Now lets move forward. Here the question is , how far is it true that the owner of the firm always runs after maximising super normal profit ? If you think deeply , you will find out maximising super normal profit is nothing but a short-term activity , in long run , entreprenuers rather want to maximise a “ steady flow of profits” or a “secure profit”. It’s true that the Profit Maximisation idea is valid for explaining the beheaviour of the firm which is working under perfect competition. In that case if firms get normal profit , they feel they are happy. But in case of oligopolistic market nature , where the number of firms are not so many, in that case the owners of the firm have to think about how to maximise secure profit , not super normal profit. The same thing may also happen in monopolistic competition as well. According to Prof.Rothschild , in oligopolistic nature of business , profit maximising assmuption is no longer sufficient. He asserts “ Here is both the desire for achieving a secure position as well as the power to act on his desire”.

So , we started with Profit Maximisation…then Supernormal Profit Maximisation..and after that Secure Profit Maximisation…not a bad idea. But, whats next?

As satisfaction or utility is the ultimate end which an individual aspires to get, therefore emenent economists like Prof. Benjamin Higgins, Prof. Reder , Prof. Tibor Scitovsky have rightly argued that in case of small unincorporated business firms, the entreprenuer who actually acts as the owner-manager of the firm, he may pursue the objective of maximising utility other than maximisation of profit. For him , leisure may appear as an alternative to making money profit. It’s very much true that profit maximisation does not guarantee utility or satisfaction maximisation. The more activity or work put in by the entreprenuer will mean the less leisure he will be able to enjoy. The preference for leisure must be incorporated into the analysis of an entrepreneur who is supposed to maximise his utility and this again shows the Profit maximisation may not be the sinle goal of a firm.

Great !!! So time onwards we will have to consider Utility Maximisation also.. !!!

Now , let us shift our focus from entreprenuer driven business model to manager driven business model incorporated by the global business giants. Here the total business set up is broken into small geographic or functioanl division and the entreprenuer keeps managers for each and every division. In reality, the corporate managers try to maximise the rate of growth of output or toatal sales revenue rather than maximising profit. Because they don’t know anything about the global movement of the company. Most of the cases their salaries are related to the sales revenue and for this they put their best efforts to maximise the sales revenue. Though , now a days , mostly the maximisation of sales revenue is pursued by the managers , subject to the constraint of minimum profits which they must obtain for the owners ( share holders). I don’t want to make this proposition more complicated by taking the example of Employee Stock Option plans where the managers may think themselves as the share holders and they go for both Sales Revenue Maximisation ( for their performance related salaries) and Super Normal Profit Maximisation ( to earn more money from the sompany shares).

Do you like to take another look into this ? There is a notion that the corporate managers aim at achieveing satisfactory rate of profits rather than maximising profits. According to this hypothesis , one can say that the corporate managers set a minimum standard of performance and that can be described as the minimum aspiration level. And in the day by day operation, a manager always wants to optimise this minimum aspiration level , not to maximise profit.

Enough of taking and making hypothesis. Lets take an example of one empirical study. This was done by the famous Oxford economists , Prof. Hall and Prof. Hitch. They interviwed around forty entreprenuers on pricing policy. From their empirical study, they have come down to a conclusion that the businessmen do not try to maximise profit by equating marginal cost with marginal revenue, which they seldom know. According to Prof. Hall and Hitch , businessmen charge prices to cover their avarage cost of production and so they add profit mark-up to fix the prices of their products. And most of the time the busienssmen aim to maximise the mark up , and not the profit, directly.

In the present days, inside the corporate giants, there is a seperation in the outlook of managing business between ownership managers (i.e. share holders) and business managers. Specifically for the business managers there is a trade-off between sales maximisation and maximisation of personal utility or leisure. And to cover up the trade off ,recruting more sub-ordiante staff is the one of the best practices. Which leads to another activity i.e. staff maximisation. If one business manager recruits more sub ordinates so he can distribute his work load amongst them so to some extent he may optimise his personal utility or leisure. On the other hand recruting new a staff will increase the sales oriented revenue stream so it will maximise sales but may not maximise profit.

So , in this way we can come to a conclusion that , in today’s era , profit maximisation may not be the best business optimisation process. There are many other proven optimising factors like sales, mark up price, staff , utility , growth, secure profits etc.

I'm eager to hear your comments...

The activity of blogging has enough potentiality to bring you recognition, work satisfaction and most importantly, substantial amount of income. All these factors are proved to be a great source of enticement for countless wannabe bloggers around the world. Though blogging portrays a rosy picture ahead, the path leading to that point is full of challenges and demands efforts of highest caliber from your side.

To the rescue of aspirant bloggers who seek to stamp their authority in this promising field, there are many winning or successful bloggers whom they can idolize and though not fully, but try to learn and put into practice some of their winning habits. Adhering to these habits will stand novices in good stead during the turbulent periods in the blogging sector.

Firstly, you need to communicate your ideas, opinions and views to a large reader base properly. Renowned bloggers handle this task effectively. Most of the times, you’ll find them sending hundreds of e-mails daily to let people know about their work and the result is there to see. Check their inbox and it is virtually flooded with responses. It is a habit that every blogger can do to perfection with the passage of time. Actually, necessity can bring the best in you.

Have you heard of social networking websites such as del.icio.us, Digg and StumbleUpon? If your response is no, then make a habit to visit those sites more often and befriend with many social media users. These esteemed users play a pivotal role in bringing a great deal of traffic for successful bloggers as they undertake a number of activities on their behalf ranging from submitting their posts to promoting them in different platforms. How many times do average or smalltime bloggers resort to these winning practices? Never, as they overlook the power of social media at their own peril.

Another winning habit of successful bloggers is that they are visionary and proactive and think one step ahead of others. After establishing themselves properly, they are soon on the lookout for other potential avenues to get their business diversify into. Sticking into one income source has its own pitfalls as you never know when that particular income stream gets cutoff due to some reasons or other. Having the cushion of multiple income sources can mitigate the severity of losses to a great extent and safely pull them out from troubled waters.

Winning bloggers spend most their valuable time in doing activities they are best at like developing new strategic ideas as well as post ideas and leave the remaining day-to-day tasks such as managing e-mails, moderating comments and other technical and administrative works to competent persons as a benefit of outsourcing. Focusing on core activities can bring success for your blogs as you’ll have fewer troubles to deal with.

Top bloggers sometimes relinquish control of blogging activities for a brief period of time in order to provide opportunity to other skilled writers who have some amazing blog ideas to arouse interest in their readers. During this period, they limit their roles to facilitator or moderator only by deciding upon what to publish and what to not.

Moving on, when you visit the blogs of popular bloggers, you’ll explore that equal attention is being provided not only to quality content, but also to the look and feel and design of blogs. Blogs with eye-catching layouts and designs can be a source of attraction for readers and greatly compliment their quality content. Initially, you can select one layout from mass number free blog themes on the Internet. But once your business grows, try to render a distinct and customized look to your blog that reflects your personality and blog ideas in an apt manner.

Last but not the least; successful bloggers know very well how to express their inability in responding to large number queries, requests and pitches. It is actually a necessity to say a polite ‘no’ as it is impossible to respond to all questions. Conveying your inability in a proper way hardly results in the loss of a reader.

To enrich your knowledge on blogging as well as other intriguing topics such as CSS, Web Design, AJAX and Web Applications, you can visit the popular informative website – http://www.css-faq.com/ that contains plenty of articles, news and videos.

What do you think? Please comment below to tell me.

When blog was first introduced, no one knows that you can make money with it. Now, more and more bloggers are achieving their financial freedom with blog. But, seriously, what do you need to build a successful blog? If you want to blog for profit, surely you will need product or traffic. And before that, you must make something clear.

Building a successful blog is like building a successful business. You need the right attitude to do it. Let’s say you are suppose to clock into your office at 9am but you reach the office whenever time you like and sometime you don’t even show up in the office. Do you think your boss will still employ you?

Of course not. You simply lack the consistency to your job. Same goes to the blogging business. When you want to make money with blog, the first thing you need is to consistently post on your blog. Your visitors like fresh information. They don’t want to click in to see a 2 years ago blog.

And to help you post consistently, you should set a specific goal to build a successful blog. Let me ask you this, what do you want from your blog?

Novice bloggers will answer money. But wise bloggers will answer $3000 by end of this month. You need to set your goal as specific as possible. It is then you will know what you need to have in your blog to achieve your goal.

Once you have your goal written down, you need to concentrate and focus your energy to achieve it. It was told that one of the best ways to do that is to write up a plan. Note down how often you are going to post in your blog. What are you going to do to get more traffic to your blog; how are you going to evaluate your blog post and etc. It is alright that you don’t have much idea to put in your plan. Just remember to add more ideas as you are building your blog.

Just like any other business, you will face a lot of challenges when you are trying to make money with blog. Now, that is the time your determination will be challenged. A lot of bloggers gave up their blogging business because they fail to see a growth of income despite their hardwork to build a successful blog.

As a successful blogger, you should take this time to see what else you can do to bring more business to your blog.

What are your thoughts on the subject?