Management in the Not for Profit Organization

Dedicated to Exploring the Philosophies and Techniques of Management in the Non-Profit Sector

Competition in the Not-for-Profit Sector  Parts I & II

Part I

Competition vs. Monopoly:

When two or more organizations provide comparable products, the consumer has a choice.  The producers must carve a niche for themselves through variation in the price, style, availability, or quality of their product.  However price and supply pressures can negatively affect quality.  In addition, the expense of marketing their brands consumes capital.  On the other hand, monopolies reduce the consumer’s choice.  Much of the control and decision-making swings to the monopoly.  In so doing, it achieves a more comfortable state of existence for itself.  Thus it can devote the time and energy to more theoretically focused activities.  That is, in a fashion similar to that identified in Maslow’s hierarchy, survival and safety must be relatively assured before higher endeavors can be seriously attempted.  Witness the tremendous research and development that took place at Bell Labs when Ma Bell dominated the telecommunications industry.  It is a fact that monopolies can be beneficial.  It is also a fact that power corrupts.  Such corruption is what led to the myriad anti-monopoly laws currently on the books.  Therefore, some of the resources of a monopoly are often utilized (and/or kept in reserve) to defend itself in court.  Additional monies are consumed in efforts to eliminate competition as it arises.  In other words, while competitive organizations use up significant portions on winning the marketing battle, monopolies similarly dedicate monies to activities which are not beneficial to the consumer.


Summary:  Competition breeds short-sightedness, but tends to cause sensitivity to the consumer.  Monopolies can behave in ways that serve their own interests above the consumer’s, but since they are pressured less regarding short-term survival they can create longer range plans and dedicate more of their resources to pure research.


Part II

Given the above information, it is not surprising that “managed competition” has become popular.  It is an attempt to have the best of both worlds.  This often takes the form of the awarding of contracts to providers who are paid to deliver a certain product for a defined length of time.  However it can also be seen in other arrangements.  For instance—licensing can be considered a form of managing competition.  It provides a barrier which can only be crossed if the potential competitor meets certain criteria.  Nowadays, managing competition is an industry in and of itself.  While this management used to be done by governments, it is now sub-contracted by them to large private concerns.  Thus, the government has only one entity to monitor, where it previously had many.


In such cases, the government has essentially designated a monopoly, albeit for a limited time.  It has assigned a managed care company to oversee, limit, authorize, refuse, arrange, and/or pay for services.  This writer asserts that despite their protestations to the contrary, managed care organizations even prescribe services.  They do so when they adhere to schedules and formularies based upon generalizations and force the direct service provider to do the same.  Anyone who has attempted to obtain authorization for a service that was not on a managed care organization’s authorized list can attest to this.  The managed competition between the managed care organizations occurs when the time for contract renewal arrives.


So, has something been accomplished?  Or has the end result been to apply another layer to a deep and involved process?  The answer most likely depends upon where people were when they started.  If they had good, honest, vibrant, dedicated, innovative, efficient, and skilled providers in the first place, then the arrival of a managed care company is an expensive, unnecessary, unwelcome, and/or damaging intrusion.


On the other hand, if there was political favoritism, callous disregard for the consumer, overpricing, and/or unimaginative low quality service, then the arrival of managed care could bring a breath of fresh air.


The unfortunate thing is that the decision to bring in managed competition/care is frequently made at the State or Province level, but traditional catchment areas were based upon city, county or regional designs.  This can have the unfortunate effect of “throwing the baby out with the bathwater”.  That is, excellent service delivery systems in some areas will be interrupted and distracted by a process that is not necessary.  If the right resources for a competitive environment do not exist then the damage could be severe and permanent.  That is, if there are not enough resources or consumers to go around, then the introduction of an artificial competitive environment will either make proper service delivery impossible, or force geographic entities to join together.  This, again is an artificial construct.  The result is a vehicle that addresses neither previously existing region exactly.


We should not paint with a broad brush.  Some areas will benefit from managed care/competition by achieving both significant cost savings and vast increases in the amount and quality of available care.  However, some areas will strangle inventiveness, reduce quality of care, and line the pockets of managed care executives.


Managed care/competition is like any other service.  Buy it if you need it.  Leave it on the shelf if you don’t.


How do you know which is for you?  If you have a good account of your finances and the quality of your services, then you already know.

Click here to go to Part III of this series