Leadership in both for- profit or non- profit organization is fundamental for their success. Leadership can be looked from different perspectives putting into consideration all the controls that are employed. Leadership in both types of organizations is complicated because they employ different types of controls in their corporate governance. These types of controls present different levels of complexities which govern both types of organizations.
In their studies Sims & Quatro (2005) found out that corporate governance for profit organizations should be looked at two main categories which include either internal or external perspectives. These two categories can thus be said to be the two main mechanisms of corporate governance. Sims & Quatro (2005) further found out that external mechanisms involve accounting rules within the organization, regulatory reporting requirements which should accompany the accounting process.
Internal mechanisms involved in corporate governance for profit organizations include board of directors and subcommittees of the board (Sims & Quatro, 2005). These subcommittees involve the audit committee, the compensation committee and the committee involved in the nomination of the CEO (Sims & Quatro, 2005). The internal corporate governance also involves compensation programs designed to align the interests of managers and shareholders.
On the other hand it has been observed that nonprofit leaders both directors and board members spend more time raising money (Dym & Hutson, 2005). This is because as result of resource decline it has motivated a change in focus among leaders of social service agencies moving them from a mission and leadership in the larger community towards a professional or managerial orientation which is more focused on self preservation (Dym & Hutson, 2005).
It is important for profit organizations to make clear distinctions to avoid fraud, power abuse and executive greed. This can be ensured by appointing proactive, effective and responsible board of directors. According to Sims & Quatro (2005) sound corporate leadership and governance should first and foremost strive to support a culture of corporate integrity and identify appropriate long- term goals for the organizations profitable growth.
The board in a nonprofit organization should be charged with the responsibility of maintaining accountability and safeguarding trust resides. The board offers a uniquely powerful mechanism to build public confidence about more than financial matters (Robinson, 2001). In many cases the board can recommend direct and sound contact to a wealth of experience, expertise and specialized knowledge through its members (Robinson, 2001).
In profit organizations as outlined by Sims & Quatro (2005) leadership should always foster the long term success of the organization and at the same time ensure that it is consistent with its fiduciary responsibility to the shareholders and to the outside regulators who generally represent the interests of the public. According to Sims & Quatro (2005) an independent executive leadership is the one that is likely to effectively carry out these responsibilities and be accountable to the shareholders.
Another importance of checklist for leadership and governance in a profit organization is that it should develop an agreed upon mission statement on the board purposes and responsibilities (Sims & Quatro, 2005). They continue to say that the leadership should articulate their chosen size, subcommittees and their set policies regarding the organizations independence.
The board also should indicate in a transparent manner the procedure of choosing new board members and at the same time develop policies regarding the maximum terms that the chosen leaders should serve Sims & Quatro (2005). These policies should include clear standards of evaluating the directors.
The leadership of a profit organization should also specify its perception of how it should interrelate with the chosen management of the corporation Sims & Quatro (2005). In this section they continue to say that it should include an indication of how the board will be evaluating the chief executive officer and at the same time determine their pay. They also said the board should set up rules of succession and policy statement that sets forth the plan for the development of a successor chief executive officer (Sims & Quatro, 2005).
Bogue (2007) says that it is important to take a careful consideration when choosing leaders for either profit or non profit organizations to avoid the category of leaders who assume office and responsibility armed only with funny stories and common sense to guide them. He continues to say that for some leaders it is common sense that conflict is a sign of pathology in many organizations (Bogue, 2007).
Organizations should strive to avoid leaders who disdain the need to know anything about the leadership role and also those leaders who exercise power and authority. In both profut and non profit organizations Bogue (2007) says that the absence of curiosity about how the organization can utilize ideas for improvement of leadership performance must be counted as a disappointing posture for organizational leaders holding the promise of both individuals and institutions and the search for truth in trust which is very essential for the growth of the organization (Bogue, 2007).
Blazey (2009) says that leader actions determine the speed and success of the effort to optimize organizational performance. For both profit and non profit organizations if leaders fail to make the right decisions and take the right actions then it implies that the transformation to a high performing organization will be delayed or not take place at all (Blazey, 2009). For profit organizations it means that this may lead to failure to meet customer needs.
Dym & Hutson (2005) says that nowadays it is a time of great struggle and vitality in the non profit organizations sector. This is due to decrease in government funding for housing, community development, environmental and workplace safety programs. As a result non profit organizations that are led by self taught leaders have risen to fill the gap (Dym & Hutson 2005).
In their observation Dym & Hutson suggested that what leaders in non profit organizations lack are in formal education and management skills or expertise (2005). They continue to say that these leaders learn quickly because they must, they build their ships as they sail and at the same time they innovate to solve the problems that they encounter in the process of running these organizations (Dym & Hutson 2005).
Due to the decline of public funding in the last decade and also the increase in competition for financial resources within the nonprofit world, then it means that the gap that exists between the skills and activities for profit and nonprofit organizational leaders has narrowed (Dym & Hutson 2005).