The crowding‐out effect within government funding: Implications for within‐source diversification

The benefits and risks of revenue diversification lead scholars to propose within‐source diversification as a possible compromise. Although this revenue strategy sounds promising, no scholarly attention has been devoted to empirically examining it. This study explores within‐source diversification across government funding, specifically whether nonprofit receipt of support from a major government funder affects support from other government funders. Using a panel dataset of U.S.‐based international development nonprofits from 1995 to 2014, we find that nonprofits with more funding from the major funder are associated with significantly less funding from other funders. This crowding‐out effect weakens as organization size grows. The findings imply that the within‐source diversification strategy might be more desirable for larger organizations with the capacity to manage multiple funding relationships.     

Foundations and innovation in the nonprofit sector

Using a sample of 17 foundations that are at the forefront of encouraging innovation this study explored foundations' motivations behind funding innovation, their perceived ability to impact the levels of innovation in nonprofit organizations, and strategies that foundations are using or can use to encourage innovation in nonprofit organizations. The results showed that among the major motives behind funding innovation were leveraging the capital, honoring the foundations' core identity (mission and values), and desiring to encourage innovation in nonprofit organizations. Five strategies/mechanisms that foundations are using/can use to encourage innovation in nonprofit organizations were identified: (a) offering innovation awards/grants as catalysts for innovation, (b) providing risk capital and supporting early stage idea development, (c) educating other foundations on the value of innovation and serving in a convener role, (d) serving as thought leaders, and (e) increasing nonprofit organizations' capacity for innovation. Implications for practice are discussed along with recommendations for future research.     

Gambling on an alternative revenue source: The impact of riverboat gambling on the charitable gambling component of nonprofit finances

This article examines the impact of casino gambling in and around Illinois on charitable gambling in that state. The research targets the impact of casino gambling on one of the vital revenue sources of many nonprofit organizations. Charitable gambling represents the most widespread form of legalized gambling in the United States. Net income from charitable gambling totaled an estimated $1.3 billion in 1997. Despite its apparent importance in providing an alternative revenue stream to nonprofit organizations, in a growing number of states charitable gambling operations must compete with an increasing number of private for‐profit gambling enterprises, including riverboat and land‐based casinos, Indian gambling operations, and pari‐mutuel wagering venues. As a result, there is interest in the extent to which forprofit gambling is crowding out charitable gambling—and in the process reducing funds (such as receipts from gambling operations) available to nonprofit organizations. The data analysis presented in this article suggests that spending on casino gambling in Illinois and in bordering areas of Indiana, Iowa, and Missouri may be displacing consumer expenditures on charitable gambling.     

How nonprofit human service organizations manage their funding sources: key findings and policy implications

Major findings and policy implications on how nonprofit social service organizations manage their funding relations are summarized. Data from in-depth case studies of six medium-sized social service organizations with distinctive funding profiles yielded findings on the major contingencies associated with controlling fees, the volatility of donations, and the driving force of public funding relationships for funders (public and private), nonprofit managers, and the role of nonprofit organizations.     

Exploring the link between government funding and efficiency in nonprofit colleges

Previous literature has suggested that federal funding can hinder the efficiency of nonprofit organizations, but this has yet not been empirically tested. This study used a two‐stage data envelopment analysis (DEA) model to measure the efficiency of a set of private nonprofit teaching‐oriented colleges, then estimate the impact of federal and state funding on organizational efficiency. The findings indicate that, on average, increases in neither state nor federal funding effect efficiency of nonprofit colleges. Increasing state funding negatively impacted the efficiency of public colleges (N = 799). This study suggests that the challenges for nonprofits that accompany government funding may not rise to a quantifiable negative effect on efficiency.     

Funding uncertainty and nonprofit strategies in the 1980s

The degree to which strategic action is related to changes in the perceived uncertainty of income from major types of funders was examined for a panel of nonprofit organizations. Uncertainty was found to be a pervasive phenomenon. Nonprofits in some parts of the sector reported increases in uncertainty over time, while those in other parts reported decreases. The use of new revenue, legitimation, or retrenchment strategies was associated with the reduction of uncertainty for some types of nonprofit organizations but not for others.     

The DIRECTIONS nonprofit resource assessment model: A tool for small nonprofit organizations

Rapid growth in the number of nonprofits has created a shortage of trained staff and experienced volunteer leadership for nonprofit organizations. The Nonprofit Education Initiative (NEI) in South Carolina developed the DIRECTIONS nonprofit resource assessment model to provide tools to help nonprofits better meet the challenges facing our communities—tools that will help nonprofits develop effective plans, integrate resources, diversify revenue, communicate effective messages, and motivate constituents. These tools are also inexpensive and available close to home. The research and development process was a cooperative effort between the Department of Parks, Recreation, and Tourism Management and Clemson University Cooperative Extension Service, with funding from the W. K. Kellogg Foundation. Cooperative Extension is a component of the land grant university system, the largest educational delivery system in the world. Cooperative Extension's role is to plan, execute, deliver, and evaluate learning programs consistent with locally identified needs. It helps people acquire the understanding, capabilities, attitudes, and skills essential to solving farm, home, and community problems. This article gives a background of the challenges facing nonprofit organizations in South Carolina, the steps taken to develop this new assessment model, and results of research conducted throughout the development process.     

Street lamps,alleys, ratio analysis,and nonprofit organizations

This article offers an accounting‐based framework for evaluating the efficiency of nonprofit organizations using four factors. Separately, these factors reflect (1) the proportion of revenues actually used in the current year, (2) the proportion of the expenditures allocated to programs, (3) the units of output produced from that spending, and (4) the value of the units produced, expressed in terms of an index value. Combined, these four factors measure the value of units produced per dollar of revenue received, an accounting measure of overall efficiency. Using this framework provides insight into both the appropriateness and the limitations of employing solely financial measures to judge nonprofit organizations and also identifies conceptual areas absent from currently available evaluation tools.     

Funding source,board involvement techniques,and financial vulnerability in nonprofit organizations: A test of resource dependence

The study examined here tested a resource dependence view of the organization on a sample of nonprofit social service agencies. Results indicated that CEOs of privately funded nonprofit agencies were more likely to use board involvement techniques than CEOs of government‐funded or commercially supported organizations. In addition, privately funded agencies were less vulnerable to economic shock than government or commercially funded agencies, and funding source explained incremental variance in board involvement and vulnerability beyond characteristics of the organization and board. These results provide support for assertions of resource dependence theory and suggest that a CEO's strategic engagement with an organization's board depends in part on the nature and concentration of the organization's resources.     

Interorganizational network portfolios of nonprofit organizations: Implications for collaboration management

Increasingly, nonprofit organizations engage in interorganizational collaboration to address large‐scale social problems. Scholarship typically focuses on the characteristics of both within‐sector and cross‐sector partnerships of two collaborating organizations or all partnering organizations involved in a collaboration, but we know little about the patterns of interorganizational relationships that single nonprofit organizations maintain. This research draws upon surveys from 452 nonprofits and introduces nonprofit network portfolios, which we define as the number, integration, intensity, and duration of relationships that nonprofits purposefully develop with other organizations. Using 12 network measures, Ward cluster analysis revealed three distinct network portfolios: restricted within‐sector (n = 319, 70.58%), which included limited collaboration and prioritized within‐sector partnerships; robust within‐sector (n = 80, 17.70%), which included more nonprofit partnerships than restricted within‐sector portfolios; and cross‐sector (n = 53, 11.72%), which had a rich assemblage of integrative partnerships with nonprofits, businesses, and government agencies. Further, nonprofits that maintained each type of portfolio differed in their revenue and social mission, suggesting these factors are related to the types of collaboration that nonprofits maintain. This study makes contributions to existing research on interorganizational networks and cross‐sector collaboration and suggests practical and policy implications for nonprofit network management.     

The economics of performance management in nonprofit organizations

This article analyzes whether and how private‐sector notions of performance management apply to nonprofit organizations. To this end the author shows that each concept of performance management used in the private sector is based on a specific economic theory of the firm and its environment. Before transferring concepts and tools derived from a certain model of the firm and its environment to nonprofit organizations, one must determine whether the assumptions underlying this model are also adequate for nonprofit organizations. Otherwise, one must first adjust those assumptions and analyze whether the derived concepts and tools are still meaningful in the new context; if not, one must determine how to modify them accordingly. The analysis elaborates on the differences between for‐profit and nonprofit organizations that are important for applying performance management concepts. Moreover, the author discusses the practical implications for the use of balanced scorecards in nonprofits.     

The gender pay gap in nonprofit executive compensation in South Florida

In general, systemic imbalance in pay between men and women is well established, but the literature on pay imbalance is mixed for nonprofit executives. Difference in organizational size could be a relevant factor in explaining pay imbalance, as previous research suggests average female nonprofit executives lead smaller organizations. The present study examines the role of governance accreditation on the gender gap in chief executive pay, using a 2 × 2 analysis of covariance to control for organizational size (as measured by annual revenue) when comparing samples of accredited and nonaccredited organizations in South Florida. We found a wage gap for gender, with female executives averaging 12% less compensation than male executives, after controlling for organizational size. No significant effect was found for accreditation; although the only significant difference between genders was in the nonaccredited sample, the findings hint that any trend towards pay equity would be due to a pattern of the male executives in the accredited sample being paid less than their counterparts in nonaccredited organizations.     

Fraud survival in nonprofit organizations: Empirical evidence

This study examines the survival of nonprofit organizations after the discovery of a fraud. Literature on nonprofit fraud claims that fraud has a destructive impact on nonprofit organizations. This study is the first to provide empirical evidence of the impact of fraud on a nonprofit organization's survival, and to analyze the significance of underlying organizational and fraud factors. An analysis of 115 nonprofit organizations experiencing a fraud shows that over one fourth of these organizations did not survive at least 3 years beyond the publication of the fraud, a rate considerably higher than the typical nonprofit failure rate. This article investigates the characteristics of surviving organizations and finds that older and larger organizations are more likely to survive, indicating the liabilities of newness and smallness hold in fraud survival situations. In cases where an executive‐level perpetrator committed the fraud, or where the organization victimized the public, the organization was less likely to survive. These findings suggest nonprofit organizations, particularly those that are new or small, could benefit by implementing governance policies and procedures that are consistent with those employed by more established organizations.     

Do operating reserves stabilize spending by nonprofit organizations?

The public budgeting literature has a long and rich tradition that examines the role of budget stabilization funds as fiscal stabilizers for state and local governments during periods of declining revenues and deteriorating economic conditions. Similarly, nonprofit organizations may accumulate operating reserves that allow them to smooth out annual imbalances between revenues and expenses, especially when facing a fiscal shock. Agency theory, on the other hand, indicates that managers might use these reserves to enrich themselves at the expense of the organization. This article is a step toward addressing a gap in our knowledge by analyzing the implications of reserves on nonprofit spending in general and also on particular functions (program versus overhead spending). Using a long panel of data from 1995 to 2011 and controlling for sample selection bias, the empirical results suggest that operating reserves held by nonprofit organizations do reduce expense gaps during downturns, but the effect is small. The results also suggest that nonprofit managers value current spending more than reserving funds for the future. Further, operating reserves are not associated with agency problems as predicted by theory. The empirical results suggest that the current rule of thumb—that nonprofits ought to hold up to 6 months of operating reserves—is inadequate if these pools of savings are intended to maintain all spending at trend during poor fiscal times. If, however, reserves are intended to only offset trend deviations partially while alternative strategies are sought, then the current rule of thumb may be sufficient.     

Terms of engagement: Facebook and Twitter use among nonprofit human service organizations

This study uses Lovejoy and Saxton's (2012) hierarchy of engagement to analyze how nonprofit human service organizations use Facebook and Twitter to engage stakeholders. Their framework has not been applied to this nonprofit subgroup, and most previous scholarship on this topic focuses on just one platform. We also contribute by drawing on organizational theory to better understand variation in the modes of engagement organizations emphasize. Based on our analysis, we add new subcategories to the hierarchy of engagement. In addition, we find that compared to other nonprofit subgroups examined in previous research, the organizations in our sample placed a greater emphasis on using social media messages to ask stakeholders to take action. We report only modest variations in how organizations were using Facebook and Twitter. Finally, according to our results, resource dependence and stewardship theories help explain the modes of engagement organizations prioritize.     

Interorganizational relations of nonprofit organizations: An exploratory study

In their several roles as appropriators, redistributors, and providers, nonprofit organizations are involved in complex transactions with organizations in the nonprofit, for-profit, and public sectors. The purpose of this exploratory investigation, based on a sample of New York State nonprofits, is to explain variation in the extent of intrasector and intersector transactions. Various kinds of prevailing environmental complexities, coupled with the ways in which organizations are structured to deal with these complexities, help explain variation in the extent of organizational transactions. Another important predictor is directors' perceptions of main problems affecting the activities of their agencies. These findings are consistent with the conclusion that environmental uncertainties and perceptions about them affect the nature and extent of interorganizational contact.     

The economic value of volunteers to nonprofit organizations

This article applies microeconomic theory to the problem of calculating the economic value of volunteers to nonprofit organizations. It finds weaknesses in two popular valuation metrics: replacement cost and demand price. It argues for a method that measures the economic value of volunteer time by the impact it has on an organization's revenue, through either fundraising or producing goods and services. An Australian case study illustrates the method, and a survey of U.S. nonprofits tests the generality of the assumptions. The concluding section offers suggestions for management practice and further research.     

Successful collaboration between the nonprofit and public sectors

Public and private funding sources often require nonprofit organizations to provide evidence of partnership with a governmental entity before financing a project. However, the circumstances under which working partnerships between the nonprofit and public sectors are forged and sustained have not been fully studied. This article presents the findings of a case study of land trusts and local governments and identifies conditions that foster successful collaboration. Social factors such as experience on the part of key personnel in working with the opposite entity and genuine affection for each other are more important than economic benefits. This suggests that a nonprofit agency interested in creating a viable partnership to improve a project should give careful consideration to assigning staff.     

Building and valuing global brands in the nonprofit sector

Global nonprofit brands are the world's new “super brands” (Wootliff and Deri, 2001). Nonprofit organizations command unprecedented levels of trust, and nonprofit brand valuations are on par with major international corporations. Leaders and managers of nonprofits face new challenges in the stewardship of their brands. Based on current thinking in nonprofit management and detailed interviews with close to one hundred executives of ten international nonprofit organizations, this article draws strategic lessons on brand building and brand valuation activities of international nonprofits. The multiple roles and stakeholders that global nonprofit brands must address make nonprofit brand building complex and challenging. In particular, differences between advocacy and relief organizations must be explained. Despite the complexity, international nonprofit organizations may have an advantage over for‐profits in leveraging public trust and brand communication. Advocacy organizations in particular successfully link brand and cause to good effect. The valuation of nonprofit brands is a new strategic challenge with significant appeal, but also significant concerns for international nonprofits. In addition to providing nonprofit leaders and managers with a better understanding of brandbuilding activities, imperatives, and best practices in the field, this article outlines the opportunities and threats associated with the valuation of nonprofit brands.