Does meeting standards affect charitable giving? An empirical study of New York metropolitan area charities

Charitable donations constitute a significant revenue source for many nonprofit organizations. To help donors decide which nonprofits to support, watchdog organizations such as the Better Business Bureau (BBB) Wise Giving Alliance have developed standards to promote wise giving. The effectiveness of these guides in channeling limited resources to the best‐managed nonprofits is not widely studied. This research attempts to empirically investigate the effects of standards on public giving, controlling for factors that have documented effects on donations. Specifically, it regresses public support on the extent to which local nonprofits meet the standards of the Better Business Bureau Serving Metropolitan New York, Mid‐Hudson and Long Island Regions, controlling for organization size, board size, service category, government funding, fundraising expense, and giving price. The study found that BBB standards have a positive effect on giving behavior. Meeting BBB standards is associated with higher levels of public support. Participating in assessment programs and striving to meet the standards are recommended for nonprofits seeking to improve funding through charitable contributions. Further study that extends the search for the mechanism that links meeting standards to improved donations is recommended.     

Resource Constraints or Cultural Conformity? Nonprofit Relationships with Businesses

Nonprofit interactions with businesses have become increasingly diverse, but which nonprofits establish relationships, and to what extent do relationships depend on the form or type of tie? Focusing on nonprofit collaboration with businesses and donations from businesses, we test arguments based on sociological institutionalism and resource dependence theory. We find that nonprofits relying on earned income, nonprofits led by individuals with management degrees, and rationalized nonprofits all are more likely to report collaborations with businesses, aligning with expectations from institutional theory. For donative ties between businesses and nonprofits, we find that rationalized nonprofits are more likely to have charitable gifts from businesses. However, nonprofits with earned income are less likely to have business donations, and funding diversity has a salient positive effect. These results reveal important but paradoxical institutional and resource dependence effects. We conclude with a discussion of our divergent findings and set an agenda for additional research on the topic.     

Nonprofit watchdogs: Do they serve the average donor?

Nonprofit watchdog organizations—organizations devoted to rating the accountability and transparency of nonprofits—claim to serve donors who are selecting which nonprofits to support. However, using three waves of the Harris Interactive Donor Pulse, we found that the overwhelming majority of donors (77.6 percent) do not consult these online intermediaries when making donations. Those who do are likely to fall into one of two groups: donors who give large sums of money or donors who are engaged in advocacy. We conclude with conceptual and practical implications.     

Charity Watchdogs and the Limits of Information-Based Regulation

Transparency concerns and the concomitant accountability challenges have motivated policy and legal scholars to explore information-based regulatory approaches. We examine their usefulness in the context of the nonprofit sector which tends to show signs of governance failure. Although nonprofits are required by law to disclose information on fund use, nonprofit donors face difficulties in accessing and interpreting information about how nonprofits are deploying resources. Charity watchdogs make this information available to donors in a convenient format. In theory, this should allow donors to reward nonprofits that devote resources to service delivery and to punish those that are less careful about controlling overheads. To test the relationship between charity ratings and donations, we examine 90 nonprofits in the state of Washington for the period 2004–2007. Drawing on ratings data provided by Charity Navigator, we find that changes in charity ratings tend not to affect donor support to these nonprofits. We explore this statistical finding via interviews with 10 charities located in Washington State. Supporting the statistical results, we find that charities believe that donors tend not to systematically embed ratings in their donation decisions. Instead, they believe that donors assess nonprofits’ effectiveness and trustworthiness via other means such as familiarity, word-of-mouth, or the visibility of the nonprofit in their community. In sum, the policy challenge is to provide information which users desire such as organizational effectiveness as opposed to basic fund allocation in the case of non-profits. What matters for policy efficacy is not how much information is provided but of what type.     

Determining the Optimal Donation Acceptance Policy for Nonprofit Stores

Many nonprofits derive a considerable amount of their financial support from the resale of donated items. Given the razor‐thin margins at which many of these organizations operate, it is critical that they maximize the proceeds that come from the sale of these items. To do so, nonprofits require policies that guide their donation acceptance decisions so as to optimize revenue generation. This article presents research about how to determine the optimal donation acceptance policy for Habitat for Humanity. Habitat affiliates sell donated material at their ReStores, or discount home improvement centers, and the revenue from the ReStores directly supports the building of new homes. Several constraints limit the revenue that the ReStores derive from the donated items, including the supply rate of items from donors, the demand rate of items from customers, and the space limitations of the ReStores. We developed a two‐step method to determine the optimal acceptance policy—the daily amount of donations to accept to maximize revenue. This approach increases revenue by up to 20 percent and additionally provides insights into pricing options, marketing strategy, and optimal store size.     

Female leaders and board performance in member‐serving nonprofit organizations

Despite an active stream of “good governance” research, there is not yet much nonprofit scholarship examining how the gender composition of a board or its leadership relates to board performance. This article helps to fill this gap, focusing on the governance practices of US‐based nonprofits serving a domestic or international membership. A structural equation model finds that the presence of female leaders relates to the performance of nonprofit boards both directly and indirectly through these leaders' presumed influence on board characteristics and operation. This research advances the field by empirically testing a longstanding theory that board performance is both multidimensional and contingent on the market and labor environment, organizational capacity and other characteristics—in this case, gender dynamics. We find there are some positive relationships between female board leadership and clearly defined measures of board performance. These findings also suggest that a strategy to balance a board's gender may serve many nonprofits, but gender representation works in tandem with other board characteristics.     

Playing to the Test: Organizational Responses to Third Party Ratings

External ratings of organizations have proliferated in the last few decades, impacting not only the behavior of consumers but also of the organizations being rated. This phenomenon has been widely studied in regards to the U.S. News and World Reports ratings of universities and law schools. This article strives to understand how third party ratings impact the behavior of nonprofits using the financial data the nonprofits provide in their IRS Forms 990. The results show that such ratings are, in fact, having an effect on how nonprofits report financial information on the IRS Form 990.     

Corporate Volunteering: Benefits and Challenges for Nonprofits

In the frame of corporate social responsibility, corporate volunteering is almost exclusively studied from the point of view of companies, while the perspectives of nonprofit organizations are neglected. Hence, this article focuses on the perspective of managers of nonprofit organizations on volunteer partnership projects with for‐profit companies. In the center of this article lie nonprofit managers' strategy and motivation for participating in corporate volunteering, conception of corporate volunteer activities, and the often‐cited win‐win‐win aspect. Key findings suggest that a majority of the questioned nonprofits lack strategic behavior and management tools for undertaking volunteer partnership projects with companies. Nevertheless, corporate volunteering is widely perceived as an opportunity and a promising method of raising donations for nonprofit organizations. This article suggests that the key to successful future cooperation between nonprofits and profit‐oriented organizations lies in the processes of internal evaluation and subsequent strategy development.     

Exploring a model of servant leadership,empowerment, and commitment in nonprofit organizations

This study examined a model of servant leadership's relationship to organizational commitment through structural and psychological empowerment, focusing on leader–follower dyads in a nonprofit organization. Survey data was collected from 128 employees of a nonprofit organization in a northeastern U.S. city. After model re‐specification, a well‐fitting model emerged, indicating that structural empowerment mediates the relationship between servant leadership and organizational commitment. Moreover, the model suggests that structural empowerment's effect on organizational commitment is both direct and indirect—the latter occurring through the meaning dimension of psychological empowerment. This study provides initial support for structural empowerment being a mechanism through which servant leadership impacts organizational commitment in nonprofits. In addition, the role of meaningful work is highlighted as an antecedent to organizational commitment for nonprofit employees. Servant leaders are suggested to create structurally empowering working environments, which support employees' stronger commitment to the organization.     

Determinants of the recovery of financially distressed nonprofits

Financial ratios are traditionally used to predict and diagnose financial vulnerability; this is helpful, but leaves unanswered how the vulnerable nonprofit should prioritize this information in order to survive. Using panel data, this empirical study observes the financial behaviors of distressed nonprofits for 4‐year periods where the first 2 years are financially vulnerable. Two definitions of vulnerability are tested: when liabilities exceed assets (insolvency) and when net assets shrink by more than 25% annually (financial disruption). In determining which nonprofits recover during the final 2 years, we find that the type of vulnerability impacts which financial indicators a nonprofit should target, and that common tactics such as improving profitability may be counterproductive. Finally, we do not find evidence for liabilities of newness or smallness in the statistical analysis.     

The Relationship between Provision of Membership Benefits and Fulfillment of Representational Roles in Nonprofit Advocacy Membership Organizations

This article explores the ways nonprofit advocacy membership organizations can manage their resource dependence on members and fulfill the organizations' representational roles, focusing on the provision of membership benefits. Membership organizations rely on financial or other resources from members and thus are constrained by them. For a nonprofit that aims to primarily speak for members, constraints by members may help to focus organizational attention on members' interests. Contrarily, for a nonprofit that aims to mainly represent broader constituents, members' constraints may hamper an organization's ability to advocate for broader constituents because members do not necessarily share the same policy goals with broader constituents. The provision of membership benefits can be a useful strategy for organizations to fulfill their representational roles and to satisfy and engage members, because people often join an organization to enjoy certain membership benefits. For an empirical analysis, this study collected a large‐scale data set through web and mail surveys of nonprofit advocacy organizations across the United States. The mixed‐mode surveys achieved a 57.5 percent response rate (729 responses). The survey and regression analysis results show that member‐serving nonprofits providing members with opportunities to participate in advocacy work are more likely to represent members' interests directly. Although broader constituency‐serving nonprofits tend to prioritize members' opinions, these organizations are more likely to adhere to the mandates of broader constituents when providing selective material membership benefits. However, when providing purposive membership benefits, these nonprofits are more likely to represent members' opinions.     

Nonprofit cash holdings and spending: The missing role of government funding

Charitable nonprofit organizations have long been under scrutiny with regard to how they manage excess funds, particularly cash holdings. Given previous empirical evidence, agency problems have been treated as an effective lens to explain the consequences of cash holdings among nonprofits. That is, nonprofit managers spend cash holdings for their own interests as opposed to the social interests of the organization. This study revisits the question of how charities manage extra cash and further examines the role of government funding in nonprofits' spending decisions. The results suggest that nonprofit managers make decisions on how to manage extra cash in accordance with the level of cash holdings; therefore, agency problems do not effectively explain how nonprofits manage extra cash. Furthermore, the results illustrate two contrasting roles of government funding in nonprofits' financial behavior: government funding may be used to monitor unscrupulous behaviors among managers, but it may also restrain nonprofits from investing in human capital.     

Small,minority‐based nonprofits in the information age

Pundits of information technology stress that the Internet opens new arenas for nonprofits through the ability to share information both locally and globally. New technology also changes funders' and other evaluators' expectations regarding proposals. Although new technology makes life easier for organizations with budgets, time, and familiarity with technology to buy and use these new tools, nonprofits that lack these resources fall even further behind in their quest to support and improve their programs. Based on ethnographic research in Kenosha, Wisconsin, this article explores the role of changing technology in the ability of small nonprofits to succeed in implementing their organizational mission. Using case studies, this article compares the experience of nonprofits and church mission projects based in the African American and Latino communities in this small city to that of two mainstream organizations in gaining funding and the general perception of those agencies in the local community. The article argues that expectations about the use of technology increase the gaps between a community's haves and have‐nots. Kenosha organizations based in communities of color are particularly at risk due to already low funding and lack of staff familiar with new technologies. The article demonstrates that the key is often not access to technology or technical assistance but the time to make the best use of available technology.     

Professionalization and Voluntary Transparency Practices in Nonprofit Organizations

There are currently no public disclosure requirements for privately controlled charitable organizations in Germany. This study examines under which conditions German nonprofits, including both public charities and foundations, voluntarily choose transparency. Transparent nonprofits are defined herein as those that publicly disclose their annual reports and detailed financial information. A very small number of German nonprofits do so. The results of a crisp‐set Qualitative Comparative Analysis suggest that the driving force behind the voluntary transparency of organizations is professional management rather than revealed cases of malpractice or stakeholder demands.     

Disentangling the Financial Vulnerability of Nonprofits

This research analyzes the concept of financial vulnerability of nonprofits in depth. We review the definitions given by the prior literature, concluding that none of them is complete. We propose a definition in which financial vulnerability consists of three dimensions: operational (variation of net assets over time), leverage (relationship between total assets and debt), and liquidity (ratio of current assets to short-term debt). We use a sample of 212 Non-Governmental Development Organizations (NGDOs) from the United Kingdom to analyze these measures, observing a limited number of nonprofits simultaneously classified as vulnerable according to the different traditional concepts. Applying our proposed multidimensional model, we find that 6 % of the sample is highly financially vulnerable according to the three dimensions, and a high proportion (18 %) of nonprofits is simultaneously vulnerable in leverage and liquidity dimensions. Finally, we compare the obtained results using traditional variables and those derived from our model.     

Identity and integration: The roles of relationship and retention in nonprofit mergers

Prior research suggests that nonprofits are flexible and possess multiple identities, although we know less about how transformative changes, such as mergers, shape nonprofit identity. This qualitative study draws upon in‐depth interviews from 13 nonprofit merger cases to explore factors that influence postmerger identity and integration. In particular, we focus on the roles of organizational similarity and relationships, program and personnel retention, and rebranding. Ultimately, we derive a typology of postmerger integration in nonprofits and suggest that postmerger identity may be classified in terms of absorption, preservation, or creation. Implications for nonprofit leaders are discussed.     

The role of technology in reconfiguring volunteer management in nonprofits in Hong Kong: Benefits and discontents

There is plenty of evidence demonstrating that volunteering generates benefits for individuals and society at large. However, the role of technology used in recruiting, managing, and retaining volunteers in nonprofits is underexplored in East Asia. Drawing from in‐depth interviews with representatives of eight nonprofits, we examine how technology reconfigured volunteer management in nonprofits, identify its limitations and shortcomings, and discuss strategies in which technology can be utilized to enhance the effectiveness of volunteer management. We found, through this study, that the use of technology reconfigured key aspects of volunteer management: improving recruitment by enlarging and diversifying the volunteer pool; enhancing precision and speed of volunteer matching; improving nonprofits’ ability to recruit professionals; and reducing overall administrative burden of volunteer management within these nonprofits. However, challenges in volunteer management resulting from technology uptake were also observed, including resistance among frontline staff to adopt technology, and volunteer accountability and quality assurance. Specifically, it was found through this study that the extent to which nonprofits are able to effectively utilize technology in volunteer management is contingent on how well volunteer managers are able to actualize the notion of capacity optimization, create a friendly volunteer environment, and build rapport with volunteers. Implications for enhancing organizational capacity in volunteer management vis‐à‐vis the role of technology in the third sector are further discussed.     

Explaining Trust in Canadian Charities: The Influence of Public Perceptions of Accountability,Transparency, Familiarity and Institutional Trust

Public trust of nonprofits can augment social benefits of the nonprofit sector by enhancing engagement of the general population in the sector. This study analyzed cross sectional data collected from a random sample of Canadians (n?=?3853) to test the effects of respondents’ perceptions of financial accountability, transparency, and familiarity of charitable nonprofits, along with the effects of trust in key institutions on their general trust in charitable nonprofits. Results show that each factor (except for trust in government institutions) has a significant effect on the level of trust respondents had in charitable nonprofits. The study helps advance our understanding of what contributes to trust in charitable nonprofits among Canadians and offers suggestions on how nonprofits can garner greater trust with the population.

     

Risk and diversification of nonprofit revenue portfolios: Applying modern portfolio theory to nonprofit revenue management

This study uses modern portfolio theory (MPT) to estimate the risk of nonprofit revenue portfolios and examines to what degree the revenue concentration measure based on Herfindahl–Hirschman Index is associated with the portfolio risk measure based on MPT. The findings suggest that nonprofits with greater revenue concentration have lower revenue portfolio risk in the whole sample analysis. However, it is plausible that this result is dominated by organizations reliant on commercial income, which comprise over half of the sample. In fact, when examined separately, the relationship varies by an organization's primary funding structure. While higher revenue concentration is positively associated with portfolio risk for organizations relying on donations or those without a consistent primary funding source, it appears to associate with a lower portfolio risk for commercial organizations and those relying on government grants. This study reflects on the concept of diversification derived from portfolio theory and calls attention to a more nuanced approach to nonprofit revenue strategy.