Community Foundations: A Growing Resource for Community Development

Like many nonprofit organizations, community development corporations (CDCs) rely on various sources of funding and support for their activities in poor and distressed neighborhoods. Funders often include the federal government, state and local government agencies, financial institutions, and philanthropic organizations. The author explains how community foundations are different from other philanthropic organizations and describes the various mechanisms that community foundations use to support community development. She suggests that there is a natural fit between the purpose of community foundations and the philosophy of community development, concluding that it is important for CDCs, as well as other nonprofit organizations, to understand how community foundations are different from other philanthropic organizations so that they may better position themselves to take advantage of the many resources that community foundations bring to their communities.     

What Helped Nonprofits Weather the Great Recession?

This study examined the effectiveness of several financial strategies for nonprofit organizations in fighting the Great Recession. Using data from human services and community improvement organizations in the state of New Jersey, we tested hypotheses about the relationships between three measures of financial sustainability and various fundraising efforts and financial indicators. We found that (1) except for strong external funding relationships, funding efforts were generally not effective in enhancing financial sustainability during the crisis; (2) higher operating margin and equity ratio improved an organization's ability to generate revenue and maintain expense levels, but higher debt ratio and administrative cost ratio were generally harmful; and (3) revenue diversification might aggravate fiscal stress and cause more expense cuts in a severe crisis. These findings improve our understanding of the mechanics of nonprofit management during times of harsh fiscal conditions and suggest useful ways for nonprofit organizations to navigate future financial crises.     

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.     

How the State Shaped the Nonprofit Sector: Public Funding in British Columbia

This article examines how the state has used its spending power to shape the nonprofit sector in British Columbia since the 1960s. The province's thriving nonprofit sector and its polarized political culture provide an ideal case study for exploring the relationship between the state and nongovernmental organizations. The following study documents changes in state policy, the trajectory of funding, funding patterns, and organizations that have received state funding. Although public funding for nonprofits in Canada has been pervasive for decades, there is little empirical evidence on the nature and scope of this funding. This article is based on an innovative new database that provides a comprehensive list of grants from the provincial government to nonprofit organizations between 1960 and 2014. Despite concerns regarding cuts to public funding in recent years, this study finds that there has been an overall increase in funding. However, there has also been a significant shift in funding from women's issues to Aboriginal peoples since the early 2000s.     

Is Bigger Really Better?

This study investigates the effect of a capital facilities project on nonprofit financial vulnerability metrics. The author employs a difference‐in‐differences technique to model the relationship between facilities investments and financial vulnerability indicators using data for a matched‐pair sample of nonprofit organizations that invested and did not invest in a facilities project. Overall the findings suggest that investments in facilities are associated with temporary increases in an organization's net assets ratio and decreases in its surplus ratio after a project is completed, and that the costs associated with facilities projects (for example, debt) place strain on nonprofit finances. The study's findings have implications for the financial management of nonprofit organizations, particularly in regard to the associated costs of capital expansion.     

“We Actually Trust the Community:” Examining the Dynamics of a Nonprofit Funding Relationship in New Zealand

Funding relationships in nonprofit management are increasingly defined by a philosophy of rational management, characterized by measurement of outputs and benchmarking, which represents an audit culture system (Burnley, Matthews, & McKenzie, 2005). There is concern that these approaches are constantly undermining the mission of community service nonprofit organizations (Darcy, 2002). In this research, we analyzed the management of funding relationships by examining dynamics within a nonprofit funding relationship in New Zealand. Through focus groups we explored the relationship between 17 representatives from nonprofit organizations and four Board members of a funding Trust. The management of this funding relationship was characterized by an appreciation of the diverse nature of nonprofit organizations, a balance between trust and control, and communication. We suggest that elements of these dynamics could be incorporated into nonprofit funding relationships in order to challenge an over-reliance on audit culture systems, and to re-establish relationships characterized by interaction between nonprofit organizations and their funders. Finally, we call for future research in this area.     

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.     

Organizational innovativeness and its determinants in South Korean nonprofit human service organizations

This study compares the level of organizational innovativeness and its determinants in different types of nonprofit human service organizations. Based on theoretical conceptualizations of organizational innovation, it was hypothesized that community service organizations (CSOs) would be more innovative than residential service organizations (RSOs), and determinants of organizational innovation (such as organizations' characteristics, internal and external properties, and executive leadership) would influence innovativeness. Data from a survey of two types of human service organizations in South Korea (127 RSOs for children and 220 CSOs) revealed that the level of innovation in both types of organizations was not significantly different. The determinants of decentralization and formalization showed significant impacts on innovativeness in CSOs. Decentralization also had a significant positive effect on innovativeness in RSOs. However, executive leadership was a significant determinant of organizational innovativeness in CSOs only. Based on these results, administrative implications are suggested for the facilitation of organizational innovation in nonprofit human service organizations.     

Corporate funding of the arts in a turbulent environment

Focusing on funding in culture and the arts, the author identifies a distinctive logic of company support for nonprofit organizations. Business giving is increasingly disciplined around company objectives, giving levels are driven by pretax earnings, and giving decisions are the province of managers who draw advice less from the arts community or public agencies than from other companies. At best, turbulence in government funding has modest effect on corporate support. In turn, change in corporate support has little impact on public backing. The separate logics of corporate and government support imply separate and distinctive long-term development strategies for nonprofit organizations.     

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.     

Managerial Control and Strategy in Nonprofit Organizations: Doing the Right Things for the Wrong Reasons?

This article presents the second stage of a study that engages with the debate that has occurred within the nonprofit literature about the propensity and relative merits of nonprofit organizations adopting for‐profit approaches to management. Specifically, this qualitative investigation examines the ways in which nonprofit organizations use management control when implementing their chosen strategies. Although this topic has been the subject of considerable attention in the management accounting research, it has rarely been explored within a nonprofit context. This is surprising not only because of the considerable social and economic impact of this sector, but also because of the apparent trend toward sectoral convergence in many structural and processual respects, including strategic behaviors and approaches to control. Based on interviews with CEOs and senior executives in thirty‐two Australian nonprofit organizations, we find that the relationship between strategy and control in nonprofit organizations is similar to that in for‐profit organizations, but quite different reasons underlie nonprofit organizations' exercising of management control.     

Innovation by nonprofit organizations: Policy and research issues

It is often claimed that a main reason public authorities and others use nonprofit organizations is that nonprofit organizations are innovative. But very little research has been conducted into innovative behavior by nonprofit organizations. How, then, does a funder formulate a policy with which to select innovative organizations? This article develops a classification matrix for types of innovations, sets out the elements of an innovation policy for a funder, and uses a review of the main theories of the spurs and inhibitions to innovation to consider how this ordering can be used in the construction of an innovation policy and as a framework for research.     

Fidelity in philanthropy: Two challenges to community foundations

Two recent court cases have raised doubts about how faithful community foundation officials must remain over time to the donor's charitable intent. For trustees of community foundations, nonprofit managers, and potential donors, the two cases discussed in this article raise three critical questions: Under what conditions can and should a donor's charitable intentions be modified? Do nonprofit organizations have legitimate claims to funds in community foundations earmarked for their organizations by donors? Should donors consider disbursing their philanthropic funds themselves rather than seek to have them held in perpetuity in a foundation? In addition to addressing these questions, the author suggests that the two court cases examined here reveal something important about the broader evolution of philanthropy over the past three decades.     

Implementing an employee performance management system in a nonprofit organization

Nonprofit organizations are not exempt from the imperatives of employee attraction, retention, and motivation. As competition for staff, donors, and funding increases, the need to manage employee performance will continue to be a critical human resource management issue. This article outlines a study of the introduction of a performance management system in an Australian nonprofit organization and analyzes its design and implementation. It explores how performance management can be introduced and used effectively within a nonprofit environment to benefit staff and the organization. However, the use of performance management is not without its challenges, and the research also identified initial employee resistance and a resulting initial spike in labor turnover. However, findings indicate that if nonprofit organizations are willing to undertake consultation with staff and ensure that the organization's specific context, values, and mission are reflected in the performance management system, it can be a useful tool for managers and a direct benefit to employees.     

Promoting social innovation amidst organizational complexity: Case study evidence from the German Red Cross

Social innovation is concerned with the creation and implementation of new solutions to social problems. Although research commonly frames social innovation as the domain of small, entrepreneurial organizations, an increasing number of large and well-established nonprofit organizations have started actively launching their own innovation initiatives. Using a case study of social innovation ventures within the German Red Cross (GRC), this study identifies organizational hurdles and viable management strategies targeting the promotion of social innovation within particularly complex organizations. Based on our results, we develop a conceptual framework highlighting that promoting social innovation in established organizations requires simultaneous attention to multiple dimensions of leadership and governance. Our study thereby offers a blueprint for management strategies that can guide nonprofit leaders in their quest to promote social innovation from within their organization.     

Organizational sensegiving: Indicators and nonprofit signaling

Resource acquisition depends upon the agreement between an organization's sense of identity and the perceptions of organizational identity held by resource providers. To smooth the flow of resources and buffer against potential issues, organizations seek to manage external perceptions and, to the extent possible, control their organizational identity. Using exploratory factor analysis, we examine the data from 300 GuideStar profiles to develop a sense of how nonprofit organizations “give sense” to resource providers and attempt to manage their organizational identity. We find evidence of three sensegiving strategies. We then use a seemingly unrelated regression model to examine the relationship between these strategies and revenue outcomes, finding evidence that (a) nonprofit organizations demonstrate intentional sensegiving, and (b) different sensegiving approaches are related to different income streams.     

Philanthropy by Decree

This article investigates the relationship among nonprofit foundations’ choice of philanthropic strategy (expressive, receptive, proactive, and collaborative) and sound governance, as measured by board capital (competencies and networks), board processes (planning, control, evaluation, and so on), and chairman power (entrenchment and tenure). Using a sample of fifty‐one Italian foundations of banking origins, this article shows that high levels of board capital, complete board processes, and chairman long tenure are positively associated with proactive and collaborative philanthropic strategies.     

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.     

How does a board of directors influence within‐ and cross‐sector nonprofit collaboration?

Board members play a significant, yet largely unexamined, role in nonprofit collaboration. Processes, such as finding prospective partners, creating common ground with a partner, and establishing appropriate collaborative governance implicate nonprofit board members. In contrast to the scholarship of the role of interlocking directorates as potential networks for nonprofit collaboration, this paper examines the role of board members' social and human capital on nonprofit collaboration with other nonprofits, businesses, and government agencies. Drawing on online survey data from 636 nonprofit organizations, this paper finds that board social capital—but not board human capital—is positively related to the presence and number of within‐sector and cross‐sector nonprofit collaboration. However, board human capital enhances nonprofit‐government collaboration, when board social capital is also high. The results provide a novel perspective in nonprofit collaboration and board management research.