Running on Empty: The Operating Reserves of U.S. Nonprofit Organizations

Operating reserves allow nonprofit organizations to smooth out imbalances between revenues and expenses, helping to maintain program output in the presence of fiscal shocks. We know surprisingly little about why nonprofits might save operating reserves and what factors explain variation between organizations' savings behavior. Findings suggest that operating reserves are reduced in the presence of concentrated public funds, access to debt, fixed assets, and endowment. However, size is not an important predictor, indicating that the lack of reserves is not limited to small nonprofit organizations but is instead a sectorwide issue. Significant numbers of nonprofits maintain no operating reserves at all. One potential explanation is that organizations discount the benefits of reserves because they are evaluated on spending, focusing instead on the “benefits of costs.” This preference for spending over reserving may also help explain the general lack of liquidity in the sector beyond operating reserves alone.     

Co‐located Nonprofit Centers

Nonprofit centers are organized to house individual nonprofits “under one roof” to enhance their efficiency and effectiveness and to offer shared services to diminish administrative load. This post‐occupancy tenant satisfaction survey of three such US centers represents the first empirical analysis of such organizations. We find that nonprofit tenants (N = 118) initially co‐located due to the leasing price and the new physical environment (free parking and safety). Nearly all nonprofit tenants wished to remain at their nonprofit centers, largely for the same reasons that brought them there. The article then discusses strategies to achieve the high response rates attained in this study. It concludes with some implications for nonprofit centers, communities, and nonprofit staff—now and in the future, including lower occupancy costs and enhanced quality of nonprofits’ workspace.     

Donor Reactions to Commercial Activities of Nonprofit Organizations: An American Case Study

VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations - This paper raises two questions. Do donors to nonprofit organizations care about whether nonprofit organizations pursue...     

The State of Nonprofit Finance Research across Disciplines

The single largest determinant of nonprofit organization success is financial sustainability. Yet the study of nonprofit finance spans multiple disciplines, creating barriers for new researchers to the field. To address this challenge, this study addresses three primary questions across disciplines: How much nonprofit finance research has been conducted, what is the content of this research, and what is the impact of this research? This systematic literature search revealed 619 nonprofit finance research articles in twenty‐seven journals published in the disciplines of nonprofit management, public administration, accounting, and economics and finance between 1970 and 2014. The vast majority (415 of the 619 identified articles) were published in nonprofit management journals (either Nonprofit and Voluntary Sector Quarterly or Nonprofit Management & Leadership ). Across disciplines, there is an emphasis on determinants of giving, but we note some variation; for example, there is more emphasis on government funding in journals outside of nonprofit management. The impact of this research is significant, with more than 32,630 citations, or an average of 52.71 times per article. The resulting bibliography may be helpful to researchers seeking to discern the status of extant nonprofit finance research across multiple disciplines.     

Nonprofit Leader Perceptions of Operating Reserves and Their Substitutes

This exploratory study has three objectives: (1) to understand the various ways academics, consultants, and practitioners conceptualize operating reserves; (2) to explore differences among academic findings, consultant recommendations, and nonprofit leader perceptions of operating reserves; and (3) to identify how practitioners operationalize operating reserves within their organizations. Using intensive interviews with nonprofit executives, we find that the operating reserve ratio (ORR) commonly used in the nonprofit literature does not accurately indicate whether an organization holds an operating reserve according to nonprofit leaders. In addition, results indicate that experienced nonprofit leaders perceive a variety of other fund types including endowment and investment savings as well as ability to borrow, other assets, sister foundations, and donor networks as legitimate substitutes for a reserve.     

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.     

Structures,Challenges, and Successes of Volunteer Programs Co‐managed by Nonprofit and Public Organizations

This article presents a mixed‐methods, multicase study and comparison of volunteer programs in US national parks that have evolved, in response to growth and fiscal pressures, to be co‐managed by national park staff and their nonprofit support partners. Findings detail why and how the expanded partnerships were formed; how they operate; challenges they face; ways in which they adhere to, stretch, and depart from theories of nonprofit management, collaboration, and program institutionalization; and the significant—even exponential—volunteer program growth that resulted in each case. These nonprofit?public volunteer program partnerships—at Acadia, Arches and ­Canyonlands, Cuyahoga Valley, Golden Gate, the National Mall, and Yosemite national park sites—employ many standard forms of interorganizational relations, even though in these cases the nonprofits give money to the government organization instead of the reverse. Their volunteer program and management structures also share similar elements because of coercive, normative, and mimetic pressures. At the same time, each volunteer program partnership is a distinct blend of collaboration and management practices because of the unique natural features, climate, needs, adjacent populations, and personalities of leaders at each site. The cases employ innovative strategies to substantially increase the number of staff who lead volunteer programs. Recommendations are offered for nonprofit management research and practice, and findings are instructive for organizations that utilize volunteers either as a single entity or as part of a collaboration.     

Work‐to‐Society Spillover?

Nonprofit employees can make ideal volunteers for other organizations in the sector, and understanding their participation in volunteering is a timely task. Based on “spillover theory,” this study tests how nonprofit employees’ experience on the job may carry over into the nonwork arena. The study focuses on how nonprofit employees’ satisfaction with the job and perception of the organization's mission achievement relate to their volunteering, controlling for the generally higher levels of prosocial motivation found in the sector. The findings suggest that the consequences of job satisfaction for this group extend beyond the workplace, contributing to societal benefits.     

Beyond Cans and Capacity

Many essential public services are provided through networks of community‐based nonprofit organizations. Previous research has demonstrated that simply providing additional resources to these organizations is insufficient to better address demands for public services. We also know little about how and why these organizations adopt network‐level objectives related to service provision. In this analysis, we expand the focus of service provision beyond capacity to incorporate the unique roles that define the very existence of nonprofit organizations, and how these roles affect organizational behavior with respect to service network objectives. We use focus group, survey, and administrative data from one hundred community‐based nonprofit organizations in an emergency food service network to explore the relationships among capacity, roles, and specific program objectives.     

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.     

The trickle‐down effect of ethical leadership in nonprofit soccer clubs

Nonprofit soccer clubs are currently facing many ethical challenges, such as abuse, doping and match fixing. While research suggests that organizational (board) ethical leadership may be effective to tackle these ethical issues, empirical support in the context of sport remains limited. Drawing on the perceptions of a sample of nonprofit soccer players (n = 438) and coaches (n = 106), we indicate that the coaches play an important mediating role regarding the associations between board ethical leadership and ethical climate. The theoretical underpinnings of ethical leadership—formed by social learning theory and social exchange theory—and the social distance between the board and the players in nonprofit soccer clubs provide support in this regard. In sum, our results demonstrate that the influence of board ethical leadership in nonprofit soccer clubs partly trickles down to the players via coach ethical leadership. Finally, practical implications for nonprofit soccer club management are discussed.     

Book Review: The Death Knell of the Utilitarianism: A Review and Theoretical Implications of To Profit or Not to Profit

This paper uses the edited volume To Profit or Not to Profit; The Commercial Transformation of the Nonprofit Sector as an opportunity to review the theories of the nonprofit sector based on the utility maximization behavioral model linked to neoclassical economics. The existence of a large nonprofit sector and its increasing commercialism undermines the logical sufficiency of these theories to explain organizational behavior. The book in question is an effort to solve that problem and reconcile the utility maximization model with seemingly contradicting evidence. In the end, however, these efforts are not very successful and lead to the partial acceptance of an alternative model, grounded in the neo-institutional theory of organizations.     

Program Evaluation Practice in the Nonprofit Sector

Nonprofit organizations are increasingly being asked to demonstrate the effectiveness of their programs and services. Faced with this challenge, agencies that decide to engage in program evaluation must choose among various approaches and methods. This article provides a window into why and how nonprofit organizations are conducting program evaluations, and it reveals the factors nonprofit agencies identify as contributing to a useful and credible evaluation. In addition, the article addresses the role of stakeholder participation in program evaluation.     

Institutional isomorphism and nonprofit managerialism: For better or worse?

Nonprofit organizations (NPOs) have increasingly adopted business‐like practices as a response to institutional pressures. Some researchers argue that this development leads to mission drift, whereas others find a positive effect on organizational performance. However, the institutional pressures responsible for shaping the nonprofit sector have remained hard to distinguish from each other. This study explores the consequences of mimetic, normative, and coercive pressures, and looks at how they affect managerialism, organizational performance, and mission drift. We link these concepts through a structural equation model based on survey data and find that one aspect of managerialism, strategic behavior, is a key construct in influencing the response to isomorphic pressures and can positively affect organizational performance while holding off‐mission drift. Normative isomorphism even has a direct positive effect on organizational performance. Mission drift can take place when organizations are under coercive pressure without having strategies or internal processes in place. These findings imply that organizations should invest in their strategy and the professional development of their staff to increase organizational performance and avoid mission drift.     

Past work experience and organizational assimilation in nonprofit organizations

This study compares seven dimensions of organizational assimilation (OA)—familiarity with coworkers, familiarity with supervisors, recognition, acculturation, involvement, job competency, and role negotiation—into nonprofit, for‐profit, and governmental organizations incorporating the role of similarity of past work experience (magnitude of transition [MoT]). An online survey of 294 employee newcomers (tenures of 3 months or less) revealed differences in OA between those entering nonprofits and those entering for‐profit, and governmental organizations. Compared to newcomers entering for‐profit and governmental organizations, nonprofit newcomers reported higher levels of job competency, involvement, acculturation, and role negotiation. Interactions between organization type and MoT from past work to current roles were examined for effects on OA. When MoT was low, nonprofit newcomers were higher on acculturation and involvement than for‐profit newcomers; governmental newcomers with high MoT were significantly higher on role negotiation than for‐profit newcomers. Theoretical and practical implications for nonprofit organizational management, trainers, and nonprofit newcomers are discussed.     

The Nonprofit Capacities Instrument

Nonprofits are guided by internal efforts and external mandates to build capacity. However, scholars and grant makers are hampered by varied definitions of the concept, competing but untested models, and the lack of a reliable and valid measure. This research defines nonprofit capacity as the processes, practices, and people that the organization has at its disposal that enable it to produce, perform, or deploy resources to achieve its mission. An inductive‐confirmatory two‐study approach introduces and validates the Nonprofit Capacities Instrument, a 45‐item measure of eight nonprofit capacities derived from existing instruments. The capacities are (1) financial management, (2) adaptive capacity, (3) strategic planning, (4) external communication, (5) board leadership, (6) operational capacity, (7) mission orientation, and (8) staff management. Intriguingly, this research demonstrates that nonprofit capacity is not a singular or second‐order concept, but better described in its plural form, nonprofit capacities.     

Nonprofit management practices and work processes to promote gender diversity

Nonprofit organizations have long provided an important space for women to establish roles in public life. Using establishment‐level data on for‐profit and nonprofit organizations, we show that the proportions of women in full‐time and mission‐critical positions are higher in nonprofits. In contrast, for‐profit businesses have more women in part‐time jobs and in jobs that are peripheral to the organizational purpose. We also demonstrate that the greater proportions of women in full‐time and mission‐critical positions in nonprofits are due to the use of inclusive work processes and transparent human resource management practices. Our findings provide evidence to pursue the aspects of nonprofit organizations that expand opportunities for working women.     

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.     

Toward the Importance of Nonprofit Brand Equity

Various brand evaluation approaches assess the value and equity of for‐profit brands; accordant approaches for nonprofit brands, however, have been limited, and there is disagreement on what makes up a strong brand in the nonprofit sector. In response, this article provides insights into the conceptualization and operationalization of stakeholder‐based nonprofit brand equity and derives an initial measurement index. We conceptualize nonprofit brand equity as having three dimensions—nonprofit brand awareness, nonprofit brand trust, and nonprofit brand commitment—thereby empirically investigating trust in nonprofit brand equity building for the first time. The methodological procedure for building the index is based on partial least squares path modeling, and we draw on a sample of forty brands (N = 3,617 brand evaluations) identified as some of the best‐known nonprofit brands in Germany. Applying the index yields some of the strongest German nonprofit brands; for example, German Red Cross has by far the highest value of brand equity, followed by Aktion Mensch and UNICEF. The nonprofit brand equity index provides the basis for nonprofit managers to compare their brands’ performance over time and develop accordant branding strategies; it can be also used by organizations from other countries.     

Leveraging Academic Partnerships to Improve Logistics at Nonprofit Organizations

This article presents the results of a partnership between a nonprofit organization and a team of academic researchers that developed a low‐cost spreadsheet‐based tool that allows organizations to effectively schedule vehicle operations. Specifically, the tool (1) handles the real‐world constraints present in moderately complex logistics environments; and (2) uses general computing hardware and software that is already deployed in most organizations, thereby rendering the solution radically low cost (effectively free). We deployed this tool to a humanitarian organization, the Idaho Foodbank, which realized a substantial improvement in its fleet efficiency and a corresponding reduction in route‐planning time. The methodology used to manage this collaboration with academia can be leveraged by other nonprofit organizations attempting to overcome the financial barriers that commonly prevent budget‐constrained organizations from accessing advanced technologies.