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.     

Nonprofits accommodate the information demands of public and private funders

In the absence of performance reporting standards, nonprofit organizations face difficulties in accommodating the varied and changing informational requirements of public and private funders. Clients, volunteers, management, and staff also use and demand performance information. The authors studied four human services organizations in Victoria, British Columbia, Canada, and their performance reporting across the management cycle, from planning through implementation and monitoring, to external reporting and auditing. The authors analyzed documentary evidence and conducted interviews with users of performance information. they conclude this article by proposing a set of general standards nonprofit organizations can use in performance reporting.     

Solutions out of context: Examining the transfer of business concepts to nonprofit organizations

Small nonprofit organizations face a dilemma when applying management theories and techniques developed for large, private businesses. Research evidence suggests both benefits and problems associated with application of these techniques. To avoid potential problems, nonprofit managers commonly limit the selection and transfer of business techniques to those that solve specific problems or appear consistent with nonprofit orientations. One consequence is that business solutions often create unintended negative outcomes that are due to contextual differences between the two types of organizations. One possible solution to this dilemma is adoption of bundles, or configurations, of practices that introduce important contextual checks and balances along with the specific tools and techniques. We explore this option through a critical, participatory ethnographic analysis of a small nonprofit service organization.     

The Role of the Nonprofit Sector in a Self-Governing Society: A View from the United States

This article explores the role of private, nonprofit organizations in a self-governing society. A framework identifying the diverse theories that explain the various types of nonprofit organizations observed in contemporary American society is sketched. This provides a fuller understanding of the varied and complex ways that nonprofit organizations contribute to the institutions of governance.     

Welfare reform and the future of nonprofit organizations

This article discusses implications of the 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) for nonprofit social service organizations. We emphasize their role in the contemporary social safety net in relation to the public sector. Based on a study of ninety organizations operating in the Detroit metropolitan area, we adopted the supplementary, complementary, and adversarial framework from Young (1999) to assess the complex and evolving relationship between the nonprofit and public sectors in the post‐PRWORA era. The findings indicate a clear presence of all three perspectives; however, the continued shifting of responsibility for social services to private, nonprofit organizations suggests a growing dominance of the supplementary role. This raises concerns regarding future nonprofit capacity and other potential costs of nonprofit sector service provision.     

Testing an Economic Model of Nonprofit Growth: Analyzing the Behaviors and Decisions of Nonprofit Organizations,Private Donors,and Governments

This study draws an economic model of the growth of nonprofit organizations by analyzing the behaviors of three major actors—nonprofit organizations, private donors, and governments—in making decisions on the allocation of limited resources for nonprofit services. Since decisions made by each actor affect resource allocation, it is important to understand what drives these decisions. The model was tested using an unbalanced, 463 panel dataset collected from 28 OECD countries over a 23-year period. The results indicated that macro- and micro-economic trends and government policies framed the decision premises of the three major actors, which led them to leverage the supply and demand for goods and services and, in turn, determined how they allocated limited resources for nonprofit services. This result implies that understanding the interdependencies of all sectors of the economy is critical to comprehending the size and development of the nonprofit sector. Effective management of micro-economic policies and macro-economic stability is necessary. More important, however, is understanding how a decision in one part of the economy will have intended and unintended effects on the nonprofit sector.     

The ecology of games between public policy and private action: Nonprofit community organizations as bridging and mediating institutions

The conception of nonprofit organizations as institutional bridges that mediate within an environment of interrelationships is a useful device for informing strategic thinking by nonprofit professionals and volunteers. The bridge metaphor neatly explains not only the rise in number of nonprofit community organizations, but also the process by which leaders of the private and public sectors have formed partnerships to project the wealth and assets of communities.     

Contextual Factors and Negotiating Spaces: Exploring the Emergence of Nonprofit and Hybrid Voluntary Organizations

The emergence of nonprofit organizations has largely been explained by the prevalent “three failures” theory. However, evidence suggests that such theories fail to capture a variety of contextual nuances that may influence nonprofit formation. In particular, these theories have remained relatively silent about the emergence of hybrid voluntary organizations. This article posits the notion that some nonprofit organizations (for example, hybrid voluntary organizations) emerge through cross‐sector negotiations, amid a number of social, policy, and political contextual complexities. We contend that any theory purporting to explain the emergence of nonprofit organizations should not neglect to account for the role contextual factors play in defining their emergence and their subsequent character and function.     

A guide to journal articles on strategic management in nonprofit organizations, 1977 to 1992

This article is a guide to over a hundred journal articles on strategic management in nonprofit organizations, published from 1977 to 1992 in nineteen leading general management or nonprofit journals. The guide provides brief summaries of articles, organized into widely accepted strategic management topic areas and research categories. The article indicates areas where substantial foundations of knowledge exist and where such bases are lacking. It distinguishes between works on general nonprofit management and those on empirical research.     

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.     

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.     

On the malfunction of the generic approach in small voluntary associations

Management and marketing techniques that are of great value in private firms may not prove as important in voluntary and nonprofit organizations. The author highlights problems in the direct application of the so-called generic approach to third sector organizations by examining small voluntary organizations in the Danish sports sector. He argues, first, that it may be unnecessary to apply generic management techniques; second, that it may be dysfunctional with regard to leadership and management; and, third, that the consequences of the chosen (generic) strategies may be detrimental to the function and image of the associations. Instead, theories of organization, strategic management, and marketing should recognize the special mix of competing, complementary, and overlapping values, rationales, and evaluation criteria that characterize small voluntary organizations.     

“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.     

Structure and adequacy of human service facilities: challenges for nonprofit managers

Findings from a statewide survey of nonprofit human service organizations in Illinois show great diversity in access to and use of facilities. Large proportions have facility-related problems that will require substantial investments beyond the financial capacity of the organizations themselves. The findings also point to major shortcomings in attention to or knowledge about facility-related problems among managers of these organizations. The findings have important policy implications for nonprofit managers, as well as for public and private funders and policy makers.     

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.     

Doing Better While Doing Good: Motivational Aspects of Pay-for-Performance Effectiveness in Nonprofit Organizations

Management practices in the nonprofit sector have been changing over the last decade. Many nonprofit organizations are now mimicking the management techniques of for-profit organizations. Referring to prevailing economic, psychological, and management theories, this paper deals with pay-for-performance plans and specifies reasons for their introduction into nonprofit organizations. The determinants of pay-for-performance effectiveness are analyzed with special emphasis on the motivational determinants. The results of the analysis are incorporated into a model of pay-for-performance effectiveness. Referring to theoretical reasoning as well as empirical studies, this paper analyzes how the motivational determinants of pay-for-performance effectiveness are coined in different types of nonprofit organizations. The paper ends with a discussion in which the author presents an alternative explanation for the introduction of pay-for-performance plans into nonprofit organizations and some suggestions for future research.     

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.     

Uncharted Waters: Exploring the Relationship between Strategy Processes and Management Control Systems in the Nonprofit Sector

The way in which strategy and management control combine has been the subject of much research attention, but rarely, within a nonprofit context. This is surprising, not only because of the considerable social and economic impact of this sector, but also in view of the apparent trend toward sectoral convergence in many structural and processual respects, including strategic behaviors and approaches to control. In this article, we explore the extent to which the relationship between management control and strategy, as found in for‐profit organizations, may prevail within a nonprofit context. Based on questionnaire responses from 182 Australian nonprofit organizations, we find that this relationship in nonprofit organizations is similar to that in for‐profit organizations, thereby lending support to the “convergence” argument. We reflect on the reasons for these similarities and advance an agenda for further research in this area.     

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.