Managing Nonprofit Organizations E-Book

Mary Tschirhart

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 923

Veröffentlichungsjahr: 2012

Beschreibung

Managing Nonprofit Organizations

Managing Nonprofit Organizations offers a comprehensive treatment of the key topics in nonprofit management for practitioners, professors, and students in both graduate and undergraduate courses. The first of its kind, this volume will serve as both text and handbook and will be supplemented with online materials and additional cases. Tschirhart and Bielefeld, two of the top scholars in nonprofit management bring theory and practice together in a cohesive way so readers are both informed and interested.

The core topics included mirror the topics covered in nonprofit/social venture survey courses, such as: nonprofit organizations and social entrepreneurship; organizational design and management; managing in a dynamic stakeholder environment; the founding impulse, the nonprofit business case; innovation, change and growth; nonprofit closure, conversion and merger; organizational design; the executive director and staff (paid and volunteer), board governance; membership, financial resources and attraction of fees, contracts, grants, and donations; strategic partnerships and affiliations, strategic planning and decision-making; programming and marketing, public relations and communications, relationships with government; and evaluation of nonprofit organizations.

Special attention will be paid to social entrepreneurship (as this could be used as a primary text in courses focused on this topic) and the inclusion of international cases throughout (to acknowledge globalization and attract international audiences).

Online materials will include cases, discussion questions, and more.

Leseprobe

CONTENTS

Acknowledgments

The Authors

Part One: Understanding, Envisioning, and Creating

Chapter 1: Understanding Nonprofit Organizations

A Roadmap Through the Chapters

The Nature of Nonprofit Organizations

Diversity in the Nonprofit Sector

Leading and Managing in the Nonprofit Sector

Chapter 2: Effective and Ethical Organizations

Multiple Dimensions for Evaluating Effectiveness

Ethics for Nonprofits

Concluding Thoughts

Questions for Consideration

Exercises

Chapter 3: Founding Nonprofits and the Business Case

Organizational Founding

Entrepreneurship for Social Benefit

Making a Business Case for a New Nonprofit

Starting a Nonprofit from an Existing Organization

Concluding Thoughts

Questions for Consideration

Exercises

Chapter 4: Organizational Structure

What is Organizational Structure?

Major Influences on Organizational Structure

Structural Deficiency

Concluding Thoughts

Questions for Consideration

Exercises

Part Two: Strategizing, Resourcing, and Aligning

Chapter 5: Formulation of Strategy

Business Strategy: A Starting Point for Nonprofit Strategy

Nonprofits and Strategic Planning

General Strategic Orientations

The Strategic Planning Process

Challenges to Planning: Emergent Strategy

Combining Perspectives

Concluding Thoughts

Questions for Consideration

Exercises

Chapter 6: Resource Acquisition

Revenue Sources and Concerns

Revenue Portfolios

The Philanthropic Impulse

Fund Development

Concluding Thoughts

Questions for Consideration

Exercises

Chapter 7: Financial Stewardship and Management

Element One: Financial Policies

Element Two: Accounting

Element Three: Budgeting

Element Four: Banking Relations

Element Five: Borrowing

Element Six: Financial Risk Management

Element Seven: Auditing and Financial Analysis

Concluding Thoughts

Questions for Consideration

Exercises

Chapter 8: Marketing

General Philosophies of Marketing and Nonprofit Organizations

Distinctive Aspects of Marketing in Nonprofits

Developing a Marketing Orientation

The Marketing Planning Process

The Marketing Audit

Marketing Objectives and Strategy

Identifying Offerings and Markets

Managing Offerings

Concluding Thoughts

Questions for Consideration

Exercises

Part Three: Leading, Managing, and Delivering

Chapter 9: Boards and Governance

Responsibilities of Nonprofit Governing Boards

Effectiveness of the Governing Board

A Broader Conception of Governance

Concluding Thoughts

Questions for Consideration

Exercises

Chapter 10: Executive Directors and Leadership

The Nonprofit Executive Director

Understanding Leadership

Strong Leaders and Shared Leadership

Leadership Transitions and Leader Development

Concluding Thoughts

Questions for Consideration

Exercises

Chapter 11: Strategic Human Resource Management

Human Resource Capacity and Human Resource Management

The Cycle of Involvement

Concluding Thoughts

Questions for Consideration

Exercises

Chapter 12: Motivation and Performance

Influences on Performance

Theories of Motivation

Concluding Thoughts

Questions for Consideration

Exercises

Part Four: Evaluating, Connecting, and Adapting

Chapter 13: Program Evaluation

Program Evaluation and Accountability Management

Understanding Basic Program Theory

The Program Evaluation Process

Challenges to Evaluation in Practice

Concluding Thoughts

Questions for Consideration

Exercises

Chapter 14: Public and Government Relations

Image and Reputation

The Public Relations Process

Risk and Crisis Management

Government Relations

Concluding Thoughts

Questions for Consideration

Exercises

Chapter 15: Partnerships, Alliances, and Affiliations

Why Collaborate?

Defining Types of Collaborative Relationship

Developing a Process for Collaboration

The Role of Governance

Factors Promoting Collaboration Success

Challenges to Collaboration Success

Concluding Thoughts

Questions for Consideration

Exercises

Chapter 16: Organizational Change and Innovation

Understanding Change in Nonprofits

Managing the Change Process

Models of Planned Change

Concluding Thoughts

Questions for Consideration

Exercises

Chapter 17: The Future of Nonprofit Leadership and Management

The Challenge of Understanding Current Reality

Imagining the Future

Leadership Development

Appendix

Index

Managing Nonprofit Organizations is accompanied by an Instructor’s Guide, which is available free online. If you would like to download and print a copy of the guide, please visit: www.wiley.com/college/tschirhart

Essential Texts for Nonprofit and Public Leadership and Management

The Handbook of Nonprofit Governance, by BoardSource

Strategic Planning for Public and Nonprofit Organizations, 4th Edition, by John M. Bryson

The Effective Public Manager, 4th Edition, by Steven Cohen et al.

Handbook of Human Resources Management in Government, 3rd Edition, by Stephen E. Condrey (Ed.)

The Responsible Administrator, 6th Edition, by Terry L. Cooper

The Jossey-Bass Handbook of Nonprofit Leadership and Management, 3rd Edition, by David O. Renz, Robert D. Herman & Associates (Eds.)

Benchmarking in the Public and Nonprofit Sectors, 2nd Edition, by Patricia Keehley et al.

Museum Marketing and Strategy, 2nd Edition, by Neil Kotler et al.

The Ethics Challenge in Public Service, 3rd Edition, by Carol W. Lewis et al.

Measuring Performance in Public and Nonprofit Organizations, by Theodore H. Poister

Human Resources Management for Public and Nonprofit Organizations: A Strategic Approach, 3rd Edition, by Joan E. Pynes

Understanding and Managing Public Organizations, 4th Edition, by Hal G. Rainey

Fundraising Principles and Practice, by Adrian Sargeant, Jen Shang, and Associates

Making Critical Decisions, by Roberta M. Snow et al.

Achieving Excellence in Fundraising, 3rd Edition, by Eugene R. Tempel, Timothy L. Seiler, and Eva E. Aldrich (Eds.)

Handbook of Practical Program Evaluation, 3rd Edition, by Joseph S. Wholey et al. (Eds.)

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Library of Congress Cataloging-in-Publication Data

Tschirhart, Mary.

Managing nonprofit organizations / Mary Tschirhart, Wolfgang Bielefeld. —1st ed.

p. cm.

Includes bibliographical references and index.

ISBN: 978-0-470-40299-3 (hardback); ISBN: 978-1-118-25864-4 (ebk); ISBN: 978-1-118-23388-7 (ebk); ISBN: 978-1-118-22017-7 (ebk)

1. Nonprofit organizations—Management. I. Bielefeld, Wolfgang. II. Title.

HD62.6.T785 2012

658′.048—dc23

2012015525

ACKNOWLEDGMENTS

We would like to thank the Jossey-Bass/Wiley team for their support and encouragement. This book would not have been possible without the patience and gentle guidance of Allison Brunner, Nathinee Chen, Alison Hankey, Rebecca Heider, Nina Kreiden, Elspeth MacHattie, and Dani Scoville.

Our sincere gratitude extends to Charles Coe and Lynda S. Clair. Charlie expertly drafted the financial management chapter and was a cheerleader during our efforts to finish the book manuscript. Lynda was instrumental in helping us distill complex financial and human resource management topics into material suitable for our audiences.

This book has benefited greatly from the thoughtful comments of reviewers. Their suggestions on content and presentation have helped to improve the chapters and the supplementary teaching materials. We sincerely thank them for joining us on this journey as we worked to meld our individual writing styles and perspectives. We list the reviewers here, along with their institutional affiliations at the time of the review process.

Alan Abramson, director, Center for Nonprofit Management, Philanthropy, and Policy, George Mason University

Rikki Abzug, associate professor, Anisfield School of Business, Ramapo College of New Jersey

Richard Brewster, executive director, National Center on Nonprofit Enterprise

William A. Brown, associate professor, Bush School of Government and Public Service, Texas A&M University

Jeffrey L. Brudney, Albert A. Levin Chair of Urban Studies and Public Service, Cleveland State University

David Campbell, associate professor, Department of Public Administration, Binghamton University, State University of New York

Russell A. Cargo, senior fellow, Midwest Center for Nonprofit Leadership, University of Missouri-Kansas City; principal, Third Sector Services, LLC

Celine Chew, senior lecturer, Cardiff Business School, Cardiff University

Monica Dignam, chief of research, ASAE: The Center for Association Leadership

Mark Hager, associate professor, School of Community Resources and Development, Arizona State University

Margaret E. Harris, emeritus professor, Voluntary Sector Organisation, Aston University, England

Margaret Henderson, director, Public Intersection Project, School of Government, University of North Carolina

Thomas Jeavons, executive director, Association for Research on Nonprofit Organizations and Voluntary Action (ARNOVA)

Kevin P. Kearns, professor, Graduate School of Public and International Affairs, University of Pittsburgh

Jane S. Kornblut, principal, Third Sector Services, LLC

Jack Krauskopf, distinguished lecturer and director, Center for Nonprofit Strategy and Management, School of Public Affairs, Baruch College, City University of New York

Roger A. Lohmann, emeritus professor, Division of Social Work, West Virginia University

Roseanne Mirabella, professor, Department of Political Science and Public Affairs, Seton Hall University

Vic Murray, adjunct professor, School of Public Administration, University of Victoria

Michael O’Neill, professor, School of Management, University of San Francisco

John Palmer Smith, former director, Helen Bader Institute for Nonprofit Management, University of Wisconsin-Milwaukee

Stefan Toepler, assistant professor, Department of Public and International Affairs, George Mason University

Dennis R. Young, Bernard B. and Eugenia A. Ramsey Chair of Private Enterprise, Andrew Young School of Policy Studies, Georgia State University

THE AUTHORS

Mary Tschirhart is a professor in the School of Public and International Affairs at North Carolina State University, and she also directs the university’s Institute for Nonprofit Research, Education and Engagement. She formerly taught nonprofit management as a faculty member at Indiana and Syracuse Universities. She is the president of Pi Alpha Alpha, the national honor society for students of public administration. She has served as a vice president on the boards of ARNOVA (Association for Research on Nonprofit Organizations and Voluntary Action) and IRSPM (International Research Society for Public Management), and as Nonprofit Management Section chair for the National Association of Schools of Public Affairs and Administration and chair of the Public and Nonprofit Division of the Academy of Management. She is on the editorial boards of the Nonprofit and Voluntary Sector Quarterly, Public Administration Review, Public Management Review, and Journal of Public and Nonprofit Sector Marketing. She has also served on the boards of nonprofit organizations and a community library. Her experience includes being the executive director of a statewide nonprofit arts organization and consulting to nonprofit organizations in the United States and other countries. She holds a PhD degree in organizational behavior and human resource management from the University of Michigan, an MBA degree in arts administration, and a BA degree in philosophy.

Wolfgang Bielefeld is professor emeritus at the School of Public and Environmental Affairs and the Center on Philanthropy at Indiana University-Purdue University Indianapolis. He has taught at the University of Texas at Dallas, the University of Minnesota, and Stanford University. He is a former coeditor of the Nonprofit and Voluntary Sector Quarterly (from 2005 to 2010) and has served on the editorial board of VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations. He has served on the board of ARNOVA and was the program chair for an annual conference of that organization. His professional experiences include serving on the board of Lutheran Child and Family Services of Indiana/Kentucky and consulting for a variety of nonprofit organizations. Bielefeld earned his PhD degree in sociology from the University of Minnesota. He also holds an MA degree in marketing, an MA degree in sociology, and a BS degree in engineering. He has authored numerous articles and coauthored a number of books, including Nonprofit Organizations in an Age of Uncertainty: A Study of Organizational Change, which won the 2001 ARNOVA Best Book Award, the 1999 Independent Sector Virginia A. Hodgkinson Research Prize, and the 1999 Academy of Management, Public and Nonprofit Division, Book of the Year Award.

PART ONE

UNDERSTANDING, ENVISIONING, AND CREATING

CHAPTER ONE

UNDERSTANDING NONPROFIT ORGANIZATIONS

It all starts with the mission. Nonprofit organizations have a distinct mandate to be good stewards of the resources they receive toward the pursuit of their mission, whether those resources come in as philanthropic dollars, government contracts and grants, membership dues, or earned income through revenue-generating activities. In this book we focus primarily on how nonprofits pursue their missions in the general social, cultural, legal, historical, and economic context of American life. We offer some examples from other countries and believe much of what we offer is applicable to international contexts. Still, this is a book about leadership and management and thus needs to be embedded in a particular place and time.

The importance of context becomes clear when we look at the competencies proposed in November 2011 for nonprofit managers and leaders by the Non-Profit Management Education Section of NASPAA (National Association of Schools of Public Affairs and Administration). Members of this NASPAA section suggest that students pursuing nonprofit careers should be able to apply knowledge and understanding of

1. The history, values, ethics, and philosophies of nonprofit organizations, and the need for transparency in nonprofit management practices to maintain the public trust

2. The current legal frameworks for operating a nonprofit organization, and the process of forming an incorporated nonprofit organization

3. The fundamental principles and concepts of fiscal management, revenue generation, and fundraising, and the ethical imperative to be a good steward of the financial resources of the nonprofit sector

4. The leadership challenges of the sector as they relate to the strategic management of nonprofit organizations, which requires integrating the roles, responsibilities, and relationships of the board of directors, the executive director, the employees, the volunteers, and all stakeholders in meeting the mission of the organization

5. The human resource and volunteer management principles necessary to manage a nonprofit organization’s core services and functions

6. The standards for accountability, performance measurement, and program evaluation, and the appropriate techniques for using both quantitative and qualitative methods to measure the performance of nonprofit organizations

The contents of this book can serve as a foundation for these six competency areas. We go beyond building knowledge and understanding in each area and add additional topics to enhance leadership and management capacity. To orient readers and provide a roadmap of what is to come, we offer a quick overview of each part and chapter.

A Roadmap Through the Chapters

Our comprehensive approach to excelling at managing and leading nonprofits is built around competency and curriculum guidelines developed by NASPAA and by NACC (Nonprofit Academic Centers Council). A summary of the NACC guidelines appears in the Appendix, where they are mapped to the chapters in this book. The six NASPAA competency guidelines have been given earlier in this chapter. Both NASPAA and NACC recognize the importance of understanding the historical development of the nonprofit sector and its values base. These issues are touchstones for our chapters. We discuss how ideas about specific management and leadership topics evolved over time and whether or not they are backed up by theory and empirical evidence. We repeatedly return to the ways in which values influence management and leadership decisions as well as the behaviors of board members, donors, staff, volunteers, and others, and how all this affects the effectiveness of a nonprofit.

As a social psychologist and a sociologist, we are steeped in our respective disciplinary traditions. However, we draw from additional disciplines as well to introduce readers to source documents and thought leaders for the ideas in the book. All our topics and recommendations for practice are grounded in the academic literature. In choosing our main examples we made sure that readers would have enough background information and in some cases even videos for a further exploration of these cases. We also provide additional learning tools in the form of questions for discussion and exercises at the end of each of the main content chapters.

In Part One, we discuss understanding, envisioning, and creating nonprofit organizations. In Chapter One, after this introduction to the book, we give a general overview of the nonprofit sector. In Chapter Two we explore ways to consider the effectiveness of nonprofits and encourage ethical behavior among those working within them. We look at multiple dimensions of organizational effectiveness: goal achievement, resource acquisition, health and efficiency of internal processes, stakeholder satisfaction, and ability to learn and adapt. In Chapter Three we examine topics important to those interested in establishing a nonprofit organization and laying an effective groundwork for future action. We show the many different origins of nonprofits. Drawing on the entrepreneurship literature, we consider how people, capital, and opportunity come together in nonprofits to deliver social value. We also discuss how to make the case for a new nonprofit, including writing the business plan. Chapter Four covers options for organizational structure. We look at formalization, complexity, and other structural elements that influence information processing, and we consider possible structural deficiencies.

In Part Two we turn to strategizing, resourcing, and aligning, because throughout their existence nonprofits should have a mission and a vision and should acquire and manage resources to pursue them. Chapter Five covers the formulation of strategy. Topics include the general strategic orientations that nonprofits adopt and the strategic planning process. We also consider the emergence of strategies in nonprofits. Chapter Six covers resource acquisition. In this chapter we examine the variety of revenue sources employed by nonprofits, including grants, gifts, and earned income. We discuss philanthropy, addressing types of gifts and donors, as well as fund development and grant proposal writing. Chapter Seven reviews financial stewardship and management. We outline best practices for policies, accounting, budgeting, banking, borrowing, financial risk management, auditing, and financial analysis. Chapter Eight provides knowledge and tools for effective marketing. We cover the philosophy of and orientations to marketing, marketing planning, and branding. In addition we explore options for the pricing, promotion, and distribution of goods and services.

In Part Three we focus on human resources and discuss leading, managing, and delivering the mission. Chapter Nine covers boards and the broader topic of governance. We discuss the responsibilities of boards, roles of executive directors in relation to boards, determinants of board effectiveness, options for board configurations and composition, and tools for facilitating governance and managing conflict. Chapter Ten adds leadership and executive directors to the mix. We explore the basis of leadership and the responsibilities of executive directors. We also consider nonprofit founders, leadership transition, and leadership development. In Chapter Eleven we turn our attention to strategic human resource management. We look at ways to measure and build human resource capacity. We then look at human resource management through the stages of initial involvement, development, maintenance, and separation. As a follow-up to Chapter Eleven, in Chapter Twelve we explore performance as determined by ability and motivation. We offer tools to increase ability and to enhance motivation to perform.

Our final section, Part Four, covers evaluating, connecting, and adapting the nonprofit. We begin with program evaluation in Chapter Thirteen. We see an effective program evaluation process as key to accountability management. We review how to prepare for evaluation, choose an evaluation approach, apply theories of change and logic models, clarify program goals, and collect data, all with an eye to meeting the practical challenges to effective evaluation. Chapter Fourteen covers public and government relations. In this chapter we look at image and reputation, strategic communication, and the public relations process. We also cover risk assessment and crisis management. Focusing on government relations, we discuss lobbying and advocacy. Chapter Fifteen covers partnerships, alliances, and affiliations. We examine reasons for collaboration, types of relationships, the collaboration process, and ways to promote successful collaborations. Chapter Sixteen introduces readers to models of organizational change and innovation in nonprofits, external and internal drivers of change, and resistance to change. We lay out strategies for managing change and innovation processes and include ideas on how to generate innovations. In Chapter Seventeen, our final chapter, we consider the future of nonprofit management. We share both our own and others’ thoughts on trends in the nonprofit sector and how they may change nonprofit management practices. Our goal is to leave readers with ideas on how they may develop their leadership skills for an ever-changing world.

The Nature of Nonprofit Organizations

This book is not about management and leadership in general; it is about management and leadership in the nonprofit sector. Yet it may not be clear what we mean by nonprofit, given the many different types of nonprofits in the United States and the alternative terms used to describe the sector. Although none of these terms describe the nonprofit sector completely, each emphasizes an important aspect of it. The term voluntary sector emphasizes that the sector benefits greatly from the work of volunteers. The sector has always been rooted in voluntarism and although the degree of voluntary participation in service delivery and management varies across the organizational types in the sector, all have boards of directors and most do not offer any form of monetary compensation or reimbursement for expenses to board members. Independent sector, or third sector, emphasizes that the sector is part of neither government nor the business sector, although it may have close relations with both. Not-for-profit sector emphasizes the distinction from profit-focused enterprises. Charitable sector underscores the sector’s role in providing direct relief to those in need. Philanthropic sector highlights the fact that many organizations in the sector receive charitable donations. Civil society sector emphasizes that many organizations in the sector are the embodiment of an engaged group of citizens with a shared interest in improving their communities. Tax-exempt sector points out that these organizations are eligible for exemptions from most taxes. These exemptions are granted to promote activities benefiting the public. Social sector captures the role of the sector in enhancing the social fabric. Other countries use yet other terms to describe the organizations that people in the United States call nonprofits. Popular names include nongovernmental organizations (NGOs) and civil society organizations.

Throughout this book, we use the term most commonly used in the United States, the nonprofit sector. It does not mean that the organizations in the sector cannot make a profit. Organizational growth may rely on obtaining more resources than are needed to cover current expenses. What the term nonprofit stresses here is that these organizations do not exist to make a profit to enrich private owners, as businesses do. In fact, nonprofits do not have owners or stockholders who are legally entitled to a share of the organization’s profits. Any profits made should be allocated toward the accomplishment of the organization’s mission.

Diversity in the Nonprofit Sector

In the United States the common feature of all nonprofit organizations is that they qualify for tax-exempt status under the U.S. Internal Revenue Code.1 Of the close to 1.6 million registered nonprofits in the United States, the majority are public charities, about 1 million. This group, exempt under Section 501(c)(3) of the tax code, includes but is not limited to churches, hospitals, clinics, schools, day-care centers, all manner of human service organizations, museums and theaters, and a variety of neighborhood organizations. Members of this group have broad public support, rather than funding from a single source, and are considered public-serving organizations. In Chapter Three we go into more detail on the qualifications an organization must meet to be classified as a public charity. Public charities employ over 7 percent of the country’s paid workforce.

The U.S. tax code recognizes twenty-five types of nonprofits, including public charities, the most common type. About 100,000 nonprofits are classified as private foundations. These nonprofits make grants to support worthy causes and may operate their own programs using funding from a single source or a small number of sources. Over 500,000 tax-exempt organizations are classified as other types of nonprofits, such as chambers of commerce, fraternal organizations, social and recreational clubs, and business leagues. These nonprofits provide valued services and attract resources as mutual benefit (member-serving) organizations. Overall in 2009, registered nonprofits in all Internal Revenue Service (IRS) categories accounted for 9 percent of the wages and salaries paid in the United States.

There is no precise, accurate count of the number of organizations making up the U.S. nonprofit sector. The U.S. government does not require churches and other religious places of worship to register as nonprofits, so it is difficult to get a handle on how many exist. One estimate is that there are close to 280,000 religious congregations in the country, all eligible for the benefits given to 501(c)(3) nonprofits.2 There are also many grassroots organizations that are not legally incorporated and thus left uncounted. These may be local, volunteer organizations that have a political change agenda or that rely on volunteer workers to care for and help others using little financial capital or physical infrastructure. David Horton Smith suggests that the nonprofit sector also contains what he refers to as deviant nonprofits, such as gangs, cults, covens, and quasi-underground organizations such as the Ku Klux Klan. These organizations operate outside normal conventions and are not legally recognized or tax exempt, but they are like nonprofits in not being organized to make a profit.3

A variety of factors account for the existence of this diverse set of organizations.4 In the early history of the United States, voluntary action was the primary way things got done in communities. Lacking an extensive government and with limited private wealth, citizens voluntarily banded together to deal with social problems. Some nonprofits were established to provide services that neither government nor businesses would or could effectively provide. Nonprofits often function in areas where markets are lacking, such as the provision of food and shelter to those without money to pay for them. In addition, nonprofits provide services that government, with its reliance on voter mandates, cannot. For example, nonprofits provide public health services and education that government is unable to fund with public dollars.

Nonprofits serve a number of other functions. They are an important feature of the U.S. political landscape, providing vehicles for combining people’s individual voices and pushing their desires for action. Advocacy nonprofits can be found on all sides of political issues. In this way they contribute to pluralism in the U.S. political system. Nonprofits may also provide people with places to meet and to relate to others who share their interests and values. This gives individuals ways to have fun and to enjoy activities such as sports competitions or cultural festivals. In this way nonprofits contribute to the establishment of social capital and the solidarity of American society, helping individuals to form bonds of trust and reciprocity with others. These bonds make it easier for community members to jointly address matters of common concern. When community members trust each other and can rely on each other to help when needed, joint actions such as community watch programs are more effective. Nonprofits also help with personal development needs. They allow individuals to express their spirituality, creativity, and altruistic impulses and to develop social and leadership skills. At their core, nonprofits nurture and sustain the values and identities of their participants.

Between September of 2009 and September of 2010, 26.3 percent of Americans over sixteen years of age volunteered through or for a nonprofit. In 2010, nonprofit organizations received $290.9 billion in charitable contributions (of which $211.8 billion came from individuals). These figures attest to the importance of nonprofits to the social fabric of American life. Couple this with the financial scope of the nonprofit sector and nonprofits’ importance increases. In 2009, the nonprofit sector’s share of the gross domestic product (GDP) was 5.4 percent. In that year, public charities reported over $1.41 trillion in revenues. They also held $2.56 trillion in total assets.

Leading and Managing in the Nonprofit Sector

Leaders and managers of nonprofits face a variety of challenges. One of the most important is to keep the mission in mind in all decision making. Nonprofits must operate to fulfill their mission and are limited in their engagement in activities far afield from it. In addition they must keep in mind that the real owner of a nonprofit is the public.5 It is the public to whom they are ultimately accountable. There are no designated shareholders or owners to please. Nonprofits are subject to the claims, and possible control, of many stakeholders, including donors, clients, board members, staff, volunteers, government at all levels, and community members. The expectations of these stakeholders can vary widely and leaders must balance competing demands.

Lester Salamon and others describe a number of additional challenges.6 Many nonprofits face fiscal difficulties, some starting with government cutbacks in the 1980s in areas where nonprofits were active. Government assistance has became more targeted and tied to stricter requirements. Not all nonprofits experiencing losses in government funding have been able to offset those losses with growth in private giving or earned income. There is growing competition as more for-profits move into areas traditionally served by nonprofits, such as health care, higher education, and employment training. The rise of B corporations, which are required to make decisions good for society, not just their shareholders, adds to the continuing erosion of sector boundaries.7 In addition nonprofits are under pressure from funders who are demanding more evidence that the nonprofits they fund are making a measurable positive impact, with some funders seeing themselves as investors with rights to influence strategic decisions.

The legitimacy of the nonprofit sector has been challenged on a number of fronts. One challenge is presented by those who feel this sector is part of an expanding government welfare state and is serving as an instrument of government. Another comes from those who feel it is too professionalized and out of touch with those it serves. These criticisms, coupled with a number of high-profile scandals, have raised public concerns about the nonprofit sector. This confronts nonprofits with a distinctiveness imperative.8 Nonprofits need to reinforce their identity and their worthiness for the benefits and discretion afforded them.

As this short summary of challenges illustrates, today’s nonprofit leaders must navigate turbulent waters in the pursuit of their organization’s mission. As part of a larger network of actors, some with contradictory views and approaches to pressing social problems, nonprofits are shaping our current reality and our future. Innovations that emerge and are tested in nonprofits will contribute to fundamental debates about what is possible and how to achieve it or avoid it.

We wrote this book with the sincere hope that it will not only provide information and tools to enhance the capacity of nonprofit managers and leaders but also inspire individuals to consider careers in the nonprofit sector. Whether serving in a paid position, as a board member, or as a volunteer, individuals working in the nonprofit sector have the opportunity to act on their values and promote their vision for a better world.

Notes

1. The statistical information in this chapter is from the National Center on Charitable Statistics, Quick Facts About Nonprofits (2009), accessed November 25, 2011, http://nccs.urban.org/statistics/quickfacts.cfm; 501(c)(3) Public Charities (n.d.), accessed November 25, 2011, http://nccsdataweb.urban.org/PubApps/nonprofit-overview-segment.php?t=pc; and 501(c)(3) Private Foundations (n.d.), accessed November 25, 2011, http://nccsdataweb.urban.org/PubApps/nonprofit-overview-segment.php?t=pf.

2. National Center on Charitable Statistics, Quick Facts About Nonprofits.

3. David H. Smith, “Some Challenges in Nonprofit and Voluntary Action Research,” Nonprofit and Voluntary Sector Quarterly 24 (1995): 99–101.

4. Lester M. Salamon, America’s Nonprofit Sector: A Primer, 2nd ed. (New York: Foundation Center, 1999).

5. Peter Frumkin, On Being Nonprofit: A Conceptual and Policy Primer (Cambridge, MA: Harvard University Press, 2002).

6. Lester M. Salamon, ed., The State of Nonprofit America (Washington, DC: Brookings Institution Press, 2002).

7. More information on B corporations is available at the B Lab Web site, http://www.bcorporation.net; B Lab is the nonprofit that certifies B corporations.

8. Bradford Gray and Mark Schlesinger, “Health,” in The State of Nonprofit America, ed. Lester M. Salamon (Washington, DC: Brookings Institution Press, 2002), 65–106.

CHAPTER TWO

EFFECTIVE AND ETHICAL ORGANIZATIONS

The Chicago Association of Neighborhood Development Organizations (CANDO) closed its doors in 2002 after suffering disagreement about its mission, difficulty gaining financial support, and disengagement by its members.1Even its leaders questioned the need for CANDO by the end of its last strategic planning process. What happened to this organization after almost twenty-three years of serving neighborhood development agencies and advancing policy benefiting them? On some dimensions the organization was effective. It membership had grown from 20 agencies to over 220. However, this growth may partially explain its downfall as it tried to serve more and more diverse interests. Also, individual member agencies were becoming more powerful, partly due to the successful efforts of CANDO to get them legitimacy and resources. As they became more self-reliant, they had less need for CANDO. Many CANDO members pursued contracts from the City of Chicago, making them reluctant to support CANDO’s efforts to aggressively lobby the city for resources and changes. Over time a new generation of leaders, with less fire in their bellies for advocacy and community organizing, took charge of CANDO. Expectations for quantifiable results grew, both for CANDO and its member agencies. In the end, CANDO’s lack of focus and expansive, noncontroversial programming left it with apathetic board members, staff, and external stakeholders who lacked the desire to fight for its survival.

The Baptist Foundation of Arizona (BFA) closed after over fifty years in existence, but not due to the apathy of those associated with it. In this case, fraudulent behavior led to fines and jail sentences for top leaders. When it filed for bankruptcy in 1999, BFA had $530 million in liabilities despite its claims of $70 million in assets. The BFA had been founded as a financial institution that promised market returns to participants entrusting their assets to the nonprofit to manage. The idea was that BFA would help worthy ministries with resources and expertise while investing participants’ funds. However, to maintain an attractive facade for participants, it hid its bad loans and debts; misrepresented its certificates of deposit, thus harming the financial status of elderly clients purchasing the CDs; used a Ponzi scheme, which allowed early investors to make a profit but required a continual influx of new investors to pay earlier ones; sold only the right to occupy property to elderly clients who thought they were buying the property itself; and inappropriately inflated the value of properties. At least one inappropriate transaction personally benefited specific BFA leaders engaged in the activity. Leaders’ unethical efforts to keep the nonprofit afloat resulted in losses for many BFA investors.