Week 7 - Signature Assignment: Write and Analyze a Case Study and Week 8 - Assignment: Create a Brochure on Organizational Planning

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Tschirhart, Mary, and Wolfgang Bielefeld. Managing Nonprofit Organizations, John Wiley & Sons, Incorporated, 2021. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ncent-ebooks/detail.action?docID=836561. Created from ncent-ebooks on 2021-10-26 19:28:12.

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MANAGING NONPROFIT ORGANIZATIONS

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Join Us at Josseybass.comJo

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Managing Nonprofi t Organizations is accompanied by ans 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

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Essential Texts for Nonprofi t and Public Leadership and Management

The Handbook of Nonprofi t Governance, by BoardSourcee

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

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

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

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

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

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

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

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

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

Human Resources Management for Public and Nonprofi t 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,e Jen Shang, and Associates

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

Achieving Excellence in Fundraising, 3rd Edition,gg 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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MANAGING NONPROFIT ORGANIZATIONS

Mary Tschirhart and Wolfgang Bielefeld

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Library of Congress Cataloging-in-Publication Data

Tschirhart, Mary.

Managing nonprofi t 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. Nonprofi t organizations—Management. I. Bielefeld, Wolfgang. II. Title.

HD62.6.T785 2012

658'.048—dc23

2012015525

Printed in the United States of America

first edition

HB Printing 10 9 8 7 6 5 4 3 2 1g

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vii

CONTENTS

Acknowledgments ix

The Authors xiii

PART ONE: UNDERSTANDING, ENVISIONING, AND CREATING 1

1 Understanding Nonprofi t Organizations 3

2 Effective and Ethical Organizations 11

3 Founding Nonprofi ts and the Business Case 33

4 Organizational Structure 60

PART TWO: STRATEGIZING, RESOURCING, AND ALIGNING 83

5 Formulation of Strategy 85

6 Resource Acquisition 111

7 Financial Stewardship and Management 140

8 Marketing 168

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viii Contents

PART THREE: LEADING, MANAGING, AND DELIVERING 199

9 Boards and Governance 201

10 Executive Directors and Leadership 228

11 Strategic Human Resource Management 255

12 Motivation and Performance 280

PART FOUR: EVALUATING, CONNECTING, AND ADAPTING 299

13 Program Evaluation 301

14 Public and Government Relations 327

15 Partnerships, Alliances, and Affi liations 356

16 Organizational Change and Innovation 384

17 The Future of Nonprofi t Leadership and Management 418

Appendix: Mapping of Chapter Content to NACC Guidelines for Study in Nonprofi t Leadership, the Nonprofi t Sector, and Philanthropy 425

Notes 429

Index 469

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ACKNOWLEDGMENTS

W e would like to thank the Jossey-Bass/Wiley team for their support and

WWencouragement. This book would not have been possible without the WW 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 fi nish the book manuscript. Lynda was

instrumental in helping us distill complex fi nancial 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 sin-

cerely 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 affi liations at the time of the review process.

Alan Abramson, director, Center for Nonprofi t Management,

Philanthropy, and Policy, George Mason University

Rikki Abzug, associate professor, Anisfi eld School of Business, Ramapo

College of New Jersey

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x Acknowledgments

Richard Brewster, executive director, National Center on Nonprofi t

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 Nonprofi t

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

Nonprofi t 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

Nonprofi t 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

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Acknowledgments xi

John Palmer Smith, former director, Helen Bader Institute for

Nonprofi t 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

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xiii

THE AUTHORS

Mary Tschirhart is a professor in the School of Public and Internationalt Affairs at North Carolina State University, and she also directs the univer-

sity’s Institute for Nonprofi t Research, Education and Engagement. She

formerly taught nonprofi t 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

Nonprofi t Organizations and Voluntary Action) and IRSPM (International

Research Society for Public Management), and as Nonprofi t Management

Section chair for the National Association of Schools of Public Affairs

and Administration and chair of the Public and Nonprofi t Division of the

Academy of Management. She is on the editorial boards of the Nonprofi t and Voluntary Sector Quarterly, Public Administration Review, Public Management Review, and Journal of Public and Nonprofi t Sector Marketing. She has also served on the boards of nonprofi t organizations and a community library. Her

experience includes being the executive director of a statewide nonprofi t

arts organization and consulting to nonprofi t organizations in the United

States and other countries. She holds a PhD degree in organizational behav-

ior 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

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xiv The Authors

former coeditor of the Nonprofi t and Voluntary Sector Quarterly (from 2005 toy 2010) and has served on the editorial board of VOLUNTAS: International SS Journal of Voluntary and Nonprofi t 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 nonprofi t 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 coau-

thored a number of books, including Nonprofi t 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

Nonprofi t Division, Book of the Year Award.

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PART ONE

UNDERSTANDING, ENVISIONING, AND CREATING

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CHAPTER ONE

UNDERSTANDING NONPROFIT ORGANIZATIONS

I t all starts with the mission. Nonprofi t organizations have a distinct man-

date 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 nonprofi ts 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 manage-

ment and thus needs to be embedded in a particular place and time.

The importance of context becomes clear when we look at the compe-

tencies proposed in November 2011 for nonprofi t managers and leaders

by the Non-Profi t Management Education Section of NASPAA (National

Association of Schools of Public Affairs and Administration). Members

of this NASPAA section suggest that students pursuing nonprofi t careers

should be able to apply knowledge and understanding of

1. The history, values, ethics, and philosophies of nonprofi t organizations,

and the need for transparency in nonprofi t management practices to

maintain the public trust

2. The current legal frameworks for operating a nonprofi t organization,

and the process of forming an incorporated nonprofi t organization

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4 Managing Nonprofi t Organizations

3. The fundamental principles and concepts of fi scal management, rev-

enue generation, and fundraising, and the ethical imperative to be a

good steward of the fi nancial resources of the nonprofi t sector

4. The leadership challenges of the sector as they relate to the strategic

management of nonprofi t organizations, which requires integrating

the roles, responsibilities, and relationships of the board of directors,

the executive director, the employees, the volunteers, and all stake-

holders in meeting the mission of the organization

5. The human resource and volunteer management principles necessary

to manage a nonprofi t 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

nonprofi t organizations

The contents of this book can serve as a foundation for these six com-

petency areas. We go beyond building knowledge and understanding in

each area and add additional topics to enhance leadership and manage-

ment 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 non-

profi ts is built around competency and curriculum guidelines developed by

NASPAA and by NACC (Nonprofi t 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 impor-

tance of understanding the historical development of the nonprofi t sector

and its values base. These issues are touchstones for our chapters. We discuss

how ideas about specifi c 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 infl uence 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 nonprofi t.

As a social psychologist and a sociologist, we are steeped in our respec-

tive disciplinary traditions. However, we draw from additional disciplines

as well to introduce readers to source documents and thought leaders for

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Understanding Nonprofi t Organizations 5

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 non-

profi t organizations. In Chapter One, after this introduction to the book, we

give a general overview of the nonprofi t sector. In Chapter Two we explore

ways to consider the effectiveness of nonprofi ts and encourage ethical behav-

ior among those working within them. We look at multiple dimensions of

organizational effectiveness: goal achievement, resource acquisition, health

and effi ciency of internal processes, stakeholder satisfaction, and ability to

learn and adapt. In Chapter Three we examine topics important to those

interested in establishing a nonprofi t organization and laying an effective

groundwork for future action. We show the many different origins of non-

profi ts. Drawing on the entrepreneurship literature, we consider how people,

capital, and opportunity come together in nonprofi ts to deliver social value.

We also discuss how to make the case for a new nonprofi t, including writing

the business plan. Chapter Four covers options for organizational structure.

We look at formalization, complexity, and other structural elements that infl u-

ence information processing, and we consider possible structural defi ciencies.

In Part Two we turn to strategizing, resourcing, and aligning, because

throughout their existence nonprofi ts 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 nonprofi ts adopt and the strategic planning process. We

also consider the emergence of strategies in nonprofi ts. Chapter Six cov-

ers resource acquisition. In this chapter we examine the variety of revenue

sources employed by nonprofi ts, 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 fi nan-

cial stewardship and management. We outline best practices for policies,

accounting, budgeting, banking, borrowing, fi nancial risk management,

auditing, and fi nancial 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, man-

aging, and delivering the mission. Chapter Nine covers boards and the

broader topic of governance. We discuss the responsibilities of boards, roles

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6 Managing Nonprofi t Organizations

of executive directors in relation to boards, determinants of board effective-

ness, options for board confi gurations and composition, and tools for facili-

tating governance and managing confl ict. 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 nonprofi t 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, develop-

ment, maintenance, and separation. As a follow-up to Chapter Eleven, in

Chapter Twelve we explore performance as determined by ability and motiva-

tion. We offer tools to increase ability and to enhance motivation to perform.

Our fi nal section, Part Four, covers evaluating, connecting, and adapting

the nonprofi t. We begin with program evaluation in Chapter Thirteen. We

see an effective program evaluation process as key to accountability man-

agement. 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 effec-

tive 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 manage-

ment. Focusing on government relations, we discuss lobbying and advocacy.

Chapter Fifteen covers partnerships, alliances, and affi liations. 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 nonprofi ts,

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 fi nal chapter, we

consider the future of nonprofi t management. We share both our own and

others’ thoughts on trends in the nonprofi t sector and how they may change

nonprofi t 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 Nonprofi t Organizations

This book is not about management and leadership in general; it is about

management and leadership in the nonprofi t sector. Yet it may not be clear t 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.

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Understanding Nonprofi t Organizations 7

Although none of these terms describe the nonprofi t sector completely, each

emphasizes an important aspect of it. The term voluntary sector emphasizesr that the sector benefi ts greatly from the work of volunteers. The sector has

always been rooted in voluntarism and although the degree of voluntary par-

ticipation 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 mem-

bers. Independent sector, or rr third sector, emphasizes that the sector is part of nei-rr ther government nor the business sector, although it may have close relations

with both. Not-for-profi t sector emphasizes the distinction from profi t-focused r enterprises. Charitable sector underscores the sector’s role in providing direct r relief to those in need. Philanthropic sector highlights the fact that many organi-r zations in the sector receive charitable donations. Civil society sector emphasizesr 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 exemptionsr from most taxes. These exemptions are granted to promote activities benefi t-

ing the public. Social sector captures the role of the sector in enhancing ther social fabric. Other countries use yet other terms to describe the organiza-

tions that people in the United States call nonprofi ts. Popular names include

nongovernmental organizations (NGOs) ands civil society organizations. Throughout this book, we use the term most commonly used in the

United States, the nonprofi t sector. It does not mean that the organizations in rr the sector cannot make a profi t. Organizational growth may rely on obtain-

ing more resources than are needed to cover current expenses. What the

term nonprofi t stresses here is that these organizations do not exist to maket a profi t to enrich private owners, as businesses do. In fact, nonprofi ts do

not have owners or stockholders who are legally entitled to a share of the

organization’s profi ts. Any profi ts made should be allocated toward the

accomplishment of the organization’s mission.

Diversity in the Nonprofi t Sector

In the United States the common feature of all nonprofi t 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 nonprofi ts 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, hos-

pitals, clinics, schools, day-care centers, all manner of human service organi-

zations, museums and theaters, and a variety of neighborhood organizations.

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8 Managing Nonprofi t Organizations

Members of this group have broad public support, rather than funding

from a single source, and are considered public-serving organizations. In g Chapter Three we go into more detail on the qualifi cations an organization

must meet to be classifi ed as a public charity. Public charities employ over

7 percent of the country’s paid workforce.

The U.S. tax code recognizes twenty-fi ve types of nonprofi ts, including

public charities, the most common type. About 100,000 nonprofi ts are clas-

sifi ed as private foundations. These nonprofi ts 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 organiza-

tions are classifi ed as other types of nonprofi ts, such as chambers of com-

merce, fraternal organizations, social and recreational clubs, and business

leagues. These nonprofi ts provide valued services and attract resources as

mutual benefi t (member-serving) organizations. Overall in 2009, registered gg nonprofi ts 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 mak-

ing up the U.S. nonprofi t sector. The U.S. government does not require

churches and other religious places of worship to register as nonprofi ts, so it

is diffi cult 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

benefi ts given to 501(c)(3) nonprofi ts.2 There are also many grassroots orga-

nizations 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

fi nancial capital or physical infrastructure. David Horton Smith suggests that

the nonprofi t sector also contains what he refers to as deviant nonprofi ts,

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 nonprofi ts

in not being organized to make a profi t.3

A variety of factors account for the existence of this diverse set of orga-

nizations.4 In the early history of the United States, voluntary action was the

primary way things got done in communities. Lacking an extensive govern-

ment and with limited private wealth, citizens voluntarily banded together to

deal with social problems. Some nonprofi ts were established to provide ser-

vices that neither government nor businesses would or could effectively pro-

vide. Nonprofi ts 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, nonprofi ts provide services that government, with its reliance on

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Understanding Nonprofi t Organizations 9

voter mandates, cannot. For example, nonprofi ts provide public health ser-

vices and education that government is unable to fund with public dollars.

Nonprofits serve a number of other functions. They are an impor-

tant feature of the U.S. political landscape, providing vehicles for com-

bining people’s individual voices and pushing their desires for action.

Advocacy nonprofi ts can be found on all sides of political issues. In this

way they contribute to pluralism in the U.S. political system. Nonprofi ts

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 nonprofi ts 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 commu-

nity members trust each other and can rely on each other to help when

needed, joint actions such as community watch programs are more effec-

tive. Nonprofi ts 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, nonprofi ts nur-

ture 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 nonprofi t.

In 2010, nonprofi t organizations received $290.9 billion in charitable con-

tributions (of which $211.8 billion came from individuals). These fi gures

attest to the importance of nonprofits to the social fabric of American

life. Couple this with the fi nancial scope of the nonprofi t sector and non-

profi ts’ importance increases. In 2009, the nonprofi t sector’s share of the

gross domestic product (GDP) was 5.4 percent. In that year, public chari-

ties reported over $1.41 trillion in revenues. They also held $2.56 trillion

in total assets.

Leading and Managing in the Nonprofi t Sector

Leaders and managers of nonprofi ts face a variety of challenges. One of

the most important is to keep the mission in mind in all decision making.

Nonprofi ts must operate to fulfi ll their mission and are limited in their

engagement in activities far afi eld from it. In addition they must keep in

mind that the real owner of a nonprofi t is the public.5 It is the public to

whom they are ultimately accountable. There are no designated sharehold-

ers or owners to please. Nonprofi ts are subject to the claims, and possible

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