© 2014 sage publications, inc. theories explaining the nonprofit sector failure theory market and...

© 2014 SAGE Publications, Inc.

Theories Explaining the Nonprofit Theories Explaining the Nonprofit Sector Sector

• Failure Theory • Market and Government Failure • Gap Fillers • Supply-Side Theories • Altruism and Giving


Theory of Commons Theory of Commons

Public Good versus Common Good? Question on Social Return on Investment.Dual bottom line. Do we need our own theory?


Chapter 6: Ensuring Chapter 6: Ensuring Accountability and Accountability and Measuring PerformanceMeasuring Performance


Defining AccountabilityDefining Accountability

• Accountability -- taking responsibility for an individual’s or organization’s actions• Not doing things that are wrong (e.g., following

the law)• Doing the right things (e.g., following best

practices)• Demonstrating effectiveness (e.g., measuring

impact on organization’s mission)• Good student metaphor• Following rules and meeting basic requirements• Engaging in exemplary student behavior• Demonstrating understanding of course material


Mechanisms for AccountabilityMechanisms for Accountability

1. Requirements of Law

2. Self-Regulation

3. Transparency

4. Charity Watchdogs


Requirements of LawRequirements of Law

• Sarbanes-Oxley Act• Adherence to “best practices”• Ethical behavior

• Pension Protection Act of 2006• Includes changes regarding charitable giving

and publishing the Form 990-T with regard to unrelated business income

• State laws – State Attorney General• IRS regulation – Form 990


Self-RegulationSelf-Regulation

• Panel on the Nonprofit Sector (Independent Sector, 2005)• Recommendations that reflect Sarbanes-Oxley

included 33 principles for good governance and ethical conduct. In the areas of:• Legal compliance and public disclosure• Effective governance• Strong financial oversight• Responsible fund-raising

• Standards and accreditation• Long history in educational and health care institutions• Relatively recent concept in the broader nonprofit

sector


TransparencyTransparency

Many nonprofits are motivated to provide accountability by public scrutiny. Charity watchdogs:•Proactively examine nonprofit organizations, applying their own standards•Complete their evaluations with or without the cooperation of nonprofit organizations•Can offer a type of certification or assurance that a nonprofit meets their established criteria for ethical operation


Charity WatchdogsCharity WatchdogsBetter Business Bureau Wise Giving Alliancewww.bbb.org/us/Wise-Giving

GuideStarwww.guidestar.org

American Institute of Philanthropywww.charitywatch.org

Charity Navigatorwww.charitynavigator.org


The Overhead Myth The Overhead Myth

http://overheadmyth.com/

http://overheadmyth.com/nonprofit-emaciation/


Measuring Performance: IntroductionMeasuring Performance: Introduction

• Key questions• How do we ensure that an organization is

effective in achieving its mission?• How do we define and measure an

organization’s impact?• Key terms and distinctions• Organizational performance• Effectiveness versus efficiency• Organizational versus program effectiveness


Measuring Performance: StrategiesMeasuring Performance: Strategies

1. Financial ratios• Ratios most commonly used in evaluations• Cost of fund-raising• Percentage of overhead expenditures

• Charity Navigator

2. Measuring against peers• Benchmarking -- comparisons among

organizations• Statistical benchmarking• Corporate benchmarking



3. Outcomes• Inputs, activities, outputs, and outcomes• Logic models and causal relationships

4. Common indicators• Identifying a common set of outcomes and

indicators for all nonprofit organizations• Urban Institute and the Center for What

Works



5. Balanced scorecard (Kaplan and Norton, 1992)• Originally developed for use in the for-profit sector• Combines financial data with other considerations• Four perspectives -- financial, customer or client,

internal business, innovation and learning

6. Dashboard (Paton, 2003)• Developed as a balanced scorecard specifically

designed for nonprofits• Five perspectives -- current results, underlying

performance, risks, assets and capabilities, change projects



7. Social return on investment (SROI)• Monetizes the social value created by nonprofits• Methodology evolved from cost–benefit analysis

8. Blended value• Builds on concept of social return on investment• Three measures -- economic value, social value,

and environmental value• Attempt to define common measures of

performance for organizations across all sectors


Debate over Performance Debate over Performance MeasurementMeasurement

• Need for performance measurement• Management inherently involves the strategic

allocation of resources to achieve and improve results

• Lacking information about performance means we cannot be certain that an organization is achieving its mission

• Concerns about performance management• Lack of universally-acceptable standards and

methods of measuring organizational performance• Amount of time and effort devoted to measuring

effectiveness takes away from other activities• Risk of developing “disconnected managerialism"

(Paton, 2003)


Chapter 7: Strategic Planning Chapter 7: Strategic Planning and Strategic Managementand Strategic Management


StrategyStrategy• Focused on the long term, not on the day-to-day• May be articulated in a written plan or it may be

more intangible• Does not require any particular process• Does require creativity and a different way of seeing

reality• Three approaches to formulating strategy for an

organization (Kevin Kearns, 2000)• Visioning approach – begins with leader’s vision and

works backward• Incremental approach – strategy evolves out of

experience, one decision at a time• Analytical approach – logic and in-depth analysis to

improve strategic fit


Strategic Planning and Strategic Strategic Planning and Strategic ManagementManagement

• Strategic planning -- a process that produces a strategic plan, which puts meat on an organization's strategy and points the way to implementing it• Achieves clarity about the organization’s mission and

sets priorities (Bryson, 2004)• Builds consensus about the organization's priorities

through the planning process (Allison and Kaye, 2005)• Strategic planning is not the same as long-range

planning, a business plan, operational planning, or strategy

• Strategic management -- an integrated approach to managing the organization that is based on the strategic plan (linking strategy and implementation)


Strategic Planning ProcessStrategic Planning Process

• Planning to plan• Clarify the organization’s mission, values, and vision• Assess the situation• Identify the strategic issues or strategic questions

that need to be addressed• Develop goals, strategies, and objectives• Write and communicate the plan• Develop operational/implementation plans• Execute the plan• Evaluate results


Planning to PlanPlanning to Plan• Need to spend time up front to build agreement about

key aspects of the strategic planning process• Purpose• Steps in the process• Form and timing of reports• Role, functions, and membership of oversight group• Role, functions, and membership of strategic

planning team• Availability and commitment of resources• Any important limitations or boundaries• Facilitate internally or hire an outside consultant• On-site or off-site work or retreat


Clarify the Organization’s Clarify the Organization’s Mission, Values, and VisionMission, Values, and Vision

• Mission• "Mission is the psychological and emotional logic that

drives an organization" (Phills, 2005, p. 22)• Mission statement explains the reason the

organization exists and therefore must be the starting point for strategic planning

• Values and vision• Vision statement -- a description of an ideal future• Values -- principles that the organization holds most

important• Debate about when vision and values should be

articulated in the strategic planning process


Assess the SituationAssess the Situation

• SWOT analysis (Harvard policy model)• Internal survey -- strengths (S) and weaknesses

(W)• External survey -- opportunities (O) and

threats (T)


Identify the Strategic Issues or Identify the Strategic Issues or Strategic QuestionsStrategic Questions

• Strategic issues -- areas in which the organization needs to take action

• Four types of strategic issues (Bryson, 2004)• Issues that go to the heart of the organization’s vision

and goals, which involve some fundamental change• Issues that require no action at present but that must

be continuously monitored• Issues that are on the horizon and likely to require

some action in the future and perhaps some action now

• Issues that require an immediate response and therefore cannot be handled in a routine way


Develop Goals, Strategies, and Develop Goals, Strategies, and ObjectivesObjectives

Goals -- directions that an organization will pursue with respect to strategic issues• Program/services• Institutional concerns• Financial goals

Strategies -- approaches the organization will take to address strategic issues and to achieve goals

Objectives -- specific, quantified targets that represent steps toward accomplishing the goals


Write and Communicate the PlanWrite and Communicate the Plan

• Written strategic plan -- records the decisions reached and the goals, strategies, and objectives to be pursued• One or two people should do the actual writing• Draft is often used to stimulate wider discussion

throughout the organization and its constituencies• Governing board should eventually take formal

action to adopt the plan as the organization’s policy• Can vary in length, format, use of year-to-year

objectives, and other ways• Written strategic plan as a tool for communication and

consensus-building


Develop Operational/ Implementation Develop Operational/ Implementation PlansPlans

• Strategic and operational plans• Can combine into one document or create separate

documents• Each plan requires separate processes• Each plan usually requires different individuals to be

involved• Operational plan -- plan for putting strategic plan into action• Identifying specific tasks to be completed• Establishing a timeline for their completion• Assigning responsibility for each task• Identifying the resources that will be needed• Defining measures by which the completion or success will

be determined• Other operational details


Portfolio AnalysisPortfolio Analysis

• Portfolio analysis -- a technique used by business firms to determine if their various programs, products, and services are in line with their strategies and goals

• Portfolio analysis for nonprofits• Kearns (SWOT)• Strengths and weaknesses• Opportunities and threats• MacMillan (Matrix)• Competitive position• Attractiveness• Alternative coverage


Criticism of Strategic Planning Criticism of Strategic Planning for Nonprofit Organizationsfor Nonprofit Organizations

• Strategic planning is not synonymous with and does not inevitably produce strategy

• Strategic planning is not a substitute for leadership• “Planning by wishful thinking” (Chait et al., 2005)• Overconfidence in predictions about the future• Failure of build broad consensus (e.g., only reflecting

consensus of the CEO and senior executives)• Amount of time and effort required• Failure to match up with the needs or situation specific

to every nonprofit organization

© 2014 sage publications, inc. theories explaining the nonprofit sector failure theory market and...

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