A little History on Nonprofits and Their Mission

By Dawna Baker

Many organizations across the country are in danger of shutting down due to years of declining support, what's more, the current recession is now forcing administrators to consider closing or cutting services (Reeves, 2009). Stories of organizations in danger of shutting down can be found in local newpapers and media outlets on a daily bases, and while this may be discouraging news, there is no reason to feel that nonprofit organizations will one day be extinct. David Hammack, in his book entitled, "Making the Nonprofit Sector in the United States," chronicles the era in which independent organizations were being shaped and developing into a distinct sector as early as 1601. While there were very few independent nongovermental, nonprofit organizations during that time, they did exist; however, the Catholic Church had legal responsibility for providing nearly all religious, cultural, human service and educational activity (Hammack, 1998).

Under the reign of Queen Elizabeth I in 1601, the British theory found legislative expression in two laws that put into effect key elements of the new relationship between church and state. They were the Statue of Charitable Uses and the Poor Law (Hammack, 1998). In the 1600s, every European, including European rulers in the Americas, believed that religious institutions should be supported by taxes, and that the church should control education and social services. Thus the activities later taken by American nonprofits were conducted, during the colonial period by established, tax supported churches and church agencies that were instruments of the government (Hammack, 1998).


Hammack(1998) states the following:

The Statute of Charitable Uses addressed problems familiar to modern American readers despite its old-fashioned language (it was written at a time when shakespeare was still producing new plays in London and when scholars were completing the King James translation of the Bible) and its use of bishops to enforce civil law. The complex description of legal authorities in its fourth paragraph reflects the intricate complexities of a British Chancellor for separate parts of the realm, playing the part that an attorney plays in the government of a state in the United States. The last three paragraphs of the act reflect a phenomenon familiar in modern America: the granting of exceptions to favored institutions, in this case Oxford and Cambridge, several notable secondary schools and certain churches, cities and towns (p.5).

Essentially, before nonprofits had an official name they existed, and in the 1600s they were known as "charitable uses. Why do nonprofits exist? Nonprofits create extraordinary levels of social impact. Much more than the government is capable of creating. These pioneering "change makers" as Crutchfield and Grant (2008) call them in their book, "Forces for Good," are the vanguard of a growing civic sector--a segment of the U.S. economy now valued at more than $1 trillion. Operating at the interstices of government and the market--a broad and ill defined "grey space"-- these organizations play an increasingly important role in shapng our world (Crutchfield and Grant, 2008). Indeed, they have been shaping our world since before the 1600s.

While nonprofit orgnizaitons have changed and grown constantly over the past 400 years, the reason they came into existence is the same reason they are still being created today. The United States society evolves and needs to address common concerns such as education, proverty, and healthcare. Public government is not able to address these concerns; and subsequently citizens join voluntarily and create versions of nonprofit organizations. Citizen action is at the root of the nonprofit sector, and it is what continues to drive most nonprofits today. (The idealist guide to nonprofit careers for sector switchers, 2009).

In addition to the social benefits of nonprofits, nonprofits make our world go around. They provide a tangile, monetary contribution to the overall U.S. economy through jobs and products. Nonprofit organizatins employ over 12 million people, representing roughtly nine percent of the entire U.S. workforce (The idealist guide to nonprofit careers of sector switchers, 2009). The annual assets of the nonprofit sector total 4.2 trillion (Statistics, 2009).

Fundamentally, nonprofits exists for a numer of reasons, but the basic reason is because they help improve the quality of life for not only millions of people with various needs, but animals and even mother earth. Still nonprofit organizations don't exist without challenges. Many nonprofits generating less than $500,000 in surplus, are bearly surviving and often find themselves considering the prospect of shutting down. The reason for this constant feeling of insecurity could be due to something as basic as "change," or forces that influence nonprofit development such as politics, economics and culture. We will address these forces and how they shape the nonproit sector in a coming blog.

Nonprofit Development: Political, Economic and Cultural Influences

By Jessica Vaughn

Nonprofit development: Political, economic and cultural forces

The nonprofit sector is constantly changing and growing due to political, economic and cultural forces. This section of the presentation introduces several key factors, which continue to help shape the nonprofit sector. Emphasis is placed on how governmental contracts and conflict over limited resources have influenced nonprofit growth and how cultural influences created by environmental and political factors continue to shape the nonprofit sector.

Political and economic forces

The governments use of nonprofit organizations was spawned from a political and economic base to first, lesson the role of governmental provision of services contributing to the 'welfare state' and secondly, to reduce cost expended on providing aide to several social causes or interests. These factors resulted in the establishment of legislation, which shuffles social demands away from government and to the nonprofit sector (Anheier, 2005). Additionally, these factors have ultimately distorted the nonprofit mission through funding and accounting requirements (Brown & Troutt, 2007).

The partnership between government and the nonprofit sector has influenced the shape and function of nonprofit organizations. Many studies (Brown & Caughlin, 2009; O'Regan & Oster, 2002; Blau & Rabrenovic, 1991) have documented the resulting effects of this partnership as related to nonprofit stability and growth. Brown & Caughlin (2009), assert that due to the nonprofit status, non-distribution constraint and donor support, nonprofit organizations are prime candidates to provide social goods and services, traditionally provided by government, more efficiently and effectively. However, the nonprofit-government relationship has also caused strain within the sector. Through the introduction of government contracts, competition has emerged within the sector between agencies and between nonprofit and for-profit organizations. For example, the for-profit sector has argued that the relationships between NPOs and the government sector is unfair and have rallied to assert their own ability to provide similar services more effectively and at lower costs. Contractual responsibilities and infused accountability standards also cause fluctuation and a steady push away from the core mission of nonprofits. As a reliance on government funding, competition for contracts and limited resources continues, small nonprofit organizations will find it more difficult to survive. This is especially true in the current economy where donors are giving less to support social causes.

Forces that influence culture

The current political and economic climate is also affecting the nonprofit organizational culture. As Guo (2007) asserts, the sectors reliance on government has pushed nonprofit leaders away from the community and from decision-making. For example, competition and an increase in nonprofit / for-profit collaborating have led to an acceptance of for-profit values to obtain nonprofit goals. There is also a shift away from advocacy within the nonprofit sector caused by the need to satisfy the demands of stakeholders and to fulfill contractual relationships and partnerships. These and other factors can lead to the community and donors questioning the motives of nonprofit organizations, ultimately harming the trust relationship. In addition, constituents or consumers may find it more difficult to differentiate between the three sectors because of this blurring of the lines.

These are some of many issues assisting in reshaping the nonprofit arena and increasing the need for professional nonprofit management. A changing economic, cultural, and political terrain challenges nonprofits to utilize strategies, including forming alliances or partnerships, without losing sight of the Global Ends of the sector and its true function within society.

As stated by Jon Van Til (2009): In such times of crisis, the third sector is thought of in a variety of new ways and relationships, resulting from such disparate motives as desperation, innovation, and creative accounting thus emerges a bewildering range of partnerships, a flourishing of subcontracted relations between state and the third sector, and a (usually specious) hope that somehow philanthropic giving can replace the declining resources provided by the public purse (pp. 1072).

Key Factors Important to the Success of Nonprofit Organizations

Post by Cordelia Kwokori

Nonprofit organizations depend on so many resources for their success, without these resources they cannot function. Resources include the mission, human resources, and a good board of directors. Nonprofit organizations cannot survive without volunteers. What would the organizations do without volunteers? Nevertheless, the biggest resource is finances. Without money, the nonprofit organization cannot take off. This blog post will address key factor and others that are important to the success of nonprofit organizations.

The Mission

An organization's mission drives everything. It is the basis of strategy and determines what the organization will and will not do. For nonprofits, the mission plays an important role in inspiring staff and donors (Hauser, 2003). An organization's culture is more than just the atmosphere of the office. When clearly articulated, it guides the staff's behavior and communicates the way things are done in the organization (Hauser, 2003). Human resource are also one of the key factors important to the success of many organizations, particularly in the nonprofit sector. Training a staff member to realize their full potential requires more than idealism. Effective managers are also needed.

People serve on nonprofits board because they believe in the charity's or foundation's mission and hope to make a difference. A member of the board that is connected in the society can increase donor base funding and connections for its organizations with one eye on mission success and the other on reducing risk (Hechinger, 2005). An efficient board behaves differently from merely responsible boards. They give their all to their organization and their time is spent more judiciously. Their skills and social networks are better utilized and their donations are more evenly distributed. They open doors and make connections. Adhearing to their legal and ethical respnsibilities, they take time to ensure financial integrity; strong managmeent, good decisions, and continuous commitment to the mission, providing invaluable and critical leadership to the organization.

Publicity

According to Jacobs & Glass (2002), nonprofit organization's income, paid staff, membership size, and library resouces are significantly related to getting media publicity. The threats of reduced governent funding, and demands for greater accountability has lead to successful nonprofit organizations investing in media publicity as an important resource. To appear more competent and legitimate, these organizations are hiring public relations specialist to justify their activities to the public. It is a way to communicate that their money is used wisely. It is also a valuable resource for nonprofit organizations seeking to justify their activities to their communities, donors and politicians--groups that are increasingly important to getting government funding. When nonprofit organizations have their activities reported to the news, they are able to reassure existing and prospective members that their donations are being put to good use (jacobs & Glass, 2002).

Internet Technology

The world is changing rapidly for America's nonprofit sector. The operating environment has grown more and more challenging for charitable organizations. IT use will increase mission-related use, focusing on strategic communications, marketing, and relationship building; the acquisition of funding sources and financial sustainability; and the use of partnerships, collaborations, and donor assistance (Hackler & Saxton, 2007). IT has the power to change the nature of nonprofit empoloyees working conditions, including workload, working environment, job performance, increased market base through the Internet and employee job statisfaction, and it also will increase diverse funding bases in nonprofit organizations (Hackler & Saxton, 2007).

Volunteers

Volunteers are also key factor contributing to the success of nonprofit organizations-- they are indispensible. They save most organizations money that otherwise would have been used to pay for the services they provide to the organizations. An organizaiton with a diverse base will increase its volunteer population and donations, have relationships with different cultural groups in their community, and will in the long term, increase their market base. Not having financial resources makes it impossible for an organization to experience the other resources talked about in this blog. Financial resources are the most important factor to the success of a nonprofit organiation. Financial resouces drive the ability to hire and retain human resources and professional nonprofit management is a critical need for nonprofits.

The Need for Professional Nonprofit Management

By Shiree Skinner

Nonprofit management is a niche profession. Nonprofit management professionals are a unique breed and the nonprofit sector needs their particular management abilities alongside their passion for their organizations. In an article in Strategy and Leadership Lynn Taliento, leader of the Nonprofit Practice area of global consulting firm McKinsey & Company partnered with Les Silverman, retired leader of McKinsey’s Nonprofit Practice and interviewed a dozen respected "crossover leaders" -- nonprofit leaders who have also held senior positions in for-profits (Taliento & Silverman, 2005). Founded in 1926, McKinsey & Company, is considered a firm of "management engineers" who are management consultants to the majority of “Fortune magazine’s most admired list of companies” (McKinsey.com, 2009). Their interviews with the crossovers yielded that their roles as nonprofit leaders required more consensus-building; that measuring performance was much more complex; and that the scarcity of resources made building an effective organization a very difficult task.

Bill Novelli the president of AARP was one of the dozen interviewed. Novelli’s corporate experience was extensive including marketing with Unilever and building advertising firm, Porter Novelli, into an “industry powerhouse” (Taliento & Silverman, 2005). Novelli said it's harder to achieve goals in the nonprofit setting because they “tend to be behavioral” and “harder to measure” unlike industries like consumer goods and finance in comparison.

Taliento & Silverman also interviewed Peter Goldmark, a director with the Environmental Defense Fund who also served as president of the Rockefeller Foundation. Goldmark expressed a similar opinion, saying there isn’t “a simple financial metric” for measuring the “more squishy and intangible issues of social change or public attitudes and behavior." Goldmark thought that for-profit executives might be able to understand this difference theoretically but that the actual day-to-day leadership of a "measurement-resistant" organization is challenging (Taliento & Silverman, 2005).

The other facet of nonprofit management is that executive directors and their management team must balance overlapping roles (Werther, Berman, & Echols, 2005). The board of directors, its chair and executive director are the source of leadership. They lead the organization in its mission. The manager’s role involves making decisions around the use of financial, human, and other resources to reach the organization's goals and move it toward its mission. Both leaders and managers must also play role of administrators, balancing the conflicting needs of constituents: clients who need services; employees who want better benefits; donors, board members, and volunteers who seek recognition. This is tricky, since according to Werther et al (2005), for most managerial positions the making and executing of decisions is the measure of success. If nonprofit success is based on more intangibles, it means decision-making is not enough to be a successful manager. Werther goes on to say:

If an executive director stays stuck in the managerial role, the needed leadership vision will be lacking. Perhaps more noticeably, the executive director may fail to assume the administrative role when needed to balance constituents' conflicting demands. Similarly, an over-reliance on the role of leader or administrator has its shortfalls. The leader's focus on the organization's vision and mission is, ultimately, meaningless without execution.

Taliento & Silverman’s (2005) "crossover leaders" generally agree that nonprofit management is very complex and the complexity is not appreciated by business executives. After advising hundreds of nonprofits in recent years, Taliento thinks that “many well-meaning business people who move into leadership roles in nonprofits end up frustrated and ineffective.” In this regard nonprofit management seems a specialized skill garnered from time within the sector. An article in Leader to Leader mentions that nonprofit “leadership is ultimately developed through experience not in classrooms” (Krongold, 2006).

In concluding on the need for professional nonprofit management, for-profit leaders seem like a mismatch for running nonprofit organizations because unlike a for-profit business - which is focused on the bottom-line, as in making profits - the nonprofit’s main concern is with executing services or programs or changing behaviors or policies, etc. The money they make (whether by fundraising, cause related marketing, or selling something) is a means to their end. It is not the goal. For-profit companies measure their success in their profit margins, their market share, the return of dividends to stockholders, etc. Nonprofits measure their success by people they've touched, policies they've changed. It’s a completely different focus. So whether it’s the difficulty of measuring organizational achievements, an issue of transitioning a for-profit executive into the nonprofit world, or trying to balance overlapping roles, it is clear that nonprofit management is complex and requires a distinct skill set gained from experience in the sector. There is an obvious need for professional nonprofit managers.

What Do You Think?

Nonprofit organizations have been around since the time bishops were translating the King James Version of the Bible. Therefore, it is not surprising that they are still around today fulfilling the same basic missions: Education, Healthcare, Assisting the poor, etcetera. Helping othere is paramount for nonprofit organizations designed to create a social change in the community. Moreover, even though they fulfill a mission that is over 400 years old, they unequivocally operate much differently than in the 1600s and earlier. While there ar many other factors, the authors of this blog chose to talk about some of the key things that influenc these adjustments. The foundamental influence is "change." Everything in life must change, and when it comes to nonprofit organizations, that change conveys because of polotical, economic and cultural forces. Change also comes because of the increasing knowledge of humanity. In the 21st Century, organizations are able to expand the reach of their missions on platforms such as the Internet. In addition, they are able to share conveniently, and make available immediately, information about the organization and how their charitable resources are being used. The authors of this blog believe that the availability of information about an organization, coupled with the missionof the nonprofit organization, financial resources and utilization of volunteers are all key factors for nonprofit success and limitless years of existence as a sector in the American economy. What do you think? Leave your comment on this blog.