Nonprofit stakeholder relations, week 2

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University of North Florida

Master of Public Administration program

PAD 6164 Nonprofit stakeholder relations, Summer 2019

Clients, constituents, members, donors and staff Nonprofit stakeholders of the week

Photo credit

Small donors! Lecture goals: discuss the concepts of clients, constituents, members, donors and staff as

stakeholders of nonprofit organizations. A lot to chew on in one bite, I know!

I. Clients, constituents and members

The three can usefully be discussed together in this (absurdly!) compressed class because a) they

are all ‘internal’ to the organization in that they are the direct beneficiaries of the services the

NPO provides, and b) the distinctions between the three are illuminating. But first, an empirical

study on the impact of donors on the stakeholder focus of NPOs.

LeRoux and different funding sources (and a good example of empirical research)

The issue: The Leroux article provides a reasonably good summary of the central issue of this

course, in terms of thinking carefully about ‘stakeholders’ of nonprofit organizations. Despite

the public service missions of many nonprofits, “nonprofits are private enterprises and they

display unmistakable business sector tendencies in their quest to sustain themselves financially”

(LeRoux, pp. 158-60). This tension is especially evident in social service organizations, with

the strong service mission, yet

equally strong need to remain financially viable.

Most haven’t sold out! A happy, opening finding of LeRoux’s study is that only 12 of her 71

organizations adopted an ‘instrumentalist’ orientation, meaning they treated donors as more

important stakeholders than clients.

Stakeholder theory and nonprofits. Stakeholder theory is defined in opening as

“…largely a normative organizational theory suggesting that managerial attention to all

stakeholder interests is critical to the [organization]’s success” (p. 160).

Who rules? LeRoux especially seeks to assess two theories of nonprofit behavior toward

stakeholders:

(a) the normatively oriented, intrinsic stakeholder management model and

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(b) the instrumentally motivated, strategic stakeholder management model. (p. 159)

In English, Le Roux seeks to assess whether the 72 organizations she studied held their clients as

the key stakeholder, or their donors (and/or other income sources).

Donors rule? The hypothesis that donors call the shots, in these social service (note: not donor

service) organizations, runs counter to the whole edifice on which the nonprofit sector is built!

After all, nonprofits have the ‘non-distribution constraint’, in that they cannot distribute profits.

So given that

↑ funding ≠ more money for the Executive Director

why would nonprofit managers care about funding?

George1 (confused)

But LeRoux offers some suggestions why this might be the case, or at least why this tension

would manifest itself:

Bigger budgets mean bigger organizations, and so in addition to higher salary, “bring the

benefits of power, prestige, enhanced reputation, productivity, additional staff, and ease of

management” (p. 164).

An early finding: as it is relevant here, I’ll report it here. LeRoux’s analysis finds that staff

size is negatively correlated with an ‘instrumentalist’ orientation. So the larger the staff (and

so the organization), the more likely it is that the client will come first.

LeRoux hypothesizes that this is because “as social service organizations get larger, they

become more professionalized” (p. 179), which, in a naked example of an instrumentalist

perspective on my part, I’ll interpret as due to competent, ethical MPA (and Nonprofit

Certificate) graduates running these organizations.

Key nonprofit stakeholders (as identified by Leroux):

Funders: “…government, private charitable foundations, corporations, clients, and individual

citizens who donate, comprise key groups of nonprofit stakeholders” (p. 161).

Clients “… who function as the organization’s ‘customer’ base… Although they provide the

justification for organizations’ existence, clients are far less powerful than funders as a

stakeholder interest. On the whole, clients are likely to be less influential in shaping

organizational resource allocation decisions, particularly if they do not pay for the services

they receive” (Ibid).

Boards of directors (pp. 161-2). More on these later.

Stakeholders (hypotheses and findings)

Corporations. Hypotheses: Grønbjerg (who LeRoux cites extensively) reads a bit like an OWS

(Occupy Wall Street – by the way, how accountable are they?) propagandist in her presentation

of corporations. Yes, corporations like to make money (it is their mission), and working with

nonprofits is a way to do this. But:

Nobody, individual or corporation, gets rich through charitable tax deductions: giving away a

dollar to reduce tax liability by 25¢. Anyone in this class who wants 25¢ from me can get one

any time they want, just give me a dollar first.

1 Who admittedly is not the brightest spark on the electricity grid

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Grønbjerg refers to corporate executives who serve on boards seeking “opportunities to

promote corporate interests and extend their sphere of influence” (in LeRoux, p. 165),

which reads sinisterly vague. Yes, the execs make contacts, and create some good vibes

toward the firm (and themselves). But it isn’t like a CSX exec who sits on the Red Cross

board is doing so in order to take over the organization and use Red Cross volunteers to

lay railroad tracks for free.

More realistically, the corporation:

...sees charitable donations as a form of advertising, and

...while corporations are not people, corporate executives are. So just as many of them

will themselves donate money to charities as a result of their innate human decency,

just like we of the ‘99%’, CEOs will also influence their corporations to do this.

So the first hypothesis is that corporate donors will result in the corporate, ‘instrumental’

mindset rubbing off on the nonprofit managers.

Finding: confirmed, corporate donations are strongly correlated with an ‘instrumentalist’

orientation.

Governments. Hypotheses: Government funding will help reduce the nonprofit’s “inherent

weaknesses of financial insufficiency, amateurism, paternalism, and particularism” (p. 166) by

imposing some of those ‘good government’ rules and regulations that we all like so much. So

government funding will see public service (rather than instrumental, corporate values), rub off

on nonprofit managers.

Finding: no relationship between government support and instrumentalism.

Foundations. Hypotheses: As foundation money is often less restrictive than government money,

and doesn’t have the profit motive of corporate giving, foundation support should reinforce the

client focus of nonprofits.

Finding: confirmed, negative correlation between foundation support and instrumentalism.

The stability and fewer complications of foundation support allow NPOs to focus on clients.

Individual donors. Hypothesis: Unlike foundations, which have institutional memory and give

money in regular, structured processes, individual donors are ‘fickle’.

Take, for instance, my fickle patronage of The Wombat Foundation,

committed to saving not just wombats, but the Northern Hairy Nosed

Wombat (an endangered species!). Check ‘em out (at right).

How (I ask, even beseech) can you not want to help out these cute li’l

critters? I mean, they may well not be kitty-witty-itties (as a colleague

sometimes exclaims), but they most assuredly are wombatty-

(ummm)-ombatty-atties! Yet despite these endangered bundles of

cuteness, I donate one year then, often as not, don’t the next.

The reason: well, I forget occasionally, but am reminded every year

when seeing LeRoux’s reference to the fickleness of individual donors, and so try to make a

donation, except that two years ago their online system still wasn’t working for non-Australian

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addresses…2). Anyhow, given this fickleness, there is competition for individual donor support,

and so, LeRoux hypothesizes, the risk of ‘instrumentalism’.

Findings: no statistically significant relationship between level of individual donors, and a

‘stakeholder emphasis’ in the relationship between clients and donors.

Fees and direct payments. Hypothesis: because clients who pay for service have that more

control over the NPO’s revenue stream, the organization will be more client-oriented. It is worth

noting, though, that clients and customers are not always the same in nonprofit social service

organizations.

Finding: no statistically significant relationship.

Nonprofit boards. Hypothesis: if nonprofit boards are composed of economic elites, and not

‘representative’ of clients, they will tend to adopt an instrumentalist orientation.

Findings:

Racial mismatch (largely white boards on a social service NPO serving largely minority

clients) results in an instrumental, ‘clients-second’ orientation.

Elite representation (largely elite class boards on a social service NPO) results in an

instrumental, ‘clients-second’ orientation.

Client representation on the board is not correlated with orientation.

*

Clients

Dumont and I justify the inclusion of clients into our model as follows:

As indicated, clients are those non-members of the organization who directly receive the non-

profit’s services. Richard Mulgan (2000) and Patricia Hughes (2006) note the importance of

responsiveness to clients; Catherine McDonald identifies “individual consumers” (1999) and

Thomas Holland identifies “recipients” as non-profit stakeholders (2002). It is also worth

noting that client accountability lies behind moves to shift the financing of human services

from grants to non-profit human service providers, to vouchers and to individual human

service clients (Savoie 1995; Steuerle and Twombly 2002) – hence Kearns’ emphasis on

accountability of non-profits to their clients, similar to that of for-profit organizations to their

clients (1994: 23-26).

Social (and spiritual) services

Smith’s Table 4-1 (page 198) provides a list of major functions these organizations provide:

Child daycare

Individual and family services (which looks to include child and youth services, services

for the elderly and disabled, and others -- source)

Job training and vocational education

Residential care

Emergency relief and miscellaneous

2 I had hope: the first thing asked for was country of origin. Despite clicking U!S!A! (chanting meanwhile); when I

came to state, the only options were Australian states. I tried one at random, but the credit card company didn’t take

it. I expected a fraud notice from them, but nothing…

Last year: bingo! I was able to donate online (I’m not a PayPal fan).

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Spiritual services! And I’ll add here the provision of spiritual services, to bring in the

religious congregations that are the focus of the Chaves chapter.

Context of welfare privatization:

Nonprofit sector growing in the US, in large part due to contracting out of welfare and

other services.

There has been a lot of politically-charged rhetoric surrounding this issue!

Some quantitative context on social services in the US can be found in Table 1.

Table 1

Social services (income security) as percent of GDP

Defense Net

interest

Social

security

Medicare Means

tested

entitlements

Medicaid Federal

outlays

1950-9 ~9.4 1.4 1.1 --- --- 17.6

1960-9 9.4 1.5 2.7 0.82 --- 19.1

1970-9 5.8 1.6 3.8 0.9 1.4 0.4 19.9

1980-9 5.8 2.6 4.5 1.6 1.6 0.6 22.3

1990-9 4.0 3.0 4.5 2.2 2.2 1.1 20.7

2000-9 4.11 1.7 4.22 2.62 2.7 1.4 20.1

2010-14 3.8 1.4 4.8 3.4 3.6 22.5

2014 3.5 1.3 4.9 3.4 3.5 20.3 Sources: Historical budget data from OMB, including

Table 8.4—Outlays by Budget Enforcement Act Category as Percentages of GDP: 1962–2016

Table 15.5—Total Government Expenditures by Major Category of Expenditure as Percentages of GDP: 1948–2010

http://www.cbo.gov/budget/data/historical.pdf

Notes: 1 – The actual figure was about 1% higher than this, as during the Bush administration much of the funding for the

military deployments in Afghanistan and Iraq were not included in normal DoD appropriations. 2 – 1962-9.

The point of the table is that despite all the politically-charged rhetoric about the deficit, and the

contribution to the deficit of our ‘promotion of the general welfare by doing unto the least among

us’, income security has not been a major cost driver of the US budget. Health care (Medicare

and Medicaid): yes. On this table, net, all increase in federal spending over the last fifty years has

been due to health costs.

Some social services potted history:

The Great Depression. In addition to Smith’s take on it, more broadly it has been argued that

in the US social services were often provided at the local level, through both public and

nonprofit (especially Church) provision, but the magnitude of the suffering of the Great

Depression overwhelmed this crudely woven safety net, and so government especially

stepped in. The ‘Great Society’ days of the 1960s ratcheted this up.

Nonprofit clients. Note, too, how PRWORA (welfare reform of the 1990s), shifted back

toward nonprofit provision, with NPOs gaining large numbers of ‘clients’, and…

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…government a key financial stakeholder. As a result, policy

advocacy is more important for NPOs, as “the characteristics of

the nonprofit social service agencies are substantially dependent

upon public policy and, more broadly, the welfare state” (Smith,

p. 193).

Note, too, Chaves’ discussion of PRWORA, and religious

congregations providing social services as government

contractor.

Finally, the graphic at right (from The Economist) indicates that

government social spending in the US is relatively low. Who

knew?

Finances and performance. There is a lot on this:

Performance v. process. Smith dates the performance outcome

movement from the 1990s, after a period during which most

NPOs assessed their performance by ‘process’ (or inputs).

Contracts v. fee-for-service. A shift in performance

measurement has been that contracts are used a bit less now, with fee-for-service adopted

instead. Rather than disbursing funds to providers, government is often disbursing (or

effectively outsourcing decision making to) the client her/himself. Because the client decides

which provider to patronize, this functions as a performance barometer: replacing

government boffins running around with clipboards trying to measure agency performance,

or the agency self-reporting their performance.

Not dead yet. Yet evaluation by government agencies isn’t dead yet (for a classic Monty

Python skit), as government contracting agencies still certify appropriate providers, and

decide on grant awards.

Competition. The point is to enhance effectiveness through introducing competition. This

creates constant (as opposed to periodic contract renewal) accountability tensions between

organizational financial survival (and staff livelihoods!) and mission (pp. 209-13).

Social enterprises. In addition to receiving public or donor funds to provide services, NP

social service agencies occasionally generate revenue through ancillary operations. Take, for

instance, the Cummer Museum store, or its rental operation for weddings and other events.

Partners and allies. This is becoming more common, as NPOs develop collaborative cost-

sharing relationships with partners and allies (pp. 216-7).

More or less random points:

Semi-formal. Note the size distribution of religious congregations in the US, with 71%

having fewer than 100 ‘regularly participating’ (and so paying) adults.

Fiscal centralization. An odd side-effect of contracting out (or fee-for-service) has been that

the federal government has extended its influence over the nonprofit sector, through ‘strings’

attached to this funding (p. 204).

Volunteers! These ‘strings’ matter, though as a result of professionalization (driven

partly by fiscal centralization and increased supply of those intrepid MPAs), volunteers

have become a bit less important (p. 205-7).

Legitimacy! Community-based nonprofit social service providers are “perceived as

legitimate, neutral organizations with community roots” (p. 205), and this contributes to their

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effectiveness, in part due to close connections with clients, in part due to stocks of social

capital (see also pp. 217-8) made available by that legitimacy.

Clients v. constituents. Smith draws a useful distinction between client and constituent in

that community-based groups operate with an element of ‘constituent’ accountability, as

all members of the community are specifically identified as stakeholders. With

government, more of an individual client focus tends to be adopted (p. 207).

Members v. public. This is how Chaves terms the members v. client tension (pp. 379-87).

Members v. clients. Chaves refers to the need to maintain a membership base for religious

congregations (pp. 367-72), but it is also worth keeping in mind that these organizations

provide services. Most of these clients are also church members, but not necessarily all of

their clients are, as many religious congregations act on Jesus’s admonition to ‘do unto

the least among us’. As a result, these members often help deliver services to non-

member clients. Indeed, it is hard to imagine why a ‘church’ would get tax exempt status

if it did not, given the centrality of ‘good works’ to the mission of most religions.

More accountability tensions. For me, religious service providers provide a ready example of

the threat of financial imperatives (and the need to provide for paid staff) causing mission

drift. My reading of Christ’s teachings show this to be an austere faith, with the afore-

mentioned admonition to do unto others, along with the statement that "If you want to be

perfect, go, sell your possessions and give to the poor, and you will have treasure in heaven.

Then come, follow me" (Matthew 19:21), not to mention the classic camel and eye of needle

metaphor (Matthew 19:24).

Hence the temptation for management (i.e. clergy) of these agencies to compromise a bit.

As it was put in a famous Canadian novel: “The Scriptures... had left no doubt that it was

easier for a camel to pass through a needle's eye than for a rich man to enter the kingdom

of heaven. But the Lord, in His infinite wisdom and mercy, had never said it was

impossible.” – Hugh McClennan, Two Solitudes (1945).

The public and policy advocacy. Finally, the public is identified as a key stakeholder, as NP

social service providers often need to advocate for their issue area to reduce the likelihood of

cuts (Smith, pp. 219-21).

*

Constituents Dumont and I justify the inclusion of constituents into our model as follows:

The importance of constituents as stakeholders has been recognized by a wide range of non-

profit accountability scholars, including Iain Atack (1999), Ruth McCambridge (2004),

Judith Miller (2002), and Adil Najam (1996). Brown and Moore distinguish between clients

and constituents (2001: 580—84), a distinction especially noted by Sonia Ospina and her

colleagues in their discussion of identity-based advocacy groups (Ospina, Diaz, and

O’Sullivan 2002: 14—20). Accountability to constituents is critical for those groups that

base their work on representing people external to the organization – hence Sergio Costa’s

distinction between interest-group associations and public-spirited groups (1994: 44—45;

Candler 1999). The fundamental challenge of (and distinction in) accountability to

constituents, rather than clients or members, is that constituents are often external to the

organization and as a result hard to interact with. Indeed, William Bogart notes “free-riding”

as a fundamental organizational problem facing “interest groups” – such as in the case of “a

person who wants to outlaw commercial whaling reaps a benefit from Greenpeace’s activities

even if they do not join Greenpeace as a dues-paying member” (1995: 159). Rubem Cesar

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Fernandes (1994: 66—67) and Joseph Helfgot (1974: 488—90), on the other hand, raise the

issue of the potential for disjuncture between professionalized advocacy groups and the

grassroots these claim to represent.

It is also important to note that while many identity-based advocacy organizations face

accountability challenges, accountability to the constituents of these groups is at least

possible. This is not the case for advocacy groups working on behalf of constituents

incapable of indicating their preferences – whether these are political prisoners, “unborn

children,” or sufferers of advanced dementia – and so the unique challenges faced by these

groups need to be addressed separately. Similarly, the interests of future generations may

well be “an obligation on the part of public officials” (Frederickson 1994: 463), but

accounting to this constituency presents at least temporal challenges.

A similar group of constituents to whom “accounting” becomes conceptually challenging are

values, animals, or the environment more broadly. For instance, the early Earth First!

identified the earth itself as its primary constituent, while Amnesty International has long

sought to work on behalf of values of human freedom (Benenson 1961; Predelli 1995: 123—

29). Questions of whether “trees have standing” (Stone 1974) are not the issue here. Rather,

for those groups that claim to represent environmental entities independent of their human

uses and for those groups claiming to represent non-cognitive humans independent of their

individual legal guardians, accounting to these non-cognitive constituents presents special

challenges. The issue especially becomes salient when a group builds reputational capital

working on behalf of a non-cognitive constituent, then invests that capital working on behalf

of another stakeholder (Candler 2001: 366; The Economist 2007).

Our readings on constituents look at an advocacy group that works for a non-cognitive

constituent (Predelli, and the Sirianni and Sofer chapter is relevant here, too); some theoretical

approaches to nonprofit management with an emphasis on accountability (Bogart); and the

representation of IBNPs: identity-based nonprofit organizations (Ospina, Diaz and O’Sullivan).

We’ll start by looking at which NGOs generally seem to have constituents.

Constituents and NPOs: some examples

The central idea behind the concept of constituent (as opposed to member or client) is that the

constituent is neither a member of the NPO, nor a direct recipient of the NPO’s services.

Constituents indirectly receive the benefits of the organization’s services (or so the organization

would like to think). The example that always comes to mind for me is the St. Johns

Riverkeeper. Their mission:

“The St. Johns Riverkeeper mission is to be an independent voice that defends, advocates,

and activates others to protect and restore the St. Johns River.

We are a privately-funded, independent and trusted voice for the St. Johns River and the

public to whom it belongs.”

Note how the St. Johns is specifically identified as a stakeholder (SJR are its ‘voice’). See the

short Shuttleworth article from the New Zealand Herald: the Kiwis have taken this a step further

and done for the Whanganui River what we Americans (through our Supreme Court) have done

to corporations: given them ‘personhood’ status.

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The importance of constituents is also reflected in the short Nonprofit Quarterly article from

Guo, with its discussion of the challenges of, and different approaches to, stakeholder

accountability. He offers two approaches: democratic representation (members vote for the

board) and participatory governance (members turn up for meetings at which decisions are

taken). In another reflection of the challenging terminological differences in the field of

nonprofit studies, the Guo article addresses a number of our stakeholders, including members

(his ‘formal representation’), the general public (Guo’s ‘descriptive representation’, and

constituents (Guo’s ‘substantive representation’).

Other examples:

National Organization of Women. The organization’s mission seems to have morphed a bit. Its

original statement of purpose:

“The purpose of NOW is to take action to bring women into full participation in the

mainstream of American society now, exercising all privileges and responsibilities thereof in

truly equal partnership with men.”

Current opening paragraph in its ‘About NOW’ page (the implied constituents is now narrower,

and more accurate):

“As the grassroots arm of the women’s movement, the National Organization for Women is

dedicated to its multi-issue and multi-strategy approach to women’s rights, and is the largest

organization of feminist grassroots activists in the United States. NOW has hundreds of

chapters and hundreds of thousands of members and activists in all 50 states and the District

of Columbia. Since our founding in 1966, NOW’s purpose is to take action through

intersectional grassroots activism to promote feminist ideals, lead societal change, eliminate

discrimination, and achieve and protect the equal rights of all women and girls in all aspects

of social, political, and economic life.”

Sulzbacher Center. Their mission:

“To empower homeless and at-risk men, women and children to achieve a better life through

a full range of services, both direct and in collaboration with community partners, thus

renewing hope and restoring lives back into the fabric of the community.”

See also Our Programs.

Nonprofit Center of Northeast Florida. About:

“The Nonprofit Center connects, strengthens, and advocates for nonprofits, creating a more

vibrant Northeast Florida.”

United Way of Northeast Florida. Mission (found on page 7 of the current Strategic Plan):

“United Way provides leadership, resources and focus to change lives in our community by

creating sustainable improvements in education, income and health.”

Beaches Watch.

“Our mission is to promote and facilitate educated and productive citizen involvement in

local and state government decisions that affect the future of our northeast Florida beaches

communities. We achieve this by raising, monitoring and researching issues; providing

factual issue information to the general public and government officials; encouraging citizen

participation in the solutions to beaches growth and quality of life issues, and organizing

citizens for action.”

*

General comments:

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Definitional confusion. Until the rest of the world Tebows to Dumont and my paper and

accepts this as the definitive word on the topic of nonprofit stakeholder relations, there will

be definitional discrepancies regarding what member, client, constituent, and such mean.

Bogart (in another paper I have used before, but have not assigned this year) lumps the board,

clients, donors, and contractors in to the ‘constituent’ category. Ospina and co-authors refer

to constituents as ‘community’ on at least one occasion.

Constituency organizational challenges. Bogart raises an intriguing issue regarding how

diverse constituents can organize. Dumont and I discuss this in an earlier paper (published in

2005). Assume that you share some characteristic with only 1% of the population. Especially

if it is something not otherwise visible or even embarrassing (a medical condition, or hobby,

or cause), you’d have a hard time finding enough people to form a group in your town.

The same applies to the Ospina and co-authors article, though here the ‘collective action

problem’ isn’t that there are very few who share a characteristic, but rather that there is

less than a plurality in most regions of the country. As a result, even though Hispanics,

the focus of the article, make up ~15% of the national population, they will be a majority

in very few Congressional districts, and so be unrepresented. Politically, of course, we

now have ‘Gerrymandered’ minority/majority districts, for good or ill. But NPOs can be

used to represent the interests of minorities, whether (as Ospina et al point out) that

minority is ethnic, veteran, disabled, elderly, or what have you.

Technology, as Dumont and I point out, has made it much easier for these disparate

groups to organize. No matter how obscure your interest, punch it in to a search engine.

Or better: organize on Facebook. There is nothing more obscure than this, for instance.

Still, the disparate nature of these groups makes accountability that much more

challenging, and so Bogart concludes this makes it especially important for managers of

NPOs claiming to represent such diverse constituencies to make an effort to entice

constituents to become members, and for managers to be accountable to constituents.

Predelli

The Predelli (1995) reading highlights the funky nature of what Dumont and I refer to as ‘non-

cognitive’ constituents. Earth First! (the exclamation point is part of the formal name!), though

described on its website as “a priority, not an organization”, does have a mission (or priority?) of

“no compromise in the defense of Mother Earth”. Predelli puts this as: “to make the proposals of

mainstream environmental organisations look reasonable in comparison with what would

become the conflictual, irreconcilable attitude of Earth First!” (p. 123). Getting back to its

mission: Predelli reports that the early Earth First! gained about 10,000 members. But again, a

central issue for the organization is its primary, mission-centric constituent is ‘Earth’. How does

one account to this constituent? Stoned yoga on the beach at sunrise? I dunno!

Sirianni and Sofer

This chapter focuses on environmental groups, hence inclusion under the ‘constituents’ week of

this class. The authors do identify ‘ecosystem-based organizations’ as NPOs that

“…form to protect and restore particular streams and rivers and often expand their horizon to

include much larger watersheds. Such associations often emerge from various groups that

refer to themselves as ‘friends’ or ‘stewards’ of a particular creek or lake…” (p. 303).

This is close enough to what Dumont and I mean by ‘non-cognitive constituents’.

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Membership is clearly important in these groups (see table 7.1), though note that the

“Environmental Defense Fund, founded by a small group of lawyers and scientists in the

fight against DDT on Long Island, has never had local chapters; its members are simply

dues-paying contributors, and decision-making resides” (p. 297) with head office.

Others, though, are more democratic, and feature pressure from below (echoing Predelli’s

discussion of Earth First!). Note, too, Siranni and Sofer’s reference to partners and allies (which

we discuss later in this class), especially in the River Networks. Our own St. Johns Riverkeeper

is one of these. See their ‘History of the Waterkeeper Movement.”

That members are a key resource is evident in the mention of Environmental Action, which

‘suffered demise’ after having “failed to professionalize3 in an effective and timely manner” (p.

297). Still, in the interest of equity to folks with odd names, it is worth pointing out that the

organization was founded by the organizers of the first Earth Day, prominent among who was

Gaylord Nelson, seen at right, no doubt out on a

casual weekend hike.

Bogart

In his ‘economic perspective’ on nonprofit

accountability, Bogart focuses on three

theoretical approaches that are common in

contemporary economics:

1. Public choice theory.

‘Public choice’ has gotten a justifiable

bad rap. It starts with the observation that

government as social actor can have

numerous imperfections. As a result, we should let ‘the public’ ‘choose’ for itself. How

to allow this? Through markets, of course! By allowing each individual to make her/his

own ‘utility’-maximizing choice, the aggregation of these choices, surely, has to be in the

public interest.

This is the ‘Austrian School’ of economics, with the roots of what came to be known as

public choice early identified by Ludwig Von Mises. Von Mises especially sought to

“convert the theory of market prices into a general theory of human choice” (1949, p. 3).

Central to this was ‘methodological individualism’ (pp. 41-4) with its assumption that

“human action is necessarily always rational” (p. 18) to the individual actor, and so

government intervention was less likely to lead to outcomes that benefit the public than

would the aggregated private decisions of citizens themselves (see also Hayek, 1944, pp.

75-9; and Galbraith, 1958, pp. 11-18).

Unfortunately, the popularity of the approach is due to its consistency with the views of

dominant economic interests, rather than its logical consistency. The approach ignores

the existence of myriad market failures (which even Bogart recognizes: page 160, and

click the link for a take on this by myself and a recent UNF-MPA graduate). These often

result in the individual utility of buyer and/or seller not being maximized in market

exchanges, let alone the utility of the society on the whole.

3 i.e.: hire an MPA.

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This is not to deny the various forms of ‘government failure’ that the public choice

theorists identify. Rather, given that market failure is a classic reason why we have

government, it is a logical fallacy to then suggest that because government can fail, we

should resort to markets; just as it would be a logical fallacy to argue that because

markets fail, we should increase the role of government.

‘Free riders’. A positive lesson that Bogart does derive from public choice, though, is the

concept of free riders. Take, for instance, the AARP. They now have a simple mission:

“AARP’s mission is to empower people to choose how they live as they age.”

Just as they recently lowered the membership age to 50 (ignoring the ‘retired’ ‘R’ in

AARP), now the mission doesn’t even mention over-50s. Yet to the extent that this

organization does work on behalf of all over-50s, non-members aged over 50 will also

benefit from the whiz-bang policy advocacy efforts of this group. Note, though, that their

reference to ‘society as a whole’ is a harder case to make: my and my parents’ generation

have saddled you young’uns with a lot of debt, so advocacy to keep pension and social

security promises us will not be good for ‘society as a whole’ (when under-40s are

added). To put it simply: you’re screwed, we don’t care, and we vote.

2. Social choice theory. Bogart doesn’t go much beyond public choice in his discussion of this:

people have a hard time organizing autonomously, so markets should rule instead. Kenneth

Arrow (who Bogart refers to) conceptually constructs elaborate rules that make it impossible

for groups to form and represent themselves politically to Arrow’s satisfaction, and so, like

the public choice theorists, Arrow declares that government cannot work, and instead

markets should be let alone. As with the public choice theorists, this ignores the reality that

market choice is at least as imperfect as social choice. After all, the same people are involved

acting in markets who act in trying to form social groups! A minority of economists

recognize this human imperfection, in a school of thought known as behavioral economics.

For two summaries, see link and link.

3. Principal-agent theory. This is much more interesting for our discussion of constituents.

The basic observation of principal-agent theory is that when groups of people (‘principals’)

decide to organize, in any group of some size, someone has to manage (or be the ‘agent’ of

the principals). Even in Earth First!, despite its anti-organizational goals, someone had to

organize the webpage, edit and publish the newsletter, and accept those donations (!).

Accountability. So the primary issue in principal-agent theory is how the principals

(stakeholders) keep the agent honest, or focused on the interests of the principal.

Amorphous principal. Principal-agent theory developed in the business sector, analyzing

how the principal (shareholders, the owners of the company) could keep the agent (CEO

and Board) focused on the shareholders’ interests. This is a simple relationship, with

profit an easy metric of performance, yet these principal-agent relationships are

apparently fraught enough in business that this literature developed in the for-profit

context. Apply this to nonprofit organizations:

Agent. The agent remains reasonably straightforward: the Executive Director.

Principal. Consider the St. Johns Riverkeeper. Who is the principal?

Members?

The community? Don’t forget the mission: “The St. Johns Riverkeeper mission is

to work on behalf of the community...”

Nonprofit stakeholder relations, week 2

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The Board? Legally yes, but the literature on nonprofit boards casts enough doubt

on the efficacy of these boards, not to mention that they are just agents of the real,

mission-identified principal:

The river?

How do these various principals monitor the agent? The AARP is the most opaque of

any of the groups mentioned this week. Despite having been a member4, I have never

been invited to weigh in on policy issues, or to vote on board members, etc. Last summer

I did (after some searching) find the 2014 Annual Report:, with financial summaries on

page 36:

Assets: $3.6b (that ‘b’ means billion, which is more money than even a university

perfesser has).

Revenues: $1.49b.

About $250m in reported management costs, and $165m in ‘Membership

development’ (from the Audited Financial Statement).

That’s all serious money. Shouldn’t they have to ‘account’ to their constituents (not to

mention members) a bit better?

Ospina, Diaz & O’Sullivan

Ospina, Diaz and O’Sullivan look at accountability challenges in identity-based nonprofit

organizations (IBNPs). The key challenge here is that a group that claims to speak for veterans,

for instance, will not, indeed will never, have all veterans as members. Consider a local example

of this: the Wounded Warrior Project.

Mission: “To honor and empower wounded Warriors.”

Vision: “To foster the most successful, well-adjusted generation of wounded service

members in our nation's history.”

All wounded veterans will never be members of this organization (and WWP restricts itself to

post 11 Sep 2001 vets – see link). Yet if WWP claims to work on behalf of this group, how does

WWP account to wounded vets? How does WWP figure out what the ‘warriors’ want? Even

though the organization’s website states (vaguely) that WWP “began when several veterans and

friends, moved by stories of the first wounded service members returning home from

Afghanistan and Iraq, took action to help others in need,” what right did those ‘several veterans

and friends’ have to speak for all ‘wounded warriors’?

My answer: none, but in the absence of someone else organizing to do so (outside of the

Veteran’s Administration, which has a range of services for veterans5), it is good that someone

has organized to provide both services and advocacy for this group. Still, being first isn’t enough

to establish and maintain legitimacy as the self-appointed ‘agent’ for this group of principals.

What is needed is, among other things...

...Negotiated accountability. For me, perhaps the most interesting insight from the Ospina et al

article is their focus on ‘negotiated accountability’. In the face of multiple stakeholders (some of

4 Kind of: my wife, eager for those AARP discounts, signed me up when we lived in Indiana. We noticed, though,

that AARP discounts are no better than AAA discounts, and when we moved to Florida the AARP discounts seemed

to vanish. 5 Given recent criticism of the VA, see this, and this, and this, and this, and (I could go on).

Nonprofit stakeholder relations, week 2

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whom the manager can’t readily communicate with); and multiple, often fuzzy things to be

accountable for; the manager needs to communicate regularly with stakeholders, in free-flowing,

two way discussions. Elements of this process of negotiating accountability:

Accountability relationships. Accountability therefore becomes a relationship between

principal and agent, with the agent having a moral responsibility to reach out to the

principals. Citing Brooks; Ospina and co-authors identify six key questions that need to be

answered in the accountability relationship:

1. Who is giving the account?

2. To whom is the account to be given?

3. For what action or job is the account to be given?

4. How is the account to be given?

5. When is the account to be given?

6. What happens if the account is unsatisfactory?

Indirect accountability. The sixth question above is probably the most challenging, in

relationships with what Dumont and I call constituents. Donors can withhold money, staff

and members can quit, and clients reject services. But constituents? What recourse does a

wounded vet in Ohio have if she feels the WWP is failing her and her fellow troops?

Two way accountability. Listen (which implies interacting with constituents and clients)!

Other broad lessons

Mission displacement. Ospina and co-authors note some mission creep within their IBNPs, as

these chase grant dollars (p. 21-2). Earth First! presents an even more dramatic case. This

raises the broader issue of the impact of mission on NPOs, especially those that are member-

based. We’ll discuss this more fully later in the class, but for now, suffice it to say that if

internal stakeholders (members, donors and staff) join, work for, or donate to the organization

because they support the mission; change of that mission can be difficult.

Legitimacy and reputation. Note Predelli’s reference to how Earth First!’s ‘success and high

media visibility’ attracted new members. These new members then tried to change the mission. I

interpret this as reputational capital (see also Ospina et al, p. 8) having been built in work on

behalf of ‘Earth’, and the new members wanted to take that reputational capital and cash it out on

issues unrelated to Earth. Is this ethical, though? Doesn’t Earth, the stakeholder whose appeal

contributed to the building of that reputational capital, have a right to that capital? You’d think

the ‘earth seconders’ (my term) who joined Earth First! would just go to another organization,

rather than pilfer Earth’s reputational capital. As indicated, the earth firsters (folks who wanted

to put earth first) lost control of Earth First!, which is now controlled by conventional left-

wingers who put earth second, or perhaps tied for first. The earth firsters, by most accounts,

went with founding guru Dave Foreman to The Wilderness Project (which became the Wildlands

Network). Their goal is another identified by Predelli: “to create and protect large tracts of

wilderness in order to sustain ecological diversity” (p. 123).

Members

Dumont and I justify the inclusion of members into our model as follows:

Members. Members are a well-acknowledged nonprofit stakeholder. For Najam, members

are a subject of internal accountability, and members also compose a component of Brown

Nonprofit stakeholder relations, week 2

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and Moore’s support and authorization stakeholders. Accountability is often an area in

which the members have the upper hand if members provide the resources (whether through

funds that provide operational resources, or through the numbers that confer legitimacy)

critical to the nonprofit’s existence (Najam 1996: 345). Indeed, for Quarter, “democratic

control by members is a fundamental characteristic” (1992: 9) of organizations in his ‘social

economy’; David Horton Smith (1997) notes that small member-based organizations make

up the largest, yet least-studied component of the nonprofit sector; and Chisholm (1995: 145-

6) notes that boards often have a legal requirement of accountability to members.

Membership is also critical in conferring legitimacy. Fears of oligarchization

notwithstanding (Morera 1990; Truman 1971: 129-39), ‘representativeness’ – the degree to

which the formal membership of an advocacy organization represents the constituents on

whose behalf the organization claims to work -- remains a key criterion of nonprofit

legitimacy (Atack 1999: 858-9).

Legitimacy, accountability, and change Table 2, below, presents a series of case studies that look at the difficulty and complexity of

organizational change in nonprofit organizations, because of the mission focus of so many

members, donors and staff. A brief summary of each case:

Michels’ Political Parties starts the story. He looked at especially trade unions: grass roots

organizations established to represent the interests of workers. He found that instead they

tended toward oligarchy: serving the interests of (and controlled by) the head office, rather

than shop floor workers.

The Townsend Movement has been offered as proof of the ‘oligarchization’ argument. Their

mission of bringing about a national retirement plan having succeeded, they tried to get

members to sell products door-to-door to maintain the bigwigs in their fancy Washington

offices. It didn’t work: this illegitimate policy shift appealed to no one.

The YMCA was established to proselytize men in urban industrial areas, and offered exercise

as something to do other than drink grog. Many YMCAs, though, are more gym club than

Christian associations. It worked, in terms of generating revenue, but seemed to reflect

mission drift6.

Table 2 -- Nonprofit legitimacy, accountability and change

Case:

core values Change

Organizational

success Legitimacy Lessons

Robert Michels

(theory)

Unlikely: iron

law of oligarchy

Top-down rule the

norm,

change is difficult

Townsend

Movement:

national

retirement plan

To soap peddler No -- membership

defected

No -- core values

violated

Changing core values

illegitimate and

dangerous: Michels is

right

6 It has since occurred to me that the gym clubs fund their work, which often remains consistent with the ‘do unto

the least among us’ central mission of Christianity.

Nonprofit stakeholder relations, week 2

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YMCA:

Christian

proselytization

To chain of gym

clubs

Yes -- popular,

well frequented

No -- core values

violated

'Selling out' unethical,

but can be successful!

March of

Dimes:

infantile

paralysis

To broader

childhood

diseases

Yes -- membership

maintained

Yes -- core

values

maintained

Change that remains

true to core values

can be successful

National

Council of

Churches:

services to

churches

To civil rights

activism

No -- membership

angered, many

defect

Yes: core values

maintained,

despite

membership

Democracy can

conflict with mission

Earth First!:

ecocentric

advocacy

To

anthropocentric

advocacy

Yes -- old

members defect,

but more new

members join

Mixed? -- old

stakeholders

dumped, but

these changed?

Importance of

external (especially

non-cognitive)

stakeholders!?!?

March of Dimes is seen as the anti-Townsend Movement. Their narrow mission obtained

with the eradication of polio (which especially afflicted children), they shifted to other

infantile diseases. It succeeded financially, and has been seen as a legitimate change! Unlike

the Townsend Movement (selling soap power to keep the execs in their offices was not seen

by members as a legitimate change from working toward social security), the March of

Dimes was: working toward eradication of childhood diseases beyond polio.

NCC provided services to small southern Christian congregations. As the civil rights

movement developed, the NCC joined this movement. By most accounts, this was consistent

with the ‘do unto the least among us’ mission of Christianity, but was rejected by many

congregations7. So a legitimate, mission-centric decision was rejected by many members!

Earth First! we have discussed: an illegitimate mission shift, but which succeeded in terms of

organizational survival, as two earth seconders joined for every earth-firster who left.

Getting back to members, donors and staff: each of these groups give money (or the equivalent)

to NPOs, largely because of the mission of those groups. Ipso facto: change the mission, and you

risk losing these members, donors and staff. For instance:

Members and donors are pretty straightforward: membership generally requires a

membership fee, and donors...well...donate!

The mission isn’t necessarily the only reason members join, and donors donate: donors

may give to a prominent NPO just to be seen; while members may join an organization

that is seen as hip within the social group that they seek to be part of.

Staff are just a bit more complicated, in that it is widely recognized that nonprofit employees

often work for less money than they could make in government or in the business world. As

a result, that difference between the market rate for their services, and what they accept to

work for an NPO, can be (has to be!) seen as a donation-in-kind to the NPO.

As with members and donors, the mission isn’t necessarily the only reason staff work for

an NPO. The challenge of managing an independent NPO (rather than a government

agency that answers to someone else, and then again probably to an elected office or

7 Controversy over this continues, see the link.

Nonprofit stakeholder relations, week 2

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legislature), and being the big cheese, as well as the relatively red-tape free environment

within an NPO, are other reasons often offered for interest in NPOs.

Dark matter!

The article by Smith is something of a classic, and we look at it mostly to broaden our

perspective on NPOs, and also because it is mostly small, member-based, volunteer-driven NPOs

that are overlooked in narrower studies of the field.

Incomprehensible complexity. As indicated, the DH Smith article is included to point out the

magnitude of NP membership, and the incomprehensible complexity of the sector. On the latter,

Smith’s analysis suggested that, in his late-1990s publication date, the nonprofit sector in the US

included some 2,000,000 NPOs with paid staff, and over 7,000,000 ‘dark matter’ groups.

Grassroots associations.

Smith defined these ‘dark matter’ groups as “locally based, significantly autonomous,

volunteer-run, formal, nonprofit groups that have an official membership of volunteers, and

that manifest significant voluntary altruism” (p. 115), with generally fewer than 50 members.

Semi-formal. Some are described as semi-formal, despite ‘formal’ in the definition above.

Magnitude of NP membership.

Under-reported, so much so that Smith referred to his grassroots groups as the ‘dark matter’

in (to mix his metaphors) ‘flat earth’ maps of the sector.

Volunteers. Smith estimated about 100m volunteers, doing some 28m FTE work, equivalent

to perhaps 14% of the paid workforce.

‘Dark matter’ groups long ignored. The money is in the bigger groups. You can’t get a paid

job (or grant money) from an NPO with a budget less than the old IRS $25,000 reporting

limit, so where’s the incentive for the self-interested NP scholar to study them?

II. Donors

Lenkowsy looks at foundations and corporate philanthropy, and Cornelius and Covington at

workplace dynamics. I’ll also mix in material from chapters in the Jossey-Bass Handbook of

Nonprofit Management and Leadership. Dumont and I justify the inclusion of members in our

framework as follows:

Donors. In accountability terms, donors represent the opposite of non-cognitive

stakeholders. While seals, for instance, can neither be communicated with nor hold an

environmental advocacy group accountable, donors are a relatively unproblematic, well-

discussed nonprofit stakeholder. As what Brown and Moore (2001: 575-6; Martinez 2003:

155) describe as ‘support and authorization’ stakeholders, nonprofits regularly initiate

communication with donors, while donors wield a hefty accountability cudgel through

withholding resources. Indeed, Peters argues that “the ultimate control over nonprofits rests

with donors. They can, by giving or withholding money or other resources, exercise the

blunt instrument of financial control” (2001: 23). As a result, donors are routinely identified

as important stakeholders in the existing nonprofit accountability literature (Chisholm 1995:

146-52; Hashemi 1996: 128-30; Broadbent 1999: 11).

Nonprofit stakeholder relations, week 2

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Donor relations are certainly one of the most-discussed elements of the nonprofit sector, and are

addressed in PAD 6208 Nonprofit Financial Management. Brief comments on donor relations:

Donor relations are highly professionalized. There are at least two professional associations:

Association of Donor Relations Professionals. This seems small, claiming just 700

members on its website.

Association of Fundraising Professionals. The 2013 Annual Report claims 30,302 (!)

members (and maybe 3000 donors). It has a First Coast Florida collegiate chapter.

The ‘development’ game is highly competitive, and counter-cyclical: at least for human

service NPOs, funds are harder to come by when need is highest.

The product has to matter, but…

…at the margin (and it is probably a very fat margin) relationships matter, too.

Anonymous gifts do exist, but few organizations can survive on these.

Some donors will be committed to the mission, and will continue to give regardless of

how they are treated by the organization.

Others are committed to more missions than they have resources for, and so will tend to

give more to organizations that treat them best.

This isn’t necessarily a matter of stroking large, insecure egos, as simple etiquette

will go a long way. A thank you, for instance, means a lot. (I’m bad at this!)8.

Lenkowsky on foundations and corporate philanthropy

Types: a) Foundations: Jesse Ball duPont Fund, b) Corporations: Jaguars Foundation,

c) Federations: United Way of St. Johns County, d) Gift fund: Fidelity Charitable.

The Gates revolution. As Lenkowsky indicates, Melinda and Bill Gates shouldn’t be credited

with too much of this, but they are very prominent and their approach has reflected, and so given

a boost to, a number of recent trends in the field:

The Giving Pledge which, beyond raising money, has sought to encourage other super-rich to

turn their money over to charitable causes.

Focus. The Gates Foundation has been part of a movement that goes by a number of names,

including entrepreneurial philanthropy. The idea is to identify specific issues that the

foundation wants to address, and both concentrate resources on this, and…

Outcome focus. …monitor grant recipients for results.

Incentives. There is also a market-conscious awareness of the importance of economic

incentives. If policy encourages people to do ‘A’, but economic incentives push people to do

‘B’, the likelihood of policy failure increases.

The Carnegie quote: for what it’s worth, I can’t find the Carnegie quote that “It is more

difficult to give money away intelligently than to earn it in the first place,” either in the 1889

or the 1900 version of The Gospel of Wealth.

Small beer. Lenkowsky refers to some $33.3b in foundation and corporate disbursements (nearly

10% from the Gates Foundation alone). Whoopie. Compare this to:

Salamon reports (p. 10) about $130b in total philanthropic (individuals, foundations and

corporations) giving, and...

8 PS: thank you for entering the UNF-MPA, and/or Graduate Certificate in Nonprofit Management program!

Nonprofit stakeholder relations, week 2

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...Lenkowsky reports that perhaps 10% of this 33.3b in foundation and corporate money (or

15% if the Gates Foundation is included) goes to the poor, so perhaps $3-5b.

Government spending on social programs is much higher. Estimates vary:

Fox News: estimates government welfare spending at over $1t.

The real figure is closer to $400b, if Medicaid and CHIP are added to ‘low-income

assistance’ spending.

As a result the nonprofit sector, especially foundation and corporate social welfare

philanthropy, is dwarfed as an alternative to government as funder of social spending ($5b v.

$400b+). The founding documents of the US were prescient in assigning to government this

moral imperative to do unto the least among us:

“We hold these truths to be self-evident, that all men are created equal, that they are

endowed by their Creator with certain unalienable Rights, that among these are Life,

Liberty and the pursuit of Happiness.--That to secure these rights, Governments are

instituted among Men…” (my emphasis) – Declaration of Independence.

“We the people of the United States, in Order to form a more perfect Union, establish

Justice, insure domestic Tranquility, provide for the common defence, promote the

general Welfare…” – Preamble to the Constitution.

Criticisms. …of foundations and corporate philanthropy are legion.

Poor outcomes. Lenkowsky reports on failures of heavily funded programs by major

philanthropies (improving urban school systems, community drug and alcohol abuse).

Charitable nepotism. Using foundation resources to fund sinecures for the dullardly

offspring of the long dead ‘wealth creator’ (an example).

Payout rates. Current requirement is for a foundation to pay out an annual equivalent of 5%

of assets. Related story.

Locked up assets. A related criticism is that billions that could be invested now are locked up

into perpetuity. If those funds invested now would yield a return on investment of more than

5%, then the perpetual foundation that dribbles money out is less effective than it could be.

Class differences. As suggested above: much of the money tends to go to causes (orchestras,

arts) that the wealthy frequent.

Anti-democratic. This is seen by many as anti-democratic, as the wealthy avoid making

their contribution to the promotion of the general welfare by dodging even estate taxes.

Though some organizations, like our own Cummer Museum, have extensive educational

and community outreach programs.

Effectiveness. The outcomes of foundation-funded projects are often poor. Yet the return on

investment on government (Iraq War, Solyndra and Bush Tax Cuts) or corporate (Long Term

Capital Management, Enron and sundry ‘leaders’) initiatives can disappoint, too!

Individual donors. Unlike foundations, which give money in regular, structured processes

and have institutional memory; individual donors are ‘fickle’.

III. Staff

Dumont and I discuss this as follows:

Staff. It is well appreciated, in management across all sectors, that an organization needs to

be cognizant of staff morale. For nonprofits, accountability to staff becomes more important

Nonprofit stakeholder relations, week 2

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because of the implicit donation reflected in the lower wages NGO staff are often willing to

accept (Brown and Moore 2001: 506-7). NGO staff, therefore, are a focus of both Najam’s

(1996: 348) internal and Kearns’ (1994: 75) negotiated accountability; and are addressed

through Brown and Moore’s (2001: 578-88) operational capacity stakeholders. The literature

has also long pointed to an inherent conservatism among NGO staff, both in terms of their

desires to protect their jobs, and in terms of their commitment to the organization’s mission,

and so reluctance to consider change (Michels 1958; Truman 1971: 129-55; Candler 2001:

357).

In-kind donation. Again, for Dumont and I the central issue regarding paid staff is that many

could get paid more elsewhere, but “the nonprofit sector offers desirable employment for

individuals looking for meaningful and fulfilling work” (Cornelius and Covington, p. 643). The

difference between nonprofit pay and what the worker could receive elsewhere represents a

donation-in-kind to the NPO (Watson and Abzug, p. 671), and so NPOs (and the general public)

should be conscious of how much a nonprofit Executive Director is donating to the organization.

Just like any donor, paid NPO staff need to be respected, over-and-above the respect than an

organization would pay to an employee.

Why put people first?

They’re valuable! If they aren’t, you shouldn’t have hired them. Presumably you hired the

best applicant you had, and so don’t want to lose this person and have to go back into the

labour pool and take #2 (if s/he is available).

NPO work is often labour intensive. People are the key resource interacting with clients,

and/or producing the goods and/or services that are central to the organization’s mission.

They’re human! Just as machines need oil to keep running, people need to be greased

(with competent people skills) now and again as well. Buy beer.

Human resources as a system: integrate the various functions into a consistent whole.

Fit and embeddedness. Watson and Abzug refer to ‘fit and embeddedness’ in an HR system:

get people who belong (fit), and maximize “the extent to which the staff and their families

are engaged in the organization and its community” (p. 674).

Families? Sounds kind of creepy. You gotta put the kids to work for the NPO?

‘Fit’ could also lead to discrimination on the basis of race/class/religious/gender/etc.

The law. Don’t rely on this class for your understanding of nonprofit law! If you are in a

human resources-related position, consult the law yourself! But:

Do not discriminate, intentionally or unintentionally on the basis of race, gender,

pregnancy or age (the last two feature widespread discrimination, but we’re in denial).

Do not permit sexual harassment, whether sexual advances, or an “intimidating, hostile or

offensive work environment” (p. 680). We can now add to that cluelessness.

Do not discriminate against the disabled, and consider reasonable accommodations to get

them into your organization.

Various other provisions, and all applicable state and local laws.

The processes of human resources

Human resources audit. Determine what you’ve got, what you need, and where the gaps are.

The staffing plan. Prioritize filling the various gaps, both existing and projected.

Nonprofit stakeholder relations, week 2

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Recruitment: identify job characteristics, and write job descriptions. Let applicants know

what you’re looking for. It’s not as easy as you’d think:

o Too specific and you may get a narrow, weak pool, while...

o ...too broad and you may get a large, unwieldy pool.

o But hey: this is a huge investment decision (often $1,000,000+), so suck it up and

dig through the applicants!

Check the market!: Determine the supply of, and demand for the labor you want.

Internal equity. If the market demands higher salaries to get the people desired, this

may create internal inequities. If other personnel do not have their reasonable requests

for pay increases responded to, some of the better ones will leave: they are the best,

and so can get another job. You’ll be left with the dullards (and/or the dedicated!).

o Searching. Very important! I’ve discovered over the years that the talent pool in society

is relatively shallow, in terms of smart, sociable, creative, hardworking people. Finding

these rare gems isn’t easy, and so is worth the effort.

o External approaches. Pretty obvious: newspapers, online job sites, social networks,

professional outlets, college recruiting/internship programs, government job service

agencies, professional search firms, job fairs, etc.

o Internal approaches.

o Employee referral – use your contacts, or directly contact people you know/want.

o Internal promotion – improve retention prospects. But be fair: avoid

discriminating against those with less social capital (i.e. ‘network’ ‘contacts’).

o Client and volunteer recruitment.

Choosing a candidate. A suggested, four-step process:

1. Is the candidate qualified? Short cuts are used to winnow out large applicant pools:

you have no Masters degree in a pool of 100, with 20 holding Masters degrees?

2. Identify the best in the pool.

Subjective v. objective evidence. Personally, I don’t care about the candidate’s

personal statement, or letters of recommendation. Show me the resume.

Psychological testing. Oh boy!

The personal interview!

Use a structured interview format: same questions for all.

Stick with behaviors: ask what the applicant did in past jobs.

As well: this is an excellent way to get a sense of personality. Relaxed,

pleasant, professional and knowledgeable: good. Otherwise: bad.

Consider a team interview. This gives more than one perspective on the candidate.

It is time consuming but, again, this can be a $1m+ investment.

3. Verify qualifications and match: check references and all that.

4. Make a decision and tender an offer.

Recognize that labour markets exist, if you pay peanuts you get monkeys, and that

extra $5k in pay may mean $10k in additional productivity. If the Board doesn’t

agree, call them Commies (after all, they apparently don’t think that labour

markets exist). (Professional tip!!!: If you adopt my cutting-edge ‘Call the Board

Commies’ approach to stakeholder management, keep your resume updated.)

Be willing to declare a failed search, if you don’t find what you need. Try to figure out

what went wrong, and try again.

Nonprofit stakeholder relations, week 2

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Discharge, layoffs and voluntary turnover

Don’t take resignations personally, though...

…exit interviews are a good thing, even if informal, with an effort at honest self-appraisal

as to whether the organization could have prevented the loss of this valuable colleague.

Try to help good workers laid off involuntarily, even if only at a human level.

Retention

Nonprofit workers often come in to the organization with strong mission-based motivations,

so it may be unrealistic to rely on that to continue to motivate. So...

…guard against burnout, or work-life balance issues. As Cornelius and Corvington put it: “It

is noteworthy that the sector continues to attract people despite continuous media reports

depicting nonprofits as work settings characterized by low pay, long hours, and staff

burnout” (p. 643). Still, this can’t be taken for granted.

Symbols matter (but again, these will only substitute for so much pay discrepancy).

Struggle to make pay and benefits less uncompetitive.

Consider the use of incentives, to reward individual and/or team performance.

Training presents a challenge, especially in small NPOs with no training programs, and no

opportunity for career advancement within the organization.

In a sense, a regional nonprofit sector is a larger NPO: the best managers of smaller

NPOs who have greater ambitions, find themselves leaving to join a larger group. So

career advancement exists. Still, this leaves the smaller NPOs facing a future of staffing

uncertainty and periodic shocks resulting from these ‘promotions’ from the farm team.

Compensation packages.

Another of the idiocies of contemporary American politics is that we have lost sight of the

concept of compensation packages in popular political discourse. We are not paid our

salaries. Instead, we receive a compensation package that includes:

Material benefits: various material elements such as

salary +

health benefits +

retirement contributions +

vacation and holiday expectations.

think of the sum of these four as the denominator, as an employee will

(consciously or not) think in terms both of

gross package (how much), and

benefits versus cost (in terms of time).

Non-material benefits:

Mission: the pay cut (below what s/he could receive in other employment) the

employee will be willing to take to work toward your mission.

Working conditions: the physical condition of the work environment.

Nature of the work.

Workplace culture: the psychological conditions of the work environment.

Try not to wing it. Day would like NPOs to strategize about compensation packages,

reasonably enough in terms of rewarding mission-oriented behavior.

Good performance that is mission-focused should result in more pay.

Nonprofit stakeholder relations, week 2

Page 23 of 24

Realistically, measuring outcomes, and attributing these to individuals, is difficult.

Focus on key areas. Markets matter: if you are having trouble finding certain skills, bring

more money to market.

Consultants. Fuggedaboutit. See the DH Smith discussion above about the preponderance

of small NPOs that lack resources to hire consultants. Besides, consultants are over-rated.

Volunteers

George’s experience. For what it’s worth, my experience has been that volunteers are

motivated by a handful of things:

Mission – ‘nuff said.

Coolness factor – are the other volunteers people you like, and want to be involved with?

Organization – getting up at 6:00 a.m. on a Saturday, turning up on site, then twiddling

my thumbs while the organizers try to figure out what to do, is not a good use of my time.

I am easily annoyed (Ask the woman whose husband I am. She’ll tell you.).

Establishing the rationale (and be open about this?).

Achieve a specific goal: clean up the beach after hordes of pagans dirty it up during

holiday celebrations on the evening of July 4.

Make a statement: 1000 people cleaning the beach can attract the press: free publicity.

Raise consciousness: those 1000 people (especially if you can rope kids in) might

develop a better appreciation for the environment, and not litter the beach themselves.

Involving paid staff (?). Okay, but what if the organization has no paid staff?

Integrating the volunteer program into the organization, or at least think about mission fit.

Creating management roles within the volunteer program. Volunteers can do this!

Preparing job descriptions for the volunteers, as appropriate.

Virtual volunteering.

Meeting the needs of volunteers.

Don’t waste my time,

Let me know what I need to bring,

Provide what I need that I might not be able to bring,

Send me off feeling good about the organization, what I did (and about myself!).

Recruiting and retaining volunteers.

Recruiting.

Concentric circle – from among stakeholder groups

Staff families and friends?

Members

Constituents

Warm body – outside the stakeholder circle, from the general public: more is merrier.

Targeted – specific skills sought.

Retaining. Did I mention:

Don’t waste my time

Let me know what I need to bring

Provide what I need that I might not be able to bring

Send me off feeling good about the organization, what I did (and about myself!).

Managing volunteers.

Nonprofit stakeholder relations, week 2

Page 24 of 24

Discipline is difficult: you need them more than they need you.

Don’t waste my time, etc.

Evaluating and recognizing the volunteer effort.

Evaluation. Do a ‘lessons learned’ exercise.

Recognition. Send me off feeling good about the organization…

And so? – This week has especially looked at the people within (broadly understood) the NPO.

Many nonprofits are human service organizations, and these human service tasks are especially

labor intensive. It is critical to be sensitive to the needs of these critical stakeholders.

References

Bogart, William (1995). “Accountability and nonprofit organizations: an economic perspective.”

Nonprofit Management & Leadership 6(2), pp. 157-70. Online link.

Brudney, Jeffrey (2010). “Designing and managing volunteer programs.” In Renz & Associates (editor),

Nonprofit Leadership and Management. San Francisco: Jossey-Bass, pp. 753-93.

Day, Nancy (2010). “Total rewards programs in nonprofit organizations.” In Renz & Associates (editor),

Nonprofit Leadership and Management. San Francisco: Jossey-Bass, pp. 709-52.

Galbraith, John Kenneth (1958). The affluent society, Boston: Houghton Mifflin.

Hayek, Friedrich (1945). The road to serfdom. Chicago: University of Chicago Press.

Mises, Ludwig Von (1949). Human action: A treatise on economics. New Haven: Yale University Press.

Watson, Mary and Rikki Abzug (2010). “Effective human resource practices: recruitment and retention in

nonprofit organizations.” In Renz & Associates (editor), Nonprofit Leadership and Management. San

Francisco: Jossey-Bass, pp. 669-708.