David O. Renz
This fourth edition of the Jossey-Bass Handbook of Nonprofit Leadership and Management, which comes two decades after the publication of the first edition, describes a nonprofit sector that is very different from that of the inaugural edition. The field has grown and developed in important and amazing ways, some very positive and some less so, and the nature and content of the work of the typical nonprofit leader and manager is quite different from those earlier days. True, the purpose and functional content of nonprofit management remains substantially the same: it is the process of planning, organizing, and leading the work of the organization, including establishing goals, developing organizational strategies, securing and allocating resources, organizing the work, recruiting and mobilizing the workforce to do it, supervising the implementation of the work, evaluating the degree to which the organization is accomplishing its goals, and then refining plans and strategies to sustain and enhance the organization's performance and impact.
And yet, as Lester Salamon explains, the context of nonprofit leadership and management has changed so much in the past twenty-five years that it is not at all the same work (2010, 2012). Some things have become easier, yet much has become dramatically more complex and challenging. In his chronicle of the changes that have led to today's demanding operating environment, Salamon identifies four key types of challenges:
Today is indeed a new day for the leader and manager of a typical nonprofit! And, Salamon suggests, tomorrow promises more—more of the same, plus more that will be different (2010, 2012). Among the emerging opportunities he describes are the following:
A number of recent reports also weigh in on the changing nature of the nonprofit environment to offer their own observations about the nature of this time of fundamental change (for example, Alliance for Children and Families, 2011; Bernholz, 2014; 2015; Gowdy, Hildebrand, LaPiana, and Campos, 2009). Gowdy and colleagues (2009) assert that the nonprofit sector is at a unique point in time, “an inflection point” that will fundamentally reshape the sector, and that successful nonprofit leaders and managers will build their capacity to be attuned to rapid and continual shifts as they manage strategically in the fundamentally new operating environment. Among the key trends they suggest are converging to fuel changes are
A more recent assessment of the human services environment, prepared for the Alliance for Children and Families (2011), identifies the following as disruptive forces causing change, adaptation, and innovation: purposeful experimentation, information liberation, integration of science, an uncompromising demand for impact, branding for causes rather than organizations, and the need to attract investors rather than donors.
As challenging as these dynamics are, they are not necessarily negative. We observe effective nonprofit leaders and managers being both innovative and strategic as they explore ways to navigate and exploit the opportunities inherent in these changes. For example:
What does all of this mean for the future of nonprofit leadership and management? It certainly suggests that the work of leaders and managers will become even more complex and demanding. It also suggests that, while passion and commitment are essential to success, effective leaders and managers need more to succeed. The knowledge, skills, and abilities explained in this Handbook are central to the future success of the typical nonprofit leader and manager.
Some worry, as we continue to professionalize the management of the sector, that the distinctive character of nonprofits in civil society will be lost. But there is no reason to believe that this must be the case. Indeed, drawing on a key marketing concept, we can and must remember to regularly and clearly articulate the key differentiators that distinguish nonprofit organizations from all others. If professionalization and education are well grounded and implemented appropriately, the sector will not lose its way because, at core, effective nonprofit management must be defined in and by mission accomplishment. So the challenge, in difficult times, is to never forget why we do what we do. I am optimistic that we are unlikely to forget our mission—our volunteers and donors and community leaders will not let this happen. Although the sector's public trust ratings today are lower than I'd like, it remains true that the average citizen values the nonprofit sector and considers it an essential part of a viable society. We know this, in part, because year after year we continue to see people across the world taking the time to create thousands of new nonprofits (and a good share of them are all-volunteer organizations) to address the needs and interests of their communities and fellow citizens.
From the perspective of nonprofit management and leadership, how do we ensure the sector does not lose its distinctiveness and viability? My answer is that we lead and manage effectively! Every one of the chapters of this Handbook explains a unique facet of how we ensure that our sector and its organizations remain vital, viable, and distinctive. At core, this has four dimensions.
Fundamentally, strategic leadership and management constitute the process of making choices about the best and most effective ways to achieve the intended purpose of the organization (that is, the mission). As Robert Herman argues in the second edition of this volume (2005), it is imperative that every nonprofit is “managing toward the morality of the mission.” It is when a nonprofit's leaders and managers forget to or fail to keep the mission, vision, and values of the organization as the foundation for all the decisions and choices they make that we have the greatest potential for losing our way. Essentially all of the trust and accountability problems of the sector derive from our key stakeholders' fears that we are not in fact doing this and doing it well—they are warning us to take the fundamentals seriously.
The oft-uttered admonition to “run it like a business” is a half-truth, valid except when it's not! Many of the most spectacular failures of nonprofit leadership and management exemplify the cultural contradictions of our sector, when nonprofit leaders think they can operate as a conventional business would operate—only to find that they had violated important conventions and rules (some written and some not) about what is acceptable for a nonprofit. All organizations today operate in an environment of increasingly complex competing and conflicting values and expectations. But businesses ultimately have the option of ignoring or shortchanging some values and expectations in favor of others (indeed, in the United States, they are legally obligated to maximize financial results for the limited group of people who are their owners—that is, their shareholders). Nonprofit leaders and managers, however, must recognize and accommodate a much larger array of stakeholders' competing values and perspectives as they determine what their organizations should do, how they should do it, and how to judge effectiveness and success.
Among the key distinctions: at its core, a business serves a market niche as long as it is profitable; when it's no longer profitable the well-managed business will leave the niche to pursue something that has greater promise for profit. A business is obligated, as a matter of responsible use of the owners' assets, to leave a niche or market when it cannot achieve an appropriate return on those assets (at whatever level of return is deemed acceptable by those owners). Alternatively, by definition and mandate associated with charity status, the typical nonprofit operates in a market where profitability is less viable (that is, the economist's concept of market failure). Indeed, in recent years, some nonprofits have been threatened with or even lost their nonprofit status because there was no clear distinction between their enterprise and a for-profit business. The nonprofit is mission-bound to stay in its specific (tax-exempt) business if at all possible, so key decisions turn on whether it is feasible to remain in the market (with some form of subsidization, including but not limited to tax exemption) to continue to serve its clients.
Nonprofit leaders must become more effective at explaining the true characteristics of the nonprofit world. We have failed to help many of our key constituents—including many who govern, manage, staff, and volunteer for our own organizations—understand the nature of the sector and its organizations. Lester Salamon observes:
Several of the chapters of this book examine the processes by which we engage, inform, and educate our key constituencies through marketing, strategic communication, and advocacy. We must be effective in using the guidance and insights of these fields to inform our work as leaders and managers.
Ultimately, people everywhere value the nonprofit sector and civil society for the social value they add. If nonprofits cannot deliver on their missions, communities legitimately ask why they should allow them and subsidize them. The ultimate judgment in the test of whether we are effectively “managing toward the morality of the mission” comes directly from our performance and from our ability to demonstrate that progress is being made. Our constituents and stakeholders want us to succeed, and the reason they will maintain or even enhance their support is because they see the value in what we seek to accomplish. There is no question that the nature of the problems and needs addressed by the nonprofit sector is such that progress can be slow, difficult, and hard to demonstrate. For that reason, the work of marketing and communication is integral to this element. But, as Greg Dees explains in Chapter Eleven, there is only one bottom line in the nonprofit world—it is the creation of social value. Without social value that derives from the effective practice of nonprofit leadership and management, the legitimacy of the field disappears and we run the danger of becoming “just another business out to make a buck.”
Some question whether there is any substantive difference between “nonprofit management” and management in other types of organizations. After all, every one of the nonprofit management functions that has been explained in this Handbook is important to the effective management of every organization regardless of profit orientation. All the tasks of management described herein are essential to the management of profit-making organizations. So is there a difference? At core, in both nonprofit or for-profit organizations, the central purpose of management is the same—to enable the organization to function well to accomplish its mission and goals. And the fundamental difference flows directly from that point: it is the purpose to be achieved by the management system that is different. Among the distinctive dimensions of nonprofit management that are important to recognize because they have a distinct impact on the success of those who do this work are those discussed as follows.
To state the obvious, the nonprofit sector in the United States and most other nations of the world is legally distinct from the other sectors. It is neither for-profit business nor government, even as it carries certain characteristics of each, and this difference in legal context is significant to the practice of management (most notably, it limits the range of strategic options available to the leadership team). In most nations the organizations that are qualified as “nonprofit” organizations receive this distinction because they have agreed to limit the nature and scope of their work. They have been granted special privileges, such as tax-exempt status, but the price of these privileges is that these nonprofit (and nongovernmental) organizations must constrain their activities to those that address broader social or charitable purposes. Such distinctiveness applies to much of the nonprofit sector across the globe, although it is essential to recognize that there is great variation in the laws of different nations with regard to permissible and impermissible nonprofit activity. Thus, it is essential that a nonprofit manager manage with respect to the legal context of each nation in which his or her organization operates.
One of the legal differences that becomes significant to management is that of organizational ownership. In the United States and many other nations, it is generally not possible to own (that is, to have an equity stake such as stock) a nonprofit charitable organization. In practical terms, the typical U.S. charity is “owned” by the community or segment of the community that it exists to serve. Thus, its governing board and management must act as stewards of the assets of the organization on behalf of the community, even as there is no singular and clear external source of accountability or control over the affairs of the organization. Such diffusion of control and accountability creates both unique opportunities and complications for nonprofit management (for more on this, see Chapter Four, “The Many Faces of Nonprofit Accountability”).
The aforementioned legal and ownership differences couple with the unique political context of the nonprofit sector to further complicate the work of nonprofit management. One result of the nonprofit's diffuse and unclear accountability is that the typical organization has multiple significant stakeholders, and many think they are “in charge.” These stakeholders bring diverse and conflicting performance expectations to bear on the organization and, therefore, on its management team. In today's environment of heightened concern for accountability and performance, the management team cannot afford to overtly ignore most such expectations, even when they are inconsistent. Thus, one of the most challenging tasks of nonprofit management is to select a course of action that strikes a reasonable balance among the shifting expectations and demands of the organization's multiple stakeholders. Ebrahim also explores this issue in depth in Chapter Four. This demands that management be especially politically sophisticated and sensitive to the external environment.
Further, efficiency in the social sector cannot be assessed as it is in business. A sector that serves to address the expressive and artistic needs of a community cannot legitimately be judged by the same criteria as those that serve instrumental functions. Indeed, this is where part of the paradox of the sector arises—for many seek to turn the sector into a purely instrumental form (and in its own way, government has done more to create this dynamic than any other part of society, as Smith discusses in Chapter Twenty). Interestingly, for some nonprofits, their mere existence is the outcome their stakeholders seek, and we should never forget this in our press to enhance effectiveness and accountability. I am reminded of the truth of this every year as thousands (really, tens of thousands) of citizens, all over the world, invest an incredible amount of time in the founding and nurturing of new nonprofits that generate “only” good will, fellowship, camaraderie, and enhanced sense of community. In a broader sense, this, too, is a market phenomenon, yet it is not the rational-logical resource-maximizing dynamic of some economic theories—and it cannot and should not be reduced to such.
Further complicating the unique work of nonprofit management is that the financial context for a typical nonprofit organization can be much more complex than it is for similarly sized for-profit businesses. The typical nonprofit's complicated mix of clients and markets, which correlates directly to complicated business models grounded in diverse and inconsistent funding and financing models, makes the work of nonprofit management distinctive. The typical for-profit business gets its financial support from a relatively uncomplicated set of sources; nonprofits increasingly must fund and finance their operations with a mix of philanthropic resources and earned income derived from a relatively diverse set of sources. This varies significantly by mission and type of work. Each source imposes its own expectations for operations, management performance, and organizational accountability. Among the most demanding are the governmental sources, since acceptance of funds from government typically intensifies the demands for procedural as well as performance accountability.
Many of these distinctions are subtle yet very real, demanding, and potentially disabling to the unprepared leader or manager. Successful business entrepreneur turned nonprofit leader and consultant, Mario Morino, described from personal experience the nature of these differences in a 2007 speech. Among the differences he articulated for his business colleagues:
Nonprofit organizations play increasingly significant and diverse roles in the development and maintenance of civil society and communities throughout the world. Consistent with this trend, the demand for sophistication and skill in leading and managing these organizations is growing. Leaders from across the globe are asking more and more of nonprofit organizations—more with regard to creativity and innovation, more with regard to responsiveness, and more with regard to impact and results.
A new generation of nonprofit managers is preparing to lead these important organizations—a generation that understands the increasingly complex nature of the work of nonprofit management. This new generation of nonprofit managers understands that, although passion and dedication are essential to the future of the nonprofit sector and continued development of global civil society, passion and dedication alone are inadequate. It is through the effective practice of leadership and management that the organizations of the nonprofit sector will continue to grow and develop in their capacity to successfully address the needs of a diverse and complicated world.
The practice of nonprofit leadership and management is riddled with paradox and contradiction. Indeed, it always has been. Central to public service and community leadership roles is the need to find ways to address and reconcile (to the greatest degree possible) a host of competing values and tensions. But I'd suggest that we're heading into a new era—new for the sector and new for those who aspire to lead and manage it. Nonprofits will play even more roles of pivotal significance in the shared-power global environment of tomorrow, and the successful nonprofit leaders and managers will be those who become adept at identifying, understanding, and addressing the dynamics needs and challenges of an environment characterized by greater variation and complexity, coupled with cycles of change that are deeper and faster than we traditionally have known. The pace of change and the extent of that change will demand a greater level of knowledge, sophistication, and skill from those who aspire to lead and manage these organizations.
These are exciting and challenging times for those who lead and manage nonprofit organizations, and the sector's capacity to deliver on its promises and to serve our communities and citizens well hinges directly on the effectiveness of its leaders and managers. The chapters of this fourth edition of the Jossey-Bass Handbook of Nonprofit Leadership and Management offer important information and guidance for both current and developing leaders and managers of the sector, preparing them with important knowledge and critical insights that will enable them to make the difference they aspire to make.