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Michael J. Price’s best-seller, Nonprofit Administration: Rules and Observe, offers a complete, insightful overview of key matters nonprofit leaders encounter day by day. Price covers each the governance and administration of nonprofit organizations— the scope and construction of the nonprofit sector, management of nonprofits, administration, fundraising, earned earnings methods, monetary administration, lobbying and advocacy, managing worldwide and world organizations, and social entrepreneurship—serving to readers perceive what they’re and the way they work. The textual content balances analysis, principle, and practitioner literature with present circumstances and the latest information obtainable, making it acceptable for undergraduates, graduate college students, and nonprofit professionals.

The Sixth Version has been up to date to incorporate new materials on variety, equality, and inclusion; volunteer stewardship; nonprofit govt transitions; fashions for pursuing earned earnings; moral dilemmas and controversial donors; generational variations within the office; and an exploration of the function of nonprofits in advancing social actions.

“This textual content offers a complete take a look at the theories, practices, and developments informing the efficient administration of nonprofit organizations in the US. It is a wonderful useful resource for college students on the undergraduate and graduate ranges, particularly for many who are concerned about pursuing a profession within the nonprofit sector. This textual content offers well timed and related info on nonprofit organizations and is accessible to a variety of audiences. Extremely really useful.”

—Catherine E. Wilson, Villanova College

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Sara Miller McCune based SAGE Publishing in 1965 to help the dissemination of usable data and educate a world group. SAGE publishes greater than 1000 journals and over 800 new books every year, spanning a variety of topic areas. Our rising choice of library merchandise consists of archives, information, case research and video. SAGE stays majority owned by our founder and after her lifetime will turn out to be owned by a charitable belief that secures the corporate’s continued independence.

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Sixth Version

Michael J. Price The George Washington College

Copyright © 2021 by SAGE Publications, Inc.

All rights reserved. Besides as permitted by U.S. copyright regulation, no a part of this work could also be reproduced or distributed in any type or by any means, or saved in a database or retrieval system, with out permission in writing from the writer.

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Printed in the US of America

Library of Congress Cataloging-in-Publication Information

Names: Price, Michael J, writer.

Title: Nonprofit administration : rules and observe / Michael J. Price, The George Washington College.

Description: Sixth Version. | Thousand Oaks : SAGE Publications, Inc, 2020. | Revised version of the writer’s Nonprofit administration, [2019] | Consists of bibliographical references and index.

Identifiers: LCCN 2020025074 | ISBN 9781544379982 (paperback) | ISBN 9781544379999 (epub) | ISBN 9781544380001 (epub) | ISBN 9781544380018 (book)

Topics: LCSH: Nonprofit organizations–Administration.

Classification: LCC HD62.6 .W675 2020 | DDC 658/.048–dc23

LC document obtainable at

This e-book is printed on acid-free paper.

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Temporary Contents

Preface xix

Acknowledgments xxiv


Chapter 1 Nonprofit Administration as a Career and a Area of Examine 2

Chapter 2 Overview of the Nonprofit Sector 18

Chapter three Theories of the Nonprofit Sector and Nonprofit Organizations 52


Chapter Four Nonprofit Governing Boards 80

Chapter 5 Government Management 116


Chapter 6 Guaranteeing Accountability and Measuring Efficiency 144

Chapter 7 Creating Technique, Constructing Capability, and Managing Danger 184

Chapter eight Collaborations, Partnerships, and Mergers 218

Chapter 9 Managing Employees and Service Volunteers 246

Chapter 10 Advertising and marketing and Communications 278

Chapter 11 Advocacy and Lobbying 306


Chapter 12 Monetary Administration 328

Chapter 13 Philanthropic Fundraising 364

Chapter 14 Social Enterprise and Earned Revenue 400

Chapter 15 Authorities Grants and Contracts 428


Chapter 16 Social Entrepreneurship and Innovation 444

Chapter 17 Governing and Managing Worldwide and International Organizations 462

Conclusion 479

Appendix: Circumstances for Dialogue 482

References 510

Index 540

Concerning the Creator 567

Detailed Contents

Preface xix

Acknowledgments xxiv


Chapter 1 Nonprofit Administration as a Career and a Area of Examine 2

A Revolution in Administration Four

A Distinct Career 5

Nonprofit Administration as a Area of Examine eight

Towards a Balanced Strategy 12

Continuing With Realism and Satisfaction 14

Chapter Abstract 15

Key Phrases and Ideas 16

Questions for Dialogue 16

Appendix Case 16

Options for Additional Studying 17 Books 17 Articles 17 Web sites 17

Chapter 2 Overview of the Nonprofit Sector 18

America’s Nonprofit Sector: A Historic Overview 21

Trying to find a Widespread Vocabulary 23

Alternate options to Nonprofit 24

Dimension of the U.S. Nonprofit Sector 25

Differentiating the Nonprofit Sector 27 Nationwide Taxonomy of Exempt Entities 27 IRS Classifications 28 Salamon’s Anatomy 36 The Spectrum of Organizations 37

Rising New Fashions 39

The Commercialization Debate 42

Commercialization and Tax Exemption 43

Implications for Nonprofit Managers 44

Chapter Abstract 45

Key Phrases and Ideas 46

u Case 2.1 The Chan-Zuckerberg Initiative 46 u Case 2.2 A Double Backside Line: Ben & Jerry’s 47 u Case 2.three Burning Man 49

Questions for Dialogue 50

Appendix Circumstances 50

Options for Additional Studying 50 Books 50 Articles/E book Chapters 51 Web sites 51

Chapter three Theories of the Nonprofit Sector and Nonprofit Organizations 52

Explaining the Nonprofit Sector 53 Nonprofit Idea Throughout the Disciplines 54 The Failure Theories 55 Market and Authorities Failure 56 Nonprofits as Hole Fillers 57 Provide-Facet Theories 58 Theories of Altruism and Giving 59 Idea of the Commons: An Interdisciplinary Strategy 59 Altering Definitions of Personal, Public, and Widespread 60

Explaining Nonprofit Organizations 62 Traits of Nonprofit Organizations 62 Nonprofits as Open Methods 65 Useful resource Dependence 66 Isomorphism 69 Explaining Nonprofit Organizational Constructions 70 Organizational Tradition 71

Chapter Abstract 72

Key Phrases and Ideas 73

u Case three.1 The Smithsonian Establishment and the Catherine B. Reynolds Basis 74 u Case three.2 The Nationwide Belief for Historic Preservation 76

Questions for Dialogue 78

Appendix Case 78

Options for Additional Studying 78 Books 78 Articles 78


Chapter Four Nonprofit Governing Boards 80

Sorts of Governing Boards 82 Elected Boards 83 Self-Perpetuating Boards 84 Appointed and Hybrid Boards 85 Advisory Councils 85

The Governing Board’s Duties 86 The Governing Board’s Authorized Duties 87 The Governing Board’s Purposeful Duties 91

The Board and the CEO 94 Carver’s Coverage Governance Mannequin 95 Chait, Ryan, and Taylor: Governance as Management 97 Herman and Heimovics: Psychological Centrality and Board-Centered Management 98

Explaining Board Conduct 100

Managing Nonprofit Boards 100 Position of the Chair 101 Governance Committee 101 Board Professionals 101

Nonprofit Board Effectiveness 102 Critics of Board Efficiency 102 Range, Fairness, and Inclusion 103 The Seek for Finest Practices 104

The Problem of Nonprofit Governance 106

Chapter Abstract 108

Key Phrases and Ideas 109

u Case Four.1 Candy Briar School 109 u Case Four.2 The Hershey Belief 111

Questions for Dialogue 113

Appendix Circumstances 113

Options for Additional Studying 114 Books/Studies 114 Web sites 114

Chapter 5 Government Management 116

The CEO’s Job 117

Administration and Management 119

Overview of Management Theories 120 An Evolution in Pondering 121 Transformational Management 124 Charismatic Management 125

The Efficient Nonprofit CEO 127 Give attention to Mission 128 Give attention to the Board 129 Give attention to Exterior Relationships 129 Share Management and Empower Others 129 Give attention to Key Roles and Priorities 130 Use the “Political Body” 130 Proper Individual, Proper Place, Proper Time 131

Founder Syndrome 132

Government Transitions 134

Main Change 135

Chapter Abstract 137

Key Phrases and Ideas 138

u Case 5.1 A Change in Management at Habitat for Humanity 138 u Case 5.2 Problem and Change at United Approach 140

Questions for Dialogue 142

Appendix Circumstances 142

Options for Additional Studying 142 Books/E book Chapters 142 Articles 142 Web sites 142


Chapter 6 Guaranteeing Accountability and Measuring Efficiency 144

Defining and Guaranteeing Accountability 146

Mechanisms for Accountability 147 Necessities of Legislation 147 Self-Regulation: Requirements and Accreditation 149 Transparency 157

Measuring and Managing Efficiency 159 Monetary Ratios 160 Benchmarking 163 Outcomes 164 Balanced Scorecard 169 Social Return on Funding 171 Blended Worth 172

Efficiency Measurement: The Persevering with Debate 174

Chapter Abstract 176

Key Phrases and Ideas 177

u Case 6.1 The Wounded Warrior Venture 177 u Case 6.2 Youth Villages 179

Questions for Dialogue 181

Appendix Circumstances 181

Options for Additional Studying 182 Books 182 Articles/Studies 182 Web sites 182

Chapter 7 Creating Technique, Constructing Capability, and Managing Danger 184

Understanding Technique 185

Strategic Planning and Strategic Administration 186

The Strategic Planning Course of 187 Planning to Plan 189 Defining Mission, Imaginative and prescient, and Values 190 Assessing the Scenario 192 Figuring out Strategic Points 194 Setting Objectives 195 Creating Methods 195 Setting Aims 198

Writing the Strategic Plan 199

Creating an Operational Plan 199

Advantages and Limitations of Strategic Planning 199

Constructing Organizational Capability 200

Defining and Understanding Capability 201

Capability Constructing in Motion 202

A Mannequin for Capability Constructing 203

Capability and Organizational Life Cycles 204

Capability Constructing Evaluated 206

Managing Danger 207

Chapter Abstract 209

Key Phrases and Ideas 210

u Case 7.1 Technology Hope Strategic Plan 2021 210

Questions for Dialogue 215

Appendix Circumstances 215

Options for Additional Studying 215 Books/Studies 215 Articles 216 Web sites 216

Chapter eight Collaborations, Partnerships, and Mergers 218

Rising Curiosity in Collaboration 221

A Continuum of Relationships 222

Exploring Collaborations and Mergers 223

Drivers of Collaborations and Mergers 224

Obstacles to Collaboration and Merger 226 Tradition 227 Egos 228 Model Id 228 Neighborhood or Political Objections 228 Prices 229

Situations for Success 229 Pushed by Mission 229 Dedication From High Management 229 Belief 230 Relatedness 230 Course of 230

Collaborations and Mergers Inside Nationwide Nonprofits 231

Cross-Sector Collaboration 232 A Continuum of Cross-Sector Collaboration 233 Benefits and Disadvantages of CSCs 234 Obstacles and Situations for Success 235

Reaching Collective Influence 236

Chapter Abstract 238

Key Phrases and Ideas 239

u Case eight.1 N Avenue Village and Miriam’s Home 239

Questions for Dialogue 243

Appendix Circumstances 243

Options for Additional Studying 244 Books 244 Articles/Studies 244 Web sites 244

Chapter 9 Managing Employees and Service Volunteers 246

Human Sources Administration 248 Necessities of Legislation 248 Range, Fairness, and Inclusion 249

An Overview of Administration Theories 250

Understanding Human Motivations 251 Maslow’s Hierarchy of Wants 251 McGregor: Idea X and Idea Y 253 McClelland: Three Wants Idea 253 Myers and Briggs: Character Sorts 254 Herzberg: Motivators and Dissatisifiers 254 Motivations of Nonprofit Employees 255 Life Cycles and Generations 257

Making use of Theories to Managing the Nonprofit Workforce 258

Managing Volunteers 261 Sorts of Volunteers 261 Motivations of Volunteers 263 Volunteer Program Practices 264 A Contingency Strategy to Volunteer Stewardship 269

Volunteer Administration as a Profession Area 270

The Way forward for Volunteerism 271

Chapter Abstract 272

Key Phrases and Ideas 273

u Circumstances 9.1–9.Four Employees and Volunteer Points 273

Questions for Dialogue 276

Appendix Circumstances 276

Options for Additional Studying 276 Books/E book Chapters/Journals 276 Web sites 276

Chapter 10 Advertising and marketing and Communications 278

Defining and Understanding Advertising and marketing 279

Advertising and marketing Serves the Mission 281

Advertising and marketing Means Motion 282

Advertising and marketing as a Course of 283

The Advertising and marketing Combine 283 Product 284 Place 285 Promotion 285 Market Segmentation 286 Worth 287 Defining the Alternate 289

Constructing the Model 289

Built-in Advertising and marketing Communication (IMC) 292

Crafting an Efficient Message 294

Disaster Communications 295

Social Media 297 From Gatekeepers to Connectors 297 Social Media Planning 298 Operational Questions 298

Evaluating Advertising and marketing and Communication 299

Chapter Abstract 300

Key Phrases and Ideas 301

u Case 10.1 Rebranding Four-H 302 u Case 10.2 Susan G. Komen Basis 303

Questions for Dialogue 304

Appendix Circumstances 305

Options for Additional Studying 305 Books/Journals 305 Articles 305 Web sites 305

Chapter 11 Advocacy and Lobbying 306

Primary Distinctions 308

Overview of Lobbying Legislation 309 Possibility I: Substantial Half Take a look at 311 Possibility II: 501(h) Expenditure Take a look at 311 Political Marketing campaign Exercise 313

Implementing an Advocacy Program 314 Utilizing Social Media 316 Creating Actions for Social Change 317

Persevering with Points and Considerations 319

Chapter Abstract 320

Key Phrases and Ideas 321

u Case 11.1 Moms Towards Drunk Driving (MADD) 321 u Case 11.2 Housing First 322 u Case 11.three Nationwide Audubon Society 324

Questions for Dialogue 325

Appendix Case 325

Options for Additional Studying 325 Books 325 Articles 325 Web sites 325


Chapter 12 Monetary Administration 328

Definitions of Key Ideas 330

Understanding Nonprofit Funds 331

Nonprofit Monetary Statements 335 Assertion of Monetary Place 335 Assertion of Actions 337 Assertion of Money Flows 339 Assertion of Purposeful Bills 339 Required Disclosures and Notes to Monetary Statements 342

Audits 343

Utilizing Monetary Ratios 344

Managing Endowment Funds 346

Creating and Managing the Price range 349

Monetary Insurance policies and Controls 351

Chapter Abstract 352

Key Phrases and Ideas 354

u Case 12.1 Hull Home 354 u Case 12.2 The Newseum 356

Questions for Dialogue 360

Appendix Circumstances 361

Options for Additional Studying 361 Books 361 Newsletters 362 Web sites 362

Chapter 13 Philanthropic Fundraising 364

Definitions and Distinctions 366

Motivations for Giving 368 Understanding Company Philanthropy 368 Basis Giving 369 Motivations of Particular person Donors 370

The Fundraising Course of 372 Figuring out Priorities and Creating the Case 373 Figuring out and Qualifying Prospects 374

Cultivating Prospects 375 Soliciting the Present 376 Acknowledging and Recognizing Donors 379 Stewarding the Present and the Relationship 380

Particular person Donor Life Cycles 381 Deliberate Giving 382

Campaigns 385

Managing Fundraising Packages 387 Development Companies 388 Prospect Administration 388 Fundraising Effectivity and Effectiveness 388 Employees Efficiency and Accountability 389

Ethics and Skilled Requirements 390 Tainted Donors and Tainted Cash 391 Affiliation of Fundraising Professionals Code 393

Chapter Abstract 394

Key Phrases and Ideas 396

u Circumstances 13.1a–g Fundraising Ethics 396

Questions for Dialogue 397

Appendix Circumstances 398

Options for Additional Studying 398 Books/E book Chapters 398 Articles/Studies 398 Web sites 398

Chapter 14 Social Enterprise and Earned Revenue 400

Defining Social Enterprise and Earned Revenue 401

Why Earned Revenue? 404

Partnerships With Enterprise 405 Licensing 406 Sponsorships 407 Trigger Advertising and marketing 408 Built-in Relationships 411 Operational Relationships 411 Placing Partnerships Collectively 412

Nonprofit Enterprise Ventures 413 Figuring out Enterprise Alternatives 414 Feasibility Evaluation and Enterprise Planning 415

Earned-Revenue Methods: Points and Choices 417 Sorting Out the Points 417 Evaluating Alternatives Towards Mission 418 A Persevering with Debate 420

Chapter Abstract 421

Key Phrases and Ideas 422

u Case 14.1 The Nationwide Geographic Society 423 u Case 14.2 Aspire CoffeeWorks 424

Questions for Dialogue 426

Appendix Circumstances 426

Options for Additional Studying 426 Books 426 Articles 427 Web sites 427

Chapter 15 Authorities Grants and Contracts 428

Adjustments in Sources and Patterns of Assist 430

Grants, Contracts, and Charges 431

Authorities Assist: Alternatives and Challenges 434

In search of Authorities Assist 436 Figuring out Grant Alternatives 436 Evaluating Grant Alternatives 437 Getting ready and Submitting an Software or Proposal 438

Nonprofits within the Coverage Area 439

Chapter Abstract 439

Key Phrases and Ideas 440

u Case 15.1 SEED Basis 440

Questions for Dialogue 442

Appendix Case 442

Options for Additional Studying 442 Books 442 Articles 442 Web sites 442


Chapter 16 Social Entrepreneurship and Innovation 444

Defining and Understanding Social Entrepreneurship 445 Social Enterprise College 446 Social Innovation College 446

Historical past of Social Entrepreneurship as a Area 448

Theories of Social Entrepreneurship 449

Social Entrepreneurship Throughout Fields and Across the World 450

Constructing Excessive-Influence Nonprofits 452

Sustaining Innovation 455

The Way forward for Social Entrepreneurship 456

Chapter Abstract 457

Key Phrases and Ideas 457

u Case 16.1 KaBOOM! 458 u Case 16.2 Harlem Youngsters’s Zone 459

Questions for Dialogue 460

Appendix Case 460

Options for Additional Studying 460 Books 460 Journals 461 Web sites 461

Chapter 17 Governing and Managing Worldwide and International Organizations 462

Definitions and Scope of Worldwide Organizations 464

Worldwide Philanthropy and Fundraising 466 Worldwide Giving 467 International Fundraising 467

Worldwide Nonprofit Governance and Administration 469 Managing Throughout Cultures 470 Governing Worldwide and International Organizations 470 Structuring Worldwide NGOs 471

Chapter Abstract 473

Key Phrases and Ideas 474

u Case 17.1 Médecins Sans Frontières/Docs With out Borders 474 u Case 17.2 Haitian Earthquake Reduction and Restoration 476

Questions for Dialogue 478

Options for Additional Studying 478 Books 478 Articles 478 Web sites 478

Conclusion 479

Appendix: Circumstances for Dialogue 482

1. New York Metropolis Opera 482

2. Share Our Power/No Child Hungry 489

three. The Y 497

Four. The Lady Scouts of the US of America 503

References 510

Index 540

Concerning the Creator 567



The primary version of Nonprofit Administration: Rules and Observe was revealed by SAGE in 2009. The second version was revealed in 2012, the third in 2014, the fourth in 2017, and the fifth in 2019. It’s putting how a lot the panorama of the nonprofit sector has continued to alter over time, requiring frequent updates to remain present with the state of the sector in nonprofit administration. Adjustments mirrored on this sixth version of the e-book embody, most clearly, sure information but in addition developments, new ideas and analysis, and new circumstances which have drawn consideration for the reason that fifth version was accomplished. The inevitable lag between analysis and writing and publication typically implies that readers ought to be alert to latest modifications and occasions that will have occurred throughout the means of publishing the e-book. Thus, even this sixth version could have some obsolescence by the point it reaches the reader. There are reminders of this actuality all through the e-book, and it’s endorsed that college students seek the advice of referenced web sites and different assets on factors that appear topic to alter.

It’s, in fact, unattainable to know what financial circumstances will prevail when this e-book reaches its readers. The recession that started in 2007, what some individuals known as the Nice Recession, took a major toll on many nonprofit organizations, leading to decreased monetary assets at a time when the demand for providers was rising. Most nonprofit organizations survived the Nice Recession, though the dying charge was increased amongst smaller organizations. Even bigger organizations discovered it needed to cut back employees, packages, and expenditures (McKeever et al., 2016). A decade later, by 2017, the financial system had largely recovered. By 2019, unemployment was low and monetary markets had reached historic highs. Then, in 2020, the COVID-19 pandemic plunged the nation into disaster, together with a major financial downturn. On the time of this writing, it’s unattainable to foretell what circumstances could prevail by the point this version reaches its readers. Maybe the financial system could have recovered or troublesome circumstances will proceed. In both situation, the Nice Recession and the COVID-19 pandemic have produced a heightened consciousness of monetary uncertainty, of the necessity for nonprofits to make use of assets effectively and successfully, and of the significance of attaining numerous income sources to climate numerous financial situations. Each historic occasions have additionally demonstrated the crucial significance of nonprofits in assembly human and group wants.

Including to the uncertainty of financial cycles, the federal tax regulation handed in 2017 had attainable implications for the nonprofit sector, together with lowered incentives for charitable giving. Within the midst of the COVID-19 pandemic, emergency federal laws was handed in 2020 to extend tax incentives for charitable giving on a short lived foundation. It’s not attainable to foretell on the time of this writing whether or not these modifications will proceed past the emergency interval. No matter could unfold, historical past means that the nonprofit sector will proceed to face new alternatives and challenges within the years forward, requiring management by educated and skilled professionals.

New to This Version

This sixth version consists of plenty of vital modifications from the fifth. First, chapter top- ics continued from the earlier version have been up to date to mirror new information, new analysis, and up to date occasions. New materials, drawn from each the scholarly and practitioner literatures, is integrated at related factors all through the e-book.

In response to reviewer feedback in addition to the evolving panorama, some matters from the earlier version have been expanded. They embody, for instance, new materials regard- ing variety, fairness, and inclusion; volunteer stewardship; nonprofit govt transitions;

xx Nonprofit Administration

fashions for pursuing earned earnings; moral dilemmas and controversial donors; generational variations within the office; and the function of nonprofits in advancing social actions. New circumstances have been developed for this version, together with the Newseum, the Nationwide Geographic Society, Technology Hope, and Burning Man. Circumstances that appeared within the fifth version have been up to date to mirror latest occasions.

Philosophy of This E book

A Balanced Strategy

College students studying this e-book are prone to have various backgrounds. Some could also be undergradu- ates who don’t but have substantial work expertise and maybe want to discover nonprofit administration as a attainable profession path. Others could also be graduate college students who’ve an curiosity in nonprofit careers however haven’t beforehand studied administration. Nonetheless others may need studied administration however could have restricted data of the distinctive values, characteris- tics, and circumstances of the nonprofit sector or how the administration rules they know might be utilized within the nonprofit atmosphere. But others could also be people with appreciable expertise working in nonprofit organizations who’re pursuing additional examine to extend and broaden their understanding expertise.

Some college students studying this e-book could also be undergraduates taking a course that’s an intro- duction to the nonprofit sector. Some could also be enrolled in a certificates program supposed to extend the abilities of nonprofit professionals. Others could also be enrolled in a program resulting in a grasp’s diploma in nonprofit administration. Some could also be pursuing a grasp’s diploma in busi- ness, social work, public administration, or public coverage, with a focus in nonprofit administration. Nonetheless others could also be taking just one course in nonprofit administration as an elective of their undergraduate or graduate diploma program, looking for solely a broad and normal orientation to the sector.

Given the variety of backgrounds and objectives typically discovered amongst college students taking a course in nonprofit administration, a textbook that seeks to offer an outline of the sector should embody each theoretical ideas and sensible functions; it should cowl some fundamentals in addition to intellectually stimulating points; it have to be each rigorous and accessible to college students of assorted educational backgrounds; and it should present each a basis of data that will function a springboard to extra superior examine and a complete overview for these college students whose one expertise with the sector will encompass a single course.

This e-book strives to deal with all these numerous wants and pursuits, with the writer’s hum- ble recognition that it might not reach assembly all of them for all college students. It makes an attempt to offer a complete publicity to matters related to the sector of nonprofit administration, however it clearly have to be selective in its dialogue of these matters. This supposed stability between comprehensiveness in matters and selectivity of their therapy could disappoint some readers. Some could discover their appetites whetted however unhappy by the short tour offered in some components of the e-book. It’s attainable that others could discover that some chapters embody concepts they’ve seen earlier than in different programs. In fact, some will discover the dialogue good for his or her degree of earlier data and need for brand spanking new understanding.

College students are inspired to tailor their use of the e-book to their very own pursuits and back- grounds. Readers who, for instance, have already got studied among the organizational and administration theories we are going to talk about are inspired to learn related sections as a refresher however to pay nearer consideration to materials that’s new to them. These to whom the theories are new, and who discover their dialogue on this e-book to be too transient, are inspired to discover the extra assets recommended all through the e-book. In sum, it’s hoped that this e-book will present a form of complete menu, from which college students could choose the matters or

Preface xxi

approaches on which they want to “click on” for extra info. Each novices and extra expe- rienced people could discover it a basis on which they’ll construct, looking for acceptable avenues for additional info and studying. Instructed further readings are included on the finish of each chapter. And, in all probability, professors additionally will elaborate on some matters and skip frivolously over others, as they sense the tempo of their particular person lessons.

Give attention to Charitable Nonprofits

As will likely be mentioned in Chapter 2, the nonprofit sector encompasses a tremendous array of orga- nizations with totally different traits, buildings, and functions. This e-book focuses totally on that class referred to as charitable nonprofits and, specifically, on people who present ser- vices, similar to schooling and analysis, well being care, arts and cultural packages, and social and authorized providers. The next chapters will even typically point out member-serving organiza- tions—for instance, commerce associations—however primarily as factors of distinction with charitable nonprofits. Spiritual congregations make up a major factor of the general nonprofit sector, however faith is the subsector that’s the least professionalized—that’s, it employs comparatively few skilled managers. Thus, this e-book doesn’t dedicate sig- nificant dialogue to the administration of church buildings, synagogues, mosques, or different spiritual congregations. We are going to talk about foundations, however primarily as sources of help for service- offering nonprofits; we won’t talk about the administration of foundations per se. This e-book doesn’t exclude, but in addition doesn’t emphasize, these nonprofits which can be primarily advocacy organizations, also referred to as social welfare organizations. Whereas they’re nonprofits, they’re additionally totally different from charitable nonprofits in essential methods, as we are going to talk about additional in Chapter 2. In fact, some rules mentioned on this e-book apply to all nonprofits and will likely be of relevance to college students aspiring to work in any part of the nonprofit world.

Give attention to U.S. Nonprofits

This e-book features a chapter on nonprofits within the world atmosphere, however it primarily addresses the administration of nonprofit organizations in the US. The American nonprofit sector is the most important on the earth; it operates below distinctive cultural, financial, and authorized circumstances. It’s the place most American college students of nonprofit administration will pursue their careers. As well as, as governments world wide search to cut back their expenditures and devolve many features to nonprofit organizations, many are also look- ing to related points of the American mannequin in creating their very own nonprofit sectors. That is evidenced by the numerous variety of worldwide college students who come to the US to review on this subject. Earlier editions of this e-book are in use in international locations exterior of the US; thus, even for college students primarily concerned about engaged on the worldwide stage, an understanding of nonprofit administration in the US is each related and helpful.

Overview of the E book

The primary three chapters of this e-book present an orientation to the nonprofit sector and a theoretical basis for the extra utilized matters thought-about later. Chapter 1 introduces nonprofit administration, each as a occupation and as a tutorial subject of examine, and gives a justification for learning the subject as distinct from administration in authorities or enterprise. Chapter 2 gives a take a look at the construction, boundaries, and traits of the nonprofit sector and establishes some fundamental definitions. It additionally discusses rising new organizational varieties that will reshape the sector sooner or later. Chapter three expands our understanding of the

xxii Nonprofit Administration

nonprofit sector by reviewing theories that specify its existence and its function in relation to gov- ernment and enterprise. That chapter additionally examines chosen theories that describe the character of nonprofit organizations and clarify their conduct.

The subsequent two chapters, Chapters Four and 5, contemplate the roles and tasks of gov- erning boards and nonprofit chief govt officers (CEOs) and the methods during which these two important actors work together in main organizations. The nonprofit governing board has func- tional, ethical, and authorized tasks. Nonprofit chief executives, whether or not titled “govt director,” “president,” “CEO,” or one thing else, lead their organizations in a fancy and dynamic atmosphere that will likely be described. The partnership between the CEO and the board is crucial to a well-operating and efficient group.

The subsequent six chapters concentrate on utilized points of nonprofit administration. Chapter 6 critiques the rising calls for for nonprofit accountability and numerous approaches to mea- suring the efficiency of nonprofit organizations. Chapter 7 discusses the event of organizational technique and the instruments of strategic planning and strategic administration now employed by many nonprofits. Strategic planning is usually step one within the bigger under- taking of constructing the group’s capability or its potential to realize the objectives recognized within the plan; thus capability constructing can also be thought-about on this chapter. The administration of threat is a subject that has gained extra consideration in recent times. Managing threat goes past the easy avoidance of legal responsibility or loss, for instance, defending in opposition to the chance employees member brings a lawsuit or the constructing catches hearth. It’s a broader idea that pertains to uncertainty that would have an effect on achievement of the group’s mission. It’s thus associated to the event of technique and sustaining a course of for managing threat is a crucial part of organizational capability (Herman, 2011).

Chapter eight explores collaborations and partnerships amongst nonprofit organizations and people who cross the sectors. As well as, latest years have introduced mergers of nonprofit orga- nizations, a subject that can also be thought-about in Chapter eight. Chapter 9 discusses each the idea and the observe of human useful resource administration in nonprofit organizations. This version consists of an expanded dialogue of the essential subject of variety, fairness, and inclusion and new supplies associated to volunteer stewardship. One of many vital variations between many nonprofits and enterprise or authorities is the substantial employment of volunteers to offer the group’s core providers. Administration of an unpaid workforce requires an understanding of human motivation and ability in managing efficient relationships between a company’s volunteers and its paid skilled employees. Chapter 10 considers the man- agement of packages for communication and advertising and marketing, important for organizations which can be extremely interactive with and depending on the world round them. This part concludes with Chapter 11, which discusses advocacy and lobbying, essential actions for a lot of non- revenue organizations that search to result in social change. This sixth version consists of new materials relating to the function of nonprofits in constructing social actions.

The subsequent part of the e-book, encompassing 4 chapters, is worried with the acquisi- tion and administration of assets. The securing of income and the administration of monetary assets are interrelated actions. Like lots of the matters lined on this e-book, monetary administration is giant, advanced, and essential. Chapter 12 offers just a few fundamental ideas and directs college students to further sources from which they’ll receive the extra detailed understanding they might search. Chapter 13 discusses the rules of elevating philanthropic funds from particular person, company, and basis donors, and it features a dialogue of con- troversial donors and tainted cash, a difficulty that has gained extensive consideration in recent times. Chapter 14 explores the topics of social enterprise and nonprofits’ earned earnings—that’s, efforts to generate income by way of actions aside from conventional philanthropy. The chapter examines the myriad and rising business partnerships between nonprofit organizations and firms, together with cause-related advertising and marketing, sponsorships, licensing agreements, joint ventures, and others. It additionally considers nonprofit enterprise ventures, the event of revenue-generating actions that present a stream of income to help mission packages.

Preface xxiii

This dialogue has been expanded on this version to incorporate fashions for relating earned- earnings to the nonprofit’s mission. Chapter 15 considers the rules concerned in securing and managing grants and contracts from authorities, a major income for a lot of nonprofits.

The ultimate part of the e-book consists of two chapters that tackle particular matters. Chapter 16 examines social entrepreneurship and social innovation. Social entrepreneurship is just not essentially synonymous with the technology of earned earnings income and even with the adop- tion of enterprise strategies by nonprofit organizations. Neither is social entrepreneurship at all times synonymous with the founding of latest organizations. Slightly, by the definition used on this e-book, it consists of improvements that result in “wide-scale change on the systemic degree” (Leviner, Crutchfield, & Wells, 2006, p. 89). In different phrases, social entrepreneurship is expounded to social innovation, whatever the particular strategies or monetary sources that could be concerned. These distinctions will likely be explored totally in Chapter 16. Chapter 17 seems past the US to debate the work of nonprofit and nongovernmental organizations internationally. The conclusion gives among the writer’s last reflections and observations.

College students could observe that the e-book doesn’t embody a chapter on nonprofit regulation. Non- earnings are topic to a big and rising physique of regulation on the native, state, and federal ranges. Nonetheless, points of nonprofit regulation are lined within the numerous chapters the place they’re most related somewhat than in a separate chapter. The e-book offers references to different assets for college students who could need to know extra. The e-book additionally doesn’t embody a separate chapter on ethics; somewhat, moral points are addressed at numerous factors all through the textual content. For instance, moral factors are included within the dialogue of Chapter 6 regarding accountability and within the dialogue of fundraising in Chapter 13. The dialogue of ethics has been enhanced on this version in all the related contexts, reflecting an elevated emphasis on moral behav- ior all through the sector.

Attentive readers will observe that there’s some redundancy among the many chapters, that’s, some factors are repeated, not less than in abstract, in numerous places. The writer has tried to attenuate redundancy, however some factors are woven all through numerous matters and require transient revisiting as new discussions are launched. As well as, some professors could not assign all chapters and a few repetition of key factors is thus important to finish the dialogue on some matters.

Once more, all the next chapters draw on the theoretical and educational literature in addition to the writing of skilled practitioners and consultants. Key factors are illustrated with precise circumstances, some drawn from the day by day headlines. College students are inspired to incorporate the circumstances of their studying of every chapter, to think about the questions recommended for dialogue of the circumstances, and to think about the broader “Questions for Dialogue” offered on the finish of every chapter. The appendix consists of 4 circumstances that minimize throughout the matters lined in numerous chapters however that will have specific relevance to particular chapters as properly. College students are additionally inspired to consider the relevance of what they’re studying to any nonprofit organiza- tions with which they might have private expertise. As well as, the day by day information throughout the span of virtually any semester or educational 12 months consists of tales that relate to nonprofit organi- zations and supply real-time circumstances that illustrate factors mentioned on this e-book.

Instructing Sources

This textual content consists of an array of teacher educating supplies designed to avoid wasting you time and that will help you maintain college students engaged. To study extra, go to or contact your SAGE consultant at



Writing a e-book is a collective enterprise, even when the e-book has one writer. Any writer builds on the work of others, and this textual content displays the knowledge of the various students and practitioners who’re cited all through it.

I’m grateful to my SAGE/CQ Press editor, Anna Villarruel, who supported my undertak- ing of this sixth version.

I’m grateful as properly to those that have reviewed this textual content; their frank feedback have added immeasurably to this revision.

I’ve realized immensely from my college students on the George Washington College, from my school colleagues, and from the various nonprofit executives who’ve participated in numerous lessons of mine over time. I thank them for the schooling they’ve offered me and hope that they may discover this e-book to be a helpful contribution to the sector. I thank Miranda Hines and Stephanie Palmer, graduate college students on the George Washington College Trachtenberg College of Public Coverage and Public Administration, for his or her administrative sup- port within the preparation of this version.

Michael J. Price Professor of Nonprofit Administration The George Washington College

Washington, DC


Chapter 1 Nonprofit Administration as a Career and a Area of Examine

Chapter 2 Overview of the Nonprofit Sector

Chapter three Theories of the Nonprofit Sector and Nonprofit Organizations

PART Understanding Nonprofit Administration, the Nonprofit Sector, and Nonprofit Organizations I


Customer middle of the Invoice & Melinda Gates Basis in Seattle. The Gates Basis, based in 2000, focuses its giving on world well being and concrete schooling in the US, amongst different areas. Jacklee/CC BY-SA ( Commons

Chapter Define A Revolution in Administration A Distinct Career Nonprofit Administration as a Area of Examine

Towards a Balanced Strategy Continuing With Realism and Satisfaction Chapter Abstract



Nonprofit Administration as a Career and a Area of Study1

This can be a e-book in regards to the administration of nonprofit organiza-tions. The subject begs two basic questions: Why do nonprofit organizations have to be managed? And, is manage- ment of a nonprofit group actually totally different from manage- ment of a enterprise or authorities company? In different phrases, is there actually a necessity for a e-book like this, or is administration a generic exercise that might be realized as properly from a textbook on enterprise or public administration?

Some could maintain a notion of nonprofit organizations as primarily collections of well-intentioned individuals who wrestle with minimal assets to fulfill human wants, with out a lot consideration to the underside line, and with some disdain for man- agement as an unwelcome distraction from the all-important work of delivering important packages and providers. This stereotype, if ever true, doesn’t describe all nonprofit organizations at present. Certainly, there was a administration revolution within the non- revenue sector in latest many years, and lots of nonprofits face man- agement challenges no much less advanced than these confronted by main firms or giant authorities businesses.

For most individuals, the time period “nonprofit” conjures up the picture of a small group, maybe run by a tiny band of volunteers extra centered on delivering providers to individuals in want than on constructing or managing a company. Certainly, most nonprofit organizations are small, with maybe few, if any, skilled employees, however there are additionally others with actions that span the nation and the globe and that make use of hundreds of individuals.

Point out the phrase “enterprise” and folks will probably assume first of a giant company similar to Walmart or Apple, though, in actuality, most companies are small. However it’s giant enterprise enterprises which can be the main target of most administration texts and MBA case research. That’s as a result of, as within the nonprofit sector, the necessity for administration varies with the scale and scope of exercise. The nook dry cleaner wants few administration expertise past fundamental accounting and a rudimentary understanding of methods to handle just a few staff. The younger expertise entrepreneur beginning a brand new enterprise within the household storage is targeted not on administration however on growth and deliv- ery of a product, a lot as the administrators of small nonprofits are sometimes extra involved with delivering packages than with

Studying Aims

After studying this chapter, college students ought to be capable of

1. Describe the variations between administration within the nonprofit sector and administration in different sectors.

2. Clarify numerous approaches to the examine of nonprofit organizations.

three. Describe the expansion of nonprofit administration as an expert subject and a subject of examine.

Four. Clarify forces which have led to the professionalization of nonprofit administration.

5. Classify numerous authors by way of their perspective on the nonprofit sector.

Four Half I | Understanding Nonprofit Administration, the Nonprofit Sector, and Nonprofit Organizations

constructing or managing the group. As an organization grows, requiring exterior funding and using extra individuals, its want for skilled administration will increase. Founding entrepreneurs are sometimes changed by MBAs who’ve formal administration coaching. So, too, as a nonprofit group turns into bigger, it faces extra advanced and attention-grabbing administration challenges, particularly if it involves function in a couple of location throughout the US or internationally. This e-book consists of some examples drawn from small nonprofit organiza- tions, however it’s principally about organizations which have not less than some full-time paid employees, and it consists of examples and circumstances drawn from among the nation’s largest and best-known nonprofits.

A Revolution in Administration

The nonprofit administration revolution of latest many years has been pushed by a number of forces, together with the introduction of competitors ensuing from modifications in funding patterns, the expansion of the sector, and rising calls for for accountability. The many years for the reason that 1980s have seen reductions in direct federal authorities funding for a lot of social packages, the devolution of funding to state governments, and elevated outsourcing of the supply of social and human providers by authorities businesses to nonprofit organizations. Nonprofits have been compelled to compete for contracts in opposition to one another and, in some circumstances, in opposition to for- revenue corporations. As well as, many authorities advantages at the moment are offered by way of voucher-type funds made on to people, who’re thus reworked into clients, free to buy the providers they want within the market. Such clients can thus choose the orga- nizations that can present providers primarily based on perceptions of high quality and different issues; this forces nonprofits to compete for his or her enterprise. Just like the competitors for contracts, the competitors for empowered clients has compelled nonprofits to both turn out to be higher man- aged or place their survival in danger.

However authorities has not been the one drive driving change. Different funders, together with foundations and even particular person donors, have proven an elevated concern with the outcomes achieved by nonprofits by way of the packages they provide. This has been very true of many newly rich entrepreneurs who amassed their fortunes throughout the expertise increase of the 1990s, the thriving monetary providers and actual property industries of the mid-2000s, and the booming inventory market and social media companies of the 2010s. Many view their phil- anthropic giving as a sort of funding from which they count on to see a measurable return within the type of efficient packages and providers. The requirement that nonprofits meet such expectations for measurable outcomes has additionally elevated the necessity for administration.

In latest many years, there has additionally been a shift in eager about nonprofit organizations that focuses extra on the group itself somewhat than merely on the packages and providers it delivers. This new focus emphasizes the capability and sustainability of organizations, concepts we are going to talk about later on this e-book. The 1990s introduced searing critiques of conventional philan- thropy and the administration of nonprofits. Amongst them was a Harvard Enterprise Evaluation article by Christine Letts, William Ryan, and Allen Grossman (1997), titled “Virtuous Capital: What Foundations Can Study From Enterprise Capitalists.” The article basically was an indictment of conventional foundations’ grant-making practices, arguing that the short-term program grants made by most foundations weren’t assembly the necessity for funding within the long-term capability of nonprofit organizations themselves. Letts et al. advocated an method to philanthropy that might parallel the method of enterprise capitalists to investing in corporations, together with a extra sustained dedication to help together with the requirement that organizations meet perfor- mance requirements. Invoice Shore’s e-book The Cathedral Inside (1999), revealed two years after the article by Letts et al., expressed comparable criticisms of conventional philanthropy. Shore argued that funders’ emphasis on packages somewhat than on constructing organizations was in reality stopping

Chapter 1 | Nonprofit Administration as a Career and a Area of Examine 5

many profitable packages from “going to scale,” that’s, rising to a degree that they may have vital impression, as a result of the organizations didn’t have the capability to increase. A decade later, Ann Goggins Gregory and Don Howard (2009) made comparable factors, figuring out a “nonprofit hunger cycle,” a time period that grew to become a part of the vocabulary in discussing nonprof- its. It refers to a vicious cycle, during which organizations reduce their overhead prices to please funders, which in flip reduces their potential to supply the outcomes that funders need.

The concepts of Letts and colleagues, Shore, Gregory and Howard, and others have contrib- uted to a change in eager about nonprofits, one which shifts focus from the packages they provide to the energy and sustainability of the organizations themselves. It was, within the phrases of Jim Collins and Jerry Porras (1994), a shift of emphasis from “telling time” to “constructing clocks.” This new emphasis on nonprofit organizational growth has additionally been a drive in rising the demand for skilled nonprofit administration.

Some philanthropists have come to view nonprofit organizations as autos by way of which they’ll tackle social issues which can be of specific curiosity and concern to them. With frustration in regards to the persistence of issues similar to poverty, regardless of many years of gov- ernment efforts to beat them, many entrepreneurial philanthropists imagine that personal philanthropy and personal, nonprofit organizations supply a extra promising technique of assault. That is illustrated, for instance, by the work of the Invoice & Melinda Gates Basis, which focuses its giving on world well being and concrete schooling in the US, amongst different areas, and which has had vital impression by advantage of the substantial monetary assets at its disposal. This conflation of nationwide points and issues with the work of nonprofits has elevated the significance of the sector and contributed to the emphasis on measurable outcomes (Brest, 2012).

One other actuality is that the dramatic progress of the nonprofit sector and its belongings has sim- ply raised the stakes. Fueled partially by a wave of philanthropy primarily based on the rising wealth of entrepreneurs and buyers, partially by the continued devolution of presidency packages, and partially by an elevated worldwide curiosity in voluntary motion, nonprofits now make use of extra individuals and management extra assets than ever earlier than. The nonprofit sector has turn out to be a consequential a part of the American financial system that can’t be ignored. Due to this fact, it has cap- tured the rising consideration of legislators, the media, and others who demand that nonprof- its be accountable for the belongings entrusted to them and for the outcomes that they obtain with these belongings. This displays an elevated concern with accountability all through American society, affecting authorities businesses and companies in addition to nonprofits. Calls for for accountability and the necessity for techniques and procedures to adjust to larger scrutiny and regulation have additionally contributed to the necessity for educated managers.

In sum, if it have been ever true that the everyday nonprofit group match the picture of a well- intentioned however unmanaged endeavor, nonprofit organizations at present, aside from maybe the smallest, have to be managed. To be in any other case is just not solely to threat failure in assembly society’s wants and expectations but in addition to put the group’s survival in danger. Nonetheless, the query stays whether or not managing a nonprofit group is totally different from managing a authorities company or a enterprise company. Is administration generic, or is administration within the nonprofit sector a distinguishable endeavor?

A Distinct Career

All through a lot of the historical past of administration as a acknowledged self-discipline, most theorists have advocated a generic method, arguing that frequent administration rules would apply equally to all organizations, whether or not companies, authorities businesses, or nonprofits. And there stay some who’re skeptical that administration within the nonprofit sector is exclusive or that it requires notably distinctive expertise.

6 Half I | Understanding Nonprofit Administration, the Nonprofit Sector, and Nonprofit Organizations

At an operational degree, absolutely administration within the nonprofit sector requires lots of the similar expertise which can be additionally essential in authorities or enterprise administration. There might not be a very nonprofit approach of processing payroll or implementing a brand new info system, and certainly, lots of the methods of enterprise administration have been adopted by nonprofit organizations as properly. However this e-book relies on the view that nonprofit administration is totally different from administration within the enterprise or governmental sector in quite a lot of methods, together with the next 4.

First, as Robert Herman (2016) explains, nonprofit administration requires a singular set of trade-offs:

A [nonprofit] chief govt, along side the board, should combine the realms of mission, useful resource acquisition, and technique. To oversimplify however phrase the problem extra memorably, mission, cash, and administration are interdependent. Making progress on mission achievement relies upon, partially, on the potential for useful resource acquisition. Any mission, irrespective of how worthy, is prone to fail if the group lacks needed and enough assets to pursue it. Conversely, the acquisition of some sorts of assets can affect the mission. Furthermore, choices about strat- egies for buying assets have to be in keeping with the mission and moral values of the group. Actions in a single realm have an effect on the opposite realms. The management problem is to see that choices and actions in a single realm are usually not solely in keeping with these in different realms but in addition mutually reinforcing. (pp. 167–168)

Managers of presidency businesses typically have a single income—for exam- ple, the U.S. Congress or a state legislature—and perform packages mandated by the regulation. Managers in enterprise obtain income from the sale of services or products and have the liberty to resolve what items or providers they may present and to which clients. Extra gross sales translate into elevated revenues, and actions that aren’t worthwhile might be discon- tinued. The identical relationships don’t at all times maintain true for a nonprofit. Most nonprofits receive assets from a number of sources and, like companies, have appreciable freedom to find out the actions during which they may interact. Nonetheless, one essential distinction is that elevated exercise could pressure assets somewhat than improve them. That’s as a result of not all of a nonprofit’s clients could pay the total price of manufacturing the great or service, and certainly, some could not pay in any respect. Judy Vredenburgh, president and CEO of Women Inc. and a former govt of Huge Brothers Huge Sisters and the March of Dimes, describes the dilemma: “Each time we in nonprofits fulfill clients, we drain assets, and each time for-profits sat- isfy a buyer, they get assets. That sounds quite simple, however it has enormous implications” (Silverman & Taliento, 2006, p. 41).

Thus, as Herman (2016) suggests, administration of a nonprofit group requires fixed trade-offs among the many mission, the acquisition of assets, and technique. That dis- tinguishes nonprofit administration from the administration perform within the enterprise or public sectors. Administration in these sectors, whereas additionally advanced, not less than begins with some fastened factors of clear objectives and optimistic relationships between actions and revenues. Manag- ing a nonprofit is extra like swimming within the air, with every thing variable and in fixed movement.

Second, the advanced relationships amongst a nonprofit group’s stakeholders require administration that’s particularly expert in negotiation and compromise, with a excessive tolerance for ambiguity. In firms and in authorities businesses, the circulation of authority from the highest down is usually clear. However, as Helmut Anheier (2014) describes,

nonprofit organizations encompass a number of parts and sophisticated, inner fed- erations or coalitions amongst stakeholders . . . [therefore] the construction of nonprofit organizations could require a multi-faceted, versatile method to administration and

Chapter 1 | Nonprofit Administration as a Career and a Area of Examine 7

not using singular, ready-made fashions carried over from the enterprise world or from public administration. (p. 328)

Jim Collins (2005) recounts a gathering between Frances Hesselbein, chief govt offi- cer (CEO) of the Lady Scouts of the US of America on the time, and a New York Instances columnist, during which the CEO addressed this distinctive attribute of nonprofit administration:

[The columnist] requested what it felt prefer to be on high of such a big group. With endurance, like a instructor pausing to impart an essential lesson, Hesselbein proceeded to rearrange the lunch desk, making a set of concentric circles radiating outward—plates, cups, saucers—related by knives, forks, spoons. Hesselbein pointed to a glass in the midst of the desk. “I’m right here,” she stated. Hesselbein could have had the title of Chief Government Officer, however her message was clear: I’m not on high of something. (p. 9)

Nonprofit administration is exclusive as a result of nonprofit organizations are totally different from companies and governmental entities—typically reliant on the help of donors and the work of volunteers, pursuing missions derived from values and rules about which there could also be disagreement, and engendering a way of possession and a need for affect amongst a number of constituencies each inside and outdoors the partitions of the group itself. On this atmosphere, a nonprofit CEO should present management in addition to administration, a distinction we are going to discover additional in Chapter 5. Robert Higgins, who labored as each a nonprofit execu- tive and a enterprise capitalist and thus was in a position to observe the variations between the sectors firsthand, explains,

In most for-profit organizations . . . individuals arrive with frequent objectives. The board of administrators could have totally different viewpoints, however shareholder worth as a basic objective is one thing shared by the board, by the CEO, and by senior administration. You begin off in another way within the not-for-profit world, with every board member arriving with a special set of objectives and infrequently totally different agendas. To handle that as a CEO is way more advanced. (Silverman & Taliento, 2006, p. 38)

Third, managers of nonprofit organizations should measure their success by a double backside line. A nonprofit exists to pursue a social mission, and success have to be measured by way of its potential to realize that mission. That’s one backside line. However, in at present’s com- petitive atmosphere, nonprofit managers should additionally pay shut consideration to the monetary bot- tom line if their organizations are to outlive and succeed. Some individuals add a 3rd backside line—the impression, optimistic or unfavorable, that the group has on the atmosphere. Ask a room of individuals, “What’s the aim of Apple?” and a few could rapidly reply, “To provide digital units,” or maybe some will joke, “To regulate the world!” However each responses miss the purpose as a result of Apple, like all companies, has one clear function: to extend the worth of the enterprise and thus the wealth of its homeowners. Producing merchandise and controlling the world are however means to that finish. To make sure, many firms at present are additionally guided by rules of social accountability and ethics, however social progress is just not their function. Certainly, social issues are correctly considered as constraints on the pursuit of the aim for which each and every enterprise exists: to maximise revenue with a purpose to enhance the worth of the homeowners’ fairness. Managers could have their very own private social objectives, but when they make them a central factor of the corporate’s function, they won’t fulfill their principal accountability to the homeowners of the agency.

In distinction, a nonprofit exists to serve a social function. However as we have now mentioned, in at present’s aggressive atmosphere, monetary outcomes additionally require the chief’s consideration—she or he should handle the double backside line of monetary and social return. And the latter could

eight Half I | Understanding Nonprofit Administration, the Nonprofit Sector, and Nonprofit Organizations

be ambiguous in its definition, even a topic of disagreement and dissension among the many group’s many stakeholders, or troublesome to measure.

Fourth and eventually, lots of the issues that nonprofit managers tackle are excep- tionally troublesome and intractable. In different phrases, it might be tougher to cut back pov- erty, stop illness, or enhance the worldwide atmosphere—particularly when not everybody acknowledges the issue or agrees on what the options is perhaps—than it’s to extend the sale of engaging merchandise that folks already need to personal. To say that managing a nonprofit is inherently extra advanced than managing a enterprise of comparable measurement is to not demean the abilities of enterprise managers or to disparage their clear concentrate on revenue. The creativity and problem-solving expertise of enterprise leaders have constructed nice organizations and propelled financial progress. Furthermore, wealth created by the enterprise sector helps to sus- tain nonprofits and make social development attainable. However the necessity to handle the double backside line, to narrate to disparate and competing constituencies, and infrequently to work in opposition to the load of deep-seated historic and cultural boundaries provides complexity to the nonprofit CEO’s problem, a problem that’s too typically underestimated by some who observe the nonprofit sector from a enterprise perspective. William Novelli, a former businessman who constructed the general public relations agency Porter Novelli and later served because the CEO of the nonprofit AARP, explains the problem:

It’s more durable to achieve the nonprofit world. . . . It might be exhausting to compete within the subject of shopper packaged items or electronics or excessive finance . . . however it’s more durable to realize objectives within the nonprofit world as a result of these objectives are typically behavioral. In the event you got down to do one thing about breast most cancers within the nation, or about Social Safety solvency, it’s loads more durable to drag that off. [And] it’s additionally more durable to measure. (Silverman & Taliento, 2006, p. 37)

This e-book is predicated on the premise that nonprofit administration is distinguishable from administration in enterprise or authorities. It’s needed, nonetheless, to acknowledge that some see a convergence of administration throughout the sectors in recent times, as each public manag- ers and nonprofit managers are anticipated to be extra businesslike and enterprise managers are anticipated to display extra accountability towards the social, environmental, and human impression of their actions (Salamon, 2012b). New kinds of organizations have emerged that mix traits of companies and nonprofit organizations, a few of which will likely be mentioned later on this textual content. Some authors additionally observe a convergence of nonprofit manage- ment and public administration (Mitchell & Schmitz, 2019, p. 14). As we are going to talk about within the subsequent part of this chapter, developments in nonprofit administration schooling in universities have mirrored the altering perceptions and realities of the sector over time.

Nonprofit Administration as a Area of Examine

College students taking a course in nonprofit administration at present may moderately assume that such programs have at all times existed. However they’re a comparatively latest addition to the curriculum at many schools and universities, and scholarly analysis within the subject, whereas rising, nonetheless doesn’t method the amount of examine dedicated to public or enterprise administration.

Certainly, recognition of administration as an identifiable perform—in any organizational setting—is comparatively latest within the scope of historical past. Whereas management-like features have been carried out all through civilized historical past, the start of administration as a subject of examine dates roughly to the event of an industrial financial system within the late 19th century. Ste- phen Block (2001) credit an 1886 paper by the engineer Henry R. Towne as the primary name for

Chapter 1 | Nonprofit Administration as a Career and a Area of Examine 9

the event of administration as an impartial subject of examine with its personal literature. The nation’s first faculty of administration, the Wharton College on the College of Pennsylvania, was established shortly thereafter, in 1898. The primary 20 years of the 20th century noticed the expansion of professional administration societies, the publication of latest books, and the intro- duction of further college packages. The primary doctoral dissertation in administration was written in 1915. In response to Block, curiosity in administration was elevated by the expertise of American manufacturing throughout World Conflict II, and the many years since have introduced explo- sive progress in enterprise administration schooling and analysis, together with the event of theories we are going to discover at related factors on this e-book. However the early examine of administration was centered on enterprise organizations, with consideration to public administration and nonprofit administration creating later. Mordecai Lee (2010) has recognized some pioneering initiatives undertaken by the YMCA that will have represented the primary efforts in nonprofit administration schooling. They included the providing of a bachelor of affiliation science diploma by Chicago’s Central YMCA School in 1911 and a 1935 textbook on the topic produced by the YMCA’s publishing home. However these early efforts, curiosity in nonprofit administration has emerged primarily throughout the previous few many years.

As talked about beforehand, till in regards to the 1960s, most administration theorists superior a “generic method,” arguing that their theories utilized equally in all kinds of organizations, whether or not companies, authorities businesses, or nonprofits. As Hal Rainey (2014), a public administration scholar, emphasizes, “With some clear exceptions . . . the theorists repeatedly implied or aggressively asserted that distinctions similar to private and non-private, market and non- market, and governmental and nongovernmental supplied little worth for creating principle or understanding observe” (p. 45). Nonetheless, by the 1960s, some authors started to problem this method and to name for extra analysis centered particularly on the administration of public businesses. This coincided with a interval of progress within the federal authorities and the devel- opment of grasp of public administration (MPA) diploma packages in universities, which for the primary time emphasised administration expertise in authorities and differentiated the examine of public administration from the self-discipline of political science. The Community of Faculties of Public Coverage, Affairs, and Administration (NASPAA) was based in 1970 and commenced to accredit such packages.

You will need to be aware that one of many well-known educational journals publishing nonprofit-related analysis, Nonprofit and Voluntary Sector Quarterly, was based in 1972. However nationwide consideration was drawn to the nonprofit sector by an essential nationwide examine con- ducted by the Fee on Personal Philanthropy and Public Wants throughout the interval 1973 to 1975. That fee, typically known as the “Filer Fee” in honor of its chair, enterprise chief John H. Filer, issued a report titled Giving in America (Fee on Personal Philan- thropy and Public Wants, 1975), which was probably the most detailed examine of philanthropy in the US as much as that point. The primary educational middle dedicated to the examine of nonprofits, the Yale Program on Nonprofit Organizations (PONPO), was based shortly thereafter, in 1978, and social scientists started to show their consideration to understanding the function of nonprofit organizations in financial and political life. The generic method was starting to yield to the view that nonprofit organizations may need distinctive traits that distinguish them from organizations within the different two sectors.

As beforehand mentioned, the 1980s marked a turning level in public coverage, with gov- ernment outsourcing extra of the supply and administration of social and human providers to nonprofits. That growth additional elevated the necessity for skilled administration in nonprofit organizations and captured the curiosity of some college students beforehand aiming for careers in authorities. Public administration school members noticed rising variety of their college students have been concerned about working in nonprofit organizations and responded by creating packages to show nonprofit-specific expertise (Joslyn, 2004). That decade additionally noticed the institution of latest analysis facilities and packages centered on the nonprofit sector,

10 Half I | Understanding Nonprofit Administration, the Nonprofit Sector, and Nonprofit Organizations

together with Case Western Reserve College’s Mandel Heart for Nonprofit Organizations and the Heart on Philanthropy at Indiana College.

Administration students and writers turned vital consideration to the nonprofit sec- tor starting within the 1990s. Writing in 1990, administration guru Peter Drucker noticed a “administration increase” occurring in nonprofit organizations, however he additionally famous the shortage of rec- ognition of nonprofit administration as worthy of consideration. “For many Individuals,” he wrote, “the phrase ‘administration’ nonetheless means enterprise administration” (p. xiv). However because the nonprofit sector continued to develop all through the 1990s and into the 2000s and 2010s, a burgeoning literature sought to adapt the theories and expertise of enterprise administration to the planning, managing, and financing of nonprofits. Programs within the strategic administration of nonprofits and on social entrepreneurship—a time period we are going to talk about additional later—began appearing in enterprise faculties, and new books utilized the methods utilized by corporations and gov- ernments to the nonprofit sector (Oster, 1995; Steiss, 2003). The Harvard Enterprise Evaluation got here to incorporate occasional articles on the administration of nonprofit organizations. The late 1990s introduced an financial increase and a increase within the literature of enterprise philanthropy, social enterprise, entrepreneurial nonprofits, and enterprise methods utilized to nonprofit organizations (Dees, 1998; Dees, Emerson, & Economic system, 2001; Kearns, 2000; Letts et al., 1999; Oster et al., 2004). The Stanford College Graduate College of Enterprise started pub- lishing a journal, the Stanford Social Innovation Evaluation, in 2003. New textbooks centered on nonprofit administration began appearing, together with the primary version of this textual content in 2009. On-line journals, blogs, and different boards associated to nonprofit administration, social innova- tion, social entrepreneurship, and associated matters proceed to proliferate. In 2012, the Heart on Philanthropy at Indiana College grew to become the Lilly Household College of Philanthropy, the primary such educational establishment within the nation (“IU’s Philanthropy College to Be Named for Lilly Household,” 2013).

The literature of nonprofit administration is drawn from three principal areas: (1) the work of social scientists who examine nonprofit organizations as social and financial establishments; (2) organizational principle, theories of organizational conduct, and administration principle from the enterprise and public sectors which have specific relevance for nonprofit organizations; and (three) a wealthy practitioner literature that gives essential understandings. This e-book is predicated on the view balanced and built-in method requires drawing on all three literatures, and that’s mirrored within the supplies introduced within the chapters that observe.

A good portion of the nonprofit administration literature remains to be written by or for practitioners and has a prescriptive, how-to-do-it method. Consultants, together with profes- sionals working in for-profit consulting corporations, even have made essential contributions to the literature of nonprofit administration. However there’s a rising physique of educational analysis, includ- ing the work of economists, sociologists, historians, and different social scientists. Students have developed taxonomies to establish and monitor the main parts of the nonprofit sector, theories to elucidate the existence and conduct of the sector, theories describing its relation- ship to authorities and the enterprise sector, examinations of its function and impression within the U.S. financial system, and analyses of associated public coverage points. The administration of nonprofits additionally has been the main target of extra utilized research drawn from the fields of public administration and enterprise administration.

Some students advocate defining a brand new educational subject of “nonprofit research” that might broaden the main target of nonprofit analysis past administration (Mendel, 2014). Observ- ing that “revealed scholarship on nonprofit organizations continues to cowl primarily issues of curiosity to public administration, enterprise, social work, and different fields,” Stuart Mendel (2014) argues that “nonprofit research is approaching a tipping level [and is] able to turn out to be an autonomous subject of examine” (p. 61). He additionally requires a brand new method to the coaching of nonprofit professionals that might go “past the administration of transactional accountability” to incorporate “the examine of civil society; the dynamics of advocacy, group organizing, and public coverage growth; the political nature of the social sector; and the

Chapter 1 | Nonprofit Administration as a Career and a Area of Examine 11

function that nonprofits play as locations of employment” (Mendel, 2014, p. 62). Nonetheless, some argue that public administration, public coverage, and nonprofit administration are “intersec- tional” and that the examine of anybody requires making use of data from the others as properly (Pandey & Johnson, 2019). Others advocate a “nonprofit/philanthropy-first” curriculum and the event of diploma packages in nonprofit administration other than these in public administration, public coverage, or enterprise (Mendel, 2015).

This e-book is a textbook, not a guide for nonprofit executives. However neither is its function to supply a completely theoretical examination of the nonprofit sector. Though it attracts on a variety of literature, it’s supposed to offer a background for nonprofit administration somewhat than a basis for nonprofit research, though the latter is essential to develop- ing a full understanding. It’s supposed to offer college students who’re contemplating or pursuing careers in nonprofit administration with a broad overview, mixing theoretical and sensible matters related to the work they do or will do. This method incurs the chance that some prag- matic people could discover it too educational and that some lecturers could discover it insufficiently grounded, however it’s acceptable to offer a complete and helpful overview of a subject that’s nonetheless evolving.

Concomitant with the rise within the analysis literature, academic packages associated to nonprofit administration have grown quickly for the reason that 1990s. Indiana College was the primary to supply a bachelor’s diploma in philanthropy and, as talked about beforehand, in 2012 grew to become the primary college to determine a faculty of philanthropy. Latest years have additionally seen a vir- tual explosion within the availability of coaching for nonprofit managers exper- tise directed towards the advance of administration practices in nonprofit organizations, together with packages supplied by academic establishments, regional associations of nonprofits, nonprofit infrastructure organizations, and for-profit consulting corporations. Formal skilled certification is obtainable in some specialties of nonprofit administration. For instance, a profes- sional specializing in fundraising can turn out to be an authorized fundraising govt (CFRE) by efficiently assembly standards established by CFRE Worldwide, together with an examination (see for extra info). And nonprofit professionals who handle volunteer packages can receive certification from the Council for Certification in Volunteer Administra- tion (see for extra info).

Formalization of the nonprofit administration curriculum in universities additionally has pro- gressed. In 2001, NASPAA issued “Tips for Graduate Skilled Schooling in Non- revenue Organizations, Administration, and Management.” The Nonprofit Tutorial Facilities Council (NACC), a membership affiliation of educational facilities and packages that target nonprofit organizations, issued its first “Curricular Tips for Graduate Examine in Phi- lanthropy, the Nonprofit Sector, and Nonprofit Management” in 2004. A second model was launched in 2008 and a 3rd model in 2015. NACC undergraduate program pointers have been developed in 2007 and revised in 2015. Improvement of a brand new version (the fourth for gradu- ate packages and the third for undergraduate packages) was in progress on the time of this writing (Nonprofit Tutorial Facilities Council, 2018).

The content material of MPA and MPP diploma packages has more and more included nonprofit- associated expertise and a few have proposed that much more emphasis be given to nonprofits inside these packages (Cantrell-Bruce & Blankenberger, 2015). Accreditation requirements launched by NASPAA in 2019, which apply to all grasp’s diploma packages it accredits, mirror an elevated emphasis on the nonprofit sector, though they don’t embody particular nonprofit curricu- lar pointers. Utilizing the phrase “nonprofit on the core,” the revised accreditation requirements “set up nonprofit administration as basic to public service schooling. Adjustments to language all through the Requirements, together with the common required competencies, explicitly combine the third sector” (NASPAA, 2019). In 2018, NACC started accrediting stand-alone packages centered on nonprofit administration and associated matters (NACC, 2018). Additionally in 2018, NASPAA for the primary time accredited a stand-alone grasp’s diploma program in nonprofit administration, on the College of Central Florida (NASPAA, 2018).

12 Half I | Understanding Nonprofit Administration, the Nonprofit Sector, and Nonprofit Organizations

Many enterprise faculties supply programs and packages related to the nonprofit sector, pro- grams typically recognized by the time period “social entrepreneurship.” The time period is utilized in other ways by numerous authors, and it is very important perceive the distinctions. Some authors use the time period to imply the appliance of enterprise rules and the technology of earned earnings by nonprofits. Others use the time period to imply social innovation (Dees & Anderson, 2006). These distinctions are mentioned additional in Chapter 14 of this textual content, which explores social enterprise, and in Chapter 16, which is worried with social entrepreneurship from the social innovation perspective.

Dialogue and debate on the suitable content material of packages to arrange nonprofit leaders will probably proceed. Many observers see a blurring of the nonprofit and enterprise sec- tors, requiring that future nonprofit executives be educated in enterprise expertise. To some, that means that nonprofit administration packages could be higher situated in enterprise faculties than in both faculties of public affairs and administration or schools of arts and sciences. However Michael O’Neill (2007), founder and former chair of the Institute for Nonprofit Group Administration on the College of San Francisco, notes that “[n]onprofits have totally different val- ues, totally different monetary techniques, totally different legal guidelines to abide by, totally different individuals (like volunteers) to handle, and really totally different objectives [than business organizations]” (p. 171S). He predicts that the long run will see continued experimentation with regard to nonprofit packages however that enterprise faculties are unlikely to turn out to be the predominant hosts of nonprofit manage- ment packages. As well as, he predicts that nonprofit administration curriculum is unlikely to turn out to be as standardized because the MBA curriculum.

Roseanne Mirabella and Dennis Younger (2012) observe the rise within the variety of enterprise faculty packages specializing in social entrepreneurship and speculate as as to whether the long run may see convergence of the content material of such enterprise faculty packages and tra- ditional nonprofit administration packages, that means primarily these supplied in faculties of public coverage and administration. One risk that Mirabella and Younger establish is that the normal packages could come to include extra programs on social entrepreneurship, whereas enterprise faculties come to incorporate extra emphasis on such matters as philanthropic and political expertise; in different phrases, the packages may turn out to be extra alike. One other risk is that the normal and enterprise faculty packages stay distinct. Echoing O’Neill (2007), the authors be aware that the respective educational models have totally different cultures and, as well as, that entrepreneurship extra typically “has traditionally not been excessive within the pecking order of topics valued inside enterprise faculties” (Mirabella & Younger, 2012, p. 55).

There’s an rising variety of collaborations and partnerships between nonprofits and authorities and between nonprofits and companies—a subject that we are going to talk about in additional element in Chapter eight. This actuality has contributed to some nonprofits changing into hybrids; that’s, they embody traits of companies and authorities businesses in addition to of tradi- tional nonprofit organizations. For that purpose, some observers recommend that schooling about nonprofits ought to be built-in into the core curriculum of packages in all skilled faculties—together with these centered on enterprise, public coverage and administration, and different skilled fields (S. Smith, 2012).

Towards a Balanced Strategy

The literature of nonprofit administration reveals quite a lot of views, not solely on the questions and points mentioned beforehand however certainly in regards to the very nature of nonprofit organizations and their function in society.

Generalization can, in fact, typically result in oversimplification; variations in perspective or method are sometimes nuanced. However college students will probably observe that authors writing about nonprofit organizations and nonprofit administration at present mirror certainly one of two

Chapter 1 | Nonprofit Administration as a Career and a Area of Examine 13

views on the needs and function of the nonprofit group which can be distinguishable, not less than in tone and emphasis.

Some see nonprofit organizations primarily as social establishments. The providers they pro- vide are essential, however nonprofits are also important for creating civil society, pursuing social change, and sustaining the free expression of concepts and opinions in a democratic society— certainly, for preserving our most essential values as a society. Course of and involvement are valued practically as a lot as the tip outcomes. On this view, involvement builds group and offers an essential expertise for taking part people, along with the advantages it might produce for different members of society. That is what Peter Frumkin (2002) calls the expressive functions of nonprofits; that’s, they supply an outlet for people to specific their values and passions by way of their involvement with such organizations.

From this angle, nonprofit managers typically are portrayed as stewards of their orga- nizations or servants of society. With regard to the schooling of nonprofit managers, those that maintain this angle often emphasize the necessity to develop an appreciation of nonprofit values, an understanding of nonprofits’ function in society, and a capability for moral resolution making. In discussing charity and philanthropy, they have an inclination to concentrate on their cultural and historic roots and look at giving as an expression of ethical and spiritual values. They don’t essentially deny the usefulness of enterprise strategies in managing nonprofit organizations, however some do categorical skepticism about the potential for measuring organizations’ effective- ness in opposition to typically lofty missions. Some categorical concern that the appliance of enterprise strategies and enterprise pondering holds the chance of undermining conventional nonprofit values and diminishing nonprofit organizations’ distinctive contributions to society. They’re typically uncomfortable about nonprofits changing into too engaged in business actions or forming shut relationships with enterprise, fearing that nonprofit tradition will likely be eroded and that orga- nizations will lose sight of their social functions within the pursuit of monetary success. And, in fact, relying on their social and political views, some could even discover it objection- in a position to see nonprofits related to non-public enterprise or authorities in any respect, maybe viewing one or each of the opposite sectors as sources of issues that nonprofits are attempting to right.

From the opposite frequent perspective, nonprofit organizations are social enterprises, basically companies which have a social function. Those that maintain this view don’t dismiss the significance of nonprofits’ social missions, nor do they essentially deny the distinctive qualities and contributions of the nonprofit sector. Most give not less than lip service to the concept that a busi- ness method might not be acceptable for each nonprofit group. Nonetheless, they have an inclination to emphasise the commonalities between nonprofit organizations and enterprise corporations and encourage using enterprise rules and methods in managing nonprofits.

Those that maintain this angle typically talk about the schooling of nonprofit managers by way of creating enterprise expertise. Their discussions typically concentrate on constructing the capability of nonprofits and the appliance of enterprise strategies, similar to strategic planning, strategic man- agement, efficiency administration, and advertising and marketing. They typically use the vocabulary of busi- ness, for instance, discussing a nonprofit group’s “aggressive benefit” and “market place.” Some criticize conventional charity and philanthropy and like that nonprofits rely extra on earned earnings somewhat than on items. They emphasize what Frumkin (2002) calls the instrumental functions of nonprofits, that’s, the providers that they supply and the wants they meet, somewhat than their function as autos for people’ expression. They’re involved about outcomes and the measurement of organizational efficiency in opposition to outlined metrics. Some even help the thought of nonprofit capital markets that might allocate funds ratio- nally to nonprofit organizations that present excessive efficiency, a lot as inventory markets allo- cate funding to the businesses that produce the best monetary returns. Certainly, latest years have seen the initiation of latest company varieties and market-based approaches, that are addressed additional within the subsequent chapter of this e-book.

Once more, the above characterizations of those two views are oversimplified, and a few writers take a average or blended stance between the 2 poles described. However it’s

14 Half I | Understanding Nonprofit Administration, the Nonprofit Sector, and Nonprofit Organizations

often not troublesome to establish a specific e-book or article as leaning towards one perspec- tive or the opposite. This textual content attracts on literature from each approaches and strives to current a balanced and built-in understanding. The place disagreements could exist, it makes an attempt to pretty summarize either side of the argument. That’s as a result of this writer believes that efficient nonprofit administration in at present’s atmosphere does certainly require a balanced and built-in method that attracts upon numerous views, expertise, and instruments.

That method results in the frequent use of the expression “on the one hand, however however” all through this e-book. Some may want to know the “proper reply” and study what’s the easiest way to steer a nonprofit group. The philosophy mirrored on this e-book is that there’s typically nobody proper reply and that the easiest way is usually pragmatic and eclectic. It consists of viewing an issue from a number of views and drawing from numerous approaches selectively as conditions could dictate. College students will discover ample different supplies written by authors who come from one specific viewpoint or one other that they might discover to be particularly engaging or persuasive.

Continuing With Realism and Satisfaction

This e-book is predicated on the view that whereas there’s a want to enhance the administration of nonprofit organizations, it’s a misperception to imagine, as some do, that they’re generically much less properly managed than companies. This misperception is predicated partially on our society’s bias towards defining success primarily in monetary phrases. The outcomes of fine enterprise manage- ment are evident in bottom-line earnings, whereas the outcomes of nonprofit administration are mirrored in progress towards a social objective, which can be much less seen or straightforward to measure. As well as, the misperception is usually bolstered when apples are in contrast with oranges, which can happen, for instance, if somebody’s picture of a nonprofit is as a small group and that individual’s picture of a enterprise is that of a bigger company. It might be correct to look at that some small nonprofits are usually not properly managed. However, it is very important be aware, the identical is true of many small companies, most of which fail within the first 5 years of their exis- tence. It is perhaps troublesome to display family-run mattress and breakfast is de facto higher managed than the native homeless shelter, which might be extra acceptable than evaluating the shelter with a Marriott resort.

When nonprofit organizations and corporations are in contrast pretty, we discover poor and glorious administration in each. For instance, the American Pink Cross, one of many nation’s largest nonprofits, was criticized for its administration of restoration efforts following the Haitian earthquake in 2010. Within the 2000s, there have been extremely seen scandals regarding execu- tive compensation and bills at American College and the Smithsonian Establishment, which led to congressional hearings and the event of latest governance pointers, mentioned later on this textual content. In 2015, the Federal Commerce Fee (FTC) alleged that James T. Reynolds Sr. had used practically $200 million that had been given to most cancers charities that he operated to pay for private advantages for himself, buddies, and members of the family. The FTC char- acterized it as one of many largest charity scandals in historical past (Ruiz, 2015). Nonetheless, it’s truthful to ask, was the Pink Cross much less properly managed than Normal Motors, which required a federal authorities bailout? Or have been moral failures at nonprofits extra egregious than these at many monetary establishments within the late 2000s, which required bailouts as properly? Had been the allegations in opposition to Reynolds extra surprising than these in opposition to Bernard Madoff, who was convicted of working a Ponzi scheme that price buyers thousands and thousands of ? We would additionally ask, are Habitat for Humanity and Docs With out Borders much less progressive organizations than Fb or Google? Is the Mayo Clinic much less able to managing threat than BP? In a sequel to his best- promoting e-book on enterprise administration, which focuses on the social (or nonprofit) sector, Jim Collins (2005) argues that the essential distinction is just not between enterprise administration and nonprofit administration however between mediocrity and greatness:

Chapter 1 | Nonprofit Administration as a Career and a Area of Examine 15

Most companies—like most of anything in life—fall someplace between medi- ocre and good. Few are nice. Mediocre corporations hardly ever show the relentless tradition of self-discipline . . . that we discover in really nice corporations. [But] a tradition of self-discipline is just not a precept of enterprise; it’s a precept of greatness. (p. 1)

The writer’s function in making this level is to dispel any misperceptions that college students could maintain that nonprofit administration is by some means second charge or, as implied by crucial articles seen within the well-liked media, that incompetence and corruption are rampant in nonprofit orga- nizations. Nonprofit managers are basically extremely succesful and devoted people, worthy of the respect and regard of their counterparts within the different sectors of enterprise and govern- ment. They work in organizations which can be totally different from companies or authorities, they’ve totally different functions and objectives, and so they typically work with fewer assets obtainable to them, however they aren’t categorically much less ready or profitable. College students pursuing schooling in nonprofit administration ought to achieve this with a delight and confidence equal to that of their classmates who could also be getting ready for careers in enterprise, authorities, or different distinguished professions.

On the similar time, college students ought to maintain no illusions in regards to the challenges of a non- revenue administration profession. Though salaries are enhancing, nonprofit managers are unlikely to realize the wealth of their counterparts in enterprise or the job safety of their colleagues who maintain civil service positions within the authorities. The pressures are vital. As Julie Rogers (2006), former president of the Eugene and Agnes Meyer Basis, observes, non- revenue executives face a endless stream of recommendation from their boards, funders, shoppers, vol- unteers, and others: “Give attention to discovering reliable sources of earnings. Produce measurable outcomes. Consider whether or not you’re making a distinction. Be strategic, not opportunistic. Construct numerous boards. Spend extra time on advocacy. Collaborate with different organizations” (pp. 45–46). And, too typically, nonprofit managers are suggested to do all this with smaller budgets, smaller staffs, much less coaching, the ever-present risk of lowered public help, and fewer recog- nition than is offered to managers in enterprise or authorities. Certainly, a 2011 examine discovered that the complexity of the nonprofit supervisor’s job and the a number of pressures she or he should deal with regularly result in frustration and burnout (Moyers, 2011).

Nonetheless, nonprofit managers additionally get pleasure from distinctive rewards, together with the satisfaction of realizing that they’re working to advance these points of human life that many contemplate to be an important—the humanities, schooling, the preservation of tradition, the safety of the environment, the development of well being, the alleviation of poverty, and the event of younger individuals. They expertise the thrill of tackling a few of society’s most daunting issues and defending society’s most weak members, making a distinction of their lives and in the way forward for society. They usually know the camaraderie and fellowship that come from working alongside others who share their values, priorities, and commitments. For a lot of who’ve devoted their careers to working in nonprofit organizations, the worth of such intangible rewards is past measure.


By way of most of historical past, administration students pursued a generic method, believing that administration in corporations, authorities businesses, and nonprofits shared comparable prin- ciples. However nonprofit administration is a definite occupation due to the distinctive traits, missions, and cultures of nonprofits. Because the 1980s, this uniqueness has been

acknowledged within the growth of analysis facilities and aca- demic packages centered on the nonprofit sector and non- revenue administration.

There continues to be dialogue about whether or not such pro- grams ought to be situated inside different educational packages or established as impartial diploma packages. Some enterprise

16 Half I | Understanding Nonprofit Administration, the Nonprofit Sector, and Nonprofit Organizations

faculties supply packages in social entrepreneurship, which has totally different meanings however generally implies a business-like method. Some assume that enterprise faculty packages in social entrepreneurship and conventional nonprofit administration pro- grams could converge. Others be aware the totally different cultures in vari- ous educational models and predict that such packages will stay distinct. Some advocate incorporating nonprofit administration matters within the core curriculum of all skilled diploma pro- grams in administration. Others advocate stand-alone diploma packages in nonprofit administration. The Nonprofit Tutorial Facilities Council (NACC) and the Community of Faculties of Public Coverage, Affairs, and Administration (NASPAA) accredit nonprofit administration packages. Some universities have established interdisciplinary facilities for the examine of nonprofits, which draw on school from numerous educational fields.

Folks maintain two totally different views on the needs and function of nonprofits in society, which affect their views on how and the place nonprofit leaders ought to be educated. Some contemplate nonprofits to be social establishments and emphasize their expressive functions, that’s, the alternatives that they supply for individuals to specific their values and passions by way of involvement. Others contemplate nonprofits to be

social enterprises, basically like enterprise corporations with a social function. They emphasize their instrumental functions, that’s, the providers they supply and wishes they meet. Many writers mirror a balanced understanding, however most have a tendency to emphasise one or the opposite perspective. This e-book makes an attempt to mix these views and to offer a balanced over- view of the sector. This writer believes that profitable non- revenue administration requires an eclectic method, drawing ideas and instruments from the work of students, practitioners, consultants, and others, as their concepts and recommenda- tions are discovered to be helpful in particular conditions.

Though some individuals painting nonprofits as much less properly man- aged than companies, that notion typically is inaccurate. Small nonprofits ought to be in comparison with small companies, which additionally typically reveal mediocre administration and which regularly fail, somewhat than to giant firms. Many com- panies are progressive and properly managed and so are many nonprofit organizations. College students getting ready for careers in nonprofit administration ought to proceed with delight and con- fidence that their subject is as distinguished as administration in enterprise or authorities. A nonprofit profession brings chal- lenges but in addition distinctive rewards.


double backside line 7 expressive functions of nonprofits 13 instrumental functions of nonprofits 13

Community of Faculties of Public Coverage, Affairs, and Administration (NASPAA) 9

Nonprofit Tutorial Facilities Council (NACC) 11

social entrepreneurship 12


1. Ought to preparation for a profession within the nonprofit sector emphasize administration expertise or a broader understanding of civil society and the function of nonprofit organizations? Clarify your reply.

2. If nonprofit administration challenges are as advanced as these in enterprise, ought to nonprofit managers

be compensated on the similar ranges as managers at comparably giant corporations? Why or why not?

three. Ought to nonprofit organizations be considered principally as companies with a social function, or are they inherently totally different from for-profit corporations? Clarify your reply.


The next case within the appendix of this textual content consists of factors associated to the content material of this chapter: Case three (The Y).

Chapter 1 | Nonprofit Administration as a Career and a Area of Examine 17



Eikenberry, A. M., Mirabella, R. M., & Sandberg, B. (Eds.). (2019). Reframing nonprofit organizations: Democracy, inclu- sion, and social change. Melvin & Leigh, Publishers.

Frumkin, P. (2002). On being nonprofit: A conceptual and pol- icy primer. Harvard College Press.

Ott, J. S., & Dicke, L. A. (Eds.). (2016). The character of the nonprofit sector (third ed.). Westview.

Salamon, L. M. (2015). The resilient sector revisited: The brand new problem to nonprofit America. Brookings Establishment.


Mendel, S. C. (2015). Nonprofit first: The promise and potential of the Nonprofit Tutorial Facilities Coun- cil. Journal of Nonprofit Schooling and Management, 5(1), 30–36.

Mirabella, R., & Younger, D. R. (2012). The event of schooling for social entrepreneurship and nonprofit man- agement: Diverging or converging paths? Nonprofit Handle- ment & Management, 23(1), 43–56.

Mitchell, G. E., & Schmitz, H. P. (2019). The nexus of pub- lic and nonprofit administration. Public Efficiency & Man- agement Evaluation, 42(1), 11–33.

Pandey, S. Okay., & Johnson, J. M. (2019). Nonprofit manage- ment, public administration, and public coverage: Separate, subset, or intersectional domains of inquiry? Public Perfor- mance & Administration Evaluation, 42(1), 1–10.

Web sites

Community of Faculties of Public Coverage, Affairs, and Administration (NASPAA):

Nonprofit Tutorial Facilities Council (NACC): http://non


Andrew Carnegie’s “Gospel of Wealth” articulated the excellence between charity and philanthropy and influenced America’s custom of giving. Public Area/Wikimedia Commons

Chapter Define America’s Nonprofit Sector: A Historic

Overview Trying to find a Widespread Vocabulary Alternate options to Nonprofit Dimension of the U.S. Nonprofit Sector Differentiating the Nonprofit Sector

Nationwide Taxonomy of Exempt Entities IRS Classifications

Salamon’s Anatomy The Spectrum of Organizations

Rising New Fashions The Commercialization Debate Commercialization and Tax Exemption Implications for Nonprofit Managers Chapter Abstract Circumstances



Overview of the Nonprofit Sector2

America’s nonprofit sector is giant, advanced, and numerous, together with organizations very totally different from each other in function, measurement, and different traits. As J. G. Simon wrote in 1987, “The sprawling and unruly assortment of animals that populate the nonprofit world—from church buildings to civil rights teams to backyard golf equipment to the Nationwide Council on Philan- thropy—makes this subject exhausting to understand and examine ” (p. 69). And, as we are going to quickly uncover, the nonprofit sector is much more sprawling and unruly at present than it was in 1987.

On this chapter, we are going to take a look at the nonprofit sector as an entire and set up fundamental ideas and definitions that can assist carry some order to our understanding of its construction, bound- aries, and traits. Let’s begin by taking a short imaginary tour round one American metropolis, ranging from the writer’s workplace on the campus of the George Washington College, situated within the Foggy Backside neighborhood of Washington, DC, close to the White Home. Because the nation’s capital, Washington, DC, is house to a major variety of nonprofits, however the number of organizations that we are going to see on our tour is typical of what we’d discover in lots of American cities. A stroll by way of this one metropolis helps give us a way of the complexity to be present in at present’s nonprofit sector all throughout the nation.

Leaving the writer’s workplace on the college, we’d stroll previous the George Washington College Hospital, then flip down the road and go Western Presbyterian Church, only a few blocks from the sting of campus. We would see women and men ready to enter the basement of the church to go to Mir- iam’s Kitchen, a company that gives meals and providers to homeless individuals and works to finish power homelessness.

If we take one other flip, we’d stroll previous the head- quarters of the Nationwide Park Service after which in entrance of the nationwide headquarters of the American Pink Cross. Proceed- ing farther into city, we’d see the headquarters of the Nationwide Geographic Society. Ultimately, we’d stroll previous the Smithsonian Establishment, situated in a number of buildings alongside the Nationwide Mall, which extends from the Washington Monu- ment to the Capitol constructing. If we walked a loop across the Capitol, we’d go the huge buildings of the Library of Congress. Strolling again towards campus over Massachusetts Avenue, we’d go the headquarters of the Cato Institute

Studying Aims

After studying this chapter, college students ought to be capable of

1. Determine numerous kinds of nonprofit organizations.

2. Clarify the historic progress of the nonprofit sector.

three. Examine numerous phrases used to establish the nonprofit sector and clarify their implications.

Four. Classify nonprofit organizations in response to the Nationwide Taxonomy of Exempt Entities and the Inner Income Code.

5. Clarify the variations between organizations labeled below 501(c)(three) and 501(c)(Four) and the benefits and limitations associated to every classification.

6. Clarify variations amongst charitable subsectors.

7. Classify organizations as purely philanthropic, purely business, or hybrid, relying on numerous traits.

eight. Clarify new organizational varieties and the idea of the fourth sector.

9. Analyze circumstances, making use of ideas from the chapter.

20 Half I | Understanding Nonprofit Administration, the Nonprofit Sector, and Nonprofit Organizations

and the Brookings Establishment, each public coverage assume tanks. Relying on our route, we’d see the Phillips Assortment, which is an artwork gallery; the City Institute; and Anderson Home, house to the Society of the Cincinnati, which promotes curiosity within the Revolutionary Conflict. Arriving again on the George Washington College, we’d be drained—it will have been a protracted stroll. Fortunately, there are a selection of Starbucks close by, so we might sit down for a cup of espresso and relaxation. We is perhaps eager about the assorted sights we have now seen in our day and attempting to establish that are nonprofits and which aren’t. That may not be as straightforward a process as it would initially appear.

We might certainly have encountered plenty of nonprofits on our tour, however some could appear extra nonprofit-like than others. When the phrase nonprofit is used, many individuals assume first of a company like Miriam’s Kitchen. Whereas it’s situated in Western Presbyterian Church, it’s a separate group. It’s small and supported largely by charitable items. Its workforce consists of many volunteers, and it offers its providers to individuals who pay nothing for them. Most individuals additionally in all probability acknowledge the American Pink Cross as a nonprofit orga- nization, which it’s, though it’s chartered by the U.S. Congress and has a mandate from authorities to offer providers to the U.S. army and to the overall inhabitants in occasions of catastrophe. Some could not consider Western Presbyterian Church or different spiritual congre- gations as nonprofits in the identical approach they consider the Pink Cross or Miriam’s Kitchen, however spiritual congregations are certainly part of the nonprofit sector. So are many artwork galleries, such because the Phillips; analysis organizations, similar to Brookings, Cato, and the City Institute; and lots of fraternal organizations, such because the Society of the Cincinnati.

Some organizations could appear to be nonprofits, however the actuality is extra advanced. For instance, the George Washington College Hospital, which we’d have handed early on in our stroll, doesn’t appear any totally different from different hospitals which can be nonprofit. However it’s in reality a for-profit hospital owned collectively by the George Washington College (a nonprofit institu- tion) and Common Well being Companies (a for-profit hospital administration company). Though the hospital is correct down the road from Miriam’s Kitchen and offers providers to a few of Miriam’s shoppers, as a company, it’s actually extra like Microsoft than Miriam’s.

Some organizations show mixtures of nonprofit missions and enterprise operations. Our imaginary tour of Washington, DC, touched two of those—the Smithsonian and Nationwide Geographic. The Nationwide Geographic Society is a nonprofit group devoted to geo- graphic exploration and schooling. However Nationwide Geographic Companions is a for-profit firm that controls the enduring Nationwide Geographic journal and numerous media entities bearing the Nationwide Geographic title. Since 2019, this for-profit enterprise has been collectively owned by the Nationwide Geographic Society and Disney (Littleton, 2019). The Nationwide Geographic Society stays a nonprofit group with its historic mission of exploration and schooling. (The Nationwide Geographic Society is mentioned in additional element in Case 14.1 on this textual content.)

The Smithsonian Establishment is a nationwide museum, and many individuals could consider it as a authorities company. However it’s a advanced group, working partially like a authorities company, partially like a nonprofit group, and partially like an entrepreneurial enterprise. The Smithsonian receives a good portion of its help from federal appropriations, however it was based by way of a charitable bequest from James Smithson, after whom it was named, and it actively solicits philanthropic items. A separate nonprofit division, known as Smithsonian Enterprises, manages the enterprise actions of the Smithsonian Establishment, together with retail shops, a mail-order catalogue, product growth and licensing, journal publishing, an academic journey program, theaters, eating places and different concessions, enterprise partner- ships for e-book publishing, and the Smithsonian TV channel. Some employees members on the Smithsonian are federal authorities staff whereas others are supported by non-public sources of income (Smithsonian Establishment, n.d.).

If the road between nonprofit organizations and for-profit companies is typically diffi- cult to tell apart, the road between the nonprofit sector and authorities itself can also be increas- ingly blurry. One third of the income of charitable nonprofits (33 p.c) comes from

Chapter 2 | Overview of the Nonprofit Sector 21

authorities grants and funds for providers below packages similar to Medicare and Med- icaid (Unbiased Sector, 2016a). Some nonprofit organizations exist primarily as govern- ment contractors implementing government-funded packages. Nonetheless, some authorities businesses even have begun to faucet the non-public sector for help to complement the funds they obtain from tax revenues, together with two we handed on our journey round Washington, DC—the Nationwide Park Service and the Library of Congress. Each are businesses of the federal authorities which can be rising their efforts to lift non-public funds to complement authorities appropriations.

Some relationships interact all three sectors. For instance, automobile producer Subaru, a company, contributes autos to the Nationwide Park Basis, a nonprofit group, to be used within the parks managed by the Nationwide Park Service, a authorities company (Subaru of America, 2016). Additional complicated the panorama, there are for-profit corporations that look, really feel, and typically sound nonprofit-like in the best way they describe their missions, packages, and objectives. Some compete instantly with nonprofits engaged in comparable actions. Contemplate, for instance, the three objectives articulated by one group: “serving to authorities, serving individuals, enhancing outcomes.” That seems like the outline of a nonprofit group’s objectives, however it’s certainly drawn from the web site of MAXIMUS, a big for-profit company that manages authorities packages and maintains workplaces in numerous places world wide (MAXIMUS, 2019).

Clearly the strains between the for-profit, nonprofit, and public sectors of our society are typically troublesome to understand with out shut examination. As we are going to talk about later on this chapter, some have certainly turn out to be hybrids that function in a couple of sector without delay. The favored picture of a nonprofit group as a small band of volunteers aspiring to do good, working with minimal assets, serving individuals in want, and sharply distinct from enterprise and authorities is much from the truth of many nonprofit organizations at present. To grasp how we got here to the place we’re and make sense of the “sprawling and unruly assortment of animals” that’s at present’s nonprofit sector, we are going to want some understanding of the historical past that introduced us up to now—and maybe some highway maps to steer us by way of the “zoo” (J. G. Simon, 1987).

America’s Nonprofit Sector: A Historic Overview

The roots of America’s nonprofit sector lie within the historic traditions of charity, philanthropy, and voluntarism. Nearly all cultures and religions embody some emphasis on the impor- tance of service to others, which incorporates giving or voluntary motion. Kevin Robbins (2012) traces the origins of those traditions within the Western world to early Greek, Roman, and Judeo-Christian pondering.

The authorized foundations of America’s nonprofit sector are drawn from English regulation, particu- larly the Statute of Charitable Makes use of and the Poor Legislation, each handed in 1601. These legal guidelines clari- fied the connection between the British authorities and the Church of England, outlined the reputable actions to be supported by charity, and established a way to make the trustees of charitable establishments accountable (Hammack, 1998). The philosophy mirrored in these statutes influenced the event of U.S. regulation relating to nonprofits and remains to be mirrored in American authorized traditions.

Though their roots are historic, it’s in the US that the traditions of charity, philanthropy, and voluntarism have reached their most elaborated expression. As early as 1835, the Frenchman Alexis de Tocqueville noticed the distinctive propensity of Individuals to type “voluntary associations” to deal with social and political aims, which he reported in his well-known e-book Democracy in America (1838). Certainly, in a younger nation born in revolu- tion in opposition to the authority of the British authorities, voluntary organizations and establishments offered lots of the providers, from faculties to volunteer hearth departments. A sure distrust

22 Half I | Understanding Nonprofit Administration, the Nonprofit Sector, and Nonprofit Organizations

of presidency has been a pervasive and persevering with facet of American tradition and has pro- vided philosophical help for personal, voluntary initiatives all through the nation’s historical past. As we noticed in our tour of Washington, DC, there seems to be some blurring of the nonprofit sector and authorities in at present’s atmosphere. However it is very important acknowledge that the blur was even larger within the earliest days of the nation, when authorities supported church buildings, and church buildings sponsored lots of the younger establishments that served communities.

The beginnings of our trendy nonprofit sector lie within the early years of the 20th century. Amid the rise of nice wealth ensuing from the Industrial Revolution, charity and philan- thropy grew to become organized actions undertaken on a big scale. This was the time of nice philanthropists similar to John D. Rockefeller and Andrew Carnegie, who endowed universi- ties, libraries, schools, and different establishments throughout the nation. Carnegie’s essay, popularly referred to as the “Gospel of Wealth,” revealed in 1889, stays a basic assertion of the philosophy underpinning the American custom of philanthropy. Carnegie expresses the accountability of rich people to offer again to the society that has enabled their accu- mulation of wealth, saying, “The person who dies thus wealthy dies disgraced” (p. 664). Carnegie’s philosophy stays deeply part of American tradition, as evidenced by many modern entrepreneurs and buyers, similar to Invoice Gates and Warren Buffett, who’ve created charita- ble foundations with comparable expressions of obligation. Certainly, Gates and Buffet have been leaders in selling the Giving Pledge, a dedication by among the world’s wealthiest individuals to make use of the vast majority of their wealth to offer again to society. By 2019, the pledge had been signed by 204 people (Giving Pledge, 2019).

Carnegie additionally helped set up a distinction between the ideas of charity and philan- thropy. Though the phrases are sometimes used interchangeably, and philanthropy is typically used because the broader, encompassing time period, they describe two various kinds of giving. Charity is appropriately outlined as giving supposed to fulfill present particular person human wants or to alleviate present human struggling—for instance, to feed the homeless or support the victims of a pure disas- ter. It’s emotionally pushed and infrequently impulsive, as evidenced by the outpouring of items made by way of the mail, by cellphone, and on-line inside days of any pure catastrophe, similar to Hurricanes Michael and Florence in 2018, in addition to the lethal Camp Fireplace in California that very same 12 months. The web site GoFundMe ( offers a automobile for people to answer the crucial wants of particular people, reflecting equally charitable motivations.

Philanthropy, however, is a extra rational type of long-term funding within the infrastructure of society, seen, for instance, in items made to assemble new hospitals, endow universities, or create new charitable foundations supposed to exist in perpetuity. If the objectives of philanthropists are finally achieved, it’s debatable that the necessity for charity will likely be eradicated since there’ll exist establishments ready to fulfill any human wants that will come up. Nonetheless, within the imperfect world of the current, each kinds of giving are essential and complementary of their impacts.

Some writers, notably Robert Payton (1988), have outlined philanthropy to embody voluntarism (additionally known as volunteerism), calling philanthropy “voluntary motion for the general public good.” However most individuals would make a distinction. Philanthropy might contain giving cash from afar whereas having little or no involvement with the group or its beneficiaries, however volunteering implies a extra hands-on function.

However the traditional roots and lengthy historical past of charity and philanthropy in the US, the idea of a definable nonprofit sector, comparable with the for-profit and governmental sectors, is of comparatively latest origin. It dates to the work of the Fee on Personal Philanthropy and Public Wants (the Filer Fee, talked about in Chapter 1) from 1973 to 1975. The fee’s 1975 report, titled Giving in America, was the primary to charac- terize nonprofits as constituting a recognizable sector of society. The Filer Fee report got here at a time when the nonprofit sector was increasing, partially reflecting modifications in govern- ment coverage. The 1960s and early 1970s have been a interval of accelerating authorities spending on social packages, beginning with the Nice Society packages of President Lyndon B. Johnson. In

Chapter 2 | Overview of the Nonprofit Sector 23

many circumstances, authorities funds have been channeled to nonprofit organizations, which offered the precise providers. “Certainly,” Lester Salamon (2012b) observes, “a lot of the trendy non- revenue sector as we all know it took form throughout this era as a direct end result of expanded authorities help” (p. 22). Within the 1980s, below President Ronald Reagan, federal spending for a lot of social packages was sharply lowered. Because the 1980s, there additionally has been a change within the type during which federal help is offered, with essential implications for the man- agement of nonprofit organizations. The shift has been away from direct grants to nonprofit organizations and towards offering support to people within the type of voucher-type subsidies. This occurred, for instance, in well being care, the place Medicare and Medicaid reshaped the indus- attempt. And it additionally occurred in increased schooling, the place authorities funds going on to col- leges and universities diminished whereas support directed to particular person college students and their households elevated. This created a brand new technology of scholar customers and reworked increased edu- cation establishments into aggressive, advertising and marketing organizations. The shift was additionally illustrated within the welfare reform laws of 1996, which introduced competitors to many areas of human providers. This empowerment of people as customers by way of direct subsidies to them has compelled nonprofits to compete for buyer not solely with different nonprofits but in addition with for-profit corporations which have entered fields that have been beforehand the unique protect of the nonprofit sector. For instance, the for-profit agency MAXIMUS, talked about beforehand, is now among the many nation’s largest managers of Medicaid and the Youngsters’s Well being Insurance coverage Program. Future modifications in authorities funding, in each scale and methodology, are at all times pos- sible and would have an inescapable impression on the nonprofit sector.

Adjustments in authorities funding additionally account partially for the rising commercializa- tion of the nonprofit sector itself, the elevated want for skilled nonprofit administration, and the calls for that nonprofits display larger accountability and outcomes. Nonprofit organizations comprise an important and rising sector of our financial system and society, however questions on their effectiveness and accountability are matters of nationwide dialogue and debate. There are even occasional challenges to the tax exemption of nonprofits, particularly these which can be extremely commercialized.

Trying to find a Widespread Vocabulary

The nonprofit sector is so numerous and its construction is so advanced that it may be complicated, and there are numerous methods during which individuals perceive it. Numerous understandings are mirrored in the truth that there are a number of phrases by which the sector is recognized.

As Thomas Wolf (1999) factors out, describing an elephant as a “non-horse” would appear to most individuals an unsatisfactory definition (p. 19). However the time period nonprofit group actually refers to at least one factor nonprofit organizations don’t do, somewhat than capturing a lot about what they’re or the varied packages and providers they provide to society. One factor nonprofit orga- nizations don’t do is distribute earnings to particular person homeowners within the type of dividends or use these earnings to reinforce the wealth of householders by way of the rising worth of the enterprise.

Nonetheless, it is very important dispel any misunderstanding that nonprofits can not earn earnings. Nonprofits can and do earn earnings, however these are outlined as merely an extra of rev- enues over bills. Certainly, one well-known examine (Chang & Tuckman, 1990) discovered that, opposite to what many theories may predict, nonprofit managers do attempt to earn earnings and construct up the belongings of their organizations. However these earnings have to be retained throughout the orga- nization and ultimately used to additional its packages somewhat than enrich people personally. In contrast to firms, nonprofits can not distribute their earnings to people within the type of dividends. This prohibition in opposition to the distribution of earnings, additionally known as the nondistribu- tion constraint, is one defining attribute of nonprofit organizations, however it’s clearly not the defining attribute. Certainly, by this slim commonplace, the Division of Protection and

24 Half I | Understanding Nonprofit Administration, the Nonprofit Sector, and Nonprofit Organizations

the state of New York is perhaps known as “nonprofits,” since additionally they don’t have any stockholders or homeowners to whom any revenue is distributed.

Whereas the time period nonprofit group or simply nonprofit is probably the most generally used time period for these organizations in the US, these nonprofits that work internationally are generally called nongovernmental organizations, though there isn’t a identifiable non- governmental sector with the identical that means because the time period nonprofit sector in the US. The time period nongovernmental is one which originated with the United Nations and displays partially the truth that many such organizations are performing government-like features within the international locations they serve and that almost all obtain a considerable portion of their income from govern- ment sources. Many are like arms of presidency working simply exterior the general public sphere. Like nonprofit, the time period nongovernmental defines organizations by what they aren’t—they aren’t authorities businesses. However this time period appears equally insufficient. It might apply as properly to profit-making corporations similar to Google and Amazon, that are additionally clearly nongovernmen- tal of their possession and authorized management.

Alternate options to Nonprofit

Whereas nonprofit is the time period mostly used to explain the sector, there isn’t a scarcity of alternate options that some individuals make use of. Every various has its personal virtues, and shortcom- ings as properly. It’s value inspecting these phrases with a purpose to perceive the totally different views and views that they mirror.

The time period impartial sector has some prominence since it’s also the title of the prin- cipal group representing the pursuits of nonprofits in Washington, DC—Unbiased Sector ( However the time period itself raises the query of “impartial from what?” Nonprofits are financially depending on assets derived from each govern- ment and personal donors and are topic to an rising array of state and federal regulation, so independence wouldn’t appear to seize their essence.

Some want the time period third sector, inserting nonprofits within the universe alongside the com- mercial financial system and authorities. The time period is correct by way of measurement—each the enterprise sector and authorities make use of extra individuals, generate bigger revenues, and account for a bigger share of financial output. However it additionally appears to suggest a rank order of significance, which might not agree with the values of many individuals, who could contemplate faith, schooling, the humanities, medical analysis, and different functions served by the nonprofit sector to be among the many most essential of human endeavors. Moreover, some students recommend that American society encompasses not three however 4 sectors: enterprise, authorities, the nonprofit sector, and households and communities. On this broader array, it turns into tougher to rank the sectors, besides by measurement, during which case households and communities would come first and the nonprofit sector could be fourth somewhat than third.

The time period charitable sector is typically used, however it’s opposite to the truth that char- itable items, whereas essential, are usually not the most important supply of nonprofit revenues. Neither is the time period synonymous with nonprofit sector, since there are organizations that qualify as nonprofit below the U.S. tax code however that neither search nor obtain any type of charitable help. That is true, for instance, of membership organizations which can be funded completely by way of dues and people nonprofits whose revenues could consist completely of grants and contracts obtained from authorities. Nor does the time period appear acceptable to embody main establishments, similar to Harvard College, which can be nonprofit however hardly in keeping with most individuals’s understand- ing of a charity.

Some use the time period voluntary sector. Certainly, that time period is a part of the title of one of many main educational journals within the subject, Nonprofit and Voluntary Sector Quarterly. Voluntarism is likely one of the foundations of the sector, and lots of organizations do certainly depend on volunteers,

Chapter 2 | Overview of the Nonprofit Sector 25

each as members of their governing boards and for not less than a part of their workforce. However the time period doesn’t mirror the truth that, in lots of nonprofits, paid employees members far outnumber volunteers. It additionally could perpetuate an inaccurate picture of nonprofits as universally small and amateurish of their operations, when in reality many nonprofits are substantial enterprises, administration of nonprofits has been a rising development.

The phrase tax-exempt sector, generally utilized by accountants, attorneys, and different tax specialists, is much like nonprofit. It identifies organizations completely by way of their standing below U.S. tax regulation. With just a few exceptions, nonprofits are exempt from paying federal earnings tax and customarily from state and native earnings taxes as properly. However, once more, the time period tax-exempt speaks to the authorized standing of such organizations and says nothing about what they really do. As we are going to talk about shortly, the sector encompasses quite a lot of organizations with few appar- ent similarities other than their tax-exempt standing.1,2

One other time period that has been proposed is civil society sector (Salamon, 2012a). There are lots of totally different definitions of civil society, and whereas “the nonprofit sector offers the orga- nizational infrastructure of civil society,” the idea itself is extra summary, together with “the sum of establishments, organizations, and people situated between the household, the state, and the market, during which individuals affiliate voluntarily to advance frequent pursuits” (Anheier, 2014, p. 9). And as Salamon (2012a) acknowledges, the time period civil society sector is like volun- tary sector in that it “emphasizes the citizen base” of those organizations, whereas most are usually not membership associations and lots of interact giant paid staffs (p. 13).

In latest many years, nonprofits have come to be more and more managed like companies, and a few undertake entrepreneurial ventures both instantly, by way of for-profit subsidiaries, or with for-profit companions. Some individuals have adopted the time period social enterprise to embody non- earnings which have a social goal however make use of business rules of their technology of income (Social Enterprise Alliance, 2019). Though the time period social enterprise is usually asso- ciated with those that particularly advocate organizations working like companies and under- taking efforts to extend revenues from business actions, it might be argued that the time period captures the optimistic essence of all non-public organizations having a social function, maybe higher than nonprofit. Like corporations, nonprofits carry collectively individuals, assets, and purposeful effort in pursuit of a mission, and so they more and more function with plans, objectives, and established standards for fulfillment—they’re certainly enterprises. However their missions relate to social functions somewhat than to the enrichment of personal people. Had been social enterprise to turn out to be a normal designation for all such organizations, the sector that comprises them maybe then could be known as the social sector to distinguish it from enterprise and authorities. That time period is certainly utilized by some individuals, however it has not gained common acceptance and the extra frequent desig- nations of nonprofit group and nonprofit sector are typically used on this e-book.

Noting the rising variety of organizations that function below each nonprofit and for-profit authorized varieties, typically known as hybrid organizations, some authors have recommended that there could also be an rising fourth sector, encompassing organizations that mix the options and strategies of each varieties (Fourth Sector Group, n.d.). Some new kinds of organizations have developed in alignment with this idea of the fourth sector, which will likely be mentioned additional later on this chapter. (This use of the time period fourth sector shouldn’t be confused with the idea mentioned earlier during which households and communities are thought-about a fourth sec- tor of society along with enterprise, authorities, and nonprofits.)

Dimension of the U.S. Nonprofit Sector

There are greater than 1.5 million tax-exempt organizations in the US which can be reg- istered with the Inner Income Service. That doesn’t embody all spiritual congregations or smaller organizations that aren’t registered; in the event that they have been included, the overall quantity

26 Half I | Understanding Nonprofit Administration, the Nonprofit Sector, and Nonprofit Organizations

could be bigger (McKeever, 2018). These organizations serve a variety of functions. Some are “public-serving” and others are “member-serving,” phrases that will likely be defined additional later (Salamon, 2012b, p. 7). The most important group is the charitable nonprofits, labeled below 501(c)(three) of the Inner Income Code, numbering roughly a million (McKeever, 2018). These embody lots of the public-serving organizations that everyone knows—hospitals, museums, faculties, schools and universities, orchestras, youth organizations, and nonprofits that present a variety of human and social providers. One other vital quantity, about 84,000, consists of these labeled below part 501(c)(Four) of the tax code (McKeever et al., 2016, p. three). This part of the tax code does embody some giant organizations which can be well being mainte- nance organizations (HMOs) or managed well being plans, however probably the most well-known organiza- tions on this class are distinguished by their advocacy on points, for instance, the Nationwide Affiliation for the Development of Coloured Folks (NAACP), the Nationwide Rifle Affiliation (NRA), and the Sierra Membership.

The nonprofit sector is a major factor of the U.S. financial system. In 2016, nonprof- its employed 12.three million individuals, over 10 p.c of the non-public workforce in the US. That totals twice as many roles because the nation’s transportation, wholesale, and finance industries (Salamon and Newhouse, 2019, p. 5). The sector paid over $638 billion in wages in 2016, which is 30 p.c greater than the retail business and 60 p.c greater than the development business (Salamon and Newhouse, 2019, p. 7). Thus, the nonprofit sector has a considerable financial impression.

The nonprofit sector has grown dramatically in latest many years. Sixty-four p.c of all public charities have been created since 1990 (McKeever et al., 2016, p. 157). From 2000 to 2013, the variety of staff within the nonprofit sector elevated by 23 p.c, in contrast with 5 p.c progress in authorities and fewer than 1 p.c in enterprise (McKeever et al., 2016, p. 29). The expansion is attributable to quite a lot of forces. As mentioned above, they embody the development that started within the 1980s towards the devolution of federal packages to state and native governments and outsourcing of the supply of many providers to nonprofits by govern- ments in any respect ranges, in addition to elevated philanthropy. As well as, some argue, the expansion of nonprofits has been fueled by a reawakening of the spirit of public service among the many present technology of Individuals. Occasions such because the assaults of September 11, 2001, and large-scale pure disasters, each in the US and elsewhere over the previous 20 years, have known as the nation’s consideration to human wants and the function of nonprofit organizations in serving to to alleviate human struggling. Elevated and speedy communication has additionally raised consciousness of human circumstances and occasions on a world foundation. The requirement of group service for commencement from highschool has uncovered a technology of younger individuals to the thought of volun- teering. Many corporations additionally arrange volunteer actions for his or her staff, extending the expertise to extra Individuals and making it much more part of American tradition.

In his influential, although controversial, 1995 article, “Bowling Alone: America’s Declin- ing Social Capital,” Robert Putnam mentioned a decline in civic engagement amongst Individuals, utilizing the metaphor of his title to recommend that Individuals have been changing into extra remoted and extra concerned in particular person pursuits than in collective pursuits and actions. But a decade later, Putnam and his colleague Thomas Sander reported that younger Individuals who wit- nessed the occasions of September 11, 2001, of their adolescent years gave the impression to be extra concerned in public affairs and group life than their older siblings. As Sander and Putnam (2005) be aware, “We’ll have to attend some years to see if this budding civic engagement blossoms, however it might show to be the most important civic shift prior to now half-century” (p. A23). It is going to nonetheless require time to establish what the long-term developments could also be, however there may be some proof that millennials do worth volunteering greater than some earlier generations (“Extra Millennials Worth Volunteering,” 2015). In 2017, greater than 77 million Individuals volunteered, offering providers that have been estimated to be value $167 billion (“Volunteer Hours Now Price,” 2018). Traits in volunteering are mentioned in additional element in Chapter 9 of this textual content.

Chapter 2 | Overview of the Nonprofit Sector 27

Differentiating the Nonprofit Sector

As we noticed from our imaginary strolling tour of Washington, DC, nonprofits are a broadly numerous group of organizations and establishments. Fortuitously, there are methods of bringing order out of the obvious chaos by inserting nonprofits into classes. Let’s evaluation a few of them and see if we will acquire a clearer image of this advanced enviornment. We are going to take a look at two methods of categorizing nonprofits in response to their functions and actions (the Nationwide Taxonomy of Exempt Entities and the Inner Income Service classifications); one mannequin that categorizes nonprofits in response to who advantages from their actions (public serving and member serv- ing); and one other that locations nonprofits alongside a continuum in response to the diploma they’re commercialized or use enterprise rules and strategies.

Nationwide Taxonomy of Exempt Entities

One approach to delineate the nonprofit sector is to make use of the Nationwide Taxonomy of Exempt Enti- ties (NTEE) Classification System (Jones, 2019). The NTEE divides the universe of nonprofit organizations into 26 main teams below 10 broad classes (Jones, 2019). These classes are primarily based on organizations’ functions, actions, and packages and are much like the business classification codes used to group for-profit corporations. Field 2.1 lists the 10 broad classes within the NTEE. The entire taxonomy, together with subcategories, is obtainable from the Nationwide Heart for Charitable Statistics (

Comparable methods of classifying nonprofits embody the North American Business Classifica- tion System (NAICS), which makes use of the identical breakout as for the for-profit sector. The Bureau of Financial Evaluation of the U.S. Division of Commerce and another businesses use a definition of “nonprofit establishments serving households” (NPISHs), which excludes nonprof- its that serve companies (McKeever et al., 2016, p. 7). The truth that totally different classification techniques are utilized by numerous businesses that acquire information on the nonprofit sector accounts partially for the truth that estimates of the sector’s measurement and impression are sometimes not constant. In addi- tion, present classification techniques could present a considerably inaccurate image. For instance, one examine that analyzed nonprofit mission statements concluded that the NTEE considerably undercounted the variety of organizations offering housing and shelter (Fyall et al., 2018).

Field 2.1 Nationwide Taxonomy of Exempt Entities (NTEE) Main Teams

Arts, Tradition, and Humanities Worldwide, International Affairs

Schooling Public, Society Profit

Surroundings and Animals Faith Associated

Well being Mutual/Membership Profit

Human Companies Unknown/Unclassified

Supply: Nationwide Heart for Charitable Statistics (2019).

28 Half I | Understanding Nonprofit Administration, the Nonprofit Sector, and Nonprofit Organizations

IRS Classifications

One of many causes that there are totally different definitions of the nonprofit sector is that classifica- tions of organizations are developed with various functions. For the Inner Income Service (IRS), what’s related is the exemption of nonprofit organizations from the company earnings tax, so the IRS locations nonprofits into greater than 30 classes (or “classifications”) that mirror the premise for his or her tax exemption (McKeever et al., 2016, p. 158). As mentioned beforehand, the very time period nonprofit pertains to the therapy of organizations below the U.S. tax code, so the IRS classifications are maybe probably the most typically talked about. Furthermore, from a sensible perspec- tive, how a company is classed below the tax code can also be of the best significance to those that govern and handle it, since this standing dictates lots of the guidelines by which the group should function. Nonprofits qualify for tax exemption below numerous sections of the Inner Income Code (IRC), relying on the character of their principal actions.

The tax code might be sophisticated, as you’ll know you probably have ever filed your personal private tax return. Determine 2.1 offers a approach to visualize the nonprofit sector and the way numerous organizations are labeled by the IRS. It first divides society into the three sectors:

Determine 2.1 Overview of the Nonprofit Sector

Supply: Primarily based on IRS Publication 557, revised January 2019 (retrieved from

Personal Sector (Enterprise)

Nonprofit Sector


501(c)(Four) Social welfare organizations

501(c)(three) Charitable nonprofits

Consists of civic golf equipment and advocacy organizations (e.g., Sierra Membership, NAACP, NRA)

Additionally consists of some giant HMOs and managed well being plans

Organizations are tax exempt, however items are usually not tax deductible.

501(c)(three) Personal foundations

Tax-exempt, apart from a modest excise tax on funding earnings

Most have one donor (particular person, household, company).

File Type 990-PF with IRS.

501(c)(three) Public charities


Items are tax deductible, inside sure limitations.

A small proportion are working foundations, however most are grant-making foundations.

Items are tax deductible, inside sure limitations.

Giant organizations with gross receipts of � $200,000 or belongings of � $500,000 should file Type 990 with IRS.

Smaller organizations could file Type 990-EZ or Type 990-N.

Spiritual congregations: Registration with IRS is voluntary.

Different tax-exempt organizations

Together with: 501(c)(5) Agricultural, horticultural, labor organizations (labor unions), farm bureaus, and so on.

501(c)(6) Enterprise leagues (chambers of commerce, commerce associations, and so on.)

501(c)(7) Social and leisure golf equipment (e.g., golf golf equipment, fraternities, sororities, and so on.)

Varied different small classes, together with veterans organizations, cemetery corporations, credit score unions, and so on.

Funding intermediaries

Embody grant-making non-public foundations and public charities that obtain help from the general public and reallocate funds to different public charities (e.g., United Approach, group foundations, institutionally associated foundations)

Obtain items from a number of sources (public help)

Chapter 2 | Overview of the Nonprofit Sector 29

authorities, nonprofits, and for-profit enterprise. The nonprofit sector then is split into 4 classes. The most important class consists of organizations which can be tax-exempt below Part 501(c)(three). There are two kinds of organizations in that class: public charities and personal foundations. Different organizations are exempt below Part 501(c)(Four). They’re referred to by the IRS as “social welfare organizations,” encompassing what many would name advocacy organizations, in addition to others. There are a selection of different tax-exempt organizations, clas- sified below numerous sections of the tax code, similar to labor unions, chambers of commerce, social and leisure golf equipment, commerce associations, and others. Whereas this latter group is tax- exempt, the organizations are usually not ones we generally take into consideration when the time period nonprofit is used. For instance, the Nationwide Soccer League (NFL) was tax-exempt as a commerce affiliation below Part 501(c)(6) of the IRC, a incontrovertible fact that was controversial till the league voluntarily relinquished its tax exemption in 2015 (Strachan, 2015). Regardless of the big selection of organi- zations which can be tax-exempt, most are usually not a spotlight of the dialogue on this chapter or on this e-book, which emphasizes the charitable [501(c)(3)] and advocacy [501(c)(4)] organizations that almost all carefully align with the conception of the nonprofit sector that most individuals maintain.

Let’s take a more in-depth take a look at the 501(c)(three) and 501(c)(Four) organizations which can be the first sorts mentioned on this e-book. Though they’re fewer in quantity than the charitable non- earnings, this dialogue will begin with the 501(c)(Four) nonprofits, recognized to the IRS as social welfare organizations. We then will flip to an extended dialogue of the charitable nonprofits, that are the most important part of the sector.
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