Nonprofit MANAGEMENT. Principles and Practice
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1 Nonprofit MANAGEMENT Principles and Practice Fourth Edition Michael J. Worth The George Washington University SAGE Los Angeles London New Delhi Singapore 1 Washiigton DC
2 Acknowledgments xvii Preface xix PART I. Understanding Nonprofit Management, the Nonprofit Sector, and Nonprofit Organizations 1 Nonprofit Management as a Profession and a Field of Study 3 A Revolution in Management 4 A Distinct Profession 5 Nonprofit Management as a Field of Study 8 Toward a Balanced Approach 11 Proceeding With Realism and Pride 13 Chapter Summary 14 Key Terms and Coneepts 15 Questions for Discussion 15 Suggestions for Further Reading 15 Books/Journafs 15 Articles 16 Websites 16 2 Overview of the Nonprofit Sector 19 America's Nonprofit Sector: A Historical Overview 21 Searching for a Common Vocabulary 23 Alternatives to Nonprofit 23 Size of the U.S. Nonprofit Sector 25 Differentiating the Nonprofit Sector 26 National Taxonomy ofexempt Entities 26 IRS Classifications 27 Salamon 's Anatomy 35 The Spectrum of Organizations 36 Emerging New Models 38 Commercialization and Tax Exemption 41 Implications for Nonprofit Managers 42 Chapter Summary 43 Notes 44
3 Key Terms and Concepts 44 Case 2.1. A Hybrid Organization: The GlobalGiving Foundation and ManyFutures Inc. 44 Case 2.2. A Double Bottom Line: Ben & Jerry's 45 Questions for Discussion 46 Suggestions for Further Reading 47 Books 47 Articles 47 Websites 47 3 Theories of the Nonprofit Sector and Nonprofit Organization 49 Explaining the Nonprofit Sector 49 Nonprofit Theory Across ibe Disciplines 49 The Failure Theories 51 Market and Government Failure 52 Nonproßts as Gap Fillers 53 Supply-Side Theories 54 Theories of Altruism and Giving 54 Theory of the Commons: An Interdisciplinary Approach 55 Changing Definitions of Private, Public, and Common 56 Explaining Nonprofit Organizations 58 Characteristics ofnonprofit Organizations 58 Nonproßts as Open Systems 60 Resource Dependency 62 Isomorphism 64 Explaining Nonprofit Organizational Structures 65 Organizational Culture 66 Chapter Summary 67 Note 68 Key Terms and Concepts 68 Case 3-1 The Smithsonian. Institution and the Catherine B. Reynolds Foundation 68 Case 3-2 The National Trust for Historie Preservation 71 Questions for Discussion 72 Suggestions for Further Reading 72 Books 72 Articles 72 PART II. Governing and Leading Nonprofit Organizations 73 4 Nonprofit Governing Boards 75 Types of Governing Boards 76 Elected Boards 76 Self-Perpetuating Boards 77 Appointed and Hybrid Boards 78 Advisory Boards and Councils 78
4 The Governing Board's Responsibilities 80 The Governing Board's Legal Responsibilities 80 The Governing Board's FunctionalResponsibilities 83 The Board and the CEO 87 Carver's Policy GovernanceModel 88 Chait, Ryan, and Taylor: Governance as Leadership 90 Herman and Heimovics: Psychological Centrality and Board-CenteredLeadership 92 Explaining BoardBehavior 93 Managing Nonprofit Boards 94 Role of the Chair 94 Governance Committee 94 Board Professionals 95 Nonprofit Board Effectiveness 95 Critics of Board Performance 96 The Search for Best Practices 96 The Challenge of Nonprofit Governance 98 Chapter Summary 100 Note 101 Key Terms and Concepts 101 Case 4.1 The American University 102 Case 4.2 The Hershey Trust 103 Questions for Discussion 104 Siiggestions for Further Reading 104 Books 104 Websites Executive Leadership 107 The CEO's Job 107 Management and Leadership 109 Overview of Leadership Theories 110 Transformational Leadership 112 Charismatic Leadership 114 The Effective Nonprofit CEO 116 Focus on Mission 117 Focus on the Board 117 Focus on ExternalRelationships 118 Share Leadership and Empower Others 118 Focus on Key Roles and Priorities 118 Use the "PoliticalFrame" 119 Right Person, Right Place, Right Time 119 Founder Syndrome 120 Executive Transitions 122 Leading Change 124 Chapter Summary 125 Note 126 Key Terms and Concepts 126 Case 5.1 A Change in Leadership at Habitat for Humanity 127 Case 5.2 Challenge and Change at United Way 128 Questions for Discussion 130
5 Suggestions for Further Reading 130 Books 130 Article 131 Websites 131 PART III. Managing the Nonprofit Organization Ensuring Accountability and Measuring Performance Defining and Ensuring Accountability 135 Mechanisms for Accountability 136 Requirements of Law 136 Seif-Regulation: Standards and Accreditation 138 Transparency 146 Measuring Performance 147 Financial Ralios 148 Benchmarking 150 Outcomes 151 Common Indicators 156 Balanced Scorecard 157 Social Retum on Investment 158 Blended Value 159 Performance Measurement: The Continuing Debate l6l Chapter Summary 162 Key Terms and Concepts 163 Case 6.1 Greg Mortenson and the Central Asia Institute 163 Case 6.2 Youth Villages 165 Questions for Discussion 167 Suggestions for Further Reading 167 Books 167 Articles/Report 167 Websites Developing Strategy and Building Capacity 171 Understanding Strategy 171 Strategie Flanning and Strategie Management 172 The Strategie Flanning Process 173 Flanning to Plan 175 Defining Mission, Values, and Vision 176 /Issessmg the Situation 178 Identifying Strategie Issues 180 Setting Goals 180 Developing Strategies 181 Setting Objectives 184 Writing the Strategie Plan 185 Developing an Operational Plan 185
6 Benefits and Limitations of Strategie Flanning 185 Building Organizational Capacity 186 Defining and Understanding Capacity 187 Capacity Building in Action 188 A Model for Capacity Building 189 Capacity and Organizational Life Cycles 191 Capacity Building Evaluated 193 Chapter Summary 193 Key Terms and Concepts 194 Case 7.1 New Hope Housing Strategie Plan Questions for Discussion 197 Suggestion«for Further Reading 198 Books/Brochure 198 Websites Collaborations, Partnerships, and Mergers 201 Growing Interest in Collaboration 202 A Continuum of Relationships 203 Exploring Collaborations and Mergers 205 Drivers of Collaborations and Mergers 206 Obstacles to Collaboration and Merger 207 Motivations 208 Culture 208 Egos 209 Brand Identity 209 Community orpolitical Objections 209 Costs 210 Conditions for Success 210 Driven by Mission 210 Commitment From Top Leadership 210 Trust 210 Relatedness 211 Process 211 Collaborations and Mergers Within National Nonprofits 212 Cross-Sector Collaboration 214 A Continuum of Cross-Sector Collaboration 214 Advantages anddisaduantages ofcscs 215 Obstacles and Conditions for Success 216 Achieving Collective Impact 217 Chapter Summary 219 Key Terms and Concepts 220 Case 8.1 N Street Village and Miriam's House 220 Questions for Discussion 224 Suggestions for Further Reading 224 Books 224 Articles/Report 225 Wehsites 225 Notes 225
7 9 Managing Staff and Service Volunteers 227 Human Resources Management 228 A.n Overview of Management Theories 229 Understanding Human Motivation^ 229 Masloiv's Hierarchy ofneeds 231 McGregor: Theory X and Theory Y 231 McClelland: Three Needs Theory 232 Myers and Briggs: Personality Types 232 Herzberg: Motivators and Dissatisifers 232 Molivalions of Nonprofit Staff 234 Life Cycles and Generations 235 Applying Theories to Managing the Nonprofit Workforce 236 Managing Volunteers 238 Types of Volunteers 239 Motivations of Volunteers 241 Volunteer Program Practices 242 Volunteer Management as a Career Field 249 The Future of Volunteerism 251 Chapter Summary 252 Key Terms and Concepts 253 Case 9-1 Getta Grant 254 Case 9-2 RitaWriter 254 Case 9-3 B b the Builder 255 Case 9-4 Myra the Volunteer Manager 256 Questions for Discussion 256 Suggestions for Further Reading 257 Books 257 Wehsites Marketing and Communications 259 Defining and Understanding Marketing 259 Marketing Serves the Mission 261 Marketing Means Action 262 Marketing as a Process 263 The Marketing Mix 263 Product 265 Place 265 Promotion 266 Marktsegmentation 2 66 Price 267 Defining the Exchange 269 Building the Brand 269 Integrated Marketing Communication (IMC) 272 Crafting an Effective Message 274 Crisis Communications 274 Online Media 276
8 Evaluating Marketing and Communication 277 Chapter Summary 278 Note 279 Key Terms and Concepts 280 Case 10.1 AARP 280 Case 10.2 Susan G. Komen Foundation 281 Questions for Discussion 282 Suggestions for Further Reading 283 Books/Journals 283 Websites Advocacy and Lobbying 285 Basic Distinctions 287 Overview of Lobbying Law 288 Option I: Substantiell Part Test 290 Option II: 501(h) Expenditure Test 290 Political Campaign Activity 292 Implementing an Advocacy Program 293 Continuing Issues and Debate 295 Chapter Summary 296 Note 297 Key Terms and Concepts 297 Case 11.1 Mothers Against Drunk Driving (MADD) 297 Case 11.2 CASA 298 Questions for Discussion 299 Suggestions for Further Reading 300 Books 300 Articles 300 Websites 301 PART IV. Obtaining and Managing Resources Financial Management 305 Definitions of Key Concepts 305 Overview of Nonprofit and Personal Finances 307 Nonprofit Financial Statements 310 Statement of Financial Position 310 Statement of Activities 315 Statement of Cash Flows 316 Statement of FunctionalExpenses 316 Using Financial Ratios 317 Managing Endowment Funds 319 Developing and Managing the Budget 321 Risk Management, Financial Policies, and Controls 323
9 Chapter Summary 325 Notes 326 Key Terms and Concepts 326 Case 12.1 Hull House 327 Case 12.2 Corcoran Gallery of Art and Corcoran School of the Ans and Design Questions for Discussion 330 Suggestions for Funher Reading 331 Books 331 Websites 331 Philanthropie Fundraising 333 Definitions and Distinctions 334 Motivations for Giving 336 Understanding Corporate Philanthrop}' 336 Foundation Giving 337 Motivations ojlndividuäl Donors 339 The Fundraising Process 340 Jdentifying Priorities and Developing the Case 341 Identifying and Qualifying Prospects 342 Cultivating Prospects 343 Soliciting the Giß 344 Acknowledging and Recognizing Donors 349 Stewarding the Gift and the Relationship 349 Individual Donor Life Cycles 350 Planned Giving 352 Campaigns 355 Managing Fundraising Programs 357 Advancement Services 357 Prospect Management 357 Fundraising Efficiency and Effectiveness 358 StaffPerformance and Accountability 359 Ethics and Professional Standards 359 Chapter Summary 363 Note 365 Key Terms and Concepts 365 Cases 13.1a-g Fundraising Ethics 366 Questions for Discussion 367 Suggestions for Further Reading 367 Books 367 Articles 367 Wehsites 368 Earned-Income Strategies 371 Why Earned Income? 372 Partnerships With Business 374 Licensing 375
10 Sponsorships 375 Cause Marketing 376 Operational Relationships 378 Putting Partnerships Together 379 Nonprofit Business Ventures 380 Identifying Business Opportunities 381 Feasibility Analysis and Business Planning 382 Earnecl-Income Strategien: Issues and Decisions 384 Sorting Out the Issues 385 Evaluating Opportunities Against Mission 386 A Continuing Debate 387 Chapter Summary 388 Key Terms and Concepts 390 Case 14.1 Minnesota Public Radio 390 Case 14.2 Aspire CoffeeWorks 391 Questions for Discussion 393 Suggestions for Further Reading 393 Books 393 Websites Government Grants and Contracts 397 Changes in Sources and Patterns of Support 398 Grants, Contracts, and Pees 398 Government Support: Opportunities and Challenges 401 Seeking Government Support 403 Identifying Grant Opportunities 403 Evaluating Grant Opportunities 403 Preparing and Submitting an Application or Proposal 404 Nonprofits in the Policy Arena 405 Chapter Summary 405 Key Terms and Concepts 406 Case 15.1 SEED Foundation 407 Questions for Discussion 408 Suggestions for Further Reading 408 Books/Reports 408 Websites 408 PART V. Special Topics Social Entrepreneurship and Innovation 411 Defining and Understanding Social Entrepreneurship 411 Social Enterprise School 412 Social Innovation School 412 History of Social Entrepreneurship as a Field 414 Theories of Social Entrepreneurship 415
11 Social Entrepreneurship Across Fietds and Around the World 417 Building High-lmpact Nonprofits 419 Sustaining Innovation 420 The Fulure of Social Entrepreneurship 421 Chapter Summary 422 Key Terms and Concepts 423 Case 16.1 KaBOOM! 423 Case 16.2 Hartem Children's Zone 424 Questions for Discussion 425 Suggestions for Further Reading 425 Books/Articles 425 Websites Governing and Managing International and Global Organizations 429 Definitions and Scope of International Organizations 430 International Philanthropy and Fundraising 432 International Giving 432 Global Fundraising 433 International Nonprofit Governance and Management 435 Managing Across Cultures 435 Governing International and Global Organizations 436 Structuring International NGOs 437 Chapter Summary 438 Key Terms and Concepts 440 Case 17.1 Medecins Sans Frontieres/Doctors Without Borders 440 Case 17.2 Haitian Earthquake Relief and Recovery 441 Questions for Discussion 443 Suggestions for Further Reading 443 Books 443 Websites 443 Conclusion 445 Appendix: Cases for Discussion New York City Opera Share Our Strength/No Kid Hungry The Y 464 References 471 Index 495 Aboutthe Author 511
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