Wednesday, February 15, 2017

Change in the Nonprofit Sector: Challenges and Solutions

Organizations operating in the nonprofit sector face the most complicated set of factors influencing change. Solutions to overcoming the challenges associated with enacting effective, positive changes must incorporate the unique elements of the nonprofit sector and some of the weaknesses therein, such as the challenges associated with nonprofit leadership, a restrictive economic model based on donations, and the difficulties associated with monitoring an organization’s progress towards accomplishing an altruistic ‘mission’.
            Leadership in the nonprofit sector, which typically involves an executive officer and a board of directors, can be difficult to execute efficiently and effectively. Who is truly in charge, the executive or the board chair? Nonprofit boards are composed of key community members who are not being financially compensated for their service, and executives are hired and overseen by this group of volunteers. The Jossey-Bass handbook notes that “boards retain their legal and hierarchical superiority (and sometimes must exercise it), whereas executives typically have greater information, more expertise, and a greater stake in and identification with the organization. Thus both parties are dependent on the other, but they are not exactly equals” (Renz et. al, p. 160). The uncertainty can lead to a reluctance to step up and provide leadership for the organization, which impedes a nonprofits’ ability to change and adapt.
            Nonprofits are less flexible due to the restrictive economic model under which they must operate: they must take steps to raise money in order to hire staff, provide services and continuing progress towards the mission. This requires that nonprofits convince stakeholders -and in particular donors - that they are using funds effectively and efficiently. Howe notes that organizations which solicit donations have to be fully accountable - “solicitations must be conducted on the basis of clear description of programs and without undue pressure (and) fundraising expenses must be reasonable and available to the public on request” (Howe, p. 4). If a nonprofit wants to change its mission or focus, it must convince a wide group of stakeholders that the change is worthwhile, and may lose donors who were attached to changed or discarded programs.
            Nonprofits can surely confront and overcome these challenges with solutions tailored to the sector. To address the leadership question, nonprofits should 1) enhance board performance assessment and 2) encourage executives to provide leadership to boards. Herman and Heimovies, who conducted a study on effective executive behaviors, found that “effective executives provided significantly more leadership to their boards” (Renz et. al, p. 162). Boards will become more invested in the organization as they engage in systematic self-assessments, which reveal areas where changes may improve the organization’s quality or performance. Executives can help drive this process, and can better direct organizational changes, only if they are willing to provide the necessary leadership to both staff and board alike. Nonprofits should also (3) seriously consider board composition, and (4) restrict board member terms to ensure new ideas and a constant stream of new opportunities. Nonprofits should take advantage of opportunities to recruit new board members with diverse skills and perspectives, which can help drive change. New board members coming into the fold might offer new opportunities or ideas for fundraising, and will not be tied down to past processes and systems. Nonprofits might also (5) look to partnerships with the governmental or private sectors to deal with the problems associated with their economic model. If a nonprofit partners with a profitable private enterprise operating in a similar issue area, financial security might allow for some flexibility in program adjustment or organizational direction. In sum, if nonprofits make deliberate, strategic decisions about governance and remain open to new partnerships, opportunities and ideas, they can overcome the inherent challenges and achieve that crucial aspect of organizational evolution and refinement: effective change.

Renz, David O. The Jossey-Bass Handbook of Nonprofit Leadership and Management. San
Francisco: Jossey Bass, 2010.

Howe, Fisher. The Board Member’s First Duty: Accountability. Nonprofit World, Vol. 18, No. 6.
December 2000.