The values-driven organization: A model for not-for-profit strategic management
by Dan R. Ebener
St. Ambrose University
What a not-for-profit (NFP) organization values affects what they decide to do,
who they hire, what programs they invest in, where they are going and how they will
measure their success. This paper presents a model that places core organizational values
at the center of strategic management and suggests that values could be a possible link
between strategic planning and strategic thinking. In a values-driven organization, core
values are identified, articulated, communicated, activated and evaluated in a process that
infuses both instrumental and expressive values throughout the organization. Core values
become the foundation for strategic thinking and action, enabling strategic choices and
program decisions to be made using the best judgment of leaders and workers who are
committed to the stated values.
Those who provide financial support for NFP organizations are requiring a greater
sense of accountability, including clearer, more consistent and more objective measures
of success. These measures are to be spelled out to funders in the context of a strategic
plan. A review of the NFP literature reveals a great deal of attention to boards of
directors and their role in strategic planning and evaluation of the NFP organization. It is
the responsibility of the NFP board and management staff to create a strategic plan that
becomes the basis for proposals for funding. These plans are intended to provide
direction for future actions and subsequent evaluation of the effectiveness of the
organization. How effectiveness is measured is a particular challenge to NFP
organizations because of the non-pecuniary nature of the organization’s purpose.
This paper presents a values-driven strategic management model that could be
useful to NFP leaders, managers and board members. The model links core values to
measurable indicators of organizational success. The process begins with formal efforts
by the NFP board, staff and stakeholders to identify, articulate and communicate core
values, then to infuse them into the policies, practices and procedures of the organization
and align them with the programs, activities and behavior of the organization in ways that
can be measurably evaluated as consistent with the core values.
Strategic thinking and planning
Strategic management is one of the most important functions of an NFP board of
directors and management staff (Allison & Kaye, 1997; Board Source, 2004; Bryson,
2004; Drucker, 1990; Howe, 1995; Wilbur, 2000). Traditionally, the NFP sector takes
what Mintzberg et al. (1998) describe as the strategic planning approach to strategic
management instead of the less prescriptive schools of management such as the cultural,
learning, cognitive or entrepreneurial schools. Strategic planning is defined here as a
formal process of producing a mission and vision statement, designing strategies,
assessing the environment and setting measurable goals or objectives for future
implementation and evaluation. The emphasis in the planning approach is usually on the
executive staff, board of directors and strategic planners who design the strategies rather
than the leaders, managers and workers who implement the plan.
This author has led or participated in strategic planning processes for many
churches and about twelve not-for-profit organizations, including a homeless shelter, a
youth center, a liberal arts college, an economic development group, a Christian camp, a
community center, a girl scout chapter and several social service agencies. Many of these
included a strategic planning retreat where the plan was designed by a small group of
leaders. The weakness of the strategic planning approach, as suggested by Mintzberg et
al. (1998), is that it places too much emphasis on the intentional or deliberate strategy
instead of the realized strategy that emerges from the interaction between strategic
planning and strategic thinking. Strategic thinking is defined as “a process of
continuously asking questions and thinking through the issues in a creative way”
(Cusumano & Markides, 2001, p. 4).
NFP strategic planning is usually conducted as a designed process led by the
board of directors. The popularity of strategic planning in the NFP sector is due in part
to the mandate by foundations, corporations and other funders who require mission
statements, strategic plans, environmental assessments and measurable goals in
applications for funding. The advantages of a strategic planning approach include the
involvement of key stakeholders, the production of mission and vision statements,
environmental assessments and specific plans, including measurable goals and objectives
(Allison & Kaye, 1997; Bryson, 2004; Howe, 1997; Wilbur, 2000).
This author suggests that while the strategic planning process can be helpful, a
strategic thinking approach is also necessary. Too often, the separation between strategic
thinking and strategic planning begins with the segregation between the strategic planners
and the strategic thinkers, i.e. those developing the formal plan and those implementing
the realized plan. Formal plans often collect dust on a shelf rather than being
implemented by staff and evaluated by those who constructed it. This paper presents a
model that places core organizational values as a possible link between strategic planning
and strategic thinking. After identifying, articulating and communicating core values
through the formal strategic planning process, leaders in the organizations can take a
strategic thinking approach by using the core values as the basis for strategic decisions
and actions that emerge after the planning process is completed. This model activates
core values by aligning the values with the structure, strategies and culture of the
organization. Core values thus become a critical focus of the planning stage in order to
prepare the NFP organization to move from planning into strategic thinking and action.
The value of values
Core values provide direction to an organization as they clarify the sense of
business and purpose. They provide focus to an organization to help it set priorities.
They provide a basis for alignment of mission and vision of the organization to its
policies, behaviors and outcomes. Values can be a source of inspiration to all people
involved in an organization. Being clear about values provides an opportunity to create a
linkage up, down and throughout an organization.
Core values shed light on problems and allows for quick decision-making when
an organization faces a serious challenge, threat or opportunity. Blanchard and O’Connor
(2003) suggest that values are so important that it should be the full-time job of any CEO
to manage the values of the organization. Wilbur (2000) suggests that core values should
guide all initiatives and become the basis for evaluating the success of those initiatives.
Collins and Porras (1996) suggest that core values may be the source of competitive
advantage but that organizations should stick to their core values even if they become the
source of competitive disadvantage. For example, while Disney might find it profitable to
make a movie that was not wholesome, it would violate their core values to do so. While
this may be profitable in the short-run, the long-term results of such a strategy could be
damaging to the Disney name.
Whetten and Godfrey (1998) suggest that core values are a critical part of
organizational identity, which is viewed as “a generator of strategies, a screen, a filter, an
enabler, and an influence on strategy” (p. 116). They also suggest that “identity can be a
source of competitive advantage” (p. 121) and that widespread conviction to a clear set of
well-stated core values makes it more likely that identity will provide that advantage.
Pointer and Orlikoff (2002) state that “core values are the most important things for
which an organization should stand” (p. 25).
Allison and Kaye (1997) identify the three components of mission statements as
business, purpose and values. Values can also be incorporated into vision statements.
The main difference between mission and vision is that “visions imagine the future”
while “missions define the present” (Pointer & Orlikoff, 2002, p. 24). Or put another
way, “visions challenge, missions anchor” (p. 24). A values-driven organization is one
that includes values as a key component of both mission and vision statements and
infuses those values throughout the organization.
Values, morals and ethics
Values are a part of socialization in every culture (Schein, 1993). Everyone
brings other sets of values to discernment about organizational values. Examples include
American values of freedom and democracy, religious values of dignity and respect, and
cultural values like individualism (Hofstede, 2001). It is necessary to distinguish core
organizational values from these other sources of values, including:
• personal values, often based on family or religion;
• professional values, such as a code of ethics for a certain profession;
• social values, such as human rights or health care;
• cultural norms, which are widely held in a certain part of the world
(Menaghetti & Seel, 2001).
Allison & Kaye (1997) define organizational values as the “principles or beliefs
which guide an organization’s members as they pursue the organization’s purpose” (p.
36). Board Source (2004) defines values as “the organization’s guiding principles, a set
of common agreements about how the organization conducts itself and relates to its
various stakeholders” (p. 16). Menaghetti & Seel (2001) define values as “core beliefs
that motivate and guide our attitudes and actions” (p. 599).
It is also necessary to distinguish values from morals and ethics. Ethics refers to
the study of morals, customs and values, or a system of moral principles or philosophical
beliefs, while morals are about right or wrong behavior or decision-making (Craig, 1998).
Every organization must conform to the moral standards and ethical norms of its society.
These are the non-negotiable values of any organization. Whether to be fair and honest,
or whether to treat people with dignity and respect, is not a negotiable decision for any
organization. Menaghetti & Seel (2001) also differentiate core values from integrity,
which is defined as the “quality that creates compatibility between our values and
actions” (p. 599). Integrity is the moral basis of trustworthiness for any organization.
Core values, on the other hand, are negotiable. They are determined by the
leadership of an organization, whether intentionally or not. “One can make a value
judgment without committing oneself to or presupposing any moral judgment” (Singer,
1977, p. 5). Collins and Porras (1996) define core values as “the essential and enduring
tenets of an organization” (p. 66). Examples they present of core values include Disney -
imagination and wholesomeness; Hewlett-Packard - respect for the individual; Proctor &
Gamble - product excellence; 3M - innovation; Nordstrom - service to the customer.
Collins and Porras (1996) suggest that these are examples of core values that may
become the source of competitive advantage because they identify unique qualities.
The Association of Fundraising Professionals includes the following values in
its code of ethical principles: volunteerism, stewardship, cultural diversity, privacy,
freedom of choice and transparency (Menaghetti & Seel, 2001). The American
Volunteer Association includes these values in its statement of professional ethics:
citizenship, philanthropy, respect, responsibility, caring, justice, fairness and
trustworthiness (Menaghetti & Seel, 2001). Other values that often appear in NFP lists of
core values include: confidentiality, accountability, civility, understanding, diligence,
self-determination, mutuality, compassion, generosity, impartiality, equity, self-restraint,
autonomy and acceptance (Menaghetti & Seel, 2001).
Many of these values speak more to non-negotiable moral principles than the
negotiable core values that Collins (2001) suggests can bring uniqueness and greatness to
an organization. However, by honoring a moral value with special attention, it can
become a core value. Confidentiality, for example, should be a non-negotiable value of
every organization. But it is more likely to be a core value for an abortion clinic or a
blood bank than for a youth soccer league. However, if a mother approached a coach
with confidential information about her son and the coach violated that confidence, it
could raise questions about the moral integrity of the coach and the league.
Because all of the values listed by Menaghetti & Seel (2001) are applicable to
certain situations, NFP organizations might be tempted to include all of them in a
statement of values. However, the number of core values needs to be a short list.
Blanchard and O’Connor (2003) suggest that organizations limit themselves to
identifying only three core values. Collins (2001) suggests that distinguishing between
values and core values is one of the steps that takes an organization from good to great
but states that core values are “only those values about which you are so passionate that
you would never, under any conditions, give them up” (p. 201).
Many books have been written about what it takes for NFP boards of directors to
be effective (Board Source, 2004; Brinckerhoff, 1994; Drucker, 1990; Howe, 1995;
Light, 2002; Pointer & Orlikoff, 2000; Scott, 2000; Wilbur, 2000). In all of these books,
strategic planning is considered a major function for NFP boards of directors.
NFP literature is loaded with normative advice about the size and structure of
NFP boards, about the strategies and policies they should pursue, and about the various
roles and responsibilities of NFP boards and management for effective governance. But
it offers little empirical evidence to support these suggestions. This article reviews five
empirical articles about the role of core values in NFP strategic planning.
Empirical studies and values for not-for-profits
The first empirical study that looked at core values of NFP organizations is an
Australian study of two public and two Catholic school systems. It distinguishes between
expressive values that “are understood as more affirming of one’s humanity” and
instrumental values that “are more utilitarian and affirm more rational or economic
achievement” (Steane, 1999, p. 196). The author concludes that “public sector managers
emphasize instrumental values” such as effectiveness and efficiency while “nonprofit
managers are more likely, but not exclusively, to affirm expressive values” that are often
based on religious beliefs (p. 203).
In a second empirical article, Wilensky and Hansen (2001) used a grounded
theory approach that centered on extensive, semi-structured interviews with 28
executives in national or international NFP organizations based in the US. They found
that executives of nonprofit organizations differed from their counterparts in the for-
profit sector in that they see themselves as constantly balancing between business acumen
and “the spiritual expression of their mission” (Wilensky & Hansen, p. 235). Both are
necessary components for generating the funds and for recruiting staff and volunteers.
A third empirical article by Thyne (2001) reported an exploratory study of 18
visitors to a museum in Aberdeen, Scotland, using interviews to determine the values of
the visitors and categorizing these values into psychographic segmentation of values.
She concludes that museum visitors are motivated by a wide range of personal and social
values and that other NFP organizations need to do similar marketing research to
determine what values motivate different people to use that organization’s service.
The fourth empirical article studied the largest group of nonprofit theatre
organizations in the US. Voss et al. (2000) found that partnerships between these
organizations were more successful with value congruence between the partnering
organizations. Using a values inventory, the authors collected surveys from 97 theatre
managers. The authors suggest that “it is possible that values are particularly prominent
in nonprofit cultural industries. For example, individuals accept significantly less pay in
the nonprofit industry than they would for similar jobs in the for-profit sector due to the
intrinsic rewards of values fulfillment” (p. 344).
In the final empirical study reviewed for this paper, Cornforth (2001) presents a
model for evaluating board effectiveness based on an empirical survey of 737 charitable
boards. The model includes 2 input variables, 6 structural variable, 14 process variables
and 17 output variables for NFP boards. Of the five function variables that were
significant, regression analysis shows that the board function that was most significant
was establishing the organization’s mission and values. Of the four process variables
that were significant, the third most important was “the board and management share a
common vision of how it should go about achieving its goals” (Cornforth, p. 225).
Strategic planning and not-for-profits
While NFP boards continue to rely heavily upon the strategic planning approach,
for-profit businesses are reacting to the rapid pace of change and the increasing
complexity of organizations today by establishing new, more flexible and adaptable
approaches to strategic management (Collins, 2001; Cusumano & Markides, 2001;
Dudik, 2000; Eisenhardt, 1999; Mintzberg et al., 1998; Senge, 1990). What Cusumano
& Markides (2001) call the classic strategic planning model (the formal process of setting
intentional strategies) is becoming less common among for-profit businesses as
organizations realize the need for strategic thinking approaches, such as the descriptive
schools of management suggested by Mintzberg et al.(1998).
Increasingly, the literature in corporate management seems to be recognizing how
a clear sense of purpose, direction and values is more important than spelling out specific
strategies (Blanchard & O’Connor, 2003; Collins, 2001), or how strategic thinking is
more important than strategic planning (Cusumano & Markides, 2001). “The key is not
getting the right strategy but fostering strategic thinking” (Senge, 1990, p. 443). While
for-profit businesses are moving toward the less formal and more flexible approaches to
strategic decision-making (Eisenhardt, 1999), the literature on NFP boards and NFP
strategy illustrates that the strategic planning school continues to dominate the NFP
sector (Allison & Kaye, 1997; Board Source, 2004; Bryson, 2004; Howe, 1997; Kearns,
2000; Light, 2001; Pointer & Orlikoff, 2002).
Textbooks on NFP strategic planning reveal differences on semantics, definitions
and recommended steps for strategic planning, but generally agree that the NFP board
does the strategic planning in conjunction with the CEO and some top management staff,
with possible input from other stakeholders. The NFP managers and staff are responsible
for the operational planning and implementation of the strategic plan. The board’s role in
strategic planning generally includes crafting mission and vision statements, scanning the
environment to identify strategic issues, agreeing on a few priorities, setting some
measurable goals, and then holding the management staff responsible for operationalizing
and implementing the plan (Allison & Kaye, 1997; Bryson, 2004).
Family Resources, Inc. is a multi-function social service agency in Davenport,
Iowa that this author worked with in developing a mission, vision and values statement
(Family Resources, 2004). The Family Resources model is what this author recommends
when working with other organizations. They not only include values in both its mission
and vision statements, but also include a third statement in all major communications, a
values statement (www.famres.org). The Family Resources vision statement simply
reads, “A caring community of healthy families”. Its mission statement states, “Family
Resources strengthens families by engaging community resources and creating effective
solutions”. These two statements provide some indication of core values, i.e. care,
community, effectiveness, strength, and results. However, Family Resources makes their
values even more explicit with a values statement that is a companion statement.
Much has been said about the difficulty of measuring the effectiveness of NFP
organizations because “their primary mission is not the generation of profit” (Slivinski,
2002, p. 187). Kaplan and Norton (2001) agree that evaluative tools like the balanced
scorecard are more difficult for NFP organizations “given that financial success is not the
primary objective” (p. 134). They suggest that for NFP organization, that “mission
should be featured and measured at the highest level of its scorecard” (p. 135).
How to measure that NFP mission has created an enormous obstacle to empirical
research into the effectiveness of NFP organizations. Very few empirical studies provide
reliable measures of NFP success (Cornforth, 2001). In recent years, some funders across
the country, most notably United Way, have started to demand that service providers
identify and measure outcomes. Outcomes are viewed as results that signify changes in
the behavior of clients. Outputs are defined as units of service delivered, such as a
counseling session. Those who contribute to NFP organizations are increasingly
requiring that outcomes be measured to demonstrate that the outputs delivered are leading
to a change in the life of the client(s). The measuring of outcomes has become a critical
component of accountability for those who provide funding to NFP organizations.
What the researchers are discovering is that, like for-profit businesses, “For the
typical nonprofit organization, there is no single bottom line; rather, there are several”
(Murray & Tassie, 1994, p. 312). To evaluate NFP effectiveness, the organization needs
to have a clear sense about not only the outcomes of its clients, but also its ultimate goal,
which can be viewed as its mission or vision. Strategies are designed as the means to
meet this ultimate goal or the interim goals that can be measured as a sign of success in
the intended direction (Murray & Tassie, 1994).
By acting as an illumination of the ultimate goal and the interim goals, core
values can become the means toward the ends of accomplishing an organization’s
mission and vision. Hambrick and Mason (1984) state, “Organizational outcomes – both
strategies and effectiveness – are viewed as reflections of the values and cognitive bases
of powerful actors in the organization” (p. 193). Rangan (2004) recognizes that without
stated core values, NFP organizations tend to be pulled by the market instead of sticking
to its mission. Tannenbaum (2003) argues that aligning the decision-making process to
core values helps to “focus the organization, increase performance and productivity, and
develop a committed workforce” (p. 20).
Proposition One: Efforts by NFP boards and management staff to identify,
articulate, and communicate the core values of the organization will be positively
associated with successful outcomes.
One point of emphasis in not-for-profit management today is on successfully
reaching measurable results or outcomes. The number of services or programs delivered
– called outputs – can be one measure of success, but only if they are effective in
reaching the intended outcomes of these activities. Identifying what outcomes the
organization wants to reach should begin with the identification of core values because
they state what is valuable to the organization. For example, if the organization values
self-sufficiency, then encouraging clients to finish school, to obtain a new job or to
purchase a new home might be outcomes that are consistent with the core values.
The identification and articulation of the core values can take place in the context
of a formal strategic planning process. The communication of these values needs to be an
ongoing priority for the leadership of the organization as it shifts from strategic planning
to strategic thinking. Schein (1993) points out that espoused values, as an important
aspect of an organization’s culture, “must be shared or held in common” and should be
“articulated, publicly announced principles” (p. 372). Once an organization has
articulated its core values, they must be communicated across the organization.
This is the values process that the author designed for the United Way of the
Quad Cities as part of its strategic planning (See Figure One). Using 50 values listed in
Blanchard and O’Connor (2003) as a starting point, the author and the president of
United Way developed a list of 50 possible core values. Based on the suggestion of
Collins & Porras (1996), the intent of the process was to discover core values, not to
create them. Using an interactive process of one-on-one, two-on-two and four-on-four
discussions, and concluding with a nominal group process, the board identified 15 values
(in priority order) that best fit the organization. The same process was used for all United
Way staff and for agency directors of United Way funded organizations.
Based on all of these results, a committee of six people, chaired by the author,
drafted the final statement of six core values. Before they were approved, the author and
United Way president organized small group discussions at a board meeting, using six
case scenarios for the board to consider as the basis for “test-driving” each of the
proposed core values. The values statement, approved on February 3, 2005, included
these six core values: leadership, stewardship, results, caring, integrity and collaboration.
Proposition Two: Efforts by NFP boards and management staff to align their
core values with the policies, practices and principles of the organization will be
positively associated with successful outcomes.
Thomas Watson, Jr., son of the founder of IBM, stated in 1963, “Any
organization, in order to survive and achieve success, must have a sound set of beliefs in
which it premises all its policies and actions. Beliefs must always come before policies,
practices and goals. The latter must always be altered if they are seen to violate
fundamental beliefs” (Wickens, 1999, p. 34). Once the core values have been identified,
articulated and communicated, they must be put into practice (See Figure Two). To
activate core values, the values must be reflected in:
1. the formal and informal norms of the organization;
2. the policies, practices and procedures;
3. the behavior of the organization;
4. the measurable outcomes.
F u eTw : Th Va e - r e O g n a io
ig r o e lu s D iv n r a iz t n
Values N r s
om B h v r
e a io s O t o e
uc m s
Mi ssi on Poli ci es Pr ogr am s Result s
Visi on Pr acti ce s Acti vi ti es M e asur es
In describing organizational culture, Schein (1993) suggests that the
organization’s “broad policies and ideological principles that guide a group’s actions …
must be shared or held in common” (p. 372). The formal policies, practices and
procedures of an organization establish the standards and expectations for organizational
behavior. As Tannenbaum (2003) puts it, “The ability to align operating values with core
values determines the overall health and success of any organization” (p. 20).
Proposition Three: Efforts by NFP boards and management staff to align their
core values with programs, activities and other behaviors of the organization will be
positively associated with successful outcomes.
The philosophical debate about whether people act themselves into a new way of
thinking or think themselves into a new way of acting is relevant here. Depending on the
situation, both of these statements can describe human behavior. The process is cyclical.
But managers tend to think that stating what ought to be the values, goals or mission of
an organization will make it so. If leaders and managers wish their stated values to
become shared values, and if they want their core values to become the source of
competitive advantage, they must put these values into practice in a clear and consistent
manner (Wickens, 1999; Young, 2001). This helps people to act themselves into a new
way of thinking about the organization.
As described in Figure Two, the values of the organization impact the behavior of
the organization via the norms, policies, and practices of the organization. In this step,
the values are put into action in ways that can be measured as outcomes. As
Tannenbaum (2003) puts it, “core values are instilled in an organization not by what you
say but by what you do” (p. 20). For example, if an organization values empowerment or
participation in the sense of participative decision-making, then to utilize self-managed
teams might create value congruency between stated values and organizational practice.
If the organization values executive control, it may compromise some of that control
when empowering the self-managed teams (Yeatts & Hyten, 1998). But if the
organization says it values employee empowerment, but practices executive control, then
the organization has value incongruence and loses credibility. Consistency between what
is said and what is done about values is absolutely necessary.
Proposition Four: Efforts by NFP boards and management staff to align their
core values with the mission and vision of the organization will be positively associated
with successful outcomes.
The NFP literature emphasizes that developing crisp and clear mission and vision
statements are essential steps in strategic planning for NFP organizations (Allison &
Kaye, 1997; Bryson, 2004). The mission statement is written in the present tense to
describe what the organization does. The vision statement is written in the future tense to
reflect how the world (or that part of the world that the organization impacts) would look
differently if the organization accomplished its mission.
The mission and vision statements provide important guideposts to the
organization to establish its purpose and direction. The mission statement answers the
question of who we are and why do we exist while the vision statement answers the
question of what inspires us and where are we going (Tannenbaum, 2003). When core
values are reflected in mission and vision statements, the organization has a clearer sense
of purpose (mission) and direction (vision) to the organization. Clarity and consistency
about mission, vision and values should keep the organization moving toward its goals,
objectives and measures of success.
Allison and Kaye (1997) suggest that mission statements are composed of three
elements: business, purpose and values. The mission statement should answer the
question of what we do (business) and why we do it (purpose) in the present. Vision
statements paint a picture of how the future would look differently if the organization met
its mission. Values can be incorporated into statements of the present and the future.
Proposition Five: Efforts by NFP boards and management staff to align their
core values with the strategic goals, measurable objectives and strategies of the
organization will be positively associated with successful outcomes.
Figure Three illustrates the proposed relationship between values, strategic
choices, strategic decisions, strategic goals and performance measures. Strategic goals
are defined here as partial measures of success in accomplishing the organization’s
mission. Strategies are the means that are selected to reach those goals. Strategic plans
can align all of these statements and strategies with the core values.
1. identifying, articulating and communicating the organization’s values;
2. discerning what are its strategic choices based on an environmental scan
of threats, opportunities and challenges;
3. making strategic decisions about these choices, including prioritizing the
issues facing the organization;
4. setting specific and measurable strategic goals and objectives, including
action plans that specify who is going to do what by when;
5. establishing milestones, standards, and other measures of success to
determine whether your results are consistent with your stated values.
Alig e o Va s
nm nt f lue :
NFPStra g P nning
te ic la
P rfo a e
e rm nc Outcomes
Me s s
a ure Results
te ic Action Plans
Gao ls Strategies
te ic Issues
De is ns
te ic Trends
C ic s
ho e Opportunities
Proposition Six: If the intentional strategies of an organization are the means of
movement from the mission to the vision of the organization, and the formal and informal
culture and norms of the organization form the parameters of activity, then the core
values of the organization could become the link between strategic planning (intentional
strategies) and strategic thinking (emergent and realized strategies) by illuminating the
strategic choices and program decisions that decision-makers make after the strategic
planning process is complete.
The mission statement is a product of a strategic planning process and it defines
what the organization does. The vision statement is also a product of strategic planning
process and it suggests the future direction to the organization. A statement of core
values can also be a product of a strategic plan and it can provide insight into the ongoing
decisions that must be made as managers, leaders and workers in an organization try to
perform its mission and move in the general direction of their vision.
Strategic plans suggest strategies that are intended as the means of going from the
present to the future. But as changes occur, challenges emerge or new opportunities
present themselves, strategic thinking is also demanded for those responsible to putting
the strategic plan into action. Olson and Eoyang (2001) suggest that planning in this
context is “a set of processes to encourage, facilitate, and evaluate organization
experiments. Rather than predicting strategies, complex adaptive planning generates
emergent strategies” (p. 72). By illuminating the judgments, choices and decisions of
strategic thinkers in an organization, a clear sense of core values can be the link between
the intended formal strategies and those that emerge from strategic thinking.
By viewing values in this way, strategic planners can play the role of articulating
the values and strategic thinkers can use these stated values as the basis for ongoing
decision-making after the formal process of planning has ended. This frees the strategic
thinkers to conceive of new strategies during the process of implementing the strategic
plan, providing that those emergent strategies are consistent with the core values.
Using the model below (Figure Four) to illustrate this proposition, the author
suggests that this process allows strategic planners to articulate the mission (present),
vision (future) and values, to create the parameters (rules and norms) around the activities
of the organization, and to suggest possible strategies (intended) to move the organization
in the right direction (vision). The strategic thinkers are empowered to think outside the
box (intended strategies) but inside the circle (the parameters), creating new emergent
strategies that become a means that are consistent with the ends (the vision). This
consistency can be evaluated by the strategic planners and strategic thinkers based on the
consistency of organizational behavior with the core values.
Intended Strategy *
* Emergent Strategies Direction
Norms, Values, Rules
Philosophers have long argued that the means must justify the ends. If a religious
organization envisions world peace as their ultimate ends, but uses violence instead of
nonviolence to achieve those ends, their violent means will not be consistent with
peaceful ends, because the “means are ends-in-the-making” (Erickson, 1969, p. 398). If a
community organization envisions new leadership and values empowerment, but uses
command and control tactics to achieve those ends, their means will not be conducive to
their desired ends of developing leaders. If a homeless shelter envisions home ownership
and values self-sufficiency, but provides only emergency shelter without teaching
independent living skills, their means will not justify the ends they seek.
Similarly, if 3M values innovation and envisions new products being developed,
their means (strategies) must justify their ends (vision). In a values-based organization,
that would involve identifying and articulating those values which are conducive to
developing new products, communicating and infusing those values into the organization,
and empowering the workers to find creative means to establish the new product lines.
Workers might be encouraged to think outside the box, but inside the circle (Figure 4).
As Peters & Waterman (1982) put it, the excellent companies are tight on “rigidly
shared values” (p. 320) but loose on the means to reach the ends. Being loose on means
is not without risks; in fact, risk is inherent in any empowerment strategy. But given the
fast-changing world in which we live, the risk of sticking to intended strategies and not
freeing workers to experiment with new possibilities, or capitalize on new opportunities,
could be an even great risk.
In NFP organizations, employing values to judge the appropriateness of strategies
allows for empowerment of the strategic thinkers (those implementing the strategy) while
also establishing a basis for evaluation of those judgments by the strategic planners (those
who designed the strategy). Empowerment here refers the transfer of decision-making
power from the leaders who create the intended strategies to those workers responsible
for implementation. Such an approach to strategic management also promotes the kind of
continuous learning that many organizations seek (Senge, 1990). To summarize, this
approach requires the organization to remain firm on mission, vision and values but to be
flexible about plans and strategies while adapting to changes in the environment.
Proposition Seven: If set of core values – as articulated, identified,
communicated, activated and evaluated by NFP boards and management staff – are
balanced between instrumental (business) and expressive (purpose) values, then the
organization is more likely to obtain successful outcomes.
Financial results are only one consideration used to evaluate success in NFP
organizations. An even more important question for NFP organizations is whether the
mission has been accomplished. As defined by Allison and Kaye (1997), mission
includes business and purpose. The NFP organization must carefully balance its concern
for its finances with its passion for its social purpose. Just as the for-profit business that
uses financial profit as the sole indicator of success may be sacrificing long-term benefits
for short-term gains, the NFP organization that looks only at whether the bottom line
showed a profit in one fiscal year may be sacrificing opportunities to enhance its mission.
As Brinckerhoff (1994) points out, “Doing some things that lose money is part-
and-parcel of the service array that not-for-profits should continue to provide” (p. 236).
But on the other hand, if the NFP organization loses money on all of its programs and
services, it will no longer be able to fulfill its social purpose. Brinckerhoff (1994)
contends that NFP organizations must turn a profit in most years if they are to remain
viable, but those profits must be reinvested in mission-based efforts. “Nowhere, in any
state or federal law or regulation, does it say that a not-for-profit must lose money or
break even financially. In fact, in the IRS code, it says that ‘the profits of the corporation
shall be inure to the benefits of (various people)’” (Brinckerhoff, 1994, p. 238).
A careful balance between social purpose and financial success will lead to
mission accomplishment. This can be illustrated by the McMillan Matrix, a strategic
planning tool for not-for-profits (Allison & Kaye, 1997; Kearns, 2000). As illustrated by
Figure Five (below), at section six of the McMillan Matrix grid, the NFP organization
can be forced to make choices about providing services to fulfill its purpose in the
community when financial resources are insufficient to meet the need. Section six
describes an agency decision where there is a strong community need for a program, no
competitors are able to provide the service, it is a good fit for the organization’s strengths
and mission, but there is little or no funding available for the program.
Figure Five: The MacMillan Matrix
Potential to Attract Potential to Attract
Resources and Enhance Resources and Enhance Existing
Existing Programs: Yes Programs: No
Alternative Coverage Alternative Coverage
High Low High Low
Strong 5. Build up
Good Fit 1. Aggressive 2. Aggressive 6. Soul of agency
competitive the best
3. Aggressive 4. Build strength 7. Orderly 8. “Foreign aid or
competitive divestment or get out Divestment
position joint venture
Poor Fit 9. Aggressive Divestment 10. Orderly divestment
The MacMillan Matrix can provide valuable insight into decisions that not-for-
The section six program choice is described in the McMillan Matrix as “soul of
the agency” (Kearns, 2000, p. 123). Choosing to operate the program under these
circumstances “represents the soul” (p. 125) of the organization. It might mean that the
agency will lose money in the short run, but it will make meaningful strides toward
fulfilling its purpose and accomplishing its mission. These are the decisions that test the
soul of an organization. If the services needed in section six are reflective of the
agency’s core values, then meeting the community need may not only fulfill the
organization’s purpose but also help to accomplish its mission. Unwillingness to take
any risks by operating no “soul of the agency” programs might indicate a lack of
commitment to one’s mission, vision and values. NFP organizations that earn a profit
every year might be viewed as unwilling to accept risks for the benefit of the community.
However, long-term commitment to too many “soul of the agency” programs can
also mean financial ruin and threaten the mission of the organization. The organization
that goes to this extreme and never makes a profit will lose its financial viability. By
having some programs make a profit, such as those in section two of the McMillan
Matrix, the organization can “do more mission, meet more needs and be more responsive
to the ever-changing needs of your community” (Brinckerhoff, 1996, p. 4).
The organization that makes all of its decisions to enhance its social purpose
without considering the economic ramifications of those decisions may be strong on what
Steane (1999) called expressive values, or those related strongly to social purpose, but
weak on instrumental values, or those related to the business side of the organization.
The result of this extreme could be financial bankruptcy. On the other hand, the
organization that makes all of its decisions strictly on the basis of instrumental values
without considering the expressive values may lose its “soul”. The result of this extreme
could be moral bankruptcy.
Jeavons (1994) suggests that NFP organizations, especially religious ones, “are
usually distinguished by their values-expressive character” (p. 58). In fact, he states that
“the affirmation of moral values is as important as the completion of the task” (p. viii).
But as Wilensky and Hansen (2001) discovered, not-for-profit executives must find a
careful balance between business performance and mission fulfillment in determining the
success of the NFP organization. What is needed in NFP management is a balanced
approach to business and purpose, i.e. to instrumental and expressive values. This author
suggests that core values statements include instrumental, expressive and moral values.
What the NFP organization values affects what they decide to do, who they hire,
what programs they invest in, where they are going and how they will measure their
success. Core values must be identified, articulated, communicated, activated and
evaluated in a process that infuses the values throughout the organization.
The policies, practices, prcoedures and behavior of an organization are
determined by what the organization values. The bottom line indicators of success are
also dependent upon the core values. This is particularly true in NFP management where
the non-pecuniary nature of the organization’s purpose often makes the bottom line
indicators of success such a subjective decision.
As each of the empirical studies reviewed in this article point out, more empirical
research is needed to test the normative advice of the consultants and textbook authors of
NFP management. Further research might look closer into the content of these core
values and distinguish them, as suggested by Tannenbaum (2003), from operating values.
Further research is needed to further define, describe and distinguish between expressive
values and instrumental values. An interesting research question might focus on the
possible correlation between those board members who have extensive experience in for-
profit business and a possible commitment to instrumental values.
The NFP literature admits the fact that measures of success are difficult to
identify and quantify in organizations because they are not as strictly measured by
financial performance. Further research needs to identify quantifiable measures of
success that are associated with the accomplishment of mission. The propositions in this
paper need to be tested to explore how much difference can be measured in
organizations that attempt this values-based approach. Finally, further research could
explore what is the correct balance between instrumental and the expressive values in
NFP organizations, and what measurable differences that balance might create.
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