DBA 940

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DBA 940

  1. 1. The values-driven organization: A model for not-for-profit strategic management by Dan R. Ebener St. Ambrose University Davenport, Iowa Abstract: 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. Introduction 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 1
  2. 2. 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 2
  3. 3. 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 3
  4. 4. 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 4
  5. 5. 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: 5
  6. 6. • 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, 6
  7. 7. 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. 7
  8. 8. 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). Literature Review 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 8
  9. 9. 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 9
  10. 10. 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 10
  11. 11. 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 11
  12. 12. 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. Measurable outcomes 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” 12
  13. 13. (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 13
  14. 14. 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 14
  15. 15. proposed core values. The values statement, approved on February 3, 2005, included these six core values: leadership, stewardship, results, caring, integrity and collaboration. Figure One: 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; 15
  16. 16. 3. the behavior of the organization; 4. the measurable outcomes. Figure Two: 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 16
  17. 17. 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 17
  18. 18. 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. 18
  19. 19. 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. Figure Three: 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 Stra g te ic Action Plans Gao ls Strategies Stra g te ic Issues Priorities De is ns c io Stra g te ic Trends Challenges C ic s ho e Opportunities Mission Values Vision 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 19
  20. 20. 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 20
  21. 21. 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. Figure Four: Parameters * * * Emergent Strategies *Values * * Intended Strategy * Mission Vision * Emergent Strategies Direction Purpose * * * Norms, Values, Rules Outside the Parameters 21
  22. 22. 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 22
  23. 23. 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) 23
  24. 24. 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 competition growth position competitor Weak Agency” 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- 24
  25. 25. 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 25
  26. 26. 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. Conclusion 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 26
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