British Statute of Charitable Uses-1601
Colonial American influenced by British Common Law
1. NPOs and the holding of property
2. Jefferson’s anti-corporation stance influences southern states
NPO growth affected by
1. Proliferation of established religions
2. Growth of cities
19th century charity work mostly through religious organizations
1. Fees primary form of financing
2. Government subsidies second
States control NPOs but have different views
States enforce the cultural norms well into the 20th century
1. Increasing affluence
2. “Great Society”
3. Civil rights movement
20th century experiences tremendous growth
As of 2004, NPOs employ 7.2% (paid) of American workers (Salamon &
Sokolowski, 2006, p. 3).
Why is Theory important?
Public Goods Theory
Established in 1975 by the economist Burton Weisbrod
Provides a rationale for the formation of nonprofit organizations to
provide public goods.
Weisbrod model uses two basic concepts : “demand heterogeneity¹”
and “median voter”.
Refers to the demand for public and
Provides a wide base for nonprofit
organizations to exist
Related to the increase in size of the
Represents the statistically average
Is attractive to government officials
Established by Joseph Schumpeter
Innovation and technological change of a nation comes from the entrepreneurs, or wild spirits
(New World Encyclopedia, 2011)
Innovation occurs when the entrepreneur is successful in one or all of the following:
- Creation of a new good or new quality of good
- Creation of a new method of production
- The opening of a new market
- The capture of a new source of supply for raw materials
- A new organization of industry (Schumpeter, n.d.)
REQUIREMENTS FOR SUCCESS
Ortmann and Schlesinger (2003) assert that there are three challenges
that must be met simultaneously in order to ensure success with
1) Non-distribution constraint must affect incentives within
the nonprofit firm in way that are compatible with
trustworthiness (incentive compatibility challenge)
2) Nonprofit behavior must not be adulterated by individuals
taking advantage of the perceived trustworthiness
3) Nonprofit status must be treated as a reliable predictor of
organizational behavior by consumers, when the
reputation of individual firms in not seen as reliable
(reputational ubiquity challenge) (Helmut, 2005, p.125)
Vastly different than business entrepreneurs in that the concentration is
shifted from monetary gains to social gains
Social entrepreneurship can be achieved by
◦ Adopting a mission
◦ Pursue new opportunities
◦ Utilize innovation, adaption, and learning
◦ Act boldly
◦ Exhibit a heightened since of the constituents
THE TRUST THEORY
So, What is the Trust Theory?
The Trust Theory is a theory which deals with
informational problems inherent in the goods or
services provided and the trust dilemma associated
with them (Anheier, p. 124). The information
problems associated with getting goods and
services from the provider to the client is said to be
what brought on the existence of the nonprofit.
THE TRUST THEORY
THINGS TO REMEMBER:
Provider and Client
Inherent Information Problems
Contract or Market Failure
The Need for Trustworthiness
THE TRUST THEORY
Let’s Look At It This Way!
THE STAKEHOLDER THEORY
So, What is The Stakeholder Theory?
The Stakeholder Theory is a theory which was developed
by Avner Ben-Ner and it is built upon he Trust argument
developed by H. Hansmann. According to the theory there
are many problems which may contribute to the consumer’s
inability to know whether their Provider of goods and services
is acting in a trustworthy manner “under normal contractual or
market mechanisms, thus resulting in contract or market
failure.” According to this theory or rational this is the reason
why nonprofits are born…”because some demand for trust
goods in market situations are not met by private firm”
(Anheier, p. 128-9).
THE STAKEHOLDER THEORY
In Other Words…
Interdependence Theory states, unlike other
nonprofit economic theories, that nonprofits
and the government are dependent on one
another (Anheier, 2005, p. 130).
Nonprofit sector and government are more
frequently partners rather than adversaries
(Anheier, 2005, p.129).
Nonprofits are good at the things government
isn’t good at and vice versa.
Nonprofits have significant deficiencies that
the government can address.
Importance of Interdependence
Theory for nonprofits
There is a risk of decreased
autonomy on both the nonprofit
(Saidel, 1991, p, 551).
By building relationships &
collaborations with government
bureaucracies, nonprofits have an
opportunity to influence
resources, expanded beyond
funding, solely, can make the
original funding go further.
Collaboration within the
framework of interdependence
theory could increase credibility
SOCIAL ORIGINS THEORY
Social Origins Theory states that the size and
structure of the nonprofit sector are a reflection of
its insertion, in a complex set of
relationships, classes, and regime types
(Anheier, 2005, p. 133).
That is to say, a nonprofit is a
reflection of social forces within the
structure its created.
SOCIAL ORIGINS THEORY
THINGS TO REMEMBER
Four different models or “regimes” of nonprofits
in Social Origins Theory, based on two key
dimensions; the extent of government social
welfare spending and secondly, the scale of the
nonprofit sector. The four models are:
Liberal—US & UK
Corporatist—France & Germany
Nonprofit Funding Cross-nationally
As Salamon illustrates
in Graph 1, nonprofit
funding comes from
private fees, private
giving and government
funding. On average
provides 39% of the
revenue for the
(Salamon, 2002, p. 31).
Graph 1. Percent of nonprofit funding, 1995
(Salamon, 2002, p. 31).
Questions remain with Social Origins Theory
How will Social Origins Theory explain the divergence of
nonprofits in each of the nonprofit “regimes”? Each country has
examples of all types of nonprofits.
What similarities and differences exist in cross-national nonprofits
(Salamon, Sokolowski, Anheier, 2000, p. 6)?
How will technology & social media increase similarities in
Is Social Origins Theory enough to explain the width, breadth, and
dimensions of the various nonprofits?
Is it possible for nonprofits in an “liberal model” to survive with
low government funding among a high number of nonprofits?
WHERE DO WE GO FROM HERE?
NEED FOR PROFESSIONAL
Six responsibilities of the board
Generating & managing funds
Ensuring work of the organization
meets basic legal & ethical standards
Keeping activities focused on the
Long-range planning & policy
of the CEO
Representing organization to the
Boards of Directors & Organizational
Skilled board members with available
time to devote to their duties [Brown
Thorough knowledge &
understanding of duties and
responsibilities [Cornforth 2001]
Training/orientation [Brown 2007]
Sharing a common vision towards
organizational goal achievement
Periodic reviews of teamwork
Constructive conflict resolution
Diversity that reflects the
MISSION STATEMENT [Bart, 1997]
Written to inspire
Provide clear &
Assists in guiding
resource allocation &
programs and goals
for the organization
Embrace creativity & change—Competition with profit organizations
1. Plan for sustainability
2. Use creative marketing and brand recognition techniques
Dealing with the economic downturn
1. By November 2010, 63 percent of NPOs reported decreases or stagnation in
contributions [Nonprofit Research Collaborative, 2010, p. 2]
2. Define core programs & constantly evaluate [NPW, 2003, pp. 20-21]
3. Alternative methods of financing [ibid]
4. Recruiting staff & board members experienced in financing and marketing
5. Form strategic alliances/mergers [ibid]
Create & maintain transparency in & outside the organization
1. Keep Sarbanes-Oxley requirements in mind
2. Create a trusting atmosphere for staff
3. Avoid conflict of interest
4. Create, review, maintain & disseminate conflict of interest & whistleblower
TIPS FOR FUTURE SUCCESS
OGY & MORE
1. Social networking
2. No need to reinvent the wheel;
use professional organization’s
informational & helpful Web
3. Better software, hardware &
Web sites for the organization
[Consider open source
4. Make it professional through
innovative funding sources
5. Don’t forget to train!
Graph 2. Social Media Outlets by Ethority.
Leadership development & succession
1. 2010 North Carolina study found that 69 percent
of CEOs plan to retire in next 5 years & only 23
percent have a succession plan [Carmen, Leland
& Wilson, 2010, pp. 97-98]
2. Executive directors often hold the corporate
history & stakeholder connections
3. Prepare & groom younger employers for these
positions now through leadership development
Attract and retain younger staff by:
1. Letting them know that you value their opinions
2. Finding ways to increase salaries & benefits to
attract experienced staff
3. Providing a more flexible working environment
with flexible hours and/or virtual work
4. Providing more opportunities for work-life
TIPS FOR SUCCESS CONTINUED
Derek Sivers-”How to
start a movement” is a
good video for new
managers and the
importance of valuing
followers. Please right
click on link, and click
“open hyperlink”. Derek
Sivers: How to start a
movement | Video on
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