Two recent books offer alternative perspectives on the economic issues facing American nonprofit organizations. Paul Light’s study, Pathways to Nonprofit Excellence, searches for the elements of excellence in nonprofit management through an empirical approach based on complementary surveys of nonprofit “opinion leaders” and executives of nonprofit organizations cited for their excellence. Peter Frumkin’s On Being Nonprofit is a synthesis of theory and research, in an effort to provide guidance to nonprofits on their role in American society and the economy. Both books provide useful insights for nonprofit managers seeking to employ their resources effectively.
Perhaps the most important point Light makes is that the path to nonprofit excellence does not strictly track for-profit business practices. Indeed, he questions the unfettered competition for dollars that puts nonprofits on a treadmill, detracting their attention from mission impacts. Hence, he searches for the ways that nonprofits can become more “nonprofit-like” so as to best serve their intrinsic purposes. He quickly discovers that, in the eyes of contemporary experts, there is no one way to do this, although excellent nonprofits do seem to have in common a clear sense of identity as to why they are in business.
Light also uncovers some important, if unsurprising, economic practices correlated with high performance. These include investment in staff training, collaborations with other organizations, diversification of the funding base, maintenance of reserve funds, exploitation of electronic technology, and recruiting talented and motivated staff who are intrinsically rewarded by mission-related accomplishments. In all, Light finds that the tools of business can be helpful, but provide no panaceas. Nonprofits need to develop business practices best suited to them. Yet the strengthening of nonprofits’ management infrastructure, to facilitate their pursuit of sensible economic and management practices, remains a priority in the pursuit of nonprofit excellence.
Frumkin’s book is not specifically intended to inform management practice, but it is lucidly written and likely to offer insights to practicing nonprofit executives and trustees. The main contribution of the book is to synthesize various theories and concepts into a holistic picture of what the nonprofit sector is about, and where various types of nonprofit organizations fit in. This in itself is useful: Frumkin builds on Light’s observation that successful management requires a strong sense of identity. He assists in conceptualizing identity by offering taxonomy of the various generic nonprofit purposes. A nonprofit may be in business, according to Frumkin, to deliver certain kinds of services, to advocate in the policy arena and help build communities, to provide a vehicle for entrepreneurs to pursue social and commercial goals, and to provide vehicles for volunteers, donors and others to express their faith and charitable values. Frumkin’s taxonomy can help nonprofit leaders identify their own particular combinations of these purposes, so that they can position themselves in the marketplace and guide their resource decisions accordingly.
What is especially interesting about Frumkin’s discussion is his special emphasis on “supply- side” nonprofit sector theory. He argues that while nonprofit organizations are “pulled” by the demands of the general public, service consumers, and various other categories of contributors who benefit from nonprofit activity, they are also strongly pushed by the preferences of social entrepreneurs, value-driven donors and committed volunteers. In a for-profit marketplace, the forces of supply and demand would be equilibrated through conventional bargaining and exchange. In the nonprofit sector, however, achieving the appropriate balance between social demands and entrepreneurial supply is more subtle and difficult. This framework, while abstract, helps to highlight the special economic challenges for nonprofit management. Certainly, Frumkin’s analysis recognizes the intrinsic role that enterprising behavior plays in the success of nonprofit organizations, and the imperative for nonprofit leaders to engage the forces of social entrepreneurship. More broadly Frumkin’s analysis hints that each nonprofit organization must think of itself as a market facilitator -- exploiting and channeling a variety of supply side resources and motivations so that it can best address a mission that reflects social demand.
Paul C. Light, Pathways to Nonprofit Excellence, Washington D.C.: Brookings Institution Press, 2002 ISBN 0 - 8157 - 0625 - 1
Peter Frumkin, On Being Nonprofit, Cambridge, MA: Harvard University Press, 2002 ISBN 0-674 - 00768 – 9