Whether accounting measures of administrative efficiency affect donations is an important issue for nonprofit managers. Prior research is inconclusive. Some studies find a significant negative relation, whereas others find no significant relation. The authors investigate a variety of reasons for the prior divergent results. The evidence is consistent with donors reducing contributions to organizations reporting higher administrative expense ratios when the ratios are presumably most relevant and reliable. The authors suggest that certain prior studies failed to find significant associations largely because their samples contained many organizations for which the administrative ratios were unreliable or not helpful for donor needs. Model specification issues also affect prior studies but are less critical than sample composition. When the authors replicate prior studies on samples containing established, donation-dependent organizations with nontrivial amounts of fund-raising and administrative expenses, they generally detect a significant negative association.
This article investigates the relationship between nonprofit board composition and organizational efficiency. Overall,we find a significant statistical association between the presence of major donors on the board and indicators of organizational efficiency. Although causality cannot be demonstrated,our findings are consistent with the Fama and Jensen (1983) conjecture that major donors monitor nonprofit organizations at least in part through their board membership. The multivariate analysis shows that the ratio of total expenses to program expenses is significantly and negatively associated with higher donor representation. Decomposing the total expense ratio into its two components,we find that different factors affect the administrative and fundraising expense ratios. The percentage of major donors on the finance committee,a key committee overseeing budgets and administrative expenses,is negatively related to the organization’s administrative expenses ratio. The presence of major donors on other board committees is not significantly statistically associated with nonprofit efficiency.
We study the relation between stability of the nonprofit organization's environment and its board structure and the impact of this relation on organizational performance from the perspectives of both Agency Theory and Resource Dependence (Boundary Spanning) Theory. The impact of board characteristics on organizational performance is contextual. Specifically, we predict and show for a sample of U.S. nonprofits that board mechanisms related to monitoring are more likely to be effective for stable organizations, whereas board mechanisms related to boundary spanning are more effective for less stable organizations. We find that the two theories are complementary and address different aspects of nonprofit performance, but the results are statistically stronger and more often consistent with resource dependence than with agency theory. Overall, this study supports Miller-Millesen's (Nonprofit and Voluntary Sector Quarterly, 32: 521-547 2003) contention that, because the nonprofit environment is often more complex and heterogeneous than the for-profit world, no one theory describes all tasks of nonprofit boards.Résumé Nous étudions la relation entre la stabilité de l'environnement de l'organisation à but non lucratif et la structure de son administration et l'impact de cette relation sur la performance organisationnelle dans les perspectives à la fois de la théorie d'institution et de la théorie de la dépendance aux ressources (partage de l'information). L'impact des caractéristiques de l'administration sur la performance organisationnelle est contextuel. Spécifiquement nous prédisons et montrons pour un échantillon d'organisations à but non lucratif des Etats Unis que les mécanismes d'administration liés à la surveillance sont vraisemblablement plus efficaces pour des organisations stables, alors que les mécanismes d'administration liés au partage d'information sont plus efficaces pour les organisations moins stables. Nous pensons que les deux théories sont complémentaires et parlent de différents aspects de la performance non lucrative, mais les résultats sont statistiquement meilleurs et souvent plus cohérents avec la dépendance à la ressource qu'avec la théorie d'institution. En somme, cette étude supporte l'affirmation de Miller-Millesen (Nonprofit and Voluntary Sector Quarterly, 32: 521-547 2003) que, l'environnement des organisations à but non lucratif est souvent plus complexe et hétérogène que le monde du lucratif, aucune théorie ne décrit toutes les tâches de l'administration des organisations à but non lucratif.Zusammenfassung Wir untersuchen die Beziehung zwischen Stabilität des Umfeldes einer gemeinnützigen Organisation und der Struktur ihres Vorstandes und den Einfluss, den diese Beziehung auf organisatorische Leistungen aus Sicht von Agency Theory und Resource Dependence (Boundary Spanning) Theory hat. Der Einfluss der Charakteristika des Vorstandes auf die organisatorische Leistung ist kontextabhänging. Speziell prognostizieren und zeigen wir für eine Beispielgruppe von US-amerikanischen gemeinnützig...
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