Nonprofit organizations (NPOs) have increasingly adopted business‐like practices as a response to institutional pressures. Some researchers argue that this development leads to mission drift, whereas others find a positive effect on organizational performance. However, the institutional pressures responsible for shaping the nonprofit sector have remained hard to distinguish from each other. This study explores the consequences of mimetic, normative, and coercive pressures, and looks at how they affect managerialism, organizational performance, and mission drift. We link these concepts through a structural equation model based on survey data and find that one aspect of managerialism, strategic behavior, is a key construct in influencing the response to isomorphic pressures and can positively affect organizational performance while holding off‐mission drift. Normative isomorphism even has a direct positive effect on organizational performance. Mission drift can take place when organizations are under coercive pressure without having strategies or internal processes in place. These findings imply that organizations should invest in their strategy and the professional development of their staff to increase organizational performance and avoid mission drift.

Nonprofit organizations (NPOs) often find themselves under pressure to invest all of their available income in mission-related activities rather than in capacity building. We investigate one factor that can influence the decision to invest in such capacity-building tasks: funding sources pursued by an organization. Drawing on the benefits theory of nonprofit finance, we take these funding sources as predetermined by an organization’s mission and propose an extension of the theory by linking it to economic multitasking theory, which states that organizations prioritize tasks that offer greater and more measurable rewards. Through regression analyses of survey data from Swiss nonprofits, we analyze the extent to which funding sources sought affect the amount of effort invested in three areas of capacity building: public relations, impact focus, and resource attraction parameters. The results support the predictions of multitasking theory by showing that the effort invested in certain capacity-building tasks is affected considerably by seeking a specific funding source. The effects are stronger for resource attraction-related tasks than for tasks closer to the service delivery of NPOs. The results indicate that an organization’s mission affects not only the available funding sources but also the extent to which an organization invests in its capacities, which can lead to a ‘lock-in’ status for organizations.

Financial management is vital to the survival of nonprofit organizations and their ability to fulfill their mission. Financial management is composed of a diverse range of tasks which require specific competencies for the success of an organization. This study explores different financial management competencies and their effect on nonprofit financial and organizational performance. Based on survey data from Swiss nonprofit organizations, a set of six distinguishable financial management competencies are derived and applied within a structural equation model. The study finds that self-assessed financial management competencies have significant effects on both the perceived financial and perceived organizational performance of nonprofits. The findings reveal that strategic financial planning competencies have the strongest effect on financial performance, and budgeting competencies have the strongest effect on the organizational performance. The study adds to the understanding of the role of different financial management areas and underlines the importance of administrative capacities for organizational success.