Financial Vulnerability among Arts Organizations: A Test of the Tuckman-Chang Measures

Abstract

In the past decade, nonprofits scholars have given increased attention to the topic of vulnerability and organizational demise. An early contribution to this literature wasFinancial distress is a common condition for many nonprofit organizations. Grants run out, or funders change their giving guidelines. Individual donor preferences change, or contributions are diverted to competing organizations. Government support declines, increases, and declines again. Sometimes, legal conflicts or fiscal mismanagement create financial shocks from which an organization cannot recover. Some organizations close as a result of financial distress, but some organizations recover. All else being equal, the difference between those that close and those that recover can usually be found in the idiosyncratic differences of management and financial arrangement.If we look back at any population of nonprofit organizations, we will see that some closed and some thrived. With a little work, we can probably determine some important differences between the two groups. However, these differences are practical only if they help us to look into the future and determine which nonprofits are currently vulnerable to financial distress. Prediction of distress is not only an interesting academic question but is also relevant to funders who want to spend their dollars wisely and managers who seek to keep their organizations viable.

Market Orientation and Organizational Performance in the Nonprofit Context: Exploring Both Concepts and the Relationship Between Them

“…A financially flexible NPO is one with access to equity balance (assets higher than liabilities), many revenue sources, administrative costs which could be cut without affecting programs' administration, and positive operating margins. Hager (2001) found that although those measures do not apply to all NPOs, they are good predictors of their survival or closure. Trying to encompass various measures we will call this dimension Financial Flexibility and Resource acquisition.…”

Toward a Romanian NPOs Sustainability Model: Determinants of Sustainability

“…However, as Lecy et al (2011) [94] have shown, rigorous impact assessment is rare in NPOs due to a lack of good impact indicators. In addition to mission completion, good financial performance has become more relevant to NPOs during the past decades [95,96]. Furthermore, commercialization of the non-profit sector has increased [97,98].…”

Beyond the Liability of Newness: Nonprofit Organizations in an Emerging Policy Domain

“…Alexander, 1998;Baum & Singh, 1996;Galaskiewicz & Bielefeld, 1998); new organizations are founded (Chambré, 1995); and existing organizations merge or die (Hager, 2001). The process of new births is particularly critical at the current time.…”