Nonprofit organizations in between the nonprofit and market spheres: Shifting goals, governance and management?

Abstract

In spite of the belief instilled by the New Public Management reforms that nonprofit organizations (NPOs) can benefit from more management, more measurement and more market practices, systematic knowledge on the organizational effects of NPOs incorporating business practices in their day‐to‐day functioning remains absent to date. This research note addresses this limitation by reviewing 49 research articles. The focus lies on the redefinition of nonprofits' mission and income streams, changing governance arrangements and shifting management practices. We find that, despite numerous detrimental effects cited in the literature, (a) generating commercial income can contribute to the financial stability of NPOs, and (b) hybridization towards the market domain can strengthen the organizational legitimacy of NPOs, suggesting that imitating for‐profit enterprises might contribute to nonprofit functioning in perception, rather than in practice.

Examining the influence of organizational characteristics on nonprofit commercialization

“…Although commercial income can contribute to the financial stability of NPOs by means of cross-subsidization and resource diversification (Guo, 2006;Toepler, 2006)-and thus, organizational survival (Gras & Mendoza-Abarca, 2014)-several studies warn for the risk of financial goals overriding the social mission (Khieng & Dahles, 2015;Salamon, 1993). In spite of this ambiguous character (Suykens, De Rynck, & Verschuere, 2018), it is often argued that nonprofit reliance on commercial income soared since the 1970s (McKay, Moro, Teasdale, & Clifford, 2015;Salamon, 1993). Commonly approached from a resource dependence perspective, this evolution is often attributed to financial stress resulting from increased resource competition as well as fiscal austerity (Eikenberry, 2004;Froelich, 1999;Kerlin & Pollak, 2011).…”

Validating a new total quality management‐benchmarking measurement model in an international humanitarian setting

“…Emphasis on customer satisfaction, continuous improvement, problemsolving processes, and employee empowerment (Zbaracki, 1998) lends TQM as one of the most obvious ways for organizations (profit and nonprofit) to reduce costs and enhance revenues (Horng & Huarng, 2002). In the same perspective, Suykens, De Rynck, and Verschuere (2018) argue the potency of systematic private-sector like measurement in nonprofit management. NGOs have borrowed several practices from the private sector, for example, benchmarking, strategic planning, supply chain, customer service/care, and others, suggesting that TQM should not be an entirely alien concept for voluntary sector organizations.…”

Construction of organizational identity claim and understanding in nonprofits: Evidence from Pakistan's voluntary organizations

“…R. Smith, 2014), mission drift (Doherty, Haugh, & Lyon, 2014;Levine Daniel & Galasso, 2019;Maier et al, 2016), and, often leading them away from their traditional identities (Binder, 2007). These multiple changes, consequently, lead these organizations to face unique challenges including choosing a legal structure, financing, distinguishing between customers and beneficiaries, and, organizational identity (Battilana, Lee, Walker, & Dorsey, 2012;Suykens, De Rynck, & Verschuere, 2018).…”

“…Brandsen, Van de Donk, and Putters () suggested that nonprofit sector in its current state seems to be something other than community, state, and market (Knutsen, ) with continuous collaboration within and outside sector with businesses and governments (Ihm & Shumate, ) causing complexity (Kendall & Knapp, ; Maier, Meyer, & Steinbereithner, ; S. R. Smith, ), mission drift (Doherty, Haugh, & Lyon, ; Levine Daniel & Galasso, ; Maier et al, ), and, often leading them away from their traditional identities (Binder, ). These multiple changes, consequently, lead these organizations to face unique challenges including choosing a legal structure, financing, distinguishing between customers and beneficiaries, and, organizational identity (Battilana, Lee, Walker, & Dorsey, ; Suykens, De Rynck, & Verschuere, ).…”