Toward a Theory of Organizational Fragility in the Nonprofit Sector

Wing, Kennard T.; Rooney, Patrick

doi:10.2139/ssrn.4256921

Cited by 2 publications

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“…In recent years, there has been a growing emphasis on nonprofit efficiency (Hung & Berrett, 2023a, 2023b, prompting this study to propose avenues for future research. By continuing to employ expense ratios, not only will measurement errors persist, but it will also perpetuate the misguided notion that these ratios reflect organizational efficiency (Gregory & Howard, 2009;Lecy & Searing, 2015;Tian et al, 2020;Wing et al, 2004aWing et al, , 2004bWing, Hager, et al, 2004). In reality, these ratios merely indicate how nonprofit organizations allocate their financial resources.…”

Section: Discussionmentioning

confidence: 99%

Does Revenue Concentration Really Bring Organizational Efficiency? Evidence From Habitat for Humanity

Berrett,

Hung

2023

Nonprofit and Voluntary Sector Quarterly

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Past empirical studies demonstrate a positive connection between revenue concentration and organizational efficiency. This supports the idea that concentrating revenue helps minimize transaction costs of nonprofit organizations, resulting in greater efficiency. However, this finding contradicts the belief that revenue concentration increases the risk of revenue volatility, leading to service delivery disruptions and reduced efficiency in nonprofits. Moreover, these studies have used an efficiency measure that might not be suitable. To address this, our study examines the relationship between revenue concentration and organizational efficiency using a more appropriate measure. Analyzing data from Habitat for Humanity, we discover a U-shaped relationship: nonprofits are most efficient when fully diverse or fully concentrated in revenue. These findings contribute to the ongoing debate on nonprofit revenue diversification, with significant implications for nonprofits. They also highlight the importance of using more appropriate efficiency measures in future scholarly research.

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Section: Discussionmentioning

confidence: 99%

Does Revenue Concentration Really Bring Organizational Efficiency? Evidence From Habitat for Humanity

Berrett,

Hung

2023

Nonprofit and Voluntary Sector Quarterly

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“…The original (unpublished) model can provide a much-needed map for research on the value of and popular aversion to overhead. The Nonprofit Overhead Cost Project ’s conceptual offerings arguably hit its pinnacle in May of 2004, when Ken Wing presented the project’s culminating ideas at the 3rd International Conference on Systems Thinking in Management (Wing, Pollak, & Rooney, 2004a; see also Wing, Pollak, & Rooney, 2004b). Later in November, Wing and Hager (2004) presented a simplified version of the May model, and it was this simplified version that Gregory and Howard branded as the starvation cycle and it became viral.…”

Section: Overhead Aversion and The Starvation Cyclementioning

confidence: 99%

Do Donors Penalize Nonprofits With Higher Non-Program Costs? A Meta-Analysis of Donor Overhead Aversion

Hung

Hager

2022

Nonprofit and Voluntary Sector Quarterly

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Disparate research on overhead aversion and nonprofit starvation can benefit from a conceptual model that explains their relationships. Following resurrection of such a model, we focus on one important piece: the relationship between overhead spending and nonprofit donations. Studies on this topic have produced inconclusive results. Our meta-analysis clarifies the relationship by synthesizing a sample of 30 original studies with 244 effect sizes. We uncover a negative association suggesting that donors penalize nonprofits with higher overhead costs. Moreover, our meta-regression models reveal that experimental designs detect higher donor aversion than studies that use other research designs and that amateur donors have more intense overhead aversion than professional donors. However, studies that measure administrative costs do not report more negative effects than studies that measure both administrative and fundraising costs. The overall contribution of the meta-analysis solidifies the conceptual link between reported capacity costs and funders’ giving decisions, a key arc in the nonprofit starvation cycle.

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Toward a Theory of Organizational Fragility in the Nonprofit Sector

Cited by 2 publications

References 0 publications

Does Revenue Concentration Really Bring Organizational Efficiency? Evidence From Habitat for Humanity

Does Revenue Concentration Really Bring Organizational Efficiency? Evidence From Habitat for Humanity

Do Donors Penalize Nonprofits With Higher Non-Program Costs? A Meta-Analysis of Donor Overhead Aversion

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