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Major Functions of Nonprofits (6)

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1. Provide Services 2. Accommodate diversity 3. Undertake experimentation 4. Provide freedom from bureaucracy 5. Guard societal values 6. Advocate for the underrepresented

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Four types of goods

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1. Pure public goods 2. Pure private goods 3. Common goods 4. Toll goods

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Public Goods

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Provided by the government and must be non-excludable and non-rivalrous

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Non-excludable

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once produced consumers cannot be prevented from benefiting except at great cost

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Non-rivalrous

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Individual use does not reduce the amount available for use

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Example of Public Goods

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National Defense is for everyone in the country

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Private Goods

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generally provided by for-profit companies and must be excludable and rivalrous

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Excludable

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once produced only consumers with property rights can benefit and others can be prevented from benefiting at no or little extra cost

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Rivalrous

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Individual use limits and can even exhaust potential use by others

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Example of Private Goods

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Your favorite meal- it is exclusive to only the person who buys it and once you eat it, no one else can

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Common Goods

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are rivalrous and non exclusive

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Example of Common Goods

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fishing at a park; anyone can fish there but it is over fished, then there will be not as many fish to catch

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Toll Goods

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are exclusive and non rivalrous

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Example of Toll Goods

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Theatre; excluded by ticket prices, but generally attendees can enjoy the experience without taking away from someone else

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Externalities

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comsumpion of a good effects other people positive: you get a flu so others don't catch the flu from you negative: your smoking produces second hand smoke, potentially others lung health

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Free Riders

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those that benefit without paying (if everyone else gets a flu shot. I wont have to)

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Sector Failures

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1. Market Failure 2. Government Failure 3. Voluntary Failure

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Market Failure

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can not efficiently allocate or provide a good or service

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Government Failure

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Government cannot adequately provide a good or service or address a problem

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Voluntary Failure

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Nonprofit sector cannot adequately provide a good or service or address a problem

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Six major theories why nonprofits exist

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1. Public Good Theories 2. Theory of the Commons 3. Trust -Related Theories 4. Entrepreneurship Theories 5. Stakeholder Theory 6. Interdependence Theory

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Public Goods Theory 1

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Nonprofit organizations are gap-fillers; they exist as a result of private demands for public goods not offered by the public sector 1

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Public Goods Theory 2

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Public choice theory: Application of economic principles of behavior to government where the average citizen's demands on public spending take precedent 2

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Public Goods Theory 3

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Demand heterogeneity: However, we live in a diverse country and not every has the same demands 3

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Public Goods Theory 4

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Nonprofits: Established and financed by the voluntary contributions of citizens who want to increase the output or quality of a public good 4

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Theory of the Commons 1

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Nonprofit organizations provide common goods, or the goods and services that are between the market and the government. 1

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Theory of the Commons 2

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the goods cannot be consumed alone by one individual, but they are not of interest or benefit to all people. 2

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Trust Related Theory 1

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Based on information problems inherent in the goods or services provided and the trust dilemmas associated with them 1

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Trust Related Theory 2

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Information asymmetry: Trust-related theories are based on asymmetric information between supply and demand that could be exploited to the disadvantage of the customer or recipient 2

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Trust Related Theory 3

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The non-distribution constraint makes nonprofits appear more trustworthy than other sectors 3

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Trust Related Theory 4

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Nonprofits: The nonprofit form emerges when it is more efficient to monitor financial behavior, in particular the treatment of potential profits, than it is to assess the true quality of output 4

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Trust Related Theory 5

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Example: Nursing homes - many people choose nonprofit nursing homes instead of for-profit ones because they believe that a nonprofit nursing home puts the care of the patient above making a profit. 5

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Entrepreneurship Theory 1

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Nonprofit entrepreneurs carry out new combinations that drive large-scale, revolutionary change

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Entrepreneurship Theory 2

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Nonprofit organizations are started by those with vision and intuition, often motivated by religious zeal or strong secular values of idealism and social justice

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Stakeholder Theory 1

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The key stakeholders are those who feel so strongly about the quality of the service provided and protection form moral hazard that they decide to exercise control over the delivery of service themselves

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Interdependence Theory 1

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Government and the nonprofit sector are more frequently partners rather than foes 1

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Interdependence Theory 2

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Third party government: The use of nongovernmental entities to carry out governmental purposes, and the exercise by these entities of a substantial degree of discretion over the spending of public funds and the exercise of public authority 2

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Interdependence Theory 3

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Resource dependency theory: Choices and behavior of organizations can be examined by focusing on their interdependence with external organizations, including government agencies 3

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Management

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Transactional; generally concerned with day-to-day operations and making things work

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Governance

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Power and authority, policies and decisions in political economy & society Different from management: is more than a staff function Broader notion than government: Interaction between formal institutions and civil society While there is no obvious standard for evaluation, typical tools of assessment include legitimacy, efficiency, accountability, or representativeness

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Early leadership

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Focused on trait studies What characteristics leaders have (1940s) Intelligence Dependable Active in social situations Believed leaders born, not made Personality is a factor in differentiating leaders (1970s)

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Leadership styles

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The behavior of leaders Ohio State studies (1940s) Consideration Initiation of structure Uni. of Michigan Contribute to achievement of group goals Maintain or strengthen the group itself Managerial grid (Blake and McCanse) Concern for production Concern for people Next slide demonstrates the grid

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Situational Leadership (hersey and Blanchard)

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Leadership depends on the setting Different situations require different styles of leadership Leaders need to understand characteristics of organization and adapt

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5 ways in which leaders engage (kouzes and posner)

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Challenging the process Inspiring a shared vision Establishing other to act Modeling the way Encouraging the heart

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Transformational Leadership (burns)

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When leaders and followers engage with one another to higher levels of morality and motivation. Mutual support for common purposes Can evolve into moral leadership, resulting in actions that are consistent with the needs, interests, and aspirations of the followers, but that fundamentally change moral understandings and social conditions. Charismatic leadership:

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Charismatic Leadership

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a leader who behaves in certain ways that cause others to see him or her as charismatic through their vision, self-sacrifice, confidence, and persuasive appeals

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Value Based Leadership

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Servant leadership - begins with a commitment on the part of the potential leader to serve others Listen carefully Empathize with others Assume stewardship - accountable for what institutions do

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Servant Leadership

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begins with a commitment on the part of the potential leader to serve others

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Assume Stewardship

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accountable for what institutions do

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Roles of executive director

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Commit to the mission Lead the staff and manage the organization Exercise responsible financial stewardship Lead and manage fundraising Follow the highest ethical standards, ensure accountability, comply with the law Engage the board in planning and lead implementation Develop future leadership Build external relationships and serve as an advocate Ensure the quality and effectiveness of programs Support the board

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CEO focuses on

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Mission The board External relationships Key roles and priorities The political frame Right person, right place, right time

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Founder syndrome

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: The challenge some organizations feel when the founding director leaves the organization

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Succession planning

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Having a plan in place to help create a smooth transition when the top executive leaves the organization

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The Board

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holds ultimate responsibility for ensuring that the organization serves its mission and for the overall welfare of the organization itself

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Duty of the Board

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Due diligence: Exercising reasonable care and good judgment Duty against self-dealing: Disclosing and scrutinizing transactions with board members Duty of loyalty: Remaining faithful and loyal to the organization Duty of obedience: Being obedient to regulations, laws and organization's purposes Fiduciary duty: Ensuring financial resources are sufficient and handled properly

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Funcitions of the Board

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Appoint, support and evaluate the organization's top paid position (executive director or CEO) Establish a clear institutional mission and purpose Ensure sound financial management and the organization's financial stability Establish standards for organization performance and hold the organization accountable

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12 best practices for boards

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Constructive partnership Mission driven Strategic thinking Culture of inquiry Independent-mindedness Ethos of transparency Compliance with integrity Sustaining resources Results oriented Intentional board practices Continuous learning Revitalization

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Stakeholders the board reports to

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Members Supporters Beneficiaries and users, Paid and voluntary staff Contractors and cooperating organizations, Public agencies (e.g., oversight, regulatory agencies)

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Accountability

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To take responsibility for one's actions and behavior

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Mechanisms for acountability

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Legal Requirements Self-regulation Transparency

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Watch dog groups

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Monitor nonprofit organizations and provide information on accountability standards Can be controversial - are they measuring the right things? Examples Charity Navigator American Institute of Philanthrop

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Legal Requirements

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Registering for local, state, Federal agencies Filing IRS Form 990 (or equivalent, depending on size) Complying with local, state and Federal laws

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Self regulation

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Voluntary adherence to standards that focus on values such as honesty, integrity, fairness, respect, trust, compassion, responsibility, and accountability

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Transparency

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Communicating openly and honestly about your organization's dealings

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Read slide 5 and 6 of accountability

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ways in which accountability can be measured

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Leadership:

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A process; defines vision, articulates direction, sets goals, and influences other to achieve them together

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To whom are nonprofits accountable?

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To individuals and groups who a stake in the organization Those that receive services Funders (private and government) Employees Community Who is accountable for a nonprofit organization's actions? Executive director Board Volunteers Staff

Intro to Nonprofit Management chapters 3-5 – Flashcards

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