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Tuesday, May 31, 2011

Nonprofit Management with a For-Profit Model? - Brian C.

Nonprofits are mismanaged and regularly wasteful in the use of their resources. At least this is the prevailing thought of many citizens and the corporate world. How much merit does this statement have? The article New and Improved?: A Case Study of Nonprofit Policy Governance by Ann C. Williams (Human Organization, Vol. 69, 2010) provides some interesting insights. The article analyzes the implementation of The Carver Method by a women’s human service nonprofit organization (the Center). The Carver Method embodies the for-profit world by focusing on the ends and not the means when it comes to board governance. According to Carver, the board should focus on goal setting and strategic policymaking. The board should then allow management to provide the means for reaching those goals without meddling. The board still has overall responsibility for evaluating the accomplishments of the organization. However, nonprofits cannot make decisions based solely on the bottom line. Many nonprofits provide human services, and their services must be tailored to the specific community. This means there are other ways to measure success that do not involve monetary profitability.

The attempt by the Center to implement The Carver Method ended with disastrous results. The executive director left in the middle of the downturn, and the board was left trying to keep the organization operational despite major financial losses. Was this the fault of the Carver Method? The case study does not directly link the Method to the troubles of the Center. There is no direct correlation to the implementation of the Method and the financial difficulties of the Center. The Center’s financial decline is mostly attributed to the cuts in funding for its social programs from the government. One contract alone made up 75 percent of the Center’s funding. It is difficult to say that the Carver Method was specifically responsible for the Center’s troubles given this dramatic and potentially disastrous loss of funding.

There were major faults by the board in the implementation of the Method. The board placed too much trust in the executive director. The board did not have an adequate understanding of the Method. If they did, they were derelict in their duty since the Method espouses that the board should be diligent in evaluating the accomplishments of the organization. The Carver Method, however, is not without fault. By focusing on only the ultimate goals, the board becomes removed from the operations of the organization. They are too reliant on the executive director for information. Unlike for-profit boards, nonprofit board members are recruited for more talents than just professionalism. Nonprofit boards have to be ambassadors to the community. They must be diverse demographically and functionally to ensure the organizations’ mission is met through the attainment of resources and program evaluation and monitoring.

While it is expedient to say that nonprofit boards would be better organized and managed if they followed the models of the for-profit sector, that is just not feasible. As the case study exemplified, for-profit governance models may provide some benefit to nonprofits, but they must be adapted to a different set of rules, expectations, and obligations that nonprofits must operate under. Success and monetary profitability cannot be the sole basis for governance, otherwise the term nonprofit would cease to be applicable. Nonprofits must always examine and evaluate the value of human capital based on the services the organization performs. While this may not be the way of the for-profit sector, it certainly doesn’t mean that it is in any way superior to the nonprofit sector.

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