Integrating Theory and Practice to Identify Contemporary Best Practice Factors in USA Not-for-Profits

Integrating Theory and Practice to Identify Contemporary Best Practice Factors in USA Not-for-Profits

Kenneth David Strang (APPC Market Research, USA; State University of New York, USA; University of Technology, Australia)
DOI: 10.4018/978-1-5225-2537-0.ch003
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This chapter used a critical analysis of the current NFP literature followed by a practitioner activity analysis using a purposive nonprobability sample of 880 NFP institutions. The current literature was integrated with the practitioner activity data to identify contemporary best practices. Eight categories emerged from the text analytics. Several insightful recommendations were provided to guide future NFP research as well as to overcome the limitations of this study. The results of this research should generalize to the key stakeholders of NFP organizations, namely to the managers and the board of director members, as well as to their volunteers and to other researchers focused on studying these entities. In particular, this research will be of interest to government social assistance agencies to inform policy development as well as to higher educational institutions for curriculum content.
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This chapter emphasizes effective business models and managerial strategies utilized by a not-for-profit (NFP) organization. The key word effective is based on the perspective of a standard or measurement scale.

Paradoxically, effectiveness is a perspective which is conditioned by social culture. Naturally a NFP in an emerging country has different priorities and perspectives as compared to a similar organization in a developed nation. As discussed in earlier chapters, NFP goals are usually different than those of a for-profit enterprise so another assertion is that NFP business models and managerial strategies differ. A constraint embedded within the literature is that most strategic management best practice studies were based on for-profit businesses. Likewise, NFP effectiveness differs based on organization size and mission. This chapter examines medium to large multinational NFP organizations. Thus, the findings should generalize across social-cultures, towards larger NFP entities rather than small associations.

On the other hand, the scholarly literature can define NFP effectiveness factors and identify the requisite techniques to measure that. This is the approach here. This chapter develops a NFP effectiveness model driven by factors grounded in the literature and it is subsequently modified by using data collected through theoretically-sampled case studies. Then unique interdisciplinary methods are explained to measure the effectiveness of not NFP. The models and strategic management methods proposed in this chapter should be of interest to established NFP organization members as well as to their stakeholders, including funding sources and consultants.

There are very few scholarly best practice studies focused purely on contemporary NFP organizations. Much of the NFP best practices were popularized in the post-industrial era of the late 1990’s or prior to 2012. More importantly a critical downfall of the existing NFP scholarly literature concerns its credibility. Some of the NFP best practice claims in the literature do not show a source or validation of effectiveness factors. This is an essential issue for NFP decision makers. NFP leaders and board of director members must be able to reduce risks by following best practices. This chapter articulates what those NFP best practices are.

This chapter articulates NFP best practices by citing the literature and by surveying effective NFP organizations in a USA sample frame. Generally accepted research design methods are applied to ensure the results are statistically reliable and will generalize to NFP stakeholders. Despite this optimistic value proposition, a practical limitation that readers need to be aware of right up front is that the authors are from USA so their western social-culture and case study organization data ultimately impact the ability of the findings to generalize outside of this context. The reason that we used a purposive nonprobability sampling technique of the USA population was that we used state accreditation as both a selection criterion and to designate the NFP as effective. State-registered NFPs contribute slightly under $1 trillion USD annually to the American economy (5.4% of the US GDP) according to their tax documents and they employ over 11 million people (more than 10% of the American workforce). We do not mean that the results of this study would not generalize to emerging nations but rather it is just that we can only statistically conclude that our hypotheses are supported for the given population. The ideas published in this chapter may be useful for a NFP stakeholder in any country or social-culture to consider.

Key Terms in this Chapter

Models: Models are analog or digital. Analog models are conceptual diagrams or figures intended to show how a system behaves. Digital models are operational versions of conceptual models, generally programmed in a language or in a spreadsheet, able to accept variables to provide an expected value in order to predict an outcome for planning purposes.

Strategic Planning: Planning for a business or entity that extends beyond one year, generally for three to five years. This type of planning will involve senior management and it will be focused on achieving the mission of the organization.

Not for Profit (NFP): A NFP may be a registered charity with a government department (most countries have this governance) or a NFP may simply an organization that does not have an owner or stock owners to share the profits – therefore in this latter situation a NFP shares the difference between revenue – expenses as a reinvestment into the organization or a distribution to the public.

Business Analytics: Business intelligence involves collecting data from competitors while business analytics may be the analysis performed on this data or on the data collected through the normal process of business (such as the transaction processing system records).

NCN: The National Council of Nonprofits (NCN) is considered an authority on the subject in USA – 46 of 52 states have a centralized NFP association that provides accreditation and best practices. The NCN have a detailed list of criteria used to accredit a NFP including solvency, community good standing, possessing a professional code of ethics, and other elements. We adopt the NCN designation of accredited as indicating a NFP is effective. The centralized NFP associations and the national council best practices are cited by the Internal Revenue Service as guidelines for registered charities under the 501[c][3] corporation tax legislation ( IRS, 2016 ).

NFP Effectiveness: In the research scope, if refers to a USA-based NFP being solvent, registered with state government, and accredited by the NCN. The NCN asserts that NFP effectiveness are best practices of accountability, transparency, prudent fiduciary oversight, legal, ethical, and responsible fundraising ( NCN, 2016 , para. 4). In that statement NCN refer to the how – the way things are done - as the measure of NFP effectiveness rather than the monetary outcomes which would be the emphasis of a for-profit business. NCN indicate that accredited NFPs do not fail otherwise they would lose their accreditation. Effectiveness for a NFP according to NCN and IRS generally means being ethical, accountable and transparent.

Enterprise Resource Planning (ERP): An ERP contains the chart of accounts for the organization and it links the separate operations models across all departments or functions of an organization. It facilitates strategic planning and business analytics by providing the data with links to the goals through activity based costing and using codes for all transactions.

Client Relationship Management (CRM): A CRM is an application used to contain customer profiles and sales forecasting data. CRM’s are intended to allow the organization to assist customers by using past transactional behavior, along with client-modified profile purchase preferences, to predict future needs and behavior. The CRM may be linked to other organizational software such as the ERP.

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