The Relation between Contingency Factors and the Efficiency of NPOs

The Relation between Contingency Factors and the Efficiency of NPOs

María del Mar Gálvez-Rodríguez (University of Almería, Spain), Arturo Haro-de-Rosario (University of Almería, Spain) and María del Carmen Caba-Pérez (University of Almería, Spain)
DOI: 10.4018/978-1-5225-0731-4.ch015
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There is growing concern regarding the enhancement of NPOs´ efficiency as it is considered an excellent strategy to tackle the imbalance between greater social demand and the decrement of their resources, as well as the lack of credibility in the current best practices of the sector. Within a Colombian context, this paper sets out two main objectives. Firstly, an analysis of the efficiency of NPOs in reaching their social goals and, secondly an analysis of the influence of certain factors in NPOs´ efficiency. The main findings indicate that, in general terms, Colombian NPOs should make a greater effort in the efficient management of their resources. Moreover, younger entities and those with a national scope are shown to be the most interested in improving their levels of efficiency.
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Nonprofit organizations (NPOs) comprise a sector of public interest due to the social, political and economic impact of their activities. In relation to their social impact, NPOs cover governmental social deficiencies (García-Mainar & Marcuello, 2007; Baur & Schmitz, 2012; Omona & Mukuy, 2013) and enhance corporate social responsibility (Laasonen et al., 2012). With respect to their political impact, they are one of the main agents that exert pressure in favour of democracy (Jordan, 2005). With regards to their economic impact, NPOs´ contribution to Gross Domestic Product has increased, mainly through the number of employees (Salamon et al., 2012).

In general terms, their work is carried out thanks to the public and private funding that they receive and to the altruistic help of volunteers (Burger & Owens, 2010; Gugerty, 2010; Taylor & Doerfel, 2011). In this regard, it is worth mentioning that, with the economic crisis, they are assuming additional responsibilities, despite the increasing difficulty in fundraising (Clark, 2011). Hence, NPOs need to make visible the added value they provide to society in order to ensure their survival and maintenance.

Moreover, the corruption cases detected at an international level have brought into question the effectiveness of their programs, the efficiency in their organizational management, and the best practices of their organization's members (Gibelman & Gelman, 2001, Greenlee et al., 2007; Vázquez, 2011). Therefore, in addition to the economic crisis, these entities are also in a trust crisis which has provoked a serious distancing between NPOs and society (Pianta, 2013). Additionally, due to recent corruption scandals there is growing skepticism in the way in which these entities manage both the human and capital resources of the organization (Martín-Cruz, 2012). As the work of these entities is carried out thanks to the support that they receive from society, the efficiency of the sector is an issue that is acquiring more and more importance among NPO managers, board members, funders and regulatory bodies (Wei-Skillern & Silver, 2013). This term, efficiency, is defined as the rational use of resources in order to maximize benefits (García-Sánchez, 2010), however, focusing on the non-profit-making characteristic of the NPO sector, efficiency should not be perceived as the maximization of benefits but rather as the achievement of social goals (Epstein & McFarlan, 2011).

Key Terms in this Chapter

Truncated Regression: It is proposed for a dependent variable with 0 to 1 distribution range. Truncation is essentially a problem of range restriction. Under the normality assumption for the population, the error terms in the truncated regression model have a truncated normal distribution, which is a normal distribution that has been scaled upward so that the distribution integrates to one over the restricted range.

Fundraising: Process of soliciting financial support (usually as grants) for a non-commercial cause.

Efficiency: Level of performance that describes a process that uses the lowest amount of inputs to create the greatest amount of outputs. Efficiency relates to the use of all inputs in producing any given output. Efficiency is a measurable concept that can be determined by determining the ratio of useful output to total input. It minimizes the waste of resources while successfully achieving the desired output.

Nonprofit Organizations (NPOs): Associations, charities, cooperatives, and other voluntary organizations formed to further cultural, educational, religious, professional, or public service objectives. Their startup funding is provided by their members, trustees, or others who do not expect repayment, and who do not share in the organization's profits or losses which are retained or absorbed. Approved, incorporated, or registered NPOs are usually granted tax exemptions, and contributions to them are often tax deductible.

Data Envelopment Analysis (DEA): Linear programming based technique for measuring the relative performance of organizational units where the presence of multiple inputs and outputs makes comparisons difficult.

Social Goals: NPOs pursue charitable, cultural, educational or other public benefit goals.

Contingency Factors: Factors that influence a company's strategic, tactical, operational and contingency planning. The structure of the average organization has a plethora of contingency factors.

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