Frumkin On Being Nonprofit

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Change in Net Worth - U.S. Households & Nonprofits

Peter Frumkin's On Being Nonprofit: A Conceptual and Policy Primer (Harvard University Press, 2005) is, as its title states, a primer on the nonprofit sector. It explores what Frumkin describes as the four important functions that define nonprofits—delivering needed services, promoting civic engagement, expressing values and/or faith, and channeling entrepreneurial activities. The book also looks at the interconnectedness of the nonprofit, business, and government sectors. It explores some facets of public funding, politics, nonprofit missions, and the tendency toward increasing commercialism.  This book provides a good general guide for nonprofit practitioners as well as explores many aspects of the nonprofit sector.

Frumkin divides the purposes of nonprofits into four functions:

1. Promoting civic and political engagement,
2. Delivering critical services within communities,
3. Providing an institutional vehicle for social entrepreneurship, and
4. Allowing the expression of values and faith.

The book looks at problems within each of these four functional realms as well as nonprofits' competitions and collaborations with the private sector and government.  The problems of nonprofits include politicization, vendorism, commercialism, and particularism.  The successes of nonprofits demand commitment to expression, engagement, entrepreneurship, and service. Balancing nonprofits' four functions while overcoming these challenges enable nonprofits to gain support and acceptance. The survival of nonprofits depends on the quality and relevance of each to its mission and its capacity to deliver value.

Peter Frumkin

Frumkin succinctly defines the nonprofit sector as “the contested arena between the state and the market where public and private concerns meet and where individual and social efforts are united.” (p. 7)

Over time, he explains that the boundaries between the public, private, and nonprofit spheres have changed and evolved. Nonprofits have contributed to democratization by opening societies and giving voice and collective expression opportunities to their constituents.

The main types of nonprofits (and their primary funding bases) are described as follows:

1. Hospitals (fee-based, stable and long-term)
2. Universities (tuition-based, stable, and long-term)
3. Mentoring programs (charitable contributions, fragile and transient)
4. Service organizations (e.g. elderly, poor, often rely on government funding)
5. Arts organizations (charitable contributions)
6. Licensing bodies (fee-based)
7. Private member organizations (non public funding)
8. Religious organizations (non public funding, stable and long term)

Frumkin lists the three defining features of nonprofits as follows:

1. They do not coerce participation (most fundamental feature, depends on good will, increases trust, moral “high ground”, closer to market than government),
2. They operate without distributing profits to shareholders, and
3. They do not have simple and clear lines of ownership and accountability.

These features can either make nonprofits weak, inefficient, and direction-less or, more likely, they give nonprofits unique advantages over other organizational types.  They enable nonprofits to service niches not addressed by the private sector or government.

Frumkin goes on to explore the politics of nonprofits and the motivations of nonprofits.  He sees some nonprofits as (generally) liberal –leaning (i.e., people willing to toil in low paying or voluntary positions, self-selected group that consist of untainted partners of government, and many political activists) or right-leaning (i.e., faith-based organizations, organizations promoting self-help and independence, and innovation factories).  Perhaps, however, this definition is more motivational than political.  In other words, some nonprofits are demand- or supply-side driven.  Demand-side nonprofits rely on the the instrumental character of their outcomes (obligations); supply-side nonprofits depend on the expressive quality of their activities.  Ultimately, Frumkin sees elements of both in many nonprofits, but he sees nonprofits' tradeoffs with respect to equality and efficiency as their central challenge.

Related articles

• IRS Definition of a Nonprofit Corporation (thinkup.waldenu.edu)
• Tom Sheridan: Nonprofits Must Stand Up and Fight for Themselves, or Perish (huffingtonpost.com)

Wolf on Managing a Nonprofit Organization

Thomas Wolf's book, Managing a Nonprofit Organization in the Twenty-first Century (Third Edition, Simon and Schuster, 1999), is an encyclopedic primer on nonprofit management that explains how to deal with organizational growth and change and that describes the challenges of working with volunteers, staff, and trustees. This book also deals with the emergence of profit-oriented ventures, changes in accounting rules, customer-orientation, and the role of leadership in nonprofit management.  From the point of view of the nonprofit practictioner, perhaps the most useful aspect of this book is its very helpful checklists at the end of each chapter. 

The author wrote this book because (1) he was concerned about the sustainability of nonprofits, (2) he wanted to articulate the difference between the nonprofit and for profit sectors, and (3) he wanted to address issues related to nonprofit leadership development and maintenance.

Wolf starts by describing what nonprofts are.  This includes:

1. A collection of over 1 million organizations in the U.S.
2. Organizationsa that range from small-budget grassroots organizations to universities with endowments in the billions of dollars
3. Five percent of all U.S, institutions and two percent of all U.S. assets
4. An employer of 15 million in the U.S.
5. A sector whose value is $200 billion annually (in 2000 dollars)
6. Ultimately, however, he concludes that there is no easy answer to "What is a nonprofit?" since this question has many forms of an answer.  Managing a nonprofit is more nebulous than the profit sector since the purpose is public service, measuring success or failure is challenging, and a nonprofit has no owner.

The defining characteristics of nonprofits include:

1. They are established to provide a public service (with a few exceptions, e.g., clubs, unions, condo associations).  They may provide services that are also provided by private sector (e.g., education, health services)—although they have no mandate of equity
2. Their governance must preclude self-interest and private gain
3. They are exempt from taxation
4. Gifts to them are tax deductible

Wolf describes the challenges facing nonprofits as:

1. Articulating a mission
2. Engaging in risk/survival analysis
3. Identifying/involving a constituency
4. Testing for "organized abandonment" (i.e., at what point, if any, has the mission been accomplished and/or is the nonprofit no longer relevant?)  This point, in particular, is interesting because it seems more theoretical than real since, in actuality, most nonprofits would simply adjust their missions rather than close (assuming they still have funds and/or funding sources).

Wolf believes that being a nonprofit board member is an honor…but more than an honor—a responsibility with legal obligations  It requires knowledge, commitment, and time.  Board members must determine mission, set programs, establish fiscal policies, provide resources, and appoint, select, and terminate the executive director/CEO.  Board members, in general, do not engage in the day-to-day operations, hire staff (other than CEO), or make detailed programmatic decisions (without staff consultation).

Wolf also recognizes that, while the board is essential for organizing the nonprofit, it cannot effectively fulfill its job without information, help, and support from its executive director. It is essential for the executive director to have a good relationship with the board by supporting their operations and administration. The following are responsibilities that the executive director has to the board:

1. Maintaining structure by sending out notices, providing agenda, and coordinating meetings.
2. Respecting them and facilitating discussion on important topics relevant to meetings and structure of a nonprofit.
3. Keeping them informed of decisions and changes.
4. Making sure he/she is not dominating the board and letting the board do their job effectively without too much intervention.

In addition, Wolf also addresses fundraising, planning, and managing information in nonprofits.  His book provides a comprehensive overview of nonprofits and nonprofit management.

Related articles

• Nonprofit Organization Start Up and Compliance (bjconquest.com)
• How to Create an Effective Non-Profit Mission Statement (crystalkeyministries.wordpress.com)
• Nonprofit Consulting Essentials: Management & Governance Consulting (forgrantwritersonly.com)
• Professionalism in Nonprofit Technology: Should My Techies be Accidental? (nten.org)
• Bringing a Network Mindset To Nonprofit Boards (bethkanter.org)
• Better Fundraising for Small Nonprofits (thenon-profittoolbox.com)

Glaeser on Nonprofit Governance

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Metropolitan Museum of Art, NYC

Edward Glaeser’s book, The Governance of Not-for-Profit Organizations: National Bureau of Economic Research Conference Report (University of Chicago Press, 2006), explores the pressures and challenges affecting nonprofit governance.   Glaeser starts his book by asking, “What makes nonprofits different?”  He answers that nonprofits have (1) tax privileges, (2) nondistribution constraints (i.e., they cannot distribute profits), and (3) no owners.  He observes that these unique features give nonprofits boards and CEOs unmatched autonomy.  Interestingly, though, this observation isn’t his main contribution.  Instead, he believes that nonprofits’ workers can also determine their firms’ preferences.

Edward Glaeser

Glaeser presents nonprofits in a model consisting of four types of actors—managers (the CEO and board of the nonprofit), workers, donors, and customers.  The role of the managers is to determine the nature of the production of the nonprofit, the workers carry out the production for the benefit of the customers, and donors provide the financing to enable these activities.  Glaeser’s thesis is that, because of weak incentives, nonprofits tend (usually) to orient their production and its details towards the interests of their workers.  Nonprofit managers' main motivation is prevention of embarrassment (which replaces maximization of profit in for profit firms).  Since workers are in the best position (usually) to cause embarrassment, the tendency toward satisfying workers is natural.  The book’s contributors look at four types of nonprofit operations—hospitals (doctors), art museums (curators), academia (professors), and the Catholic Church (priests)—from aspects ranging from fundraising to endowments to specific governance issues.  The overall picture that presents itself is one of a complex range of governance problems and observations—everything from nonprofits that maximize their employees’ interests to nonprofits that closely mirror their stated missions.  Thus, nonprofit government becomes a balancing act that must incorporate the interests of all four classes of actors.  Overall, the book is an interesting, challenging read.

Related articles

• Book Review: 'Triumph of the City' (businessweek.com)
• Triumph of the City, By Edward Glaeser (independent.co.uk)
• Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier and Happier (newstatesman.com)
• EDWARD GLAESER: The Country Needs to Unleash Entrepreneurs (lexingtonva.wordpress.com)
• A Conversation With Edward L. Glaeser (economix.blogs.nytimes.com)