Approximately 90 million Americans volunteer services to the nearly one million organizations which comprise the nonprofit sector. With charitable contributions totaling around $143 billion, the nonprofit sector contributes an estimated $250 billion to the United States economy and has evolved as an increasingly important influence on contemporary America (Economist, 1998; Business Week, 1995). Given the size and impact of the nonprofit sector in our society, the level of managerial research focusing upon this sector is inadequate (cf. Kearns and Scarpino, 1996).
Two decades ago, Hofer (1976) and Wortman (1979), foreseeing that major environmental shifts would impact the continued success of many nonprofit organizations, lamented the lack of strategic management studies in such organizations. As predicted, the nonprofit sector has experienced a fundamental shift in environmental conditions (cf. Stubbs, 1998; Menefee, 1997; Wiesendanger, 1994; Oliver, 1991). Underlying this shift has been an increased demand for nonprofit services (e.g., homelessness, substance/domestic abuse) coupled with decreased support (e.g., less government subsidy, tax law changes, underemployment, donor skepticism). These evolving conditions have prompted increased attention to nonprofit management practice (e.g., American Heart Association, American Association of University Women, The Dallas Symphony, Dropping the Cow, National Private Truck Council (Wiesendanger, 1994)) and nonprofit management research (Kearns and Scarpino, 1996; Stone and Crittenden, 1994).
The objective of this study is to examine the domain of strategic planning processes as they exist in select nonprofit organizations and to determine any relationships that exist between organizational characteristics and strategic planning processes. As noted by Kearns and Scarpino (1996), there is an inadequate understanding of internal and external influences on the strategic planning process in nonprofit organizations. Such a delineation of influences should assist in the development of contingency theories that take into account differences in the private and nonprofit sectors (cf. Goold, 1997; Bryson, 1988; Steiner, 1969).
The remainder of this article is organized as follows. The first section discusses the strategic planning literature as it relates to the nonprofit sector. The second section describes the sample and methodology undertaken in the current research. The results of two separate factor analyses and the canonical correlation analysis of the relationship between organizational characteristics and strategic planning elements are discussed in the third section. We conclude with managerial implications and future nonprofit research directions.
Strategic Planning in Nonprofit Organizations
Strategic planning attempts to systematize the processes that enable an organization to attain its goals and objectives. There are five general steps in the strategic planning process: (1) goal/objective setting, (2) situation analysis, (3) alternative consideration and selection, (4) implementation, and (5) evaluation. Bryson (1988) suggested that the nature of organizations in the nonprofit or public sector prevents exact duplication of the private sector strategic planning process. More numerous stakeholders, conflicting criteria for performance assessment, public accountability, and the social service nature of nonprofit organizations tend to make replication difficult between sectors (cf. Chlala et al., 1995).
While research in the nonprofit sector has increased over the past two decades, two comprehensive reviews of strategic planning in nonprofit organizations have identified noticeable gaps in the literature. Stone and Crittenden (1994) noted five major areas that warrant increased attention: (1) strategy formulation, (2) strategy content, (3) strategy implementation, (4) performance, and (5) governance. Additionally, Kearns and Scarpino (1996) suggested that research attention should focus on: (1) the independent variable, (2) context and process, and (3) the dependent variable. …