Can Nonprofit Management Help Answer Public Management's "Big Questions"? (Big Questions/Big Issues)

Article excerpt

Introduction

Defining moments in academic disciplines often occur when their principal unanswered questions are specified. Such was the case with Robert D. Behn's frequently cited 1995 article in Public Administration Review, "The Big Questions of Public Management." In this article, Behn laid out what he saw as the three areas of inquiry with the potential to make public management most useful to the field and "scientific" in its method of inquiry:

1. How can public managers break the cycle of micromanagement, which inhibits public agencies from producing results?

2. How can public managers motivate people to work toward achieving public purposes?

3. How can public managers measure performance?

The relatively new field of nonprofit management saw similar contributions in 1993 and 1997 when Dennis R. Young, editor of Nonprofit Management and Leadership, defined the "key contemporary managerial and leadership issues facing nonprofit organizations." In his estimation, these issues are board governance, executive leadership, human resources management, development of financial resources, strategic adaptation to change, organizational structure, and performance measurement (see figure 1).

There is evidence that the nonprofit field journals have focused these issues well. For example, analysis of a sample of articles in the two most prominent nonprofit journals, Nonprofit and Voluntary Sector Quarterly and Nonprofit Management and Leadership, shows that 66 percent of the articles published in 1990-98 were devoted just to these seven areas. (1)

These areas in nonprofit management overlap considerably with Behn's big questions. Given that a significant literature addresses these areas, it stands to reason that the nonprofit management literature might be able to help inform public management practice and scholarship. I set out to make this case in this article. In the next section, I will review Behn's questions in public management and introduce the parallel questions in nonprofit management. Then, I will survey the main findings in nonprofit research that illuminate these questions especially well. Because my primary intention here is to make the case for the value of the nonprofit management literature to the academic or practitioner in public administration, I look at nonprofit research findings in far greater depth than those from public management. Thus, many important innovations in the latter field will receive short shrift. I assure the reader this is simply a function of focus and space, not of oversight.

Applying Lessons from Nonprofit Management to Public Management

The literature in three of these areas--board governance, human resource management, and organizational effectiveness--is especially well suited to illuminate Behn's questions. In these areas, nonprofit organizations often deal with "polar cases": those that exaggerate the particularly intractable elements of the issues seen in public management. I intend the following examples from the nonprofit literature to make this point. While the findings I outline from nonprofit scholarship do not represent an exhaustive literature review, they should give a flavor of the unique resource this literature represents for public management.

Nonprofit Board Governance and Breaking the Micromanagement Cycle

Micromanagement is a problem in the public sector that is primarily the result of what economists refer to as the "principal-agent problem." According to Behn, principals (such as elected officials) have trouble monitoring quality among agents (agency managers), resulting in extreme codification of behavior through legislation. This results in distrust, worse performance, more rules, and so forth. Natural extensions of this problem exist at a lower level in the public sector. For example, agency managers (principals) micromanage their employees (agents). Similarly, agency governing boards micromanage both public managers and their employees. In the absence of better techniques for

monitoring performance, breaking the cycle of micromanagement requires innovations to reduce mistrust and better define the proper roles of principals and agents at each level.

If there is an administrative hierarchy in which jurisdictions are more blurred than in the public sector, it is found in the nonprofit sector. The traditional role of nonprofit trustees provides an example: While nonprofit boards are responsible for high-level oversight of their organizations (as in the case of for-profit firms), they are also frequently called upon to perform functions that are arguably farther down the chain of responsibilities, such as fundraising, managerial coordination, and even volunteering (Oster 1995). That is, the principals are often agents themselves. (2)

This principal--agent confusion has spawned a body of literature on effective board governance that aids in defining the set of tasks and issues that are the most appropriate focus for trustees. For example, Stone (1991) shows that a board's understanding of organizational mission and its focus on high-level policy issues are associated with especially effective organizations. Green and Griesinger (1996) and Bradshaw, Murray, and Wolpin (1992) find the same thing, specifying a list of appropriate board tasks at the policy--not operational--level. Miller, Kruger, and Gauss (1994) show that effective boards tend not to be involved in the day-to-day administration of their organizations; rather, they intervene at lower levels and only in periods of crisis (usually in funding). These articles all advocate a focus on policy goals, leaving considerable latitude to the agents in their attainment. This provides a clear parallel with the practical recommendations of the New Public Management (Kaboolian 1998; Nagel 1997).

What provokes a crisis? A pattern that emerges in the research on board governance is the positive feedback between crises and micromanagement. Wood (1992) argues that a board's interest in an organization's bureaucratic procedures--to the exclusion of high-level mission issues--lowers board effectiveness and can lead to just the type of crisis that requires the board's attention to detail. The lesson taken from this is that crisis intervention by boards must be parsimonious so as not to provoke the very problem they are attempting to solve. The resemblance here to the public-sector cycle of micromanagement is unmistakable.

The primary difference between the nonprofit and public management literatures on micromanagement is that the latter has advocated relying on market forces to align incentives (Kettl 1997; Scott, Ball, and Dale 1997). In contrast, the former has developed a number of analytical tools specifically to codify proper trustee functions and to gauge the extent to which boards are successful in focusing on these functions. For example, Total Activities Analysis (Harris 1993) is used to define board roles in an organization, while the Board Self-Assessment Questionnaire (Jackson and Holland 1998) has been developed to measure board effectiveness. I will use the latter as a brief example of how a technique developed in the nonprofit literature might be used to help understand and combat micromanagement in the public sector.

Jackson and Holland's research begins with an assessment of the overall effectiveness of different boards with respect to six competencies:

* Contextual: The board understands the culture of the organization it governs.

* Educational: The board sees to it that members are informed about the organization.

* Interpersonal: The board fosters a sense of autocohesiveness for effective decision making.

* Analytical: The board has the capacity to apprehend and analyze complex problems facing the organization.

* Political: The board works to maintain good relationships between stakeholders to the organization.

* Strategic: The board shapes institutional direction.

Next, the authors structure a questionnaire to measure these competencies and administer it to the trustees of 34 nonprofits in different subsectors across the country. Among a number of interesting uses of the data, the authors compare the observed competency scores with several measures of financial success for each organization. The competencies that best predicted this success were contextual, educational, interpersonal, and strategic, while analytical and political competence were less predictive. This is a notable finding, in that the latter two competencies might be argued to represent the most "micromanagerial" of the six.

An instrument that captures the remaining four competencies (the contextual and strategic dimensions in particular) among public managers could be developed along the lines of Jackson and Holland's survey. Factor analysis could then be used to construct latent variables measuring the degree of an agency's managerial effectiveness along each dimension. Naturally, the contribution of each to quantitative measures of success would be interesting and useful information. Even further, however, the measures could be used for comparison among agencies.

This is only one suggestion among many possibilities for using a finding in nonprofit scholarship in the public management context to help get our arms around the micromanagement problem. It is especially germane to this discussion, however, as it ties in with the question of performance measurement.

In sum, although the role of nonprofit trustees is not identical to that of public-sector principals, it is clear there are useful similarities. For example, in both nonprofit and public management we might agree on the following lessons for understanding the micromanagement problem:

* Clarification of (and adherence to) an agency's mission is a critical function for principals.

* Intervention by principals at the agent level should be reserved for crisis situations. However, "crises" should be defined conservatively, as excessive intervention can actually provoke them.

Motivating Nonprofit Volunteers and Public-Sector Employees

Employee motivation is a second major challenge in the public sector. Behn characterizes the dilemma with the following public manager's lament: "How can you motivate anyone in the public sector? Everyone is protected by civil service rules. We can't fire anyone. We can't reward anyone. How can they expect us to get anything done?"

In part, this is once again a principal--agent problem (Moe 1984). Motivation requires knowledge of performance: A manager motivates employees by either rewarding excellent work or penalizing substandard work. Yet worker performance is difficult to monitor, creating incentives to shirk responsibilities. An environment in which employees are not properly motivated leads to what might be thought of as "Gresham's Law of Public Service": Bad employees drive out good ones. (3) Uncontrolled performance means uncontrolled morale, leading the cream of the workforce to exit.

But motivation goes beyond simple control of the workforce. It also involves inspiration to achieve "public purpose" with vigor. In the words of Leavitt and Johnson (1998), "clarity of mission, vision and values rather than clarity of job tasks is an essential aspect of post-bureaucratic organizations." Understanding this involves attention to the personal benefit calculation of public-sector employees. Given the relatively low salaries at the local government level, a significant portion of the compensation is certainly nonpecuniary, as many authors in public management have noted (Karl and Sutton 1998; Kovach 1987). (4) The problem can be explained as follows: An employee in any sector earns compensation C, where C=W+V. W represents money wages and fringe benefits, while V is nonpecuniary compensation such as job satisfaction, public spiritedness, experience, career enhancement, and a host of other intangible benefits. Imagine that an employee is offered two jobs with wages [W.sub.p] and [W.sub.g], where the former is a private-sector firm and the latter is a local government. If [W.sub.p] > [W.sub.g], yet the employee chooses to work for government, it must logically be that [V.sub.g] > [V.sub.p]: Nonpecuniary benefits are higher for the government job. The lesson here is that under constrained financial resources--where W is effectively fixed at a low level--the handle on employee motivation is V.

The literature on nonprofit administration deals with the most extreme form of this problem. Volunteer workforces are prevalent in many nonprofits, and they represent the case in which W=0, so C=V. Thus, understanding volunteer compensation is equivalent to understanding the power of nonpecuniary benefits in isolation. Nonprofit research is well placed to assist public management on this aspect of employee motivation? This is especially the case given the number of articles in public personnel administration that find the link between W and job performance in the public sector to be weak or nonexistent (Kellough and Lu 1993; Heneman and Young 1991).

What stimulates someone to volunteer? In reviewing the literature, David Horton Smith (1994) identifies six basic categories of variables that lead to participation in nonprofit activities: social background, personality, community characteristics, attitude toward the nonprofit, contact with the organization, and other types of social participation. Empirical research has attempted to isolate the contributions of individual variables in these categories (Hodgkinson and Weitzman 1986; Curtis, Grabb, and Baer 1992; Hodgkinson et al. 1992). The managerial utility of these results has been in designing employment environments where the most important nonpecuniary benefits are enhanced.

Obviously, most of the benefits in these categories cannot be manipulated by managers. Fortunately, the literature has isolated several main nonmoney benefits that are major motivators to volunteers and that nonprofit managers can influence to one extent or another.

1. The perceived social meaningfulness of the activity (Onyx and Maclean 1996).

2. The career-enhancing ability of the volunteer opportunity with respect to both skills and resume building (Mensch et al. 1998; Janey, Tuckwiller, and Lonnquist 1991).

3. The role of the opportunity as a substitute for market work (Stephan 1991).

4. A positive organizational culture (Puffer and Meindl 1995).

These closely track known motivators found in public-sector employment (Wittmer 1991; Schmidt and Posner 1987; Rainey 1982).

Heidrich (1990) and Clary et al. (1994) describe the marketing of these benefits to potential volunteers, and examples of such marketing are evident and easy to find in practice throughout the nonprofit and voluntary sectors. For example, one Chicago-area volunteer service center solicits participation with the following advertisement: (6)

 
   The reasons for volunteering are as varied as individuals--whatever your 
   reason, volunteerism can be truly rewarding for both the giver and the 
   recipient--it creates a win/win situation, enriching one's own life while 
   working to benefit others. 

Some motivations for volunteering are ...

* To work for social change

* To express personal gratitude

* To expand your knowledge

* To improve your community

* To build self esteem

* To develop leadership skills

* To demonstrate love for others

* To be a responsible citizen

* To learn new skills

* To build teamwork skills

* To enrich and give new meaning to life

* To have a good time

* To enhance resume

* To experience new challenges

The four principal nonpecuniary benefits of volunteering discussed above are advertised here in abundance.

Employment "branding" is a hot topic in the private sector, especially in tight labor markets (Corporate Leadership Council 1999). Nonprofit management theory and voluntary-sector practice have concentrated on branding volunteer activities with respect to nonmoney benefits. Public managers might model employee recruitment efforts on these ideas.

To summarize, challenges in motivating public-sector employees are not precisely the same as those in recruiting and retaining volunteers. However, there are significant areas of overlap, and the two literatures might agree on the following suggestions:

* Nonpecuniary motivations for employment in the public and nonprofit sectors should be identified.

* Understanding the relative value of different nonmoney benefits, managers can enhance the nonprofit or public-sector workplace without necessarily increasing pay or tangible fringes.

* Marketing the most important intangible benefits of employment will aid in recruiting, retention, and employee motivation.

Toward a Multidimensional Definition of Performance

The first two big questions in public management coalesce around employee performance and the trouble managers have in monitoring it. The third question asks what constitutes the quality of performance that managers would like to monitor in the first place. Recent attempts to answer this question have manifested themselves in legislation, administration movements, and government programs. Notable examples are the passage of the Government Performance and Results Act of 1993 (Gore 1993; Kravchuk and Schack 1996); the establishment of the National Performance Review, later renamed the National Partnership for Reinventing Government (Osborn and Gaebler 19921); the Total Quality Management movement in the public sector (McGowan 1995); and institution of the Government Accounting Standards Board (GASB 1993, 1994).

Despite of the best of intentions, the process of codifying standards of public-sector performance has met with mixed success: Measures of assessment have not been readily apparent, and the quantification of measures identified has never been straightforward. The result has been, in the words of Poister and Streib (1999), that "rhetoric has outdistanced practice by far." Much of the literature has focused on broad quantitative categories such as production inputs, outputs, and the notoriously amorphous "outcomes," but their combination into meaningful standards for organizational comparison--generally in the form of ratios of inputs to outputs or outcomes--has been the real challenge (Joyce 1993).

Performance measurement in the public sector would be much simpler if there were some analog to the commercial sector's pursuit of profit, which is both quantifiable and one-dimensional. For government, however, the objective is neither one-dimensional nor especially well defined. The "bottom line" arguably has less meaning for public agencies than it does for firms, and exclusive pursuit of any single financial objective is almost certainly not consistent with the mission of an agency. The result of this is a pervasive sense of ignorance about whether a public-sector agency is performing well or poorly (Stanley 1964). In addition, there seem to be few incentives for public managers to define an agency's objectives clearly (Widalvsky 1972).

Nonprofit organizations are familiar with a similar problem of a fuzzy, multidimensional objective. On the one hand, these organizations must be cognizant of their bottom line, or they risk bankruptcy and disappearance. On the other hand, not-for-profit designation under the Internal Revenue Code is tied to performance of a public mission. How can multiple objectives be pursued simultaneously?

The nonprofit administration literature has begun to tackle this multidimensional problem by developing multidimensional assessments of performance. An especially clear example of such an approach is Kushner and Poole's (1996) model of nonprofit organizational performance. It defines the performance of a nonprofit along four lines: the adequacy of funding, the efficiency of operations, the attainment of the organization's goals, and the satisfaction of its constituents. To ignore any of these dimensions is to possess an incomplete understanding of the organization's performance. The implications of this model are more far-reaching than just this definition, however. The individual dimensions exist in a positive feedback loop. For example, inadequate resources often lead to inefficient operations, compromising goal attainment and harming client satisfaction. This in turns leads to a greater crisis in resources, and so on. This is illustrated in figure 2.

[FIGURE 2 OMITTED]

Kushner and Poole's model bears striking resemblance to several attempts to codify the important dimensions of public agency performance. For example, Total Quality Management in government includes measures of client satisfaction and goal attainment, as well as continuous improvement and worker participation measures (Swiss 1992).

Operationalization of an approach such as Kushner and Poole's involves integrating known performance metrics. For example, nonprofits can gauge resource-acquisition effectiveness and efficiency with respect to many financial measures, such as the list provided by Tuckman and Chang (1991) in their work on the financial vulnerability of firms. Client satisfaction can be measured through customer interviews and repeat-business ratios. Goal attainment usually requires a three-step process of mission definition, identification of goals consistent with the mission, and the measurement of outcomes associated with these goals.

In the public sector, an integrated measurement approach can also be constructed from pre-existing resources. For example, client satisfaction can be gauged through the client surveys developed through the National Performance Review (Radin 1995), while Government Performance and Results Act efforts to link agencies' expectations with outcomes might provide a means to measure goal attainment (Kettl 1995). Harry P. Harry's (1980) resource-utilization measures include many that capture agency efficiency or productivity. Resource acquisition for public agencies is probably the dimension that is least comparable with the nonprofit sector. Nonetheless, a measure such as agency budget growth might arguably capture this factor.

A distinct but related issue to that of organizational performance is accountability, which is certainly as relevant to public-sector agencies as it is to nonprofits. (7) How can stakeholders such as governments and trustees know that nonprofit organizations are accountable with respect to (in the nonprofit management vernacular) the duties of loyalty and care (Simon 1987)? The subject of accountability has received treatment in the nonprofit literature from many perspectives: legal (Chisolm 1995), economic (Bogart 1995), ethical (Lawry 1995), and historical (Hammack 1995). In other words, the nonprofit literature has tackled this issue multidimensionally as well.

In sum, public and nonprofit management might come to the following areas of consensus on performance:

* The search for a single performance metric for a public agency is probably inappropriate.

* Components of performance probably include not only the efficiency of its operations and the satisfaction of its constituents, but also the adequacy of agency funding and the attainment of agency goals.

* Positive feedback exists between these dimensions. Ignoring one may mean the unexpected manifestation of trouble in others down the line.

Conclusion

In this brief survey of how the nonprofit literature relates to public management's big questions, I have intended to make the point that nonprofit management is a natural complement to public management. I have not set out to give any comprehensive lay of the intellectual land--only to point out that the two fields overlap so much that studying one area can hardly help but enrich the other. Indeed, I have argued here that nonprofit organizations provide excellent examples of the kinds of problems that the public management research questions seek to address.

None of this is to imply the intellectual relationship between the sectors is a one-way street, however. Indeed, public management is well placed to illuminate nonprofit administration and vice versa. For one example among many, in cases featuring principal-agent problems, the public sector may face special managerial complexity because many more people feel empowered to advise a public manager than a private or nonprofit sector manager, effectively driving up the number of stakeholders. As such, future research might describe how specific tools and analysis that have been developed in the public management literature might be applied in the nonprofit context.

 
Figure 1 Percentage of Articles in the Nonprofit 
Literature Focusing on Nonprofit Management's Seven 
"Big Issues" 
 
Other                                34% 
Board governance                      8% 
Executive leadership                  8% 
Human resources management           12% 
Development of financial resources    7% 
Strategic adaptation to change        9% 
Organizational structure             14% 
Performance measurement               8% 
 
Source: Nonprofit and Voluntary Sector Quarterly and Nonprofit 
Management and Leadership 1990-1998. 
 
Note: Table made from pie chart. 

Acknowledgments

For their helpful suggestions, I am grateful to Ted Poister, John Thomas, and David Van Slyke. Jaime McMahon provided excellent research assistance. The usual caveat applies.

Notes

(1.) Obviously, there was significant overlap between issues in many articles. Thus, the placement of a number of articles in just one category for the purpose of comparison involved a certain degree of compromise. My method in conducting this categorization follows Young (1993, 1997). A more rigorous content analysis of the nonprofit management literature, with an explanation of methodology, can be found in Brudney and Durden (1993).

(2.) The complicated political-electoral context of administration problems in the public sector makes this parallel imperfect. However, lessons from the nonprofit-sector literature should still be valuable.

(3.) Gresham's Law is the economic proverb that "bad money drives out good," meaning that if part of the economic medium of exchange is worthless while another has worth, the latter will be hoarded, and only the former will remain in circulation.

(4.) According to the 1999 Statistical Abstract of the United States, the average local government employee earned less than $28,000 in 1997.

(5.) Volunteer management is especially germane to agencies that use volunteers themselves (Brudney 1990).

(6.) This advertisement is from the Volunteer Center of Northwest Suburban Chicago. See http://www.nsn.org/ahkhome/ ahrsvp/.Accessed May 2000.

(7.) Arguably, accountability is the best-understood part of this question in the public sector, having been a mainstay of public administration theory since Woodrow Wilson.

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Arthur C. Brooks is an associate professor of public administration at Syracuse University's Maxwell School of Citizenship and Public Affairs, where he teaches courses on nonprofit management and economics for public administrators. His research focuses on nonprofit organizations, philanthropy, and cultural policy. Email: acbrooks@maxwell.syr.edu.

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