Adaptive Strategies of Nonprofit Human Service Organizations in an Era of Devolution and New Public...

Adaptive Strategies ofNonprofit Human ServiceOrganizations in an Era of

Devolution and New PublicManagement

Jennifer AlexanderThis article reviews the results of a multiphase study of nonprofithuman service organizations serving children and youth inCuyahoga County, Ohio. The purpose of the study was to iden-tify adaptation strategies organizations found effective for thecurrent environment. The study reviews the results of longitudi-nal focus groups and a final workshop directed to analyzingstrategies for maintaining organizational viability. Effectiveadaptations included strategic expansion of services and clientbases, networking as a means to acquire and stabilize revenuestreams and resources, and increased use of business techniquesand technology to generate outcome measures and an image ofeffectiveness with funders.

NONPROFIT organizations engaged in human service deliveryare experiencing serious threats to their survival due to dra-matic changes in their environments. In recent years, these

organizations have confronted increased financial vulnerability fromreduced government funding, a shift from grants to service contracts,and heavy competition for foundation, corporation, and individualdonor support. The devolution of federal social programs, such aswelfare reform, has left nonprofits competing in their traditional ser-vice areas with for-profit agencies for contracts and clients. With thenew emphasis on business-oriented practices, funders expect non-profits to professionalize management practices and to demonstratemeasurable outcomes while keeping costs low. In short, a multiplic-ity of changes in the expectations of funders have reconfigured therules for organizational survival.

NONPROFIT MANAGEMENT & LEADERSHIP, vol. 10, no. 3, Spring 2000 © Jossey-Bass Publishers 287

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One impetus behind this maelstrom of change is a reform move-ment known as the “new public management” (see Hood, 1991;Kettl, 1997; Terry, 1998). The “new public management” has beencharacterized by two assumptions: (1) the efficiency of markets andthe value of competition as a strategy for improving organizationalperformance; and (2) the conception of management as a genericpractice perfected by the private sector (Kaboolian, 1998). This newmanagerialism requires entrepreneurial leaders who emphasize thevalues of efficiency, economy, and effectiveness (Terry, 1998).

The recent devolution of federal programs is a reform effort tomake government more efficient and economical by shifting respon-sibilities down to lower levels of government. It began when a largelyRepublican Congress converted a number of entitlement and incomesecurity programs into block grants and turned them over to thestates; most notable among the changes was welfare reform (Gold,1996). Devolution is manifested as a progressive “bumping down”of responsibility and risk as states now direct income security pro-grams and related services with a fixed amount of federal revenue.Nationwide, states have responded to the challenge of providingthese new services by forming contracts with nonprofit and privatesector organizations. These reforms have the capacity to change theunique character of the sector.

This article identifies the ways that executive directors and upper-level program staff in nonprofit social service organizations believethey can best adapt to the current challenges. The study on which thisarticle is based was part of a multiphase investigation of over two hun-dred nonprofit social service organizations serving children and youthin the thirteenth largest county in the United States—CuyahogaCounty, Ohio. (Cuyahoga County, which includes the city ofCleveland, comprised 13 percent of the population of the state and25 percent of the state’s total welfare rolls in 1990. The population wasestimated at 1,386,803 in 1995; an average of 20 percent live inpoverty.) This study examined strategies for maintaining organiza-tional viability from the literature on best practices and from discus-sions with nonprofit directors and staff in focus groups. The discussionof each strategy includes comments regarding the applicability of thestrategy in the current context as well as the challenges to implemen-tation. An analysis of each strategy was generated as a part of a work-shop with nonprofit providers, grant makers, as well as otherparticipants in the nonprofit community of Cuyahoga County, Ohio.

Organizational Adaptation TheoriesIn the literature of organizational theory, organizational adaptationand survival have been addressed in terms of the organization’s stagein its life cycle, its ability to manage adaptation, and its skill in gar-nering resources. Adaptation can become particularly complex fornonprofits because they may embody attributes of both public and

288 AL E X A N D E R

This newmanagerialism

requiresentrepreneurial

leaders whoemphasize the

values ofefficiency,

economy, andeffectiveness

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private sector organizations. As is the case for public organizations,nonprofits may pursue multiple objectives, reimbursements may notflow directly from clients, and organizational stakeholders can holddiverse expectations. Like private organizations, they may serve theneeds of discrete populations, and they must generate resourcestreams in order to survive.

Unfortunately, challenges particular to nonprofit adaptation andsurvival are poorly elaborated in the literature because there has notbeen a strong focus on third sector organizations. This is due, in part,to the unwieldy nature of the category. Third sector organizationsinclude a broad spectrum of organizational types and structures thatmake generalizations unsuitable. Below, I will briefly review how lifecycle theory, organizational adaptation, and resource acquisition per-tain to social service nonprofits.

Life cycle theorists assert that organizations pass through iden-tifiable stages of development (Rock, 1988). During their courseof maturation, survivability is closely linked to two tasks: theestablishment of an external support network and a “distinctivecompetence”—those specific capabilities and proficiencies thatare morally acceptable (Selznick, 1957). The life cycle literature pre-supposes that as distinctive competence is recognized by other actors,the organization is able to exercise some degree of control overresource flows and that stability will therefore ensue (Thompson,1967). However, for nonprofits, the achievement of distinctive com-petence and stable resource streams can become a problematic anddrawn-out process. This is because nonprofit organizations oftenarise to serve the distinctive needs of a particular population andtheir mission may not be widely supported. Hence, organizationalsurvival is rooted not only in developing competence but also in theprocess of creating and maintaining support for their objectivesamong the public at large and in the broader interorganizational envi-ronment (Wamsley and Zald, 1976; Meyer, 1975).

For nonprofits with a history of heavy reliance on external fund-ing or organizations that serve unpopular clientele or causes, theprocess of generating public support is vital to survivability(Antrobus, 1987; Yudelman, 1987). These “low-autonomy” organi-zations are more fragile by virtue of the hegemony the interorgani-zational environment is able to assert (Antrobus, 1987; Yudelman,1987). Human service organizations that are engaged in social actionor that serve poor and low-paying clientele often meet this descrip-tion because they are highly dependent on funding from governmentand foundations (Grønbjerg, 1988; O’Connell, 1996; Zimmerman,1996). The survival of such organizations is closely tied to confor-mity with the demands of dominant actors in the interorganizationalenvironment.

Two prominent schools of thought on the subject of adaptationare institutionalism and resource dependency theory. In the institu-tionalist literature adaptation is particularly salient for human service

AD A P T I V E ST R AT E G I E S O F NO N P R O F I T HU M A N SE RV I C E OR G A N I Z AT I O N S 289

Nonprofitorganizationsoften arise to

serve thedistinctive needsof a particularpopulation and

their mission maynot be widely

supported

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nonprofits because it emphasizes the role of normative pressures inan organization’s quest for survival (Selznick, 1949; Perrow, 1961;Wamsley, 1969; Zucker, 1987). Institutionalists contend that organi-zational congruity with values delineated in the larger environmentprecedes resource flows. Conformity to professional norms, standardoperating procedures, and other identified rules enhances the legiti-macy of an organization and, in turn, its prospects for survival(Zucker, 1987, p. 445). Adaptation to dominant norms may, how-ever, also be independent of actual goal attainment or effectiveness(Mayer and Rowan, 1977; Perrow, 1961; Wilson, 1989). Accordingto this literature social service organizations are prone to goal dis-placement and distortion through adaptation because outcome mea-sures are often indirect and subject to external influences (Wilson,1989). Consider the example of higher education. Measures of effec-tiveness may include, among other things, any combination of:faculty-to-student ratios, retention and graduation rates, employmentprospects for students, or faculty publications.

Conformity to the divergent norms of key stakeholders, or“strategic constituencies,” can also present a challenge. Strategic con-stituencies include groups whose cooperation is essential to the orga-nization’s survival or who have some stake in the organization(Cameron, 1980). One group may include the public and privatedonors—foundations, government agencies, and related social ser-vice agencies from which the organization seeks funding, licenses,and recognition of its distinctive competence. A different con-stituency may consist of staff, a client community, and volunteerswho hold a tacit knowledge of a population’s service needs but whohave limited capacity to influence the organization’s direction. Writ-ers in the institutional school assume that organizations will conformto norms asserted by the dominant actors, but they do not addressthe organization’s need to accommodate divergent norms or the abil-ity to respond strategically (Oliver, 1991).

A second theory, resource dependency (Pfeffer and Salancik,1978), imagines a free-market environment in which organizationsare rational entities competing for resources. Yuchtman and Seashore(1967, p. 898) “define the effectiveness of an organization in termsof its bargaining position, as reflected in the ability of an organiza-tion . . . to exploit its environment in the acquisition of scarce andvalued resources.” Like the institutionalists, resource dependencytheorists believe that organizational goals evolve and are displacedthrough a dynamic process of interaction with the environment.But they judge adaptation differently: if an organization can sustaina resource stream, adaptation was effective.

This theoretical review of adaptation literature informs ourcurrent study of social service organizations because it foreshadowsthe ways in which adaptations have the capacity to compromise orga-nizational effectiveness. To date, community-based and human ser-vice nonprofits that serve low-paying clients have adapted by


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engendering support among funders for their values—the needs of aparticular client community. Like government, they produce “publicgoods,” such as services to the poor, community education, advocacy,research, and teaching. But as nonprofits are pressed to commercial-ize and generate income through fees for services, will they continueto provide the public goods that have characterized the nonprofitsector—when these goods are no longer funded or measured?

Strategic Responses to the 1980sIn an effort to understand how human service nonprofits might bestrespond in the current environment, I reviewed literature on hownonprofits responded to the fiscal challenge of the early 1980s. Dur-ing the Reagan years, the federal government cut the budgetsof social programs and shifted to block grant funding for states(Abrahamson and Salamon, 1986). Human service nonprofits thatwere heavily dependent on such funding responded to the loss bycreating revenue-generating programs and redirecting their efforts tostate and local sources of funding (Liebschutz, 1992; McMurtry,Netting, and Kettner, 1991). This “marketization” of nonprofitsbecame the trend of the decade (Salamon, 1997).

Among available studies, Hadley and Culhane’s national study ofcommunity mental health centers (1993) documents responses thatwere typical of social service nonprofits. They found that professionalstaff was reduced, caseloads were increased, and fewer services wereavailable to children, adolescents, the elderly, and the uninsured.Organizations sought to offset the decline in federal funds throughstate funds and fees for services (Hadley and Culhane, 1993, p. 97;Liebschutz, 1992).

Another frequently cited study by Liebschutz (1992) identifiesthe impacts of federal cutbacks on social service organizations activein family services and the antipoverty movement in Rochester, NewYork. All six organizations in the study had relied heavily ongovernment and the United Way for income. Liebschutz (1992),like other researchers, found that nonprofits relied on revenue-generating programs and diversified funding streams in order to con-tinue support services that lacked sufficient funding. Nonprofits inthe study also reoriented themselves to funding opportunities in stateand local government agencies.

Additional studies indicated that human service nonprofitsresponded by cutting programs and services to the poor (Grønbjerg,1988); by “increasing efforts to gain media attention to increasecharitable donations” (McMurtry, Netting, and Kettner, 1991,p. 244); by expanding networks with other agencies; and by greaterproductivity with current resources through increasing staff work-loads and relying more on volunteers (McMurtry, Netting, andKettner, 1991). Organizations recruited board members whobrought fundraising abilities and skills to the organization, and they


As nonprofits arepressed to

commercializeand generate

income throughfees for services,

will they continueto provide the

public goods thathave

characterized thenonprofit sector?

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identified the indirect and hidden costs that accompanied variousprograms and populations.

In retrospect, the financial cutbacks of the 1980s and the changesthat occurred in the government-nonprofit partnership during theReagan era marked the beginning of a transformation in the normsof nonprofit relations and the requirements of survival. In the sub-sequent section, I will review the method for discerning the viabilityof these strategies given the challenges of the current environment.

MethodologyThe analysis of effective adaptation strategies was conducted througha series of longitudinal focus groups that culminated in a half-dayforum and workshop. Social service nonprofit organizations wererandomly selected from a database of all identifiable service providersfor children, families, and youth in Cuyahoga County. Through let-ters and follow-up phone calls, executive directors, associate direc-tors, and program staff were invited to attend focus groups. Nonprofitrepresentatives from each organization were loosely grouped in focusgroup discussions according to the following three organizationaltypes:

Traditional, established organizations that were often national in scope,such as the American Red Cross, Easter Seals, the YMCA, and theSalvation Army

Community-based organizations that included neighborhood centersand social action organizations providing a broad variety of ser-vices, often to an immediate locale

Faith-based organizations that provided a variety of community ser-vices and emergency services, such as food banks, homeless shel-ters, and child welfare services

Focus groups were held in May 1996 with each of the three orga-nizational types, then repeated in November 1996 and June 1997. InNovember 1997, a half-day forum and workshop was held for allfocus group participants to review the results and analyze the adap-tation strategies that had been generated. A total of nine focus groupdiscussions were held over the course of the eighteen months priorto the half-day workshop, three with each organizational category.Approximately fifty organizations were invited to each discussiongroup, with an average focus group size of eight participants. ByNovember 1997, fifty-six participants from forty-eight different orga-nizations had been a part of the study.

Focus groups were considered an optimal method for generatinginformation on adaptation strategies because directed conversationsamong participants could explore what they deemed pertinent.Discussion groups generated information and insights grounded inthe participants’ understanding rather than the perceptions of the


The changes thatoccurred in thegovernment-

nonprofitpartnershipduring theReagan eramarked the

beginning of atransformation in

the norms ofnonprofitrelations

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investigators. Transcripts of the focus groups were analyzed using acombination of ethnographic and content analysis. Key topic areaswere identified through a review of the transcripts by the fourresearch participants. Each research participant identified recurrentthemes, which were then systematically coded and collapsed underlarger themes until four adaptation strategies emerged:

• Pursuing strategic expansion• Developing business management techniques• Stepping up boundary-spanning activities• Maintaining public service character through commercialization

The adaptation strategies were presented in November 1997 toan invited group that included all study participants as well as ahandful of nonprofit executives, educators, and grant makers whohad expressed a strong interest in the study. Attendees were dividedinto four groups, each assigned to analyze one of the adaptationstrategies. Participants were asked to critique the viability of a strat-egy, discuss the strengths and challenges to implementation, and thenassess the analytic work of another strategy group.

Adaptation StrategiesIn this section, the four adaptation strategies identified in a contentanalysis of focus group discussions and analyzed by workshop par-ticipants are presented. The discussion of each strategy is integratedwith relevant literature and commentary offered by the nonprofit par-ticipants at the forum.

Strategy 1: Pursuing Strategic ExpansionAs organizations confront a tight funding environment, one of themost common responses mentioned in focus groups has been toexpand to include new services and populations. However, relevantliterature indicates that this strategy can also prove destructive toorganizational survival. Short-term grant seeking causes goaldisplacement, resource diffusion, unreimbursed expenditures, andcash flow problems. Apart from the financial troubles short-term ven-tures generate, agency legitimacy and client relationships can sufferwhen services are suddenly discontinued (Netting and Williams,1997, p. 292).

Workshop and focus group participants pointed out that expan-sion can be unpopular with donors when it appears erratic or incon-sistent with the organization’s mission. Also, in a tight fundingenvironment, funders are averse to unnecessary duplication of ser-vices. Participants noted a weeding-out process occurring as severalorganizations terminated services peripheral to the organizationalmission or services being delivered more effectively by anotheragency.


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In addition, any expansion needs to be considered with a clearidea of core expertise and how accountability will be assessed by keystakeholders—county agencies, clients, and funders (for an in-depthdiscussion, see Salipante and Golden-Biddle, 1995). Nonprofit sur-vival rests on a well-honed reputation for reliability and account-ability to clients and resource providers (Hannan and Freeman,1977). The business management literature relates organizationalsurvival with the capacity to change (Pfeffer and Salancik, 1978;Salipante and Golden-Biddle, 1995), but that literature is groundedin the experience of private sector organizations, where effectivenessand accountability can be assessed against a bottom line. In contrast,public and nonprofit organizations need to sustain trust with estab-lished constituencies—which requires a certain constancy and relia-bility. Rapid change can jeopardize relationships with organizationalstakeholders who are fundamental to survival.

Consider the following example offered by a staff member of amental retardation/developmental disabilities (MR/DD) facility. TheBoard of Mental Retardation and Developmental Disability has sev-eral vocational education facilities that could be used for job train-ing of Ohio Works First (OWF) former welfare recipients as thecounty implements welfare reform. With a 3-mill tax levy, MR/DDalso has a considerable amount of revenue to support this initiative.Training OWF recipients, however, presents a conflict for MR/DDstakeholders. By taking on this new service population, an agencywould ultimately compromise placement and retention of MR/DDadults who would then “compete” with OWF recipients for entry-level jobs. Although there may be political or financial incentives forexpanding to include this new client group, such a move wouldthreaten the relationship of trust between MR/DD and core con-stituencies. In short, organizations need to take on new initiativeswith the understanding that survival is not related only to finances.

With an eye on core expertise, the organization can strategicallyexpand programs and services, moving from particular to general.A March of Dimes representative offered the example of his organi-zation, which began by fighting polio, then birth defects, and nowdedicates its energies to an even broader spectrum—“healthy babies.”The organization has continued along a predictable continuum andin accordance with changes in public need.

Advice and CaveatsIn the workshop, participants reaffirmed that organizational expan-sion grounded in core expertise builds stronger external support forthe organization, especially with foundations. Hence, successfulexpansion begins with a clear mission and strategic thinking elicitedthrough a SWOT (strengths, weaknesses, opportunities, threats)analysis, which improves the chances of long-term organizationalsurvival. A SWOT analysis of how expansion derives from coreexpertise can also be used to evaluate the fit of current programs with


Participantsnoted a weeding-

out processoccurring as

severalorganizations

terminatedservices

peripheral to theorganizational

mission

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organizational mission and direction. Participants claimed that “thefastest way to fail is to do what you don’t know.”

Participants argued that when an organizational board and staffunderstand core expertise and how accountability is derived fromthat, they can then conceptualize the client community’s needsand how the organization currently meets them. Through a strate-gic analysis of current services and community needs, an organiza-tion can identify gaps in the continuum of care. Organizationalexpansions that are then directed to gaps in services are a naturalextension of core expertise. In the best of circumstances this strategyalso allows the organization to avoid competition and duplication ofservices and enables the organization to have a positive impact onthe community.

One limitation to expansion efforts, particularly for young orga-nizations, concerns the role of founding members. Founders who areactive can thwart new initiatives even though they appear as naturalextensions of the current mission and expertise. Consider the exam-ple of a women’s activist organization with a mission to train womenin the building trades and thereby empower them to earn a livablewage. The prospect of male contractors as board members wasrejected out of hand by founding members as a form of politicalcapitulation, whereas new staff and board members regarded it as aviable strategy for furthering organizational goals.

An additional dilemma occurs when core expertise and currentfunding initiatives diverge. According to the workshop participants,the director and staff can attempt to ride out the change by analyz-ing current services and repackaging existing programs that wouldrequire the least amount of change. Participants offered that when anorganization is unable to hold on to core expertise and strategicallyexpand, it is useful to consider mergers or even closing. Organiza-tions challenged to stretch beyond their established expertise insearch of funding should consider making their organization moreattractive to funders through partnerships. The best policy is to avoidterritoriality and remain open to collaboration.

Strategy 2: Developing Business Management TechniquesAt present the literature on survival of nonprofits takes a strong busi-ness management approach (see, for example, Steckel, 1992). How-ever, not all business techniques are equally applicable in thenonprofit context. Fundamental differences between private and non-profit organizations related to their markets, authority structures,accountability, and mission make certain business techniques morerisky than beneficial (Salipante and Golden-Biddle, 1995). In addi-tion, the world of nonprofits encompasses organizations with pro-found differences in organizational structure, which can limit theeffectiveness of generic management techniques. Given these limita-tions, under the broad umbrella of nonprofit professionalization,there are a number of management steps that can be of benefit when


Participantsclaimed that “thefastest way to failis to do what you

don’t know”

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taking on the challenges of the current environment—namely, strate-gic planning, technological capacity building, marketing, fundrais-ing, and new management practices. I will discuss the managementtechniques identified as most helpful.

Focus group participants and workshop attendees all agreed thatstrategic planning is one of the most important management toolsfor taking a proactive stance toward managing change. In the best ofcircumstances, strategic planning encourages management to con-sider a range of possible futures in light of current trends in the envi-ronment and in the organization. It is considered the ideal tool forshifting the organization’s direction or focus (Bryson, 1988, p. 4).Strategic planning does, however, have some limitations for non-profits that are important to consider (see Liebschutz, 1992; Salipanteand Golden-Biddle, 1995; Bryson, 1988).

Participants warned that a strategic plan may take months to cre-ate and can quickly become obsolete. The plan may also blind man-agement to chance opportunities that were not anticipated. In short,there was some question among participants as to how useful strate-gic plans have been for organizations managing turbulent environ-ments. Findings of Liebschutz (1992) corroborate this. In a study oforganizations that survived the 1980s, Liebschutz found that orga-nizations rely more on a “creative and principled pragmatism” than astrategic plan. According to workshop participants, the overridingvalue of strategic planning is the organizational analysis it generates.It serves as a snapshot of present organizational SWOT and later asa lens through which to gauge the value of opportunities that pre-sent themselves.

A second area of professionalized management that participantsfound critical to organizational survivability is technological capac-ity. Focus group participants regarded technology as crucial to cre-ating leaner organizations. Information systems are necessary todocument fiscal and programmatic accountability. Recent federal leg-islation (the Government Results and Performance Act) and the trendof donor agencies to connect funding streams to measurable out-comes have made technological capacity a must. In addition, theInternet has become a valuable medium for rapid access to informa-tion, development of linkages with related organizations, and iden-tifying training and funding opportunities. Electronic communicationallows organizations to consult and coordinate activities morequickly. E-mail, the Internet, and community electronic bulletinboards are all tools that organizations are using to accomplish thesetasks. Participants found computer workshops and computer pack-ages on such topics as fundraising and management processes to befundamental to moving into the future.

Marketing was another business strategy the traditional, estab-lished nonprofits were pursuing with vigor. Marketing has grownin importance as nonprofits attempt to expand their paying andcontract-eligible clientele and base of services. However, community-based and faith-based nonprofits were not pursuing this strategy.


Not all businesstechniques are

equallyapplicable in thenonprofit context

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In part, they were limited by marketing costs. Nonprofits with a pre-dominantly lower-income clientele indicated that their reputation andlocation constrained their ability to expand services to a wider clientbase. In addition, workshop participants who found marketing plansuseful emphasized that in order to be effective, a marketing plan mustbe integrated with fundraising and the strategic plan.

A final area that focus group participants discussed related to theorganizational management style and the need to retain trained staffin the current environment. Recent literature on nonprofit manage-ment indicates a strong preference for the “corporate model” of lead-ership (see Bradshaw and Padanyi, 1997), which may be effective forlarger organizations but in this study seemed to have limited applic-ability. Nonprofits can be difficult to manage using a traditional com-mand-and-control model based on hierarchy because leadership hasa weaker authority bond in the nonprofit sector than is found in pri-vate sector organizations. Consider the composition of employees—largely knowledge workers (professionally licensed and highlymobile) and volunteers. Organizational representatives found theirorganizations were profoundly affected by turnover and the compe-tition for their trained staff. As a result, focus group participantsargued that effective leaders and managers were inclusive in theirmanagement style and able to sustain a high degree of cohesion andmorale for the organization. These leaders could identify and bridgeboth internal and external factions to build shared meaning, partic-ularly in times of stress.

Advice and CaveatsWorkshop participants believed that many of the management tech-niques that accompanied the commercialization of the sector couldoffer powerful benefits for a number of reasons: they enhance theproductivity of current resources; they result in more consistentservice delivery; they can save time through routinization and plan-ning; and they can improve images of accountability and credibilityto funders. They emphasized that management information systemsare critical for tracking funds and programs, given recent emphasison outcome measures.

Workshop participants warned that a strategic plan requires aconsiderable amount of time and effort to generate. In the best of cir-cumstances, this plan should maintain a logical connection to theorganization’s core expertise and extend a minimum of three yearsinto the future. However, strategic planning does not predict all ofthe changes that can present themselves, and it should be a guide-line that is periodically reviewed.

Not surprisingly, workshop participants observed that business-oriented practices have the capacity to change relationships withstakeholders. For example, one of the risks they associated with pro-fessionalizing organizational processes was losing internal stake-holders. Existing staff and board members may be committed to theorganization because they are dedicated to an aspect of the purpose


Focus groupparticipants

regardedtechnology as

crucial tocreating leanerorganizations

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that is compromised by change. For voluntary organizations that areprofessionalizing, this staff may be the “heart and memory” of theorganization. Yet they may not conform with the new character ofthe organization, and they may not be able to remain active.

Finally, administrative changes can require a considerable invest-ment of organizational time and expense to become implementedand institutionalized, and moving to a management-orientedapproach can require consultants. Some providers argued that busi-ness practices can actually lengthen the service delivery process,making it more costly and difficult to measure progress.

Strategy 3: Stepping Up Boundary-Spanning ActivitiesThis strategy linked organizational survival to interorganizational tiesthat the organization cultivates and maintains. Focus group partici-pants repeatedly made reference to the resources they were able togarner through linkages: grants, contracts, donated professional ser-vices, referred clients, media attention, and the ability to shape policy.Linkages can be fostered by clients, staff, and board members whobring resources to the organization in terms of funding and skills,networks, and political ties. Board members are increasingly respon-sible for connecting the organization to funding opportunities,donors, and political officials who have the ability to buffer or sup-port the organization.

Focus group participants identified a plethora of technicalresources and skills they exchanged with complementary organiza-tions. Consider the example of teaching hospitals sending residentsto nonprofit health clinics or the women’s health center that trainsmedical staff of other health clinics in women’s health issues. Localuniversities provide the services of graduate students for much-needed tasks, such as grant writing, research, and information man-agement. Through use of in-service training, organizations canminimize personnel costs and receive short-term services.

As nonprofits become active in networks, they are able toadvocate for their organization and clients through coalitions andfederations—which are far more powerful in their effect than discreteorganizations. By the accounts of focus group participants, thesecoalitions will become increasingly important as the linkages betweenstate government and nonprofits intensify with devolution.

Advice and CaveatsWorkshop respondents noted that active networking helps an orga-nization assert its core expertise and develop some consensus aboutdomain with respect to other organizations. Networking allows theorganization to engage in advocacy by creating proximity to govern-ment officials and expanding opportunities for media attention.Workshop participants emphasized in particular the importance ofcultivating relationships with local public officials in order to sustainpolitical support and engage in advocacy.


Some providersargued that

business practicescan actuallylengthen the

service deliveryprocess, making

it more costly anddifficult to

measure progress

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Participants also touched on the challenges to networking. Inspite of its importance for generating resources, during the early yearsof an organization, networking can be terribly time consuming. Chal-lenges mentioned were the difficulty of identifying complementaryties. Nonprofits also lose some degree of control as they becomeembedded in networks because there is a tendency toward confor-mity. For example, participants noted that interorganizational net-works can lock organizations into particular funding circles andpatterns of response to problems that are not always conducive tolong-term viability.

Workshop participants warned that in an environment charac-terized by change there was a need for established organizations toexplore new opportunities for complementary linkages. Their ten-dency was to become more cohesive under the stress, but the forma-tion of new networks and links was regarded as a consistent meansof bringing new resources and opportunities to the organization.

Strategy 4: Maintaining Public Service CharacterThrough CommercializationSurvival of nonprofits in the current environment presents a paradox.According to study participants, revenue-generating programs andan expanded client base can provide an organization with theautonomy necessary to develop programs and services needed bylow-paying clients. In the best of circumstances, as the organiza-tion becomes more business oriented, it will move from crisismanagement—careening from one financial crisis to another—to amore deliberate and proactive course of action. A degree of financialindependence generated by commercialization can afford more con-trol over goals and organizational services directed to low-payingclients. Instead of a long-term sacrifice of the organization’s politicalor public character, “businessification” could allow the organizationmore autonomy.

One of the toughest challenges for human service nonprofitsdedicated to low-paying clients and the poor is the shift away fromserving community needs and toward the commercialization of ser-vices. It is a transformation that can compromise the mission of theorganization and generate tension with stakeholders. The logic ofthe market holds that important organizational stakeholders orclients will shape services and future directions through revenues.However, social service nonprofits have developed stakeholder rela-tionships based on needs rather than consumer demand for services.Hence these stakeholders may not directly shape services based onmonetary exchanges. Attempting to maintain some commitment toestablished stakeholder and client communities while generating newstakeholders and programs that are dollar driven can be a difficultand dangerous endeavor.

Nonprofits in this study that were in the largely traditional,established organizations touted the benefits of commercializing


The formation ofnew networksand links wasregarded as a

consistent meansof bringing newresources and

opportunities tothe organization

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services and using funding to sustain programs for low-paying andpoor clients. However, the faith-based nonprofits and some of thesocial-action community-based nonprofits were more skeptical.

ConclusionThis study has reviewed the various ways in which human servicenonprofits in Cuyahoga County are responding to two recent reformefforts: the devolution of federal programs and the new public man-agement. Organizations in the study indicated that fiscal pressuresare hardly new and that much of what was effective as an adaptationin the 1980s is still viable. Common responses include: cutting pro-grams and, on occasion, staff; rationing services; relying more on vol-unteers; assessing more realistically the costs of various programs;and attempting to stretch current revenues to accomplish as muchas feasible.

New challenges of the current environment include: increasedcompetition among providers, including the entry of for-profits inservice areas traditionally the realm of nonprofits; the positioning oflocal government as a critical policy arena; and the pressure todemonstrate efficiency and effectiveness in order to sustain funding.Nonprofit representatives in the focus groups recognized that theirorganizations could become more strategic in their adaptations andeconomically efficient in their programming by employing businesstechniques and technologies, such as the use of marketing strategies,strategic analysis of organizational mission and goals, and computer-assisted fundraising efforts. These adaptations also foster and sustainorganizational legitimacy in the eyes of government and foundations.In spite of the advantages of these adaptations, smaller organizationsoften found them out of reach. The strategies required more finan-cial and personnel resources than these organizations could readilymuster. Moreover, smaller community-based and faith-based organi-zations that serve the poor expressed frustration over the missionconflict that resulted as they were pressed to generate incomethrough their programs and services.

The devolution of federal programs has resulted in increasedattention to interorganizational networks as a means of reducingenvironmental uncertainty and securing revenues. Virtually all of theorganizations characterized as “traditional and established” have ahistory of receiving county contracts. In spite of this stable resourcenetwork with county agencies, these organizations are in fierce com-petition with each other as well as the county to sustain resourcestreams. The smaller community-based and faith-based organizationswere largely unable to secure government service contracts becausethey lacked the administrative sophistication or resource pool nec-essary for performance-based contracts. Smaller organizations rec-ognized the need to work with, and through, the larger organizations


Smallercommunity-basedand faith-basedorganizationsthat serve the

poor expressedfrustration over

the missionconflict that

resulted as theywere pressed togenerate income

through theirprograms and

services

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in order to garner government resources. Overall, networking as anadaptation had gained in importance for the smaller organizations inthe study.

Whether the adaptation strategies identified by participants inthe study will be adequate to sustain organizations through these tur-bulent times is unclear. By all indications, the long-term challenge toorganizational survival will center on organizations’ capacity to sus-tain relationships with core constituencies. These relationships havebeen nurtured by a history of shared organizational values and prac-tices. Hence, the question of whether core organizational values willbegin to recede in the face of “businessification” is a legitimate areaof future inquiry.

JENNIFER ALEXANDER is an associate professor in the master of publicadministration program in the Maxine Goodman Levin College of UrbanAffairs at Cleveland State University. She received a Ph.D. in publicadministration and policy from Virginia Tech in 1993 and a bachelor ofscience in foreign service from Georgetown University in 1978. Herresearch interests include administrative responsibility, private/publicpartnerships, and the political capacity of nonprofit organizations.

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