An investigation of managerial practices, leadership styles and issues in public, private and nonprofit organizations Nargiza Jedwab, May 2011

A THESIS PRESENTED TO THE FACUTLY OF POLITICAL SCIENCE DEPARTMENT KUTZTOWN UNIVERSITY OF PENNSYLVANIA

In partial fulfillment of the requirements for the degree Master of Public Administration

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Acknowledgments

I would like to take this opportunity to express my sincere appreciation to everyone

who has served as instruments in the production of this thesis. This includes the people who

have been the subjects of the study, professors, my fellow students and friends.

I would like to extend my gratitude to the following individuals:

To my adviser, Dr. Paula Holoviak, whose expertize in the subject has given me the

necessary guidance in employing the appropriate tools in my research. Dr.Holoviak’s

knowledge she shared in the classroom, enabled me to gain essential skills in the public

sector management.

To my husband, Joseph, who motivated and supported me throughout the process. As

a doctor of philosophy who had to write his own doctorate dissertation, he has provided an

irreplaceable support in my writing.

To my dear friend Ros Goodfellow, who has encouraged me from thousands of miles

away.

To all the professors of the Political Science Department at Kutztown University,

whose absolute knowledge in the relevant subjects aided me in my own research.

To my former director, Ms. Sarah Wade, who employed me as a graduate assistant at

the International Programs Office, the job that eased the financial burden for me to complete

my studies and enriched my professional experience. To all my colleagues, who were

tremendous to work with and who encouraged me throughout my studies in Kutztown

University.

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Table of Contents

1. Introduction 5

Problem statement 5

Definition of terms 5

Methodology 6

Pros and cons of study 7

2. Review of the literature 8

Public vs. private sector 8

3. Review of the literature 26

Nonprofit sector 26

4. Case studies 48

Case study # 1 48

Case study # 2 57

Case study # 3 66

5. Discussion and findings 72

Appendix 83

References 86

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Chapter 1

Introduction

The purpose of this research is to advance knowledge and understanding of the

differences among public, private and nonprofit sector organizations, their work

environments and managerial practices, as well as the factors that impact the decision-

making practices. The audience for this essay can consist of scholars or researchers interested

in learning more about these phenomena. The review of the literature will help provide a

perspective to those seeking to apply appropriate tools in management of public, private or

nonprofit sector organizations. It will also show the results of various research supporting

hypotheses that public, private and nonprofit organizations differ in various ways and,

therefore, should be run by application of sector-specific management strategies. The case

studies featured in this essay will record results of qualitative study and its limitations.

Problem Statement

What are the differences among public, private, and nonprofit sector organizations?

Do the contexts within which they operate differ in any way? What factors impact decision-

making practices?

Definition of terms

1. Public or government organizations – those that are primarily financed by taxpayer

funds. They serve the public by providing public services such as policing, waste

management and others.

2. Private organizations or businesses and corporations – companies that are privately

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owned and the primary purpose of which is profit making.

3. Nonprofit organizations (for the purpose of this study) are tax-exempt organizations

(501 (c3) of the Internal Revenue Tax Code) that provide a vast array of services to

the population.

Methodology

In order to investigate the differences between public, private and nonprofit sector

organizations and how such differences affect managerial practices, the researcher employs a

combination of exploratory and descriptive case study methodologies. Using the case study

method as an empirical inquiry, the researcher investigates issues within real life situations.

The case studies are used in order to provide detailed contextual analyses of organizations

and their conditions (Yin, 2003). A questionnaire was developed for conducting interviews

and measuring the day-to-day running of organizations: processes such as hiring and

dismissal of personnel, planning, initiatives as well as internal and external constraints

associated with them. The narratives of the interviews are compared to one another and

analyzed against the trends discussed in the chapter containing the literature review.

Ultimately, the case study research aims to develop general conclusions from a limited

number of cases. The units of analysis in this research are organizations presented in this

research. All the managers’ identities as well as the names of organizations are not

mentioned throughout the research in order to preserve their anonymity.

Pros and cons of study

The case study methodology is a widespread approach of measuring processes such

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as decision-making, implementation and others related to organizational management (Yin,

2003). In addition to being comprehensive, the case studies, conducted in the form of

interviews with managers, allow probing for deeper answers to questions (Yin, 2003). In

addition, the interview process can capture important nonverbal responses to questions,

which are essential components of the collected data and analysis. Limitations of this

research method, however, should also be noted. Firstly, the study of one case per sector can

offer insufficient grounds for establishing reliability or generality of findings (Yin, 2003).

Secondly, although certain trends discussed in the literature review are confirmed by the

information obtained from the interviews, it must be noted that observations are based only

one researcher’s analysis. Finally, companies represented in the case studies are not

representatives of similar industries across nonprofit, public and private sectors.

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Chapter 2

Review of the literature

Public versus private sector

Similar or different?

For several decades, similarities and differences between public and private sectors

have been debated among scholars of public administration, economics and politics. A

classic scientific thought deriving from scholars of organization theory such as Herbert

Simon (1946) is that public, private and nonprofit organizations are more similar than

different. In his later works Simon added that: “the common claim that public and nonprofit

organizations cannot, and on average, do not, operate as efficiently as private businesses” is

simply false” (Simon, 1998). Generic traditionalists such as Daft (2010), Hall and Tolbert

(2004) have supported Simon’s theory. Rainey (2009), however, called for cautious

examination of the sectors, stating that in order to draw accurate conclusions, researchers

should compare appropriate samples such as a large public organization to similar sized

private firms and take into account other variables in addition to size (Rainey, 2009).

The meaning of public, originating from the Latin language, pertains to the

community, nation or state, whereas the concept private is “to be deprived of public office or

set apart from government as a personal matter” (Guralnik, 1980). Benn and Gauss (1983)

further stated that the distinctions between public and private sectors lie within three major

factors: 1) affected interests (whether interests are individual or communal); 2) access to

information or resources; 3) agency (that is whether an organization act alone or on behalf of

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a community). Rainey (2009) added that the main distinction is in their ownership: members

of political communities own public agencies collectively, whereas businessmen or

shareholders define private sector ownership. More specifically, public agencies, unlike their

private sector counterparts, are funded by taxpayer funds, whereas private companies are

funded by customer fees paid directly to services or goods (Rainey, 2009). At last but not

least, public sector organizations are predominantly controlled by political forces, while

businesses are controlled by market forces, sales, and are continuously investing in

innovations. As classical theorists Dahl and Lindblom (1953) claimed, primary constraints

that make the two sectors distinct are imposed by the political system in the public sector and

the economic system in the private sector, which are still true to this day (Rainey, 2009).

In government-owned organizations, a central tenant of public administration or

management, its so-called publicness, leaves a strong imprint on organizational activities.

Studies have examined the effect of publicness on personnel management, decision-making,

strategic management, information systems management, computing and other organizational

characteristics (Bretschneider, 1990; Rainey, 2009). The distinct qualities also impact the

relationships between government and businesses and influence educators who seek to define

these concepts. Many upper-level managers and executives who have worked in both private

and public sectors attest to sharp differences between the sectors’ work environments (Weiss,

1983, IBM Endowment for the Business Government, 2002). However, Rainey (2009)

argues that these differences are relevant in the higher levels of managerial ladder and asks a

question on whether such studies addressed the issue of how well these small samples

represent the sectors and whether they account for all kinds of variables that may affect the

overall results of such research (Rainey, 2009).

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Some private sector characteristics

The private sector quality philosophy evolved from the idea of quality control and

developed into a comprehensive method of quality management, where leadership is the

fundamental part of comprehensive quality management (Schedler & Felix, 2000).

According to Schedler & Felix (2000) the private sector quality philosophy is based on a

management framework called European Foundation for Quality Management (EFQM)

Model, which originates from the Total Quality Management (TQM) model. The EFQM

model supposes that: “customer satisfaction, people (employee) satisfaction and impact on

society are achieved through leadership which drives the policy and strategy, people

management, partnership and resources and processes, leading to excellence in business

results” (Schedler & Felix, 2000, 2000, p. 132) These terms are often used in the private

sector where the meaning of policy in this context implies corporate policy, not government

policy.

Many private sector companies think in terms of the so-called service profit chain.

The service profit chain suggests relationships between the employee outcomes to customer

and business outcomes. It describes a driving force behind profitability in business, which is

linked to highly satisfied customers. In addition, in order to keep customers profitable, the

manager needs to take into account all aspects of operations that affect customer satisfaction,

which is the service profit chain. Scholars suggest that employee satisfaction is affected by

internal service quality such as enabling employees with skills and power to serve customers.

Moreover, employee satisfaction, as a result, drives employee loyalty, which in turn impacts

employee productivity. Employee productivity implies better service for customers, which in

turn affects customer satisfaction and loyalty. According to the Harvard Business Review

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authors, (Heskett, et. al., 2011), customer loyalty can result in an increase of profits by 25 to

85 percent.

Comparative studies: motivational factors

According to polls, the population believes that unlike their private sector

counterparts, public sector employees are less hard working and thus less productive

(Volcker, 1989). “The image of the federal service is that its members are lazy, unambitious,

and less than competent” (Meier, 1993, p.244), however there is little evidence that either

confirms or refutes this stereotype (Frank & Lewis, 2004). Several studies implemented in

the last few decades, where Baldwin (1984) and Brehm & Gates (1997) found no differences

between motivational factors among private and public sector employees.

Work motivation “refers to how much a person tries to work hard and well - to the

arousal, direction, and persistence of effort in work settings” (Rainey, 2001). Scholars offer

varied reasons for this. Pinder (1998) suggested individual characteristics such as values and

human needs can be one explanation. Others, however, explain this by linking motivation to

job characteristics and work context (Wright, 2001), theories such as needs hierarchy

(Maslow, 1954), McGregor’s theory X and Y (Rainey, 2009) provide different takes on

motivation. Many public employees possess a pride to serve society and the public interest

compared to their private sector counterparts (Crewson, 1997; Rainey, 1983). Also, salary

range is of less importance to public than to private employees (Crewson, 1997; Wittmer,

1991). The differences in motivational factors in public and private companies may exists

due to the type of rewards they offer or the kind of workers they attract (Frank & Lewis,

2004). As Frank & Lewis (2004) further noted:

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“Private businesses may be better structured to link external motivators to individual productivity, but government work may be intrinsically more satisfying. Whether people perceive government jobs as safe havens for the lazy or as opportunities for public service may determine which sector attracts more motivated workers. A belief that extrinsic rewards and punishments are the primary sources of work motivation may underlie the popular perception of the lazy bureaucrat, as governments face more obstacles than businesses in using compensation or discipline to motivate managers and employees.” (p.37)

Also, unlike private company managers, public sector managers cannot distribute

profits even if their agencies perform well; in addition, these managers are not in danger to

lose their jobs if their agencies fail. Thus, government organizations have fewer material

incentives to produce high performance (Johnson & Libecap, 1994). According to a survey

implemented by Alonso & Lewis (2001), employee expectation of extrinsic rewards has a

strong impact on their motivation and performance. This confirms expectancy theory by

Vroom (1964), which suggests that extrinsic motivators such as increase in pay and

promotions have an effect when employees understand there might be a strong link between

the efforts they put in a job and rewards associated with them. In addition, there is an effect,

when employees know that their behavior can determine their job performance and that they

are expected to be rewarded for high performance, as well as when they recognize the value

of the rewards (Frank & Lewis, 2002).

According to Frank & Lewis’s (2002) hypothesis, the type of workers the public

sector brings in have to do with their perceptions of working in public sector organizations.

The authors further suggest that indolent people may prefer jobs in government if they think

these types of jobs are undemanding. One way to measure people’s attitude to work is to

observe whether or not they adhere to the Protestant Work Ethic (PWE) which stands for: “a

dedication to hard work, asceticism, industriousness, deferral of gratification, avoidance of

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idleness and waste, conservation of resources, and individualism (Furnham, 1990; Weber,

1930). According to Furnham (1990), empirical research has shown the connection between

PWE to work ethic. This type of work ethic is also linked to a specific demographic,

represented by church-attending Protestants and Catholics and those affiliated with the

Republican Party (Frank & Lewis, 2004; Furnham, 1984; Tang & Tzeng, 1992).

Frank & Lewis (2004), critiquing such survey method, as a fairly small, nonrandom

sample of managers, provide their own survey results based on a random national sample.

These research findings refute the popular stereotype of public servants as being indolent,

showing that public sector employees agree with statements such as:

“I make a point of doing the best work I can, even if it sometimes does interfere with the rest

of my life”, showing the significant 6.5 percentage point difference with the private sector

respondents at the .10 level. Moreover, this indicator remains similar when only public

administration employees are considered. The survey results also supported the hypothesis of

the extrinsic and intrinsic motivational factors, which were discussed above. In this particular

area the results showed that private sector employees are indeed motivated by advancement

and higher income, whereas public sector employees had a stronger desire to serve public

interest and help others. Also, government employees are more likely to report on job

security and work being interesting than those representing private sector (Frank & Lewis,

2004). Another finding of the Frank & Lewis (2004) research suggested that Protestant Work

Ethics indicators were not significantly different between the sectors. For example, private

sectors employees were not likely to be Republican, but they were more conservative than

the government workers. Also, while accounting for equally Protestant populations, people

working for government agencies were more likely to be regular church attendees. Another

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finding showed that government workers were substantially better educated and also older.

Even when teachers were excluded from the public sector employees’ category, public-

private differences did not show a significant change, however this particular group showed a

higher percentage of male respondents (Frank & Lewis, 2004).

Decision-making contexts

Rodrigues & Hickson (1995) conducted research in decision-making practices of

public and private sector managers and found notable differences. For-profit sector

organizations are shown to have smoother decision-making practices compared with public

sector agencies. Public sector agencies experience more interruptions and delays, which can

be explained by the different roles private, and public sector organizations play in our society.

The function of businesses is to sell goods or services to consumers, generate profits for

themselves and wealth for their shareholders. A typical public sector organization is funded

by taxpayer funds with a purpose of providing a wide range of services for the public. Thus,

these distinct context and roles call for distinct expectations and accountability, which in turn

impact decision-making practices (Nutt, 2005).

Nutt (2005) further suggests that decision-makers in private sector organizations have

significantly higher levels of discretion and more substantial resources to implement their

plans. He further suggests that business people use analysis techniques when making

decisions. Managers of the private sector organizations work with strategic market data

characterized by regional sales, which is used as a tool to analyze success or failure of

companies. Such analysis is recognized as risk assessment of various options before any

action is taken (Nutt, 2002). More specifically, a manager would balance risk with profit.

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According to this, business managers are more sensitive to risk and are more action-oriented

compared with those of the public sector. This can also be explained by the fact that

businesses are much more able to make decisions without external interference (Nutt, 2002).

Furthermore, Nutt (2002) suggests:

“…Decision makers in for profit organizations will be drawn to decision practices that call for analysis. There is less need to mediate with people in key power centers. Decision makers face fewer demands to appease such groups, so they have less need to bargain and to network.” (Nutt, 2002, pp. 298-299).

Moreover, the private sector operates within a very competitive environment where

success is determined by the buying behaviour of the public. Because of this, the businesses’

motivation to improve quality is related to increasing sales (Nutt, 2005).

Nutt (2005) suggests that, in both the public and private sectors, factors that impact

strategic decision-making are environmental, transactional and procedural. Environmental

factors are markets, political influence and others. Organizations in the public sector have to

follow more formal procedures for decision-making. They are also more rigid and are risk-

averse unlike private sector organizations (Bozeman and Kingsley, 1998; Farnham and

Horton, 1996, Nutt, 2005). Thus, public managers are constrained in ways that limit both

what they can do and their prospects of success in making decisions. They operate under so-

called sunshine laws, which compel them to disclose their strategic decisions. Red tape or a

“pathological side effect of bureaucracy” (Boyne, 2002, Bozeman and Scott, 1996), which is

demonstrated in a counter-productive adherence to rules rather than production, is a “result of

the delays and subsequent irritation caused by formalization and stagnation” (Bozeman,

1992).

Furthermore, public sector managers have significantly more implied obligations than

their business counterparts. For instance, they aim at meeting public desires and expectations,

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related to meeting overall organizational goals, which are often vague and conflicting

because of the influence of third parties and stakeholders. Business managers, on the other

hand, have much fewer implied obligations and do not hold such a high degree of public

accountability (Rainey, 2009).

Management of information systems

Information systems constitute an important segment of every organization. Well-

developed information systems can save time and significantly increase employee

productivity. Empirical tests of public and private organizational differences suggest there

are important distinctions in managing information systems between the two sectors

(Bretschneider, 1990). In his work, “Management information systems in public and private

organizations” Bretschneider (1990) demonstrates differences between public management

of information systems (PIMS) and business management information systems (MIS).

Research shows that public sector organizations are distinct from the private sector in

terms of procedural delays, greater interdependence and a higher level of accountability

(Bretschneider, 1990). For example, interdependency and the presence of red tape in the

public sector organizations showed that if measured in the number of weeks, it takes longer

to accomplish the same tasks when compared to the private sector. These results explain that

is either public sector organizations are poorly managed or they are affected by other

variables. More specifically, research showed that PMIS practices result in longer delays than

private sector MIS in the area of personnel, such as creating positions and firing. In addition,

in terms of planning, PMIS differed from MIS in the use of more formal planning processes

related to budgeting, while the private sector used steering committees. Moreover, the study

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showed that in such environments, business MIS cannot be easily adopted. Thus, according

to Bretschneider (1990) the environment of public organizations affects or tailors the nature

of management action. In more recent studies by (Rocheleau & Wu, 2002), suggest that

private sector organizations are willing to invest more resources in training and equipment

than do government organizations. Varon (2000) proposes that the differences in

competitiveness and profit incentive may affect recruitment of IT personnel, specifically, in

the public sector due to low salary structures and lack of stock options, giving the private

sector an advantage.

In addition, when public sector organizations are unable to recruit staff with specific

Information Systems (IS) skills, they may have to outsource more of their IS needs than

private sector organizations would. For many private sector organizations, the information

system is a core competency because it provides companies with its competitive edge and

thus, according to some experts, should not be outsourced (Venkatraman, 1997).

If it is true that private sector Information Systems are designed to compete with one

another, whereas public sector managers are primarily structured around accountability and

openness, then this suggests that there may be differences between the sectors regarding

investing in new equipment and training. Reed (2001) observed differences in strategic

information system planning in U.S. state government and found a more diverse spectrum of

stakeholders compared to the private sector counterparts. Thus, he proposes that such

diversity could prevent effective strategic IT planning, since political interactions may

dominate technical necessities (Reed, 2001). West (2001) discusses his research findings in

e-government websites suggesting that they are less interactive in comparison to many on-

line businesses.

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Work-family conflict

Research suggests that work culture impacts work-family conflict directly in the

private sector and indirectly, through less work pressure, in the public sector. According to

(Dolcos & Daley, 2009) work-family culture had a much stronger impact on supervisor

support in the private sector. In the public sector, however, employees received higher levels

of supervisor and organizational support, while being higher level of work pressure (Dolcos

& Daley, 2009). Government affords federal support to employees through the Family and

Medical Leave Act (1999). This law allows unpaid and paid leaves in both public and private

sectors, however it fails to provide support for maternity and parental leaves, reduced work

time policies, and quality child care (Gornick and Meyers 2003; Heyman, Earle, and

Hanchate 2004; Heyman, Earle and Hayes 2007). In addition to government-mandated

benefits, many public and private organizations provide other work-family support, such as

child and elder care resources, referral services, flexible scheduling, and telecommuting

options (Dolcos & Daley, 2009).

Since public sector organizations are more open to public pressures, they are more

likely to accommodate to work and family conflicts by providing a supportive work

environment (DiMaggio and Powell 1983; Dobbin, Edelman, Meyer, Scott, and Swidler

1988; Goodstein 1994; Ingram and Simons 1995). Research also suggests that larger

organizations are more likely to provide work-life programs and institute policies to permit

more flexible leave time (Goodstein 1994; Ingram and Simons 1995; Morgan and Milliken

1992). Furthermore, organizations with higher percentage of female employees are more

likely to use family friendly employment policies in order to retain and recruit female

personnel (Davis and Kalleberg 2006; Guthrie and Roth 1999). Some scholars suggest that

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there is little research data on how the ability to balance work and family life differs across

public and private sectors. Goodstein (1994) & Ingram & Simons (1995), suggest that the

availability of family friendly policies may vary by sector of employment, however the

effects of implementing such policies formally is not clear. In addition, informal benefits

such as supervisor and coworkers’ support can also influence workplace characteristics

across the sectors. Several studies investigating this issue found that coworkers can influence

employees’ ability to integrate work and family demands in sectors (Brough & Pears, 2004;

Thompson & Prottas, 2005).

Daley (2009) suggests that there is no empirical data available to propose that the

public sector offers superior work-family conditions compared with the private sector,

although conventional wisdom would suggest so. However, some scholars claim that public

sector employment is perceived as more family friendly than the private sector (Martino-

Golden, 2005); such characteristics of working conditions would be important factors in

deciding a place of work (Buelens & Van den Broeck, 2007; Nielsen, Simonsen & Verner,

2004).

Work hours

In certain jobs, the presence of sector differences is also overlaid by gender

differences in the way employees respond to pressures at work (Diamond & Gillian, 2007).

For example, in a study of public and private sectors information technology companies, the

results showed a large discrepancy between private and public sectors in the percentage of

employees working long hours. Also, there were significant gender differences in long hours,

for women, in particular; in addition, it was found there are differences between those with

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and without children (Diamond & Gillian, 2007). The results also indicated a longer-hours

culture in the private sector and a rarity of part-time work in both sectors. Thus, according to

Diamond & Gillian (2007): “The experiences of Information Technology professionals are

influenced by the complex interaction of Information Technology work culture, sector and

gender (Diamond & Gillian, 2007, p. 335).

New Public Management

According to Bumgarner & Newswander (2009): “public sector operates under

legislative and judicial constraints, which obstruct innovation, change and productivity, while

a results-centred public organization would provide resources to achieve the ends”

(Bumgarner & Newswander, 2009, p. 191). New Public Management embodies a shift

towards rational public administration (Watkings & Arrington, 2005). The principles of NPM

are “emphasis on products rather than processes, quantifiable measures and hard technologies”

(Pallot, 1999), “compulsory competition” (Seal, 1999), and “a commitment to customer-

contractor and other quasi-commercial policy making and management principles,” (Boden

et al.,1998, p. 267). It is “based on the language of managerial and economic rhetoric from

the private sector” (Pettersen, 1999, p. 378) that Guthrie et al. (1999) describe as “a

seemingly endless list of accounting based, ‘financial management,’ techniques that are

being drawn on in the pursuit of reform” (p. 210). NPM can include “cost improvement

programmes, performance indicators, financial management information systems, financial

targets, delegated budgets, and resource allocation rules,” that create “the perceived need to

rationalize public services and, above all, the stress on quantification as a means of

demonstrating achievements (efficiency gains, new levels of performance) and of holding

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responsible persons accountable” (Lapsley, 1999, p. 201). These measures lead to

government policies that are “aimed at cutting budgets, enhancing efficiency and improving

manageability of operations,” (Groot, 1999, p. 354). The application of NPM techniques in

the public sector is facilitated through deregulation, decentralization, privatization and

outsourcing (Pina & Torres, 2003). Gendron (2001) states that NPM promotes manager

accountability, whereas Jacobs (2000) argues that it “erodes the profound public values that

grounded in the public welfare. In addition, NPM eliminates the principles of the ideal caring

institution turning it into business where “accountability is defined in financial and

accounting terms” (Jacobs, 2000, p.361).

New Public Management is ultimately focused on customer satisfaction based on

market-driven, discretionary management (Aucoin, 2006). In order to ensure this

environment is sustained, rules and regulations need to be replaced by more flexibility where

managers are let to manage (Kettl, 1997). In such circumstances managers would be able to

govern through entrepreneurial means, thus serving the public by application of market-based

tools, not bureaucratic means (Bumgarner & Newswander, 2009). One of the practices of

New Public Management, contracting out services to private companies, derives from the

belief that this way, resources would be used more efficiently (Bumgarner & Newswander,

2009). However, achieving efficiency is often challenging since “market mechanisms such as

efficiency and effectiveness must be tempered against the current realities of the contracting

environment” (Bumgarner & Newswander, 2009, p. 191). According to Bozeman (2002) and

Pozner (2002), governments are often faced with a shortage of service providers and are

unable to monitor contracts and oversee adherence to constitutional values. Rosembloom &

Piotrowski (2005) added that in a constitutional democratic state, management discretion

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should not over-ride political and legislative values. More specifically, they have argued that

not requiring contractors to adhere to traditional constitutional rules compromises the ideal of

a constitutional republic, that is upholding individual rights. Considering the above-

mentioned realities, NPM presents many challenges in the light of the administrative law,

which has been built for over approximately sixty years. This paradox posed by NPM,

expands the traditional power of the state while seeking to curb its influence. Taking these

facts into account, Bumgarner & Newswander (2009) state that public administrators should

incrementally create a balance within their organizations where individuals’ rights are

maintained while government efficiency is increased.

The influence of NPM is showcased not only in the United States but also worldwide.

Countries such as New Zealand, United Kingdom, Japan have applied NPM principles in

industries such as healthcare and education. In these cases research showed that while

principles of accountability and professional autonomy have proved to yield success in some

industries, they also eroded the profound public sector values (Jacobs, 2000). Moreover, in

less developed countries such as Bangladesh, privatization policies “have morally

devastating outcomes” (Uddin & Hopper, 2003, in Watkins & Arrington, 2005 p.37).

From NPM to NPR

“I’m from the government and I’m here to help, are the most terrifying words in the

English language” (The Quotations Page, Ronald Reagan), is a well-known quote from the

40th president of the United States Ronald Reagan. Known for his idea of trickle-down

economics, a conservative Reagan was one of the contributors to the growing anti-

establishment sentiment – “The Republican Revolution”, which put the nail to the

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Roosevelt’s New Deal and Johnson’s Great Society (Watkings & Arrington, 2005). Reagan

and his followers asserted that government is a problem, not a solution to societal issues,

while making the values of the private sector superior to the traditional values of the state

(Watkings & Arrington, 2005).

In the early 1990s, the Democratic Party’s president Bill Clinton and vice-president

Al Gore followed suit by advocating the new era of administrative reform called National

Performance Review (NPR):

“We can no longer afford to pay more for – and get less from – our government. . . . It is time to radically change the way the government operates – to shift from top-down bureaucracy to entrepreneurial government that empowers citizens and communities to change our country from the bottom up. We must reward the people and ideas that work and get rid of those that don’t” (Clinton & Gore, 1992 in Watkins & Arrington, 2005, p.38).

NPR, says Moe (1994), was a combination of ideas from the privatization literature of

the 1970s and 1980s, which exalted the free market economy and contemporary business

economics. It represented a comprehensive example of NPM, NPR and consisted of 380

major recommendations, which affected 270 federal agencies and 14 government systems

(GAO, 1994, Thompson, 2000, Watkings & Arrington, 2005). The aim of the NPR was to

eliminate government monopolies and promote greater competition between public sector

agencies and the private sector by modeling principles of the market economy. The crucial

elements of the NPR plan assumed that:

“A monopoly’s managers don’t even know when they are providing poor service or failing to take advantage of new, cost-cutting technologies, because they don’t get signals from their customers. In contrast, competitive firms get instant feedback when customers go elsewhere. We can create an environment that commits federal managers to the same struggle to cut costs and improve customer service that compels private managers. We can imbue the federal government—from top to bottom - with a driving sense of accountability . . ..This process will be neither quick nor easy. But as it unfolds, a very different type of government will emerge, one that is accountable to its true customers - the public.” (Executive Office of the President, 1993 in Watkins & Arrington, 2003, p.40)

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NPR certainly encouraged competition between public sector organizations and the

private sector. It also supported education and training through introducing career

development centers, which would encourage generating their own profits through fees from

employers and employees. This performance-driven process would facilitate the participation

of both private and public organizations where customer’s demands would be one of the

priorities in consideration (Executive Office of the President, 1993). However, these

initiatives were followed by problems and risks due to the fact that government sponsored

enterprises (GSEs) were the responsibility of the U.S. Treasury should they become bankrupt.

For example, Fannie Mae alone “created an unfunded implicit liability upon U.S. taxpayers

of nearly $1.8 trillion” (Lee, 2002).

Introducing user-fees for services was one of the other ways to imitate the private sector company practices. NPR suggested that federal agencies should be allowed to charge fees without facing any restrictions. For example, the administration of the National Parks should be allowed to charge any entrance fees and take advantage of the great demand for such services as an opportunity to generate revenue. However, such initiative, as Watkings & Arrington (2005) pointed out, will certainly exclude the poor population. Another attribute of the NPR, also borrowed from the private sector, is a cost- saving hands on management technique, which is aimed at eliminating unnecessary layers of

management and liberating agencies from centralized government control. The NPR

documents boast of a success in the Defense Logistics Agency (DFA), which by cutting a

whole level of management, created self-managing teams. However, some employees may

view such policies threating to their jobs since these policies cause a decrease in the numbers

24

of public sector employees (Executive Office of the President, 1993).

Major reforms such as NPM and NPR aimed at eliminating red tape, loosening

personnel rules with hopes that this would provide an atmosphere for better performance,

enable managers to create pay-for-performance systems and improve the image of the

government before the public (Feeney & Rainey, 2009).

However, even after decades of these reforms, scholars emphasize that these

initiatives have not relieved public managers from many constraints, associated with

managing public sector organizations (Ingraham, 1993 & Ballendstedt, 2007). For example,

an important factor related to performance and job satisfaction, researched across decades

shows that: “government managers are much more likely than managers in business firms to

say that personnel rules make it hard to reward a good performer with higher pay and fire a

poor performer” (Feeney & Rainey, 2009).

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Chapter 3

Review of the literature

Nonprofit organizations

Nonprofit organizations comprise a vast array of agencies that share a common

mission although sometimes sharply varied in their approach to implementing public services.

They have played important social, economic and political roles since pre-colonial times.

Nonprofits comprise six percent of U.S.’ national income and employ nine percent of the

country’s labour force, excluding volunteers (Boris, 2006) They serve the public in education,

healthcare, science, poverty relief, childcare, art and in many other ways. Nonprofit

organizations are self-governing organizations governed by the nondistribution constraint

under which they are barred from distributing profits to the individuals who oversee the

organization or its internal governance structure. Because of the nondistribution constraint,

government considers nonprofits as more trustworthy than for-profit organizations, which

makes them preferred partners in delivering public services. The nondistribution constraint is

believed to reduce incentives and opportunities for nonprofits to deceive consumers.

Nevertheless, the government must oversee operations of nonprofits to ensure the

nondistribution constraint is observed and that their governing boards follow certain

principles. Public confidence and trust are also crucial to the success of nonprofits, however

the public does not always have a good understanding about the range of nonprofits and how

they operate. Nonprofits have to ensure they are transparent, particularly about their donated

money, because any scandal can lead to inquiries from government and new regulatory

proposals. Although nonprofit organizations are distinct from government, the way they are

run is often shaped by governmental policies (Boris & Steuerle, 2006).

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Nonprofits in the United States are tax-exempt under the federal tax code. The

Internal Revenue Service (IRS) is the primary government agency that determines whether or

not an organization meets eligibility of tax-exemption status and it also oversees its activity.

All nonprofits in the United States with $5000 or more of annual revenue are required to

register with the IRS, except religion-based groups. Nonprofits, under section 501 (c) (3) of

the tax code, can apply for a charitable status in order to receive tax-deductible contributions

from donors. The charitable status is an important incentive, which encourages donor giving

(Brody & Cordes, 2002).

Finances

Many nonprofits are small organizations with modest resources, volunteers and

usually operating locally. Some, however, have large budgets and hundreds of employees.

Most nonprofit resources are concentrated in these large organizations and multipurpose

service agencies, which are mainly involved in healthcare and education. Nonprofit revenues

vary from individual donations, corporate giving, government grants, special events,

investments, fees-for-service and other sources (Boris & Steuerle, 2006). Government grants

are less important than fee-for-service income since fee-for-service comprise a large

proportion of nonprofits income. Fee-for-service agreements include government contracts

through Medicare and Medicaid, government or private vouchers for job training and

childcare (Smith, 2002). According to Smith (2002), Medicaid is the driving force in the

growth of government funding for nonprofits. But dependence on fee-for-service income

raises concerns that nonprofits are becoming commercialized, which may have an undesired

effect on their unique character. In recent years, nonprofits have become more business-like

27

in their marketing and management style, competing with other nonprofits for government

contracts. The religious public is concerned that faith-based organizations’ involvement in

government fee-for-service projects, would make these organizations lose their autonomy

(Boris & Steuerle, 2006).

The shortage of funding compels nonprofits to look for other revenue sources. For

instance, social enterprise and commercial contracts through corporations are becoming more

popular. Such contracts are mutually beneficial. Corporations use charitable organizations to

expand their client base, enhance marketing and improve their visibility on the market. These

market changes and the growing emphasis on capacity building, forces nonprofits to make

significant investments in their infrastructure. However, many donors are reluctant to sponsor

capacity building, preferring funding specific programs. There are some exceptions, however,

such as Venture Philanthropy Partners and Edna McConnell Clark Foundation among others,

which make significant contributions in nonprofit capacity building (Smith, 2002).

Nonprofit governing boards and the CEO

The governing board of nonprofits has the overall responsibility for the organization.

There are three main types of boards, including those established by the organization’s

members. These types are: elected, self-perpetuating and boards appointed by external

authority. Some organizations, such as religious congregations, have board members

appointed by a church authority. Colleges and universities may have boards appointed by the

alumni. The board may also have some seats that are ex-officio, that is, a position held by

someone who holds an office or position. For example the head of the board of trustees in

Catholic University of America is the Archbishop of Baltimore (Worth, 2009).

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Hopkins (2003) explains that nonprofit board members are “fiduciaries of the

organization’s resources and guardians of its mission.” This means the board is accountable

“for everything the organization does and how those things are accomplished” (Howe, 2002).

The fiduciary responsibilities include the duty of care, loyalty and obedience. State law,

enforced by state attorneys general and state courts, defines the responsibilities of governing

boards. However, in recent years, the federal government and especially the IRS have had

more influence on nonprofits. The scrutiny of nonprofit boards by the federal and state

governments, other agencies and the media, have been increased by the passage of the

Sarbanes-Oxley Act in 2002. Now nonprofit boards can face penalties for failure to fulfill

fiduciary responsibilities. These regulations led nonprofit boards to adopt new conflict-of-

interest and disclosure policies (Worth, 2009). Functional responsibilities of boards include

appointment, support and evaluation of CEO’s performance, establishing organizational

mission and goal, approving programs, ensuring sound management and financial stability

and establishing standards for evaluation of organization’s performance (Worth, 2009). Other

responsibilities of boards may include but are not limited to: ensuring the organization’s

financial stability and sustainability, which sometimes comes from personal financial

contributions and active engagement in fundraising. Some boards have policies requiring that

members give or raise a minimum amount, while others encourage its members to participate

according to their skills and capacities (Worth, 2009).

The Chief Executive Officer (CEO) is an important figure in a nonprofit (and for-

profit) organization. Researchers offer different views on the relationship between the CEO

and the governing board. John Carver (1997) suggests a model called policy governance with

a clear separation of roles outlined in the policies established by the board. Chait (2005)

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suggests a model called governance-as-leadership with the division of responsibilities of the

board and the CEO where the parties work together on the most critical issues and questions

facing the organization. The research by Herman & Heimovics (2005) reveals that board

members and the executive consider the CEO as the primary person responsible for the

success or failure of the organization, calling this condition an “executive psychological

centrality”. They advise that the CEO accepts that responsibility and supports and facilitates

the work of the governing boards.

The position of the CEO in a nonprofit organization is different from similar positions

in government and for-profit sectors because of the unique character of nonprofit

organizations. While every organization regardless the sector relies on effective management,

nonprofits especially need CEOs who are able to exercise strong leadership. The reason for

this is because nonprofits hold certain values and are driven by their missions, which marshal

commitment and support (Worth, 2009).

Accountability and performance measurement

Nonprofits are facing an increasing demand for accountability. For some

organizations it means following legal and ethical requirements, while for others it means

that they adhere to recommended best practices in governance and management.

Accountability also means being responsible to demonstrate that the organization is

achieving results through the resources entrusted in it; that these resources are used ethically,

efficiently and effectively (Worth, 2009).

Many nonprofits are exempt from taxation, and its donors enjoy tax deductibility

from the gifts they give. Because this tax-exempt revenue is regarded as some form of a tax

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subsidy, nonprofits, in a way, are working with the public's money (Worth, 2009). This gives

the society an interest in ensuring that nonprofits are accountable for their use of resources

and that these resources are used toward the accomplishment of their missions. The question

is: what exactly does the public expect? They expect adherence to a basic principle of

accountability: following the law, nondistribution, avoiding conflict of interest, and filing of

the IRS reports. But there is much more to accountability than this. Accountability also

includes showcasing effectiveness in achieving the purposes for which the nonprofits exist.

This requires that nonprofits use their resources in a way that benefits their stakeholders. This

particular component of accountability is the most difficult to define and measure (Worth,

2009).

Along with accountability to the state and federal laws, the nonprofit sector has

established various methods of self-regulation. These are the standards of best practice and

programs by adherence to which nonprofits are granted accreditation. In addition, ratings

from charity watchdogs and private organizations have a strong impact on the nonprofit

sector. Program effectiveness, efficiency and organizational performance are distinct factors

in the evaluation process. Effectiveness relates to achieving the mission, but performance

involves financial outcomes and other variables. Evaluation of effectiveness and performance

often involves financial ratios, percentage of expenditures devoted to programs rather than

overall management and fundraising. Some argue that overemphasis on efficiency could

compromise effectiveness, that is when an organization chooses not to invest in capacity

building (Kelly, 1998; Baruch & Ramalho, 2006).

One of the well-known performance evaluation methods is the balanced scorecard,

which combines internal and external variables in order to give a comprehensive picture of

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the organization. The concept developed by Kaplan & Norton (1992) gives a balanced

perspective on the performance by combining of financial data with other variables. It looks

at the organization from four different angles: financial, customer, internal business,

innovation and learning perspectives. Nonprofit managers should be committed to the

performance evaluation, but this cannot be done at the expense of delivering their mission

delivery Kaplan & Norton (1992).

Building capacity and managing change

The public has increasing interest in the performance of nonprofits and the view that

capacity building is an important way to enhance its performance. Capacity building has

become an industry in itself. There are various nonprofit and for-profit consultants and

training specialists offering services to assist organizations to build their capacity (Worth,

2009).

What is exactly capacity? Light (2004b) offers a definition as follows: capacity is

“everything an organization uses to achieve its mission, from desks and chairs to programs

and people” (Light, 2004b, p.15). What is capacity building? Letts et al. (1999a) call it a

process “to develop, sustain, and improve [nonprofit] mission delivery” (Letts, et. al., 1999a,

in Worth, 2009, p.146). Capacity building in a nonprofit organization means employing all of

its resources to pursue its mission and strengthen the organization in order to make the

organization more effective in achieving its goals. Capacity is comprised of internal

relationships, that is the organization’s staff, processes and infrastructure; and external

relationships with funders, partners, volunteers and others (Connolly & Lukas, 2002).

Specialists in the field have argued that historically nonprofits focused on delivering services

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rather than building organization and this was mainly due to the fact that nonprofit funders

failed to provide support for capacity building. Although these critiques have created to a

growing interest in capacity building and increase in funding in support of it, most of these

initiatives are still funded by the organization’s own funds (Worth, 2009).

An organization might concentrate on strengthening its different elements or

capacities. Some authors categorize these as internal and external while others developed

more comprehensive systems to describe them. For instance, Paul Light (2004b) divides

capacity into four categories: external relations, internal structure, leadership and

management systems. Organizations use various instruments in order to identify elements of

capacity that need to be strengthened, and capacity-building approaches. For example, these

initiatives could include board development leadership training for the CEO, training of staff

members, or use of consultants to improve management systems and procedures (Worth,

2009).

Nonprofits go through life cycles: they begin as a dream, going through a period of

growth and eventually reaching maturity. They usually reach a time for a renewal or

additional growth, that is when they aim at redefining and reenergizing themselves, whereas

some nonprofits become stagnant or even cease to exist. The type of capacity building that

organization needs will depend on a stage it is in. For example, young organizations may

need to focus on building systems and accountability, while mature nonprofits may revisit

their missions, goals and values. Experts such as McKinsey & Company (2001), recommend

that in order to succeed, organizations begin their capacity building with its mission, vision,

and values and then focus on more detailed considerations such as personnel and structure.

The prominent change theorist Kotter (1996) suggests that a process of change, which results

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in an organization adopting new practices, is a necessary final step to ensure that this change

is permanent. Kotter (1996) also argues that leadership should serve as a catalyst for such

organizational transformation.

Opinions on whether capacity building increases organizational effectiveness are

varied. Light (2004b) asserts that it does, however he says that there are disagreements about

the precise definition of effectiveness and the tools used to measure it. Therefore, this lack of

consensus makes it difficult to prove the link between capacity building and organizational

performance. Before applying any capacity building strategy, an analysis of expected costs

and benefits should be done first. It is then followed by a thorough evaluation of capacity

building impact on the organization’s effectiveness and performance (Light, 2004b).

Strategic planning and strategic management

Strategic planning is a process, which many nonprofits have adopted from the

corporate world. Strategic planning may serve as an important instrument for capacity

building. Management consultants and scholars have given a number of definitions on

strategy and how to develop it. Strategy may come in a shape of a written plan or another

approach in reaching the organizational goal. As Allison & Kaye (2005) put it, “It is

concerned with the longer-term course that the ship is steering, not with the waves” (Allison

& Kaye, 2005, p.12).

Kearns (2000) identifies three approaches to developing an organizational strategy.

The first is the visioning approach, which is based on a leader’s vision, followed by a step-

by-step plan to determine: “what strategic, tactic, actions, and resources are needed to

achieve it”. This approach may be best suited for a new young organization or one facing a

34

crisis. Such visionary method can build an opportunistic and flexible organization enabling it

to seize available possibilities that may arise. However, it can also come with certain risks

because a sole reliance on the leader’s vision can make the organization vulnerable to

external threats (Worth, 2009). The visionary approach is one when a strategy is made, but it

may also become increasingly inadequate as the organization grows in size and becomes

more complex (Worth, 2009).

Kearns (2000) describes another approach to developing strategy – the incremental

approach. It involves making one decision at a time as the organization goes along. He adds

that this may be the most realistic approach given the complexity of many nonprofits. This

method, nevertheless, produces an organization that is flexible and open to opportunities.

However, applying such a approach may not provide a concrete direction because it is not

considered a strategic planning method; some even argue whether an organization operating

in this way has a strategy at all (Kearns, 2000). The third way of developing strategy Kearns

(2000) calls the analytical approach. It is one in which “you use logic and in-depth analysis

to improve the strategic fit between your organization and its environment.”

Many organizations use a combination of various approaches. One well-known

version is the Harvard Policy Model upon which many alternative models are based. It

presents the following steps: “1) Planning to plan – determine the process, actors and their

responsibilities; 2) Clarify the organization’s mission, values and vision; 3) Assess the

situation – examine the external environment and the organization’s internal situation; 4)

Develop strategies, goals and objectives; 5) Write a plan; 6) Develop implementation plans;

7) Put plan into action” (Worth, 2009, p. 170).

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According to Bryson (2004), a widely cited author on strategic planning, strategic

planning is: “disciplined effort to produce fundamental decisions and actions that shape and

guide what an organization (or other entity) is, what it does and why it exists” (Bryson, 2004,

p.6). Strategic planning offers many benefits. It enables the organization to rethink about its

goals, mission and values, ask questions, confront problems and look at the environment

around it. It gives the organization an opportunity for rational decision making, rather than

reliance on intuition. However, according to Worth (2009), strategic planning is not a

solution to all organizational problems. It may not be suited for all organizations and all

circumstances, especially in a nonprofit’s early years and when in crisis situations.

In addition, strategic planning cannot become an all-consuming activity, but

according to Bryson (2004), should take ten percent of any key decision-maker’s time during

the year and even may be more than most organizations will require. At the same time,

strategic planning cannot be merely comprised of a number of actions and a written report,

but is a continuous part of the organization’s operations and a plan that should be a living

document, revisited and adjusted according to the circumstances and the changing

environment (Worth, 2009).

Strategic management is a concept that has entered the nonprofit world and

government through many textbooks and business school courses. Strategic plan is at the

centre of this approach, while strategic management is a broader concept. Koteen (1997)

acknowledges the term strategic management “does not possess an exact, universally

accepted definition”, but he offers at least a description:

“Strategic management emphasizes an ongoing process that integrates strategic planning with other management systems…. [it] seeks to use and merge all necessary approaches and resources to reach strategic goals… it embraces the entire set of managerial

36

decisions and actions that determine the long-run performance of an organization.” (Koteen, 1997, p.21). In other words, strategic management is a comprehensive method of managing the

organization based on the strategic plan, which consists of formulating a strategy, its

implementation and evaluation. The strategic plan defines decisions such as program design,

budgeting, organizational structure, human resources development, and evaluation. Strategic

management is a link between strategy and implementation (Worth, 2009).

The DNA of leadership

On a day-to-day basis, the activities of leaders consist of interactions with people.

Often interactions form a pattern, which can be either comfortable or uncomfortable. These

patterned interactions are called leadership DNA (Dym & Hutson, 2005).

Leadership can be described as a four-player system: the mover, who initiates action,

the follower – who supports the mover’s action, the opposer – who opposes initiatives and

the bystander, who steps back, comments on the process in the system as an observer (Dym

& Hutson, 2005). Here is an example:

“A program director makes a suggestion (mover); another program director insists

that it will not work (opposer). A development officer makes another suggestion (also a mover), but both program directors oppose it. Then, the executive director observes that people are too concerned about their own territory and are not building on each other’s suggestions (bystander). He suggests that they decide which project works best with the company’s strategic priorities and that they come back to him with a shared idea (mover). Leadership involves a perspective (bystanding) and insisting that others collaborate on a shared idea where they follow one another. Then they come back to the director with a plan that he is likely to accept (follow)” (Dym & Hutson, 2005,p. 139).

Although such illustrations are usually relevant to interactions of small groups,

37

they can also be applied to whole organizations (Dym & Hutson, 2005). In order to create an

effective system, players must be flexible and sometimes play two or more roles. Some

players can always take the opposing side, while others only provide feedback and never

enter the battle. But effective leaders will participate and bring challenging ideas. Often such

interactions become patterned, which can sometimes lead people to become identified with

their roles in a negative sense. Initiators can be stereotyped as controlling, whereby making it

difficult for others take the lead. Followers are said to be weak, insecure and passive.

Bystanders are disengaged and unable to be personal. When people become identified in

these roles, it shows that the system has become rigid and leadership will fail. The important

point about the four roles is this: “Stagnant situations are characterized by the limitations of

roles one can play; vibrant situations allow and even encourage people to play many roles”

(Dym & Hutson, 2005, p.141).

Forms of transactions between leaders and followers determine organizational

patterns. Leaders can remain ignorant of these patterns or choose to ignore them to their own

detriment (Dym & Hutson, 2005). But effective leadership consists of self-awareness as well

as awareness of the behavioural, cognitive and other components of the organization. “When

the roles of mover, follower, opposer and bystander as played in the system are optimized,

they can reinforce, extend or disrupts patterns which can pave the way to greater or lesser

alignment. These patterns are powerful and fundamental in determining outcomes” (Dym &

Hutson, 2005, p.148).

Foundations: what they do and how they do it Foundations are valuable social institutions the central force of which is sponsorship

of organizations that are involved in provision of public services, and the betterment of the

38

lives of humankind (Fleishman, 2009). Thousands of foundations are nowadays engaged in

social services, providing for the poor and the disadvantaged within the United States as well

as abroad. Wealthy citizens who decided that it is time to serve the public by giving away a

portion of their accumulated wealth, form foundations. Such statement of human generosity

dates far back in time. It was in part inspired by people like Carnegie and Rockefeller, who

demonstrated their servanthood to the people by establishing organizations that provide for

basic needs of communities. Foundations are among most powerful institutions, which enjoy

minimum accountability and have significant tax-benefits. They are workforce that is

engaged in the civic service independent from the government. Fleishman (20009) points out

“just as private investors and venture capitalists inspire new products and services in the

nonprofit sector, foundations provide capital that enables agencies to power innovation and

experimentation in the civic sector” (Fleishman, 2009, p. 59). Foundations sponsor the

creation of numerous civic-sector organizations that deal with human rights issues, civil

liberties, public advocacy, and the building of human capital. They also assist many

organizations in strengthening national, regional and local constituencies that enable social

change. They “play an important influential role in the continuous change in the American

society, including the redistribution of power and wealth” (Fleishman, 2009, p. 59).

Foundations are usually led by a staff of professionals who are guided by a board of

trustees. They provide funds from the foundation’s resource pool in order to support

nonprofit organizations, charities or other programs. Foundations play three main roles:

driver, partner and catalyst. The first function, the role of a driver consists of playing a

specific economic or cultural role while following a strategy to attain its goals. In this case, a

foundation directs a change effort and gives grants to an organization that will carry out the

39

strategy created by the foundation. The second function is that of a partner, where a

foundation shares the responsibility to shape a strategy and participates in crucial decision-

making with other partner organizations, and makes grants to support the organizations that

implement the strategy. The role of a catalyst implies the foundation does not engage in

developing a strategy to solve a problem, but gives grants to agencies to deal with a

particular problem (Fleishman, 2009).

Foundations, however, have limits as to what extent they can make an influence. If a

social problem is permeated in a large part of the society, foundations can usually do little in

solving the problem besides just ameliorating some of the symptoms and providing guidance,

which may bring ultimate solutions. For example, a foundation-established and supported

National Board of Professional Teaching Standards identified teachers in subject-matter

fields and created the nation’s first market for teachers (Fleishman, 2009). Within its twenty

years of existence, the Board has certified 74,000 teachers, which produced an overall

improvement in the quality of the elementary and secondary education. But the Board’s

attempt to create more comprehensive solutions has been prevented by various social and

psychological factors imposed by poverty, opposition from teachers and administrators’

unions (Fleishman, 2009). Another example is a situation in the healthcare system. While

many in the U.S. enjoy better healthcare than in many places in the world, however, there are

millions who are unable to access healthcare services due to their income and social status.

This problem is caused by a combination of the following factors: the majority political self-

interest, strong opposition by the healthcare pharmaceutical and insurance companies and

many others. Although foundations are not strong enough to influence a comprehensive

change, the Urban Institute, which was partially endowed by the Ford Foundation, that

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provided data that showed impact of foundations on the successful Massachusetts Health

Reform Law enacted in 2006 (Fleishman, 2009). Foundations are also involved in educating

the public about the need to change in funding and distribution of the American healthcare

system (Fleishman, 2009).

Another example that illustrates the limits of foundation power is the problem of

poverty. Poverty is a very complex and overwhelming challenge, involving every aspect of

social life and touching upon areas of health care, drug abuse, education, employment, racial

discrimination and others. History has shown that foundations can do something meaningful

about poverty, not by working alone, but with the help of government. Fleishman (2009)

suggests that only government has the needed resources necessary in order to put money into

poor people’s pockets and it can only do so if the public is willing to engage in a nationwide

redistribution of wealth. There are some examples of foundations that were able to bring

about change. In fact, the Earned Income Tax Credit (EITC) is a today’s largest public

assistance program for the working poor, which is foundation-created. Among others are

Manpower to Demonstration Research Corporation (now called MDRC), which is designed

to evaluate welfare demonstration programs and Child Health Insurance Program (CHIP),

pioneered by foundations and now managed by the state. However, ultimately, “it would be

naïve to expect foundations to work alone to eradicate poverty, it is the government that must

act” (Fleishman, 2009).

Why people give

Alexis de Tocqueville, Democracy in America (1835) wrote the following:

“Americans of all ages, all stations in life, and all types of dispositions are forever forming associations. There are not only commercial and industrial associations in which all

41

take part, but others of a thousand different types – religious, moral, serious, futile, very general and very limited, immensely large and very minute. In every case, at the head of any new undertaking, where in France you would find government or in England some territorial magnate, in the United States you are sure to find an association” (Tocqueville, 1835, in Fleishman, 2009, p.71). The American civic sector, or the third sector, dates back to the times when religious

oppression in Britain and France compelled people to flee to the New World. New

immigrants arriving in the New World began establishing independent religious

congregations, which branched into providers of schooling, healthcare and other needed

services (Fleishman, 2009). Nowadays, American civic sector is supported annually by about

seventy percent of the population from all layers of the society estimating $ 306.3 billion

(Fleishman, 2009). In his book Strategic Giving: The Art and Science of Philanthropy,

Frumkin (2006), makes a distinction between two types of charitable giving: instrumental or

expressive. Instrumental giving is strategic, which means it is focused on achieving a

particular policy objective and is intended to make a significant social impact. The idea of

instrumental giving is originated in Andrew Carnegie’s book The Gospel of Wealth (1889),

in which he claims that the philanthropic goal cab be achieved through a systemic change.

Today instrumental giving is what the majority of large foundations practice. Expressive

giving, on the other hand, is a reflection of a donor’s desire to support a cause without having

any expectations with regards to whether the monetary gift would make any impact. It is a

characteristic of smaller foundations and individuals (Fleishman, 2009).

So, what motivates people to give? In the case of charitable and other civic

organizations, motivations are primarily altruistic, however sometimes giving is seen as

pursuit of self-interest and a grey area where the two blend. For instance, some people give

time and money to organizations primarily because of the social status that particular

42

organization aligns itself with (Fleishman, 2009). Others give in order to attain a better

reputation, fame, and more customers to their business or for a general self-satisfaction.

There is a debate on whether motives for giving should matter at all if monetary gifts are

used for the public good. If a so-called impure altruism were forbidden, there would not be

much civic sector left. In any case, given the human nature, it would be impossible to

completely eliminate any self-interest (Fleishman, 2009).

The most cited motivation for charitable giving is a desire to give back. Many

successful businessmen give out of gratitude: “America has been good to me, and made it

possible for me to become successful and wealthy. Now I have an opportunity and an

obligation to repay the debt” (Fleishman, 2009, p.94). Others may give out of their religious

obligation; this is particularly true when beneficiaries are religious congregations, divinity

schools or seminaries (Fleishman, 2009). Representatives of the three major religions

Judaism, Christianity and Islam believe in regular donations to charity and some

denominations even provide a specific guideline to giving, for example ten percent of the

income (practiced by many Protestants). Therefore, it should not be surprising to observe that

the largest fraction of all charitable donations in the U.S. was to religious organizations in

2007 totaling about 33 percent (Giving USA, 2008).

Achieving and measuring impact

Fleishman (2009) claims that an impact of a foundation is not measured in inputs, i.e.

money, time, energy and effort put into a project or outputs, i.e. buildings built, awarded

scholarships, financed studies, or grants made. Rather, impact is the degree to which such

investments made a noticeable change in a society. It is about how investments helped create

43

new institutions, generated knowledge, created opportunities and improved human lives in

general. In other words, an impact a foundation has made is measured by the broader and

deeper effect in society. The impact of some foundation initiatives is difficult to determine or

possible to measure. This practice is common when a foundation addresses a large-scale

issue. As an example, Turman (2000) mentions the 1970s and 1980s when small foundations

focused on nuclear disarmament, where the scale of this issue was beyond participated

foundations’ capacity to make a notable change. However, other foundations’ initiatives in

the international arena such as those focused on the development of new food gains, curing

particular diseases or creation of new institutions e.g. the International Criminal Courts are

making a noticeable impact (Fleishman, 2009).

Achieving impact also takes time especially when a foundation is dealing with a

complex problem. In addition, a thorough research and strategic planning at an early stage of

a project is time-consuming. Furthermore, as a project goes on, refinement tactics usually call

for adjusting strategies and openness to experiment. Therefore, identifying and measuring of

impact cannot be done quickly because impact becomes evident in the long run (Fleishman,

2009). Any attempt to measure impact must begin by the ultimate goal of the foundation

initiative, which should be clearly distinguished from the means to be employed. For

example, if the aim is to improve the environment, then the means might be passage of laws

and regulations to control harmful emissions. However, the true measure of impact might be

changes in levels of pollution in the air or water (Fleishman, 2009).

There are several ways to observe impact. First, it can be measured by determining

whether there are major benefits to the public. For instance, the Green Revolution and the

Population Council in cooperation with other women’s reproductive rights programs have

44

saved and impacted billions of lives (Fleishman, 2009). If such an initiative leads to a

legislation that benefits the population or initiates a new change in society; these outcomes

are considered an evidence of impact (Weise, 2003). Another way to measure impact is by

observing the evidence of outputs and benefits being created. For example a foundation

provides funds for building projects. Building projects are not considered to be an impact but

only an outcome. The building’s impact is measured by the extent of the benefits that

individuals who use the building enjoy (Fleishman, 2009). For example the Kresge

Foundation, which provides construction support, renovation and purchase of major

equipment for buildings, primarily focuses on environmentally friendly buildings and

buildings for historically black colleges and universities, which provide benefits to particular

communities (Ascoli, 2006).

Failures

There are seventy-two thousand foundations in the United States making thousands of

grants each year. They are not all expected to succeed in bringing the desired results. In fact,

it can be argued that if a foundation does not experience some failures in its grant making,

this might mean that it is either “not tackling challenging enough problems or is not taking

high-risk solutions to solve them” (Fleishman, 2009, p.262).

Many foundations do take risks, thus failures are inevitable. Foundations should not

be ashamed of their failures, but view them as “badges of honor” (Fleishman, 2009) that

demonstrate their desire to serve the public in a way that justifies their tax-exempt status.

However, foundations should be ashamed of their unwillingness to recognize their failed

initiatives and explain the reasons for these fiascos. Failures are also not likely to appear on

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TV news and newspapers articles. There are, however, foundations that publicly own up to

their mistakes. For example John D. and Catherine T.MacArthur Foundation reported in

2006 that its middle school reform project in Minneapolis was not working as intended and

that it would end its funding. The Avi Chai Foundation in its annual report in 2005 stated that

JSkyway distance learning program failed to produce the desired results and therefore the

Foundation ended its funding for the program (Dees, 2005). In addition, Robert Wood

Johnson Foundation showed reports of completed grants, grant clusters, and national

program evaluations of unsuccessful project initiatives, which provide facts of these grants

but do not comment on particulars of their failures. It is obvious that foundations should

prefer to announce their successes and hush their failures. However, by recognizing and

evaluating their failures, foundations can strengthen their practice and improve success rates.

This will also help the nonprofit sector to be in the know about what did not work so that the

same mistakes are not repeated by other organizations. Moreover, acknowledgment of

failures can be a sign on maturity and self-confidence and trustworthiness (Fleishman, 2009).

Challenges

Foundations, much like for-profit corporations, are incorporated. This means that as

smaller entities they are part of a larger company, or founded as charitable trusts under state

laws (Fleishman, 2009). Foundations are tax-exempt from their income, however they are

only required to pay a small annual federal foundation tax, which totals one or two percent of

the net investment income (Fleishman, 2009). As a result of such tax laws, the U.S. Treasury

and states lose a substantial amount of revenue. For example, in 2005 it was estimated that

“out of thirty-one and a half billion individual gifts to foundations all of which was likely

46

deducted either from income or estate taxes. Had such deductions not been provided, those

individuals or their estates would have paid income, capital gains, or estate tax on that

amount” (Foundation Today Series, 2007, in Fleishman, 2009, p.111). Based on these figures

and other methods of tax calculation, the society then should ponder whether it is receiving

benefits for supporting such tax-exempt status. Foundations undoubtedly do bring benefits to

the society, but sometimes it is disputable whether the benefits measure up to the costs.

Fleishman (2009) argues that these figures alone do not prove or disprove the position on

whether the society is reaping the benefits for the support of foundations. But because the

population supports their activity, foundations are vulnerable to an attack if they do not

demonstrate that a significant social impact is achieved as a result of their activity.

At present, foundations are at risk to lose their tax-exempt status, because as they

grow larger, Congress is taking a closer look at whether they are meeting public needs. Such

scrutiny is a result of allegations that foundation executives and trustees are paid excessive

salaries and reported misconduct. Some of the attempts to regulate foundations were to raise

annual foundation payout minimum in 2003 and 2004 and instituting closer monitoring of

foundations and nonprofits by the Senate Finance Committee and the Joint Committee of

Taxation. “If foundations hope to retain their current privileged tax status, they need to

answer to the public demand that they use their assets as effectively as possible and present

evidence that they are doing so” (Fleishman, 2009, p.112)

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Chapter 4

Case studies

Case study # 1: A public educational institution.

Introduction

The organization discussed in this essay is an educational institution, which is a

member of a public system of education. For the purposes of this study, it be will be referred

to as “college”, “organization” or “institution”. The essay includes an interview with the head

of the department in charge of international student admissions and initiatives. In this essay,

the head of the department will be identified as “manager”. The manager was asked a set of

questions to provide an understanding of the department’s day-to-day functions. The

following narrative is a result of this interview.

The state system of education of which this college is a member, includes fourteen

similar colleges. The system consists of various governing bodies, administering the overall

functions of the college. The Board of Governors and the Council of Trustees oversee the

college externally, whereas the president and his cabinet do so internally. The Board of

governors establishes managerial, fiscal and personnel policies. The governor of the state is

responsible for the four-year appointment of board members, followed by the State Senate’s

confirmation. The state governor or a designee, along with the State Secretary of Education,

are members of the Governing Board. In addition, three students representing student

government associations are selected to serve on the Board until their graduation. Finally, the

State Senate and the House of Representatives select four legislators as members of the

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Board (Organization’s website).

The college has a growing population of over ten thousand students from twenty-six

states and fifty-one nations. Its mission is to cater to the needs of a diverse student population

and prepare them for lifelong challenges and responsibilities, integrating various facets of

college life and the local community (Organization’s website).

What it means to lead

The nature of this job calls for a leader with a desire to learn about the opportunities

presented to students, and a mind curious about the world and its cultures. One of the most

important aspects of the job is dealing with the current and prospective student population.

Thus, the nature of this work requires personnel with skills and qualities such as the ability to

see students as unique persons, a willingness to understand their cultural differences and a

desire to see them succeed. The incoming students entering this educational institution are

presented with a variety of educational opportunities that would allow them to better their

personal and family lives. The goal of the department of international programs is to provide

support in helping students realize their dreams (Manager).

The manager of this department should have the ability to realize projects from start

to finish, set the tone and the vision for what the department is doing, as well as have the

aptitude to manage people and processes. Other duties, identified by the manager are:

guiding, advising and managing the personnel who work in the department and helping

employees become aligned with its vision. Furthermore, one of the most important aspects of

managing people is the ability to see and identify potential in employees and allow them to

develop that potential (Manager).

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The manager points out that experience of working in the college provides

opportunities for professional growth, since many projects at the department were created

from scratch. These projects can be considered as tangible positive changes within the

organization, which brought the department to the stage where they are able to cultivate

growth by moving the various projects to the next level (Manager).

The needed resources

In order to accomplish its goals, the organization needs a dedicated staff team,

financial and administrative support as well as the support of the senior leadership of the

college. Senior leaders have played an important role in the running of the department by

providing essential guidance and approval of new programs and maintaining support

throughout the processes (Manager).

Current Challenges

One of the current challenges of the department is developing the Study Abroad

Program. The Study Abroad program offers many excellent educational opportunities for

students to sample various collegiate environments and enriching cross-cultural experiences

abroad. In general, there is a lack of interest in the program and the challenge is to enthuse

the current local students to take advantage of these opportunities. This lack of interest can be

explained by the location of the college and financial constraints associated with the costs of

going abroad.

A second challenge is handling many tasks within an understaffed office. The

manager pointed out that the department could use more employees to take on projects at a

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larger scale, expanding the existing programs and involving the members of faculty. A third

challenge was keeping the India office open; and as a result of the economic downturn, it was

the decision of the department to close the office (Manager).

Initiatives

In the last two to three years, the department has initiated the intensive English

language-learning program. This program allows international students to be admitted

conditionally, while they are on track to improve their English language skills in order to

prepare them for undertaking academic assignments. While the intensive English program

presents these opportunities, it also increases the international student population. Another

project implemented in the last year was the initiation of working agreements with

commercial agents who play an important role in bringing in new students to the college

(Manager).

Organizational planning, constraints and decision-making

While the department is able to carry out initiatives successfully, it has to go through

certain processes before new programs can be implemented or organizational changes can be

made. The manager needs to deliberate over the strategy, planning and ability of the

department to fund all of these long-term. The senior level management needs to gauge

whether the new programs are going to benefit the college. Other factors to consider are the

prerequisites of the union, institutional bargaining agreements, legislative limitations and

contract provisions, all of which are important for the approval process. All these layers of

authorization can create delays for which the manager has to plan.

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The approval process also includes engaging with the human resources and

purchasing departments. The manager also ensures that the organization operates within the

established legal and moral limits that the college recognizes. Before implementing a new

project, the manager weighs various scenarios: do these new processes and initiatives

advance the vision of the college and the department? Are they going to put an undue burden

on staff and the school in general? For example, in the case of the English language program,

the manager needs to account for where the funding would come from and consider the

program’s long-term running climate. In addition, factors such as expanding the staff team

and whether there will be sufficient resources for enduring salary and benefits are taken into

consideration. The manager also asks whether these programs would increase the

international student population and meet the needs of the organization as a whole and

whether, from the immigration and admissions perspective, it would be possible to handle

new tasks with the available resources.

While the department sets its own goals, they must be aligned with the mission of the

college and established at least a year ahead. These goals include but are not limited to:

increasing the international student enrollment, the number of students for study abroad,

involving faculty and others. As the manager points out, the goals should always be

consistent with the organization’s resource base, because the department only sets its goals

within the bounds of what they know they are able to accomplish.

Although the manager operates under one level of supervision, there are external

bodies can influence the running of the department. The organization has to follow the law

set by the state, and federal guidelines related to visas and immigration. In addition, the

department makes it a priority to maintain high ethical standards while interacting with

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various establishments and individuals. Moreover, while the department adheres to federal

and state laws against discrimination, it must also maintain high ethical and professional

standards in daily activities. For example, during recruitment fairs, it is important to provide

prospective students with all the relevant information to enable them to consider the costs

associated with study in the United States. In the case of agent recruitment, the department

needs to ensure the commercial recruitment agents have a good reputation before initiating

any business with them. Providing the highest levels of customer service to students is also of

highest importance at the department of international admissions and initiatives (Manager).

Personnel management

The hiring process of the department is highly structured. Before a person is hired, the

manager is required to receive an approval from the senior management team, the human

resources and purchasing departments. The manager creates a position, which includes duties

and title, but based on the duties HR establishes the classification of the position, which

determines salary, benefits, etc. If the senior management team approves the new position,

the human resources office usually follows suit.

Other levels of authorization in the hiring process are the labour union and the legal

council, which ensure adherence to the institutional policies and procedures. Furthermore,

there is very little room for contract negotiation directly with an employee. Any negotiation

will depend on the classification of the position: whether it is unionized or not. In addition, a

prospective employee can negotiate only within the salary range.

If the manager were to dismiss a member of staff, they have to follow certain

disciplinary measures determined by the bargaining unit. Moreover, the manager must refer

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to the human resources department first before taking any action regarding dismissal

(Manager).

Motivational factors

The manager states that they are motivated by challenge, by being able to accomplish

a variety of projects, starting new assignments and making them successful. Another

important motivational factor is students. The manager is motivated by knowing that their job

can help put students in the position of academic and professional success.

The manager also serves as a motivator of the team they oversee. Helping colleagues

develop professionally, giving them a sense of ownership of the daily projects can be causes

for a better performance. It is letting the employees know that they have control: that they

have power to make decisions; also cultivating a team-like atmosphere – all these factors

make people work better together.

The manager points out that it is also important to reward staff for their hard work

and achievements. Employees can be rewarded by being given flexible schedules, providing

opportunities for occasional staff retreats, being taken out for lunch and in many other ways.

However the public status of the institution along with the legislative and financial

constraints, make this practice challenging (Manager).

Measuring efficiency and effectiveness

The levels of efficiency in the organization are measured by student enrollment

numbers: how many applicants have been received in comparison to other years. In addition,

every month the manager measures the department’s team workload in order to gauge each

employee’s workload to ensure that the tasks are well distributed within the department. The

54

best way to measure this is to see whether the office is doing more with less: for example,

how many students come in a day and how many are helped without delay. The effectiveness

of programs and projects is assessed by means of surveys and numbers to see if the

department was able to increase their student enrollment, the study abroad population and

other functions (Manager).

Job performance and productivity

The department is required to evaluate each employee’s job performance once a year.

Informally, this process is based on measuring the team’s ability to finish projects and handle

multiple tasks. The most important component of evaluating impact and productivity is how

the department delivers customer service, which is how it responds to student requests.

Measurement of productivity is not required formally. Informally, though, it is evident that

employees are able to handle their work as the load increases. During the monthly

departmental meetings, the manager looks into what tasks members of staff are implementing

and which ones require follow up. In addition, processes such as dealing with prospective

student applications, making decisions and learning new software can be considered

measures of productivity (Manager).

Planning

Like many organizations, the department of international programs considers

development as an important factor for success. Thus, building organizational capacity would

consist of continuous discussions about improvement strategies, incremental changes within

the department, innovation and introducing new software in order to increase efficiency.

However, shortage in funding does not always allow implementing such changes.

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In addition, a strategic five-year plan is decided within the department team. Among

the components of such a plan are new processes such as how to increase student enrollment,

executing the study abroad program, and advertising, education, and seminars to promote

study abroad.

The manager points out that improvements can also be made in the admissions

process: with the help of a new database, the process can be more automated and more

efficient (Manager).

Work hours

The job of the manager involves regular travel for recruitment purposes and

professional development. The number of working hours per week depends on the season.

During travel abroad for recruitment, work can reach up to 70 hours per week. Half the year,

the manager works normal 40-hour weeks, though often working through lunch. A third of

the year, a usual week makes up 50 hours (Manager).

Conclusion

This case study discussed various organizational processes within a publicly funded

educational institution. By narrating a dialogue with the director of an administrative office,

the essay presents discussion of daily activities as well as providing an understanding of the

manager’s functions, the opportunities presented to them and the challenges shaped by

external and internal environments.

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Case study # 2: A private sector corporation.

Introduction

The company investigated in this case study is a manufacturing company. As an

independent company, it operates the largest facility in its industry, and is dedicated to

producing quality products to achieve a complete customer satisfaction both within the

United States and abroad. For the purpose of this study it will be referred to as “the

company”, “the corporation” or “the business”. This essay discusses an interview with a

vice-president of the company’s production department who will be identified as “the

manager”.

What it means to lead

As the manager pointed out, in order to lead the company, one should have a solid

knowledge of the business, appropriate education, strong listening skills and the ability to be

patient. In addition, the manager should be conservative in terms of guiding the speed of

company development and bringing changes in products and services. In order to succeed,

the manager needs to communicate well with employees and partners of the company. It is

important to know what and whom the company is dealing with, being aware of all its areas

and facets which are directly or indirectly connected. And last but not least, the manager

must have the skills and the ability to handle various situations and personalities. The most

valuable skill required for the job is the ability to complete projects successfully (Manager).

The needed resources

In order to accomplish its goals, the corporation needs a team of dedicated people,

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including senior management, who are there to guide the company, and also including human

resources and quality control groups who oversee key processes. According to the manager,

many employees whose family has worked for the corporation for two or more generations

are the most valued assets to the company. Such employees are usually very dedicated and

hard working. In addition, historical information about the corporate activity can serve as a

valuable platform in ensuring better planning for the future (Manager).

The current challenges

The current biggest challenge within the company is its rapid growth. Since its

establishment, the plant has grown from a small, family-owned business to one with an

international capacity. This expansion of the company has had an effect on its infrastructure

and changed its routine operations for which the plant was not well prepared.

Initiatives

In the last three to five years, the company has introduced new technologies, initiated

various government-contracted projects and expanded internationally. In order to implement

new projects, one of the most important tasks the company must undertake is to ensure that

its employees are well trained and competent to meet new challenges associated with

technological innovations. Since a number of new projects involve some international travel,

the manager must ensure all the appropriate arrangements such as medical exams and

inoculations have been completed before travel. Any initiative of the company is first

examined from different angles. Senior level managers would meet to discuss a project’s

various aspects and would ultimately decide whether to move it forward or not. In addition,

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meetings at an intermediate level are held where the production team’s input is discussed and

the layout of the project is examined. The time taken to make the decision can depend on the

size of the program. With some programs, the vice-president may be part of the discussion

process. Also, most new projects have to go through the capital project approval. As the

company grows, taxes, all operational processes, including small items, have to be

documented and itemized (Manager).

Organizational planning, constraints and decision-making

The manager’s decision-making practices are influenced by considerations of the

impact on manufacturing rate, and whether production rates will increase or decrease. The

timing of production is also of importance. The manager considers how long it will take to

implement a project, and what human resources and equipment it would involve. Ultimately,

the manager probes the issue of whether the project will bring profit to the company. The

customer base can also influence the decision-making. The company must implement a so-

called testing from a customer, whereby the company measures whether there will be a good

customer base if it were to introduce a new production line and new products. Customer

service and integrity is at the top of the list for high quality service, thus the management

team will have to recognize the future impact of a new project on a larger scale. For example,

if a customer comes to the plant asking for a product to be manufactured and if the plant

agrees to do so, the management thinks it is important not deny this service to another

customer with a similar request. That is why the plant managers first consider the long-term

effects of a new project before initiating it. A new production of any kind may have a long-

term effect on the economy of the plant because any new goods involve new technological

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changes. New production will mean that the plant will have to invest in new equipment. The

management team must also forecast whether the production market may change or stay the

same for a substantial period of time and how this will affect the plant’s ability to make high

quality products and generate sales.

The company manager is engaged in daily activities, which include not only running

the production side of the business, but also responding to phone calls, emails from clients

and from company personnel. External constraints include new markets, new competition

and securing a customer base. Furthermore, processes, such as customer requests for certain

products that cannot be handled at a given time, may put pressure on the company, since the

plant’s priority is to meet all customer needs. However, at the same time it needs to consider

the long-term effects and feasibility associated with any initiatives. In addition, another

constraint can be production flexibility because of the equipment and time availability.

The company goals are mostly consistent with its resources. However, the growth of

the plant makes goal setting more complicated, because of the multiple projects taking place

simultaneously. Also, activities, such as new technology evaluation, usually have to take

place within a certain time frame and are very complex processes where various people and

equipment are involved. These procedures create a challenge to completing the project by the

initial target. Internal and external environments influence the company goal setting.

Internally, the senior management as well as the production teams set some key goals.

Externally, sale trends, markets and customers affect goal setting (Manager).

The company also hires various law firms to handle major issues such as lawsuits,

product liability, and patent offices to patent products. In addition, the plant interacts with

various government agencies to ensure adherence to legislation and various contracts. For

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example, the Occupational Safety and Health Administration implements reviews and spot

checks within the plant grounds. Furthermore, the company follows strict regulations

established by state and federal government. For example, the fleet of trucks must adhere to

government guidelines on shipping and the hours that drivers can be on the road.

Lastly, the company makes sure it is always honest with their customers. In the product

testing, for example, when the company wants to showcase the high quality of its products, it

does not disclose the names of other companies when showing the results of product testing

(Manager).

Personnel management

The hiring process within the company involves various stages. For example, when a

request for a new position within a department is made, it is forwarded to the department

supervisor for approval. The supervisor then sends the request to the human resources

department. The human resources department posts an announcement on the company

website and gathers a list of interested candidates. As the manager points out, the company

usually first tries to find appropriate personnel internally. A candidate’s seniority is a factor

in determining whether a job is given to them or not. In addition, the human resources

department can hold interviews, and test the candidates’ education standards. Any contract

negotiations are not done at the vice-presidential level.

The human resources department mostly handles the dismissal process of an

employee. The activities of the employee subject to dismissal are thoroughly documented

and a discussion with the employee is held. Also, the person being dismissed is always

informed of the reasons for their release. The company guidelines and rules are enforced and

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warnings are given prior to any dismissal. If a serious offense such as stealing or physical

abuse is committed, the employee is dismissed without warning (Manager).

Motivational factors

The manager mentions that they are motivated by the desire to serve people within

and outside the company. Furthermore, making sales, and satisfying the demands and needs

of the public are other factors. On behalf of the company as a whole, the manager strives to

contribute to increase in production efficiency, and to complete new projects in a timely

fashion while managing changes. Motivating staff involves a continuous communication

about the current events at the plant, what projects need to be implemented and the reasons

for the launch of new production. The manager emphasizes that motivating employees by

communicating purposes is important as well as letting them know how their contributions

positively impact the overall sales. The company rewards their employees individually by

providing monetary returns, such as bonuses. There are other seasonal rewards such as

Christmas turkeys and company meals. The company also motivates by encouraging

contribution of suggestions on how the company can do its business better. For instance, in

the past, people have made suggestions on how to improve safety standards, or save

resources by ensuring lights are turned off when not in use. Employees are also given verbal

praise for providing the company with beneficial ideas. The vice president points out that

their own motivation lies with being employed in a very successful company, with a drive

experiencing growth, the fact that it is privately owned family business and known for its fair

practices. In addition, the company’s drive to grow and move forward is another motivation

(Manager).

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Measuring efficiency and effectiveness

The efficiency of the company is measured by how many items the production side

makes per day, per week or per shift. In more detail, it is measured by man-hours: how many

details and parts are made per hour. There are also economic indicators to indicate efficiency

and how the plant is running. Effectiveness is measured by whether or not projects are being

completed and the progress of ongoing projects. In addition, it is measured by how many

requests the company receives and whether they are being completed or not. The process of

effectiveness evaluation is also measured by the lines of communication: that is by the

number of emails, phone calls made to determine how the business is growing and whether

more help is needed. Since the plant is the second largest employer in the area, it can

measure its impact on the community by the number of local people it employs year after

year. Moreover, an understanding of environmental effects and the following of regulations

are also very important (Manager).

Job performance and productivity

The job performance of employees is evaluated annually. The manager makes

decisions on employee performance and has regular discussions with employee supervisors.

As a result of these evaluations, managers decide whether an employee deserves a salary

raise. Usually, a salary raise is determined by changes in an employee’s performance. The

measure of productivity is often subjective: for example, did the production line complete the

job? It is not an easy task for the vice president to track every employee’s job. Thus,

feedback received from a supervisor in the maintenance and production lines is essential

(Manager).

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Planning

The company’s capacity is built on a team approach. The plant assigns improvement

teams that work on specific projects: The Six Sigma Quality Black Belt Project and Lean

Manufacturing business strategies which are employed to improve manufacturing efficiency

and general process outputs. The Black Belt training aids personnel in team leadership team

dynamics. The Lean Manufacturing practice training provides tools for manufacturing only

products that a customer will pay for and is aimed at reducing any waste associated with time

put in productions. This method is ultimately intended for creation of services or products

that would preserve value with less work. Members of staff can receive such off-site training

in all the tools to work on narrowly scoped projects. For example, if a production line needs

improvements, the department may need thirty “black belts” to be involved in the project.

For the purpose of training, an external body becomes involved, the training lasts six weeks,

for four days a week. While employees are being trained, they are simultaneously involved in

a project.

The overall company planning is done top down. Vice presidents and managers

discuss various key aspects for which agenda is set by the senior managers. The main

projects are picked after the discussion. The current processes, however, can be improved by

hiring more managers and engineers. There might be a need for new people and time for

people to handle work (Manager).

Work hours

The manager mentions that their work routine is usually about forty hours, but

sometimes up to sixty hours a week. With the expansion of the company they have to travel

abroad which can cause unpredictability in the usual work schedule.

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Conclusion

This case study discussed various organizational processes within a private company.

By narrating a dialogue with the company vice presidents, the essay presents discussion of

daily activities as well as provides an understanding of the manager’s functions, the

opportunities presented to them and the challenges shaped by external and internal

environments.

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Case study # 3. A nonprofit organization.

Introduction

The organization presented in this study is a private, non-profit corporation, a

charitable status of which exempts it from the federal income taxes. For the purpose of this

case study it will be referred to as the “Foundation” or “organization”. The following essay

discusses the Foundation’s activities and narrates the interview with its director.

The Foundation operates under Section 501(c)(3) of the Internal Revenue Code. It

was established in 1983 upon the merging of the university’s foundation and the endowment

fund. Its mission is to raise funds in order to enable the development of the university,

provide educational opportunities for students, alumni, and faculty as well as make an impact

the community. Although it is located on campus of a public university, it is an independent

institution governed by its own Board of Directors. The Board of Directors comprises friends

of the university, alumni and the community. The Board is in charge of formulating goals,

budget, policies and the Foundation’s operations. The executive director and staff are

responsible for managing operations and daily business. The Foundation also operates a

subsidiary corporation, which owns and builds student housing and similar enterprises. The

Foundation aims to be an effective community partner and respond to university needs and

strives to have a positive impact on the lives of thousands of people every year

(Organization’s website).

What it means to lead

The manager of the organization identified credentials such as experience in the field,

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ability to adapt to changes and strong listening skills as essential for the job. This particular

position would also call for someone with patience, high integrity, drive, willingness to learn,

as well as a person who practices a high degree of accountability. The duties of the director

consist of tasks such as planning, budgeting, staffing, directing, mentoring, making sure the

staff team are advancing the mission and objectives of the organization. The director’s drive

to provide help and opportunities for students and professors to realize their educational

needs also play a role in the quality of organizational management.

The Foundation’s role lies within raising funds for scholarships, buildings and setting

up endowments in order to provide means for these activities. One of the priorities of the

director is to ensure that each monetary gift is processed and accounted for and the receipts

for donors are provided for tax exemption purposes. In addition, the director sees that funds

specified by the donor are invested directly to the programs it is intended for (Manager).

The needed resources

In order to accomplish its goals, the Foundation needs a dedicated staff team – the

people that are able to identify with the vision and competent to use technology efficiently. In

addition, there is a need for personnel who is able to put into practice their marketing

expertise for making contacts with current or potential donors. The Board of Directors, which

consists of alumni, friends of the university and members of the community, is also a

valuable resource that plays an important role in governing the organization. The Board

formulates policies, budget and sets goals. Other resources are the executive director and

administrative staff in charge of daily business and operations. It is expected that they be

fully responsible stewards of the donors’ money, maintain transparency, accountability, be

67

forward thinking and respected within the community. The Foundation has to ensure that its

revenues are strictly used for the purposes associated with its mission and are not used to pay

for operational expenses. The costs associated with the running of the organization are paid

for by the gift fee, which is charged when contributors make their donations. The fee is

applied to all donors within a particular gift class and it is not affected by the given dollar

amount (Manager).

Current challenges

One of the current challenges the Foundation faces is the lack of resources. Since the

organization’s main purpose is to raise funds, it is important to have open lines of

communication with as many donors as possible. However, the disconnect between the

organization and the university regarding some of the donor contacts makes this challenging.

Such problem emerged when the Foundation became completely independent from the

university to which it was initially accountable. The Foundation has the ownership of certain

properties, which also require resources for their upkeep.

Initiatives In the last two to three years, the Foundation initiated the fundraising campaign

timeline and created a new system of measuring its success. In addition, coordinating with

the university, the Foundation leadership has had negotiations with the university regarding

future fundraising campaigns involving alumni, faculty, students and the community. In

addition, the organization has begun work with volunteers in order to increase donor lists and

increase giving.

68

The manager emphasized the importance of a detailed planning process in order to

achieve these goals, the need to communicate and keep good relationships with the major

donors. For implementing a new program such as a fundraising campaign, the management

team writes a case statement, detailing the means of obtaining the ends, defines goals and

recruits volunteers. The Foundation also refers to the donor database and does analysis of

potential donors for various projects. The job of the Foundation director is to communicate to

the alumni, business partners and the donors the vision and the economic impact the

education can have on the population, ultimately why people should give (Manager).

Organizational planning, constraints and decision-making Since the Foundation depends on donor giving and endowments, the market can be

the factor impacting the amount of giving in a year. The manager has to investigate the

condition of the markets in deciding whether or not to launch fundraising campaigns and how

long they will last. This requires careful planning and taking into account factors such as the

state of the economy, how many officers they have, operations staff, project funding and

other factors. In addition, the organization must consider how initiatives may affect the

relationships with staff, donors, alumni and the overall future fundraising prospects.

The manager can set their organizational goals, however the goals have to be

challenging and enabling the Foundation to explore new avenues. The goals are also set in

reliance on historical data and those that would sustain organizational growth. They are not

necessarily consistent with the company resources. For example, there might be an upcoming

fundraising campaign, but not necessarily the sufficient budget to achieve the fundraising

target, thus, the organization will explore new avenues to achieve that target.

The resources that the Foundation raises transform the lives of thousands of people

69

every year. The Foundation is doing an important work by bridging the funding gap between

the government educational subsidies and the current needs of the student population. That is

why financial aid and scholarship funding are critical, especially to enable less well-off

students to assist in gaining essential education. Since government subsidies are insufficient,

private sources of funding are important. They enable the university to maintain high

standards of the academic programs and the quality of students (Manager).

Personnel management The director points out that the current staff of the Foundation is very competent,

enthusiastic and pro-active. Since employees actively interact with the community, it is also

important that they maintain the highest level of ethics when it comes to fundraising business.

In order to recruit a new member of staff the Foundation must follow government

regulations with regards to equal employment opportunities, the Americans with Disabilities

Act and any other federal laws pertaining recruitment. During the hiring process the director

is not bound by internal regulatory bodies and has the discretion in determining the budget

and salary range for the new employee. The Foundation does not hire people based on

contracts, but one-year renewable assignments according to employee performance within

the probation period. The manager desires that their employees succeed professionally,

however if an employee shows poor performance, certain procedures are followed before

anyone is dismissed. The Foundation practices at-will employment and a written warning

would be given to an employee performing poorly. The manager pointed out that if an

employee were discovered in dishonestly handling the business, they would be dismissed

immediately. The Foundation strives to practice fair salary arrangements. Salary negotiations

depend on the available budget, similar jobs on the market and are also weighed against the

70

other current staff’s salary (Manager).

Motivational factors The director pointed out that one of the reasons they took on the job was to correct

the underperformance of the Foundation. They pointed out that other motivational factors, in

addition to repairing the damaged processes, are mentoring and organizing. Also, the

Foundation provides excellent opportunities to invest in education, and more specifically in

the minds of people. Such investing in education has other important implications, such

helping restore the economy. All these factors serve as motivational factors to the director.

The manager believes that it is important to acknowledge employees for their

excellent performance. Public recognition, especially when colleagues and spouses are

present can serve as motivational factors for better performance when employees feel

appreciated and valued. In addition, a non-threatening and non-coercive management method

is important in order to have positive effect on the employee morale.

The Foundation’s model of rewarding employees for excellent performance and not a

corporate style performance-based salary, but it is empowering each one to do their best on

the job without micromanaging (Manager).

Measuring efficiency and effectiveness

Efficiency of the Foundation is measured by identifying how much money is spent in

return of how much is raised. Effectiveness, on the other hand, is measured by what the

scholarship impact has on university recruitment, outreach, appointments and donor visits.

The Foundation has an important impact on the community by providing essential resources

to the university. Success stories about impact on students obtaining education and travelling

71

abroad, which are continuously reported, serve as measures of effectiveness of the

Foundation’s activity.

Job performance and productivity The most important aspect of Foundation’s work is to raise funds. Thus, the

Director would evaluate the job performance of officers, the employees that raise funds, by

measuring by the amounts they raise and networks they build. Furthermore, performance of

staff is measured by how many contacts are made and how many alumni have contributed.

Additionally, performance quality is determined by how many visits to donors are made, how

much money is raised, how many calls are made, how much mail is sent, and the response

rate from the donors and the community.

Planning

One of the ways the Foundation builds its capacity is by encouraging its employees to

attend professional conferences where they presented with opportunities for professional

development. In addition, a task force is necessary to enable people to become involved in

assignments in other areas. The director believes that it is important to be engaged in

mentoring and guiding the staff to help them succeed in their tasks and bring the organization

to achieve its goals. Employees are essential tools in implementing strategic planning of the

Foundation. Thus, the director and his staff together develop a timeline and work out the

processes necessary in achieving the goals. Outside facilitators provide support of the

planning process where employees contribute their ideas too.

The current systems of the Foundation should, however, be improved. The

fundraising team can use a more systematic approach to warranting endowments and other

72

giving. The director emphasized that it is important that staff working with the donors have

donor-centered mindset. The university, in addition, can help communicate the vision to its

faculty and raise awareness of the importance of the Foundation’s role in the university life.

These changes should be incremental. In addition, the officers and the director should

communicate with the deans and other administrative personnel to impart the Foundation’s

vision and the importance of fundraising (Manager).

Work hours

The job of the manager involves travelling around the United States in order to meet

current and potential donors. Sometimes the visits include weekends and nights. The working

week can consists of fifty-five to sixty hours per week. The overtime is not rewarded with

monetary gifts, however schedule flexibility is regularly practiced (Manager).

Conclusion

This case study discussed various organizational processes within a nonprofit

organization. By narrating a dialogue with the director, the essay presents discussion of daily

activities as well as provides an understanding of the manager’s functions, the opportunities

presented to them and the challenges shaped by external and internal environments.

73

Chapter 5

Discussion and Findings

In accordance with the reviewed literature and the data that has been collected from

the case studies, it is evident that managerial practices in public, private and nonprofit

organizations have some similarities. However, differences should also be noted.

Organizational structures and the purpose for which these organizations exist, shape the way

managers behave in their workplaces. The following discussion will be a comparison of the

cases studies in public, private and nonprofit organizations where, the manager in the state

funded college may be referred to as manager #1, the corporation’s vice-president as

manager #2 and the Foundation’s director as manager #3.

Organizational structure and leadership

From the first case study we observe, that the state funded college is governed by

various bodies such as a Council of Trustees, a Board of Governors and members of the State

Legislature. This sort of collective ownership is one of the major influences on the

organization’s internal operations and upon manager #1’s decision-making discretion as

mentioned below. The literature by Rainey (2009), Bretschneider (1990) and Dahl &

Lindblom (1953) discussed this phenomenon in previous chapters of this thesis. By contrast,

the private sector company is not governed by external parties, but mainly is influenced by

market forces and sales. As manager #2 pointed out, although the company adheres to the

Occupational Safety and Health Administration’s regulations at the federal level and certain

regulations at the state level, this does not place an undue burden on the vice-president’s

managerial discretion. Furthermore, manager #2 said that sale projections, market data and

74

customers dictate their job. The company uses forecasting techniques when making decisions,

which determines the types of projects on which the plant should focus (Chen, 2008; Rainey,

2009), Manager #2. The only other time when the government has an influence the functions

of the plant is when it provides grants for projects. When we examine the Foundation, we can

see that its governing structure does not involve various parties, but only the Board of

Governors. Manager #3 also pointed out that the organization is completely independent of

other agencies although it is located on the campus of a university. The Foundation ensures

adherence to laws pertaining to charitable giving (Fleishman, 2009) and strives to maintain a

good relationship with its donor base (Manager #3)

The term “customer” entered the public sector from the private industry when the

movement to deregulate government was in its full swing (Clinton & Gore, 1993). Manager

#1 pointed out that students are “customers”. Although the director’s job is influenced by the

current needs of students, they also need to consider prerequisites of labour unions,

institutional bargaining agreements, contract provisions and legislative limitations. These

layers of oversight can influence the accomplishment of projects in a timely fashion; thus,

careful planning is important. Manager #1 said that it is essential to be sure that the invested

resources are going to create growth. Such an attitude is an indicator of professionalism on

the part of the manager. This goes along with Simon’s (1998) claim that, when it comes to

planning and ensuring efficiency, public and private companies are more similar than

different. Furthermore, according to manager #1, their job requires a person with a mind

curious about the world and its cultures and a desire to learn about the opportunities

presented to students. It suggests that this position needs a person with so-called “soft skills”.

The director should also have the ability to see projects from start to finish, advise personnel

75

and ensure the organization is aligned with its vision. These qualities require that manager #1

have appropriate training and professional experience in order to be successful in this job

(Manager # 1). Manager #2 stated that it is important for a vice-president to have a solid

knowledge of the business, have strong listening skills and have the ability to work with

people, which are similar to the credentials in manager #1’s list. We also observe that the

focus of the public sector manager’s job is mainly students. As for the corporation’s vice-

president, the main focus is production; while for the Foundation manager’s, the focus is

acquiring sufficient resources for projects. The Foundation’s manager also said, it is

important for the person in charge to have experience in this particular field, have strong

listening skills and be able to work with people, suggesting the need for a person with “soft

skills”. This particular job also requires someone who is able to maintain company ethics and

maintain a good reputation in the community (Interviews with Manager #1,2,3).

Personnel management

In terms of personnel management practices, the case studies showed that the college

department manager is constrained by the college’s so-called “publicness”, features common

in state funded organizations (Rainey, 2009). The publicness in this case is demonstrated by a

highly structured hiring process, which involves human resources and purchasing

departments as well as collective bargaining agreements. Other bodies of authorization,

which participate in the hiring process such as labour unions and legal counsel ensure

adherence to the institutional policies and procedures. Moreover, there is little room for

negotiation of the contract directly with employees. By contrast, in the private manufacturing

plant, the absence of internal and external oversight makes the hiring process straightforward.

76

The role of the human resources department is to post an announcement on the company

website and gather a list of candidates. In addition, the company prefers to choose from the

candidates who are current company employees. The Foundation follows a fairly

straightforward process to hire new personnel. Although they must adhere to stipulations

related to Equal Employment Opportunity and the Americans with Disabilities Act, the

director is not bound by other regulatory bodies such as unions, but maintains complete

discretion, for example, in determining salary range. Furthermore, manager #3 added that the

Foundation practices a system of at-will, one-year renewable appointment. This means that

they base their decision of whether to keep or dismiss an employee solely on the employee’s

performance (Manager # 3).

Motivation

All the three managers mentioned that they are motivated by the desire to make an

impact on the community and emphasized the importance of motivating their employees. In

addition, the college and Foundation managers said they have a desire to help individuals

realize their dreams. As scholars suggest, employees can be inspired by extrinsic hygiene

factors such as monetary rewards, benefits and flexible hours; and motivators or intrinsic

rewards such as opportunities for growth or exercise of discretion in implementing certain

project (Herzberg, 1959). We can observe these trends across all the three case studies.

Professionalism and knowledge of the trades are central credentials for successful

management in all three cases. This fact, for example, refutes one of the popular images

Meier (1993) cites, that public sector employees are lazy, lacking in ambition or unqualified

compared to their private sector counterparts. From the case studies we must also note that all

77

three managers are motivated by the desire to make an impact on the community, meet the

needs of their customers and enable their employees to grow professionally. Since the

managers represent different industries, they have their job specific motivators, however,

they all point to similar reasons that drive them at work. Manager #1 explained that helping

students succeed is one of the strongest stimuli in their job. Other intrinsic factors included

the atmosphere where they are able to innovate and sustain organizational growth. We should

notice that there was no mention of monetary rewards associated with the job. Comparing

with the private sector organization, we observe that manager #2 did mention that one of the

reasons for their choice in employment in a corporation is the fact that it is a very successful

private sector company. This may suggest that that they may be drawn to a private sector

extrinsic reward system, which Vroom (1964) and Frank & Lewis (2004) discussed. Manager

#1 extends their motivation to their colleagues by means of cultivating a team-like

atmosphere and providing verbal praise for excellent performance. However, the so-called

publicness, as discussed by Rainey (2009) and Johnson & Libecap (1994), limits the

manager’s ability to provide extrinsic rewards to their employees. Monetary bonuses and

flexible schedules are not acceptable rewards in the public sector, although manager #1 stated

that it is important to reward employees for their hard work and if they were not constrained

by certain rules, they would certainly do so. By contrast, the private sector extrinsic rewards

such as company bonuses are a regular practice and an essential part of motivating and

attracting the workforce. In addition, the company manager is not constrained by external

oversight that would prevent them from distributing these rewards. Both managers mentioned

the importance of motivating their employees by providing opportunities for growth and

allowing discretion to handle tasks with minimal supervision. They further pointed out that

78

communicating the purpose for which the organizations exists, and the employees’ important

contributions can increase motivation. Examining the Foundation, we observe that the

director’s strongest drive in the job is their belief that education can transform individual

lives and the nation as a whole. By investing in the minds of people who desire to attain

knowledge, the Foundation plays a part in empowering individuals and on a larger scale; the

director believes they are ultimately investing in the nation’s economy. The result of this case

study demonstrates a trend in the literature on nonprofit organizations that many of them

exist to make a difference in the society. Manager #3 thinks that a non-threatening and non-

coercive method of management can boost employee morale and positively impact the

overall health of the company. This method includes intrinsic motivators such as verbal

praise for excellent performance, flexible schedules where this is the case, and where the

manager is not constrained by peripheral oversight (Interviews with Managers # 1, 2, 3)

Current challenges and development

The three organizations are facing different challenges. Both public and nonprofit

organizations are experiencing a shortage of resources to move their projects forward. In the

case of the college, this could be due to insufficient state funding. As for the nonprofit

organization, their capacity depends on endowments and other types of giving which is in

turn affected by the economic well being of the area and the nation. By contrast, the private

sector company manager did not mention any concerns regarding financial capacity, but their

concern was rapid growth and the impact on infrastructure and its routine operations for

which they are not well prepared. These are quite different challenges across the three sectors.

In the last few years all three organizations have grown and have initiated new

projects. The private sector manager emphasized the importance of proper personnel training

79

to ensure competence with technological innovations. Furthermore, they added that the

company takes training very seriously: it invests company resources in training of its

personnel by hiring professional training experts (Manager #2).

Measuring efficiency and effectiveness

Efficiency is quantifiable in all three organizations. The college measures it by

student enrollment numbers, the team’s workload and how much more the office is doing

with less. Student feedbacks are measurement tools of effectiveness. The Foundation

measures its efficiency by the amount of dollars raised, effectiveness, on the other hand, is

measured by how the funds distributed among various programs impacted the college’s

student recruitment, individual students and the well being of the community (how is well

being measured?). The plant’s efficiency is quantified by how many items the production

makes per day, which is in turn translated into dollar amounts. Effectiveness, on the other

hand is measured by the impact on the community by being one of the largest employers in

the area.

Performance evaluation

The corporation’s vice-president, with the help of his floor supervisors, performs

annual employee evaluations. They depend on the supervisors’ employee performance report

and discussions, as a result of which the vice-president determines salary raises. Overall

performance evaluation is subjective and is measured by whether or not employees complete

their tasks. The employees of the Foundation are evaluated by recording the amounts of

money they raise and the networks they build. When it comes to the public sector

80

organization, employees can be assessed by customer service quality and other related tasks.

In addition, as the department is doing more with less, the manager monitors productivity by

the amount of completed tasks implemented in a given time.

Capacity building

The corporation builds its capacity by training its personnel in organized teams. This

is considered a significant and calculated investment in the business. The company

manufactures products that customers will purchase and in order to meet customer needs,

they invest its resources in providing appropriate training of its personnel. Some literature

suggests that public sector organizations operate under legislative and judicial constraints,

which obstruct innovation (Bumgarner & Newswander, 2009). Although this may be true,

this is not necessarily a reflection of managerial competence or the manager’s motivation to

improve organizational functions. According to manager #1, the department considers

development as an integral part of its well-being. The changes, however, are done

incrementally and as resources permit (Interview with Manager #1). Here, we can observe a

similarity with the corporation in terms of incremental development. The difference is in the

availability of resources to complete development projects, since the college relies on state

funding, which is often insufficient. To ensure efficient planning, a five-year plan is decided

with a team of personnel directly involved with the department. Manager #3 stated that the

Foundation has seen a significant growth and is in need of more personnel to handle the work.

They also emphasized the importance of their staff’s professional development. Employees

are encouraged to participate in conferences as part of such development. In addition, any

changes should be incremental. All employees should identify with the vision and

81

communicate the importance of the work the Foundation is doing and its positive impact on

the community.

This thesis has examined managerial practices in public, private and nonprofit

organizations from both scholarly research perspective and case studies conducted by the

author of this paper. It aimed at answering the following questions: What are the differences

among public, private, and nonprofit sector organizations? Do the contexts within which they

operate differ in any way? What factors impact decision-making practices? By employing a

case study methodology, this thesis researched processes such as decision-making,

implementation and others pertaining organizational management. The case studies,

conducted in the form of interviews with managers, allowed probing for deeper answers to

questions and observing important nonverbal responses, as essential components of the

collected data and analysis. As we note limitations of this research method, we must point

out that the study of one case per sector can offer insufficient grounds for establishing

reliability or generality of findings (Yin, 2003). Furthermore, although certain trends

discussed in the literature review are confirmed by the information obtained from the

interviews, we must note that observations are based only one researcher’s analysis. Finally,

companies represented in the case studies are not representatives of similar industries across

nonprofit, public and private sectors.

82

Appendix

Case study questions

General What characteristics have helped you become the executive of your organization? What do you think are the qualities of a successful manager? What does your role as a manager involve? What do you most value in your work? What resources do you have to accomplish your organizational goals? What do you think are the current problems within your organization? Initiatives and discretion Has your organization had new initiatives in the last 3-5 years? Can you please describe them? What obstacles did you encounter prior to implementation of these initiatives? What processes do you have to go through in order to start a new program? What level of discretion do you have in spending your organization’s finances? Personnel management What processes do you have to follow to hire a member of staff? What process do you have to follow in order to dismiss a member of staff? What is the process of contract negotiation with new employees? Decision-making What internal and external factors influence your decision-making? Can you give an example of a project that was influenced by internal or external environment?

83

What other factors do you have to consider in making a decision? Motivation and goals What motivates you as a manager? How do you motivate your staff? How do you reward your staff? Do you set your own goals or do others set them? Example. Are the goals consistent with the company resources? Example. What do you think are some of the benefits in being part of this organization? Efficiency and effectiveness How do you measure efficiency of your organization? How do you measure effectiveness of your programs/projects? How do you measure your organization’s impact on the community? Performance and productivity How do you evaluate job performance? How do you measure productivity? How do you build capacity? E.g. training staff, improving processes, etc. How do you implement strategic planning? How do you think the current processes can be improved? Constraints What kind of internal constraints do you have to overcome on a daily basis? What kind of external constraints do you have to overcome?

84

What internal or external processes create these constraints? Accountability How many levels of supervision do you have? What external bodies partake in the governing of your organization? What legal or ethical requirements do your organizations have to follow? Work-family conflict Do you have to work long hours? If yes, how many hours in per week on average?

85

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