Daniel ForceNLM 510Final Writing Assignment

The Idea of a Nonprofit Sector

Peter Frumkin sets the nonprofit sector apart from the for-profit and public sectors. The

nonprofit sector is broad and sometimes overlaps with other sectors, but remains distinct. For

Frumkin, the nonprofit sector is “…a real and identifiable group of tax-exempt organizations that

encourage political engagement and produce services” (1).

Although the sector is broad and contradictory, it shares three primary bonds between

organizations; “(1) they do not coerce participation; (2) they operate without distributing profits

to stakeholders; and (3) they exist without simple and clear lines of ownership and

accountability” (3). The strength of these bonds is currently under scrutiny due to government

mandating individuals’ participation, high salaries for nonprofit executives, and asset transfer

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when a nonprofit becomes a for-profit. Some nonprofit organizations, such as public charities,

receive a tax-exempt status on donated income.

Formal nonprofits can be split into “…those that serve the public and those that serve

members” (7). The larger and more visible public serving nonprofits include hospitals, churches,

private colleges, and social service agencies. Organizations that serve members, such as trade

associations and service clubs, have vast resources but are rarely publicly visible.

Frumkin’s organizing framework for On Being Nonprofit is the two dimensions of the

nonprofit sector. Demand side nonprofits “…exist because they are able to meet important social

needs” (20). Supply side nonprofits exist as an outlet for “…the resources and ideas that flow

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into it…” (21). The expressive dimension allows individuals to “express their values and

commitment through work, volunteer activities, and donations” (22). The instrumental

dimension exists to accomplish important tasks in communities. The two dimensions can work in

harmony or create tension. While many contradictions exist in the sector, the sector is still a “…

powerful force for good in society” (28).

Civic and Political Engagement

Nonprofits participate in civic and political engagement to “Mobilize citizens for politics,

advocate for causes, and build social capital within communities” (26). Formal nonprofits were

created in the 20th century. Associations, nonprofits informal ancestors, played an earlier role in

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US history. Alexis de Tocqueville, of Democracy in America fame, believed associations were

critical to the political and civic engagement of Americans. Frumkin concludes that “…if

individuals are to be truly free [in democratic societies], they must have ways to accomplish

projects of their own invention and ways to join with others to form strong communities” (39).

Social capital is the trust, norms, and networks within communities that create

cooperation and mutual benefit (40). The effects of social capital spans across politics,

communities, and markets. Social capital in the US is either declining or at the very least

shifting. Voluntary political participation is an integral part of creating strong political

associations. Government has traditionally taken this role in the past. Voluntary participation

through nonprofits, however, allows individuals to commit personally and locally.

Advocacy focused nonprofits use a small amount of resources to “…multiply their impact

by changing public priorities” (52). Because the efficacy of advocacy nonprofits has come into

question, some nonprofits have moved to political lobbying to directly influence public priorities.

501 (c)3 nonprofits can lobby, but it cannot be a substantial part of their expenditures. 501 (c)4

have fewer limits on lobbying, but donators aren’t allowed to deduct the donation on their

personal taxes like a public charity.

Service Delivery

Nonprofits engage in service delivery to provide communities with “…needed services

and responds to government and market failure” (26). Per Frumkin, service delivery is “…the

central function of the nonprofit and voluntary sector” (94). Early nonprofit academic minds

have theorized that nonprofits fill in the gaps where business and government contracts have

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failed. This approach “…depict[s] nonprofit and voluntary action as a fallback position that

consumers turn to when parties drop the ball” (70). A second approach defines nonprofits as

active agents of change and innovation in their communities.

Rather than government executing public programs themselves, they have shifted toward

a contract model where contracts are given to third parties who execute the program. When the

government contracts nonprofits, nonprofits work to meet needs quicker and more personally

than government. In contrast, nonprofits who receive government contracts are at risk of losing

autonomy, sight of their original purpose, and flexibility. The stakes are high for government

contracts, because they often serve “…the most disadvantaged and least powerful members of

society” (95). Because of the shift to third party contracting, businesses have begun competing

with nonprofits for contracts. The nature of nonprofits makes it difficult to compete with the

efficiency of for-profit firms.

Performance measurement in the nonprofit sector is a highly-contested issue. Due to

nonprofit’s competition with for-profit firms, they’ve begun focusing on outcomes over values.

Some perceive nonprofit’s charitable efforts as rivaling those of the government. For others, the

sector’s existence weakens government welfare programs. Per Frumkin, “…overreliance on the

nonprofit sector might also lead to government’s being released from responsibility for important

social problems” (90).

Values and Faith

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Values and faith expression in nonprofits “Allow volunteers, staff, and donors to express

values, commitments, and faith through work” (26). Values and faith focused nonprofits magnify

individual’s civic and political voice by transmitting their values to large institutions. Leaders in

the nonprofit field should balance organizational outcomes with expression of faith and values.

While values expression is important for its own sake, expression also motivates staff and

volunteers to achieve better outcomes.

Donations to nonprofits can either be used for the good of a community or for the

personal preferences of the donator. These widely different perspectives create either a demand-

oriented approach for the former, or an expressive approach for the latter. Donor driven

philanthropy is when donors take a major role in the recipient organization. This perspective

emerged recently and is picking up momentum.

Per Frumkin, “…religion receives by far the largest share of individual charitable giving”

(115). Religious nonprofits come in any shape or size imaginable. Faith-based nonprofits find

efficiently balancing expression and providing social welfare difficult. When faith-based

nonprofits accept government contracts, they enter a state of tension between effective work and

faith expression. The areligious stance of US government further complicates the autonomy of

faith-based nonprofits in serving government contracts.

An expressive centered perspective of the nonprofit sector believes that “…only by

centering its activity on the expression of important private values and commitments can the

nonprofit sector remain vibrant and innovative” (124). This perspective delivers services, but

measures its efficiency by values and the development of participants.

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Social Entrepreneurship

Social entrepreneurship in nonprofits “provides a vehicle for entrepreneurship and creates

social enterprises that combine commercial and charitable goals” (26). Social entrepreneurship

focuses on leaders who give vision to their organizations.

Under any definition of the word “entrepreneur”, entrepreneurship supplies the nonprofit

sector with critical change and innovation. All formal organizations fit somewhere on the “social

enterprise spectrum” (134) running from purely profit driven motivation to purely charitable.

Entrepreneurs will choose the placement of their organization along that scale, depending on the

entrepreneur’s vision and goals. Entrepreneurial initiative in the nonprofit sector is enacted by

executives, staff, volunteers, or high level donors.

Financial stability is a constant struggle for nonprofits. Social entrepreneurs respond by

finding new channels of earned income. Some entrepreneurs have created commercial ventures

related to the organization’s mission. Other social entrepreneurs have created ventures with “…

no real connection to their core charitable mission…” (147). As more nonprofits shift toward

these financial models, loss of original purpose, cultural changes, and ballooning salaries are

problematic. Social entrepreneurship has shifted the sector inward to its own participants and

created an increasingly commercial culture.

Balancing the Nonprofit Sector

The nonprofit sector must find balance in its four roles or else it may fall prey to

polarization, vendorism, particularism, or commercialism. Polarization results when the sector

engages in too many partisan activities. Polarization causes problematic lobbying tensions and

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alienation of grassroots populations. Vendorism occurs when the sector becomes “…nothing

more than tools of government action or efficient private producers…” (169). Vendorism causes

specialization of the sector, loss of autonomy, and a focus on scale. Particularism occurs when

the sector doesn’t seek the public good, but the good of the audience they serve. Particularism

causes a loss of accountability and exclusion. Commercialism occurs when the sector focuses on

entrepreneurial goals over purpose. Commercialism causes inefficient allocation of resources,

loss of purpose, and unjustifiably high salaries for leaders.

The nonprofit sector is growing rapidly in resources and number of organizations (173).

This growth has fragmented the sector into duplicated, uncoordinated organizations. If the sector

is viewed as primarily expressive, a fragmented sector offers profound opportunity for

expression. If the sector is centered on service delivery, however, fragmentation is inefficient. 1

1 Word count and references found in appendix.

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