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Nonprofit Decision Making
- 1. Decision- making: Nonprofit Leadership DEL 830: Executive Decision Making Dr. John Barnette Presented by: Dallas Bragg
- 3. Current Research Nonprofit Organizations Nonprofit Leaders Nonprofit Decision-making Government Funding Need for Talent Intuitive (Bezjian et al., 2009; Cornelius et (Boris et al., 2010) (Cornelius et al., 2011; Tucker et al., 2005) al., 2011; Inbar et al., 2010) Individual Donors Collaboration Participative (Cray et al., 2007; Bess et al., 2011) (Cray et al., 2007; Boris et al., 2007) (Bess et al., 2011; LeRoux, 2009) Generative Capacity Building Change Agent (Bess et al., 2011; (Cornelius et al., 2011; (Carlson & Donohoe, 2010; Boris et al., 2010; www.councilofnonprofits.org) Cray et al., 2007; Yaghi, 2008) Tucker et al., 2005; Vogelsang, 2008)
- 4. The Shifting Nonprofit Nonprofit Organizations •Government funding Government Funding accounts for 65% of (Boris et al., 2010) human service organizations’ budgets. Individual Donors (Cray et al., 2007; •Individual donors are Bess et al., 2011) being courted using diverse efforts. Capacity Building (Cornelius et al., 2011; •Federal government www.councilofnonprofits.org) needs nonprofits now more than ever.
- 5. Current Research Nonprofit Organizations Nonprofit Leaders Nonprofit Decision-making Government Funding Need for Talent Intuitive (Bezjian et al., 2009; Cornelius et (Boris et al., 2010) (Cornelius et al., 2011; Tucker et al., 2005) al., 2011; Inbar et al., 2010) Individual Donors Collaboration Participative (Cray et al., 2007; Bess et al., 2011) (Cray et al., 2007; Boris et al., 2007) (Bess et al., 2011; LeRoux, 2009) Generative Capacity Building Change Agent (Bess et al., 2011; (Cornelius et al., 2011; (Carlson & Donohoe, 2010; Boris et al., 2010; www.councilofnonprofits.org) Cray et al., 2007; Yaghi, 2008) Tucker et al., 2005; Vogelsang, 2008)
- 6. The Demand for Leaders Nonprofit Leaders •Talent over passion for Need for Talent the cause. (Cornelius et al., 2011; Tucker et al., 2005) •Collaborate to Collaborative encourage mission (Cray et al., 2007; first. Boris et al., 2007) •Transform the Change Agent institution. (Carlson & Donohoe, 2010; Cray et al., 2007; Yaghi, •Become more for- 2008) profit thinking.
- 7. Current Research Nonprofit Organizations Nonprofit Leaders Nonprofit Decision-making Government Funding Need for Talent Intuitive (Bezjian et al., 2009; Cornelius et (Boris et al., 2010) (Cornelius et al., 2011; Tucker et al., 2005) al., 2011; Inbar et al., 2010) Individual Donors Collaboration Participative (Cray et al., 2007; Bess et al., 2011) (Cray et al., 2007; Boris et al., 2007) (Bess et al., 2011; LeRoux, 2009) Generative Capacity Building Change Agent (Bess et al., 2011; (Cornelius et al., 2011; (Carlson & Donohoe, 2010; Boris et al., 2010; www.councilofnonprofits.org) Cray et al., 2007; Yaghi, 2008) Tucker et al., 2005; Vogelsang, 2008)
- 8. Nonprofit Decisions Nonprofit Decision-making Intuitive •Intuitive decisions (Bezjian et al., 2009; based on the Cornelius et al., 2011; Inbar et al., 2010) environment. Participative •Participative decisions (Bess et al., 2011; LeRoux, 2009) to be network- Generative inclusive. (Bess et al., 2011; Boris et al., 2010; •Build a culture of Tucker et al., 2005; learning, generating, Vogelsang, 2008) and creating.
- 9. What does all of this mean?
- 10. From Individual Leaders to Decisions cannot be singular Shared Leadership (Deiser, 2008; Klein, 2009; Obolensky, 2009; Tucker et al., 2005; Uhl-Bien et al., 2010)
- 11. Nonprofit Leadership Skills Necessary for Effective Decision-making •Understand complexity and networks (Bess et al., 2011). •Transformational and transactional (Barros & Nunes, 2007; LeRoux, 2009; Pfeffer & Sutton, 2006; Yaghi, 2008; Useem, 2010). •Simulate decision scenarios (Cornelius et al., 2011; Klein, 2009; Lee, Oh, & Pines, 2009;Tucker et al., 2005). •Effectively balance intuition and rational reasoning (Klein, 2009; Pfeffer & Sutton, 2006; Mauboussin, 2009)
- 12. References Barros, C. P. & Nunes, F. (2007). Goverance and CEO pay and performance in non- profit organizations. International Journal of Social Economics, 34(11), 811-827. doi:10.1108/03068290710826404. Bee, K. D., Perkins, D. D., Cooper, D. G., & Jones, D. L. (2011). A heuristic framework for understanding the role of participatory decision making in community-based non-profits. American Journal of Community Psychology, 47, 236-252. Boris, E. T., de Leon, E., Roeger, K. L., & Nikolova, M. (2010). Human service nonprofits and government collaboration. Retrieved from Urban Institute website: http://www.urban.org/uploadedpdf/412228-nonprofit-government- contracting.pdf Cornelius, M., Moyers, R., & Bell, J. (2011). Daring to Lead 2011. Retrieved from CompassPoint website: http://www.compasspoint.org/sites/default/files/docs/research/Daring%20to%20 Lead%202011%20Main%20Report_062211.pdf Cray, D., Ingles, L., & Freeman, S. (2007). Managing the arts: Leadership and decision making under dual rationalities. Journal of Arts Management, Law, and Society, 36(4), 295-313/ Lee, E., Oh, J., & Pines, E. Unknown Year. Practical managerial decision making tools: Operations research. Journal of Applied Business and Economics. Pfeffer, J. & Sutton, R. (2006). Hard facts dangerous half-truths and & total nonsense: Profiting from evidence-based management. United States of America. Inbar, Y. (2010). People’s intuition about intuitive insight and intuitive choice. Journal of Personality and Social Psychology, 99, 2, 232-247.
- 13. References Klein, G. (2009). Streetlights and shadows, searching for the keys to adaptive decision making. London, England: MIT Press. LeRoux, K. (2009). Paternalistic or participatory governance? Examining opportunities for client participation in nonprofit social service organizations. Public Administration Review, 69(3), 504-517. Mauboussin, M. (2009). Think twice, harnessing the power of counter intuition, United States of America, Harvard Business Press. Tucker, J. S., Cullen, J. C., Sinclair, R. R., & Wakeland, W. W. (2005). Dynamic systems and organizational decision-making processes in nonprofits. The Journal of Applied Behavioral Science, 41(4), 482-502. Useem, M. Decision making as a leadership function. Excerpted from Nohria, N. and Khurana, R. (2010) Handbook of leadership theory and practice: a Harvard business school colloquium. Unites States of America. Yaghi, A. (2008). Leadership values influencing decision-making: An examination of nine Islamic, Hindu, and Christian nonprofit institutions in the US. South Asian Journal of Management, 15(1), 24-41.
- 14. Questions?
Notas do Editor
- In this presentation, the researcher will present current research from a broader perspective, that of trends related to nonprofit organizations, then will narrow that down to nonprofit leaders, and even further drill down into nonprofit decision-making. After presenting current research, the implications of that research are presented and proposed skills necessary for nonprofit leaders to operate within the current state of the industry.
- Nonprofit Organizations:It is no secret based on the current economy and economic indicators over the past five years that government, state, and local funding for public and private nonprofits has been reduced. Boris, Leon, Roeger, and Nikolova (2010), all affiliated with the Center on Nonprofits and Philanthropy partnered with the Urban Institute in 2010 to complete an in-depth nationwide survey of nonprofit organizations looking at the implications of shrinking government funds. They looked specifically at human service organizations, the largest segment of nonprofits nationwide. They found that “government funding accounts for over 65 percent of total revenue” for human service nonprofits which is devastating when taking into account that these funds are now drying up and increasing more challenging to attain (Brois et al., 2010). While the individual donations have been essential to the overall operations of nonprofits, most have not depended on this particular cash flow for long-term growth. However, with disappearing government funding, many nonprofits has turned to external donors (Cray, Inglis, & Freeman, 2007). Attracting donors have led to organizations diversifying their efforts by venturing into major fundraising, social media, and networks that include for-profit organizations (Bess, Perkins, Cooper, & Jones, 2011). In tandem with struggles for funding, the federal government has called on nonprofits to build capacity because their services are needed by the government now more than ever (Cornelius, Moyers, & Bell, 2011). An essential component of capacity building is sustainability through financial strategies. According to the National Council for Nonprofits, “In 2009, the White House and Congress identified nonprofit capacity building as a priority and authorized resources for two important programs: $50 million through the American Reinvestment and Recovery Act’s Strengthening Communities Fund (SCF) and $25 million over five years for the Nonprofit Capacity Building Program (NCBP), which was approved as part of the Edward M. Kennedy Serve America Act” however, these funds were not approved and the fiscal 2011 budget does not include any of these funds (Retrieved from http://www.councilofnonprofits.org/public-policy/federal-issues/nonprofit-capacity-building, 1/3/2012).
- Nonprofit Leaders:A major shift such as funding trickles down to alter all other aspects of leading a nonprofit organization. Nonprofits are now forced to look for executives who have leadership talent more than those who have a deep moral calling based on the nonprofit’s mission (Cornelius et al., 2011). Nonprofits are now called upon to engage in futuring, mission-building, streamlining, and organizational learning (Tucker, Cullen, Sinclair, & Wakeland, 2005). Previously nonprofits could focus solely on leaders who had a passion for the cause. Therefore, research shows there is a real need for leaders to engage in development activities (Cornelius et al., 2011). Another major impact for nonprofit leaders is the need to be collaborative. With the increasing reliance on individual donors, many nonprofits are more obligated to cater to these donors’ needs. Collaborative leaders are needed to create the type of relationships with donors that enable shared mission for the organization that comes before special interests (Cray et al., 2007). The recommendations made from the research conducted by Boris et al. (2010) reaffirmed that nonprofits will need leaders who can create healthy, communicative partnerships with external entities in order to achieve future sustainability (Boris et al., 2007). Nonprofit leaders are called upon now to become change agents and to behave more like for-profit organizational leaders while balancing the social service aspect of their job description (Carlson & Donohoe, 2010). In order to build capacity, leaders must not only be engaged in but must enable the entire organization to join them in performance measurement, quality improvement, benchmarking, and financial planning; all of which are traditionally seen as for-profit tasks (Cray et al., 2007). Nonprofit leaders are increasingly called upon to be transformational because in order to carry out these duties, they must enable the entire organization to see the vision of the organization above their own individual needs. The change agent must transform the entire organization, both internally and externally, to meet the needs of the future (Yaghi, 2008).
- Nonprofit Decision-Making:What implications does all of this information have for decision-making by nonprofit leaders? Cuts in government funding has led to a greater need for leadership talent and ability. Therefore, nonprofit leaders will need to be equipped for effective decision-making. The researcher posits that nonprofit leaders will specific ability to make decision intuitively because the current state of the economy and funding have not been experienced by current leaders; this is unchartered territory (Bezjian, Holmstrom, & Kipley, 2009). Not to mention researchers are predicting heavy turnover in the next five years among nonprofit leaders, mainly baby-boomers who have held off because of diminishing retirement accounts and financial security (Cornelius et al., 2011). These factors do not lend toward the availability of data and experience therefore the need for intuitive decision-making. Inbar, Cone, & Gilovich’s (2010) studies show that situations that have characteristics matching those of an intuitive nature will necessitate intuitive decision-making processes (Inbar et al., 2010). Moreover, the current situation is ripe for intuitive thinking instead of what Klein (2009) called information overload, or when leaders get so much exact information it becomes counterproductive. In order for nonprofit leaders to meet the needs of becoming more collaborative, research shows they will need to more participative in their decision-making process (Bess et al., 2011). Bess et al. (2011) demonstrated that participative leaders in nonprofits will engender loyalty, performance, and forward-movement from the board and staff thus increasing organizational capacity (Bess et al., 2011). LeRoux (2009) also affirmed that because nonprofits have become more dependent on networks that encompass inside and outside the organization, leaders who practice participative decision-making are more likely to meet performance objectives and stay on target in terms of strategy and mission (LeRoux, 2009). This type of decision-making will be the least challenging in faith-based nonprofits because they already lead by consensus most of the time (Yaghi, 2008). Lastly, in order for nonprofit leaders to take on the daunting task of becoming change agents, they must build a culture of learning, generating, and creating (Bess et al., 2011; Boris et al., 2010; Tucker et al., 2005; Vogelsang, 2008). In order for leaders to be successful they must create a culture in which everyone seeks to learn from every situation and generate knowledge from that learning to help create ideas for the future. There is little resources available to hire talent or pay for development, therefore the entire organization must contribute to the development of one other for the common good.
- Next we will try to synthesize all of this information to determine the implications for decision-making among nonprofit leaders.
- Specifically what leadership skills will nonprofit leaders need to focus on in order to operate within the current and future environment? Just as with for-profits and other industries, nonprofit leaders must begin to understand the principles of complexity and networks. The researcher is finding an increasing amount of literature infusing complexity into nonprofit research. Bess et al. (2011) determined the best way for nonprofit leaders to begin to operate in a complex environment was to participate in and encourage single and double-loop learning (Bess et al., 2011). Single-loop learning is adapting to new information and making decisions based on that information. However, single-loop learning still rests upon implicit and explicit mental-models and culture. Double-loop learning is a deep reflective process that looks deeper into the embedded assumptions of the individual and company when the adaptations still fail. This is a process that involves after-action review-type discovery among groups within the organization. This type of organizational learning is a first step for nonprofit leaders who want to begin to move their organization toward adaptation and self-organizing ecosystems such as in complexity science.The researcher concludes that parallel to the paradoxical nature of complex adaptive systems, so is the call for leaders to become transformation as well as transactional. These styles of leadership have sometimes been introduced as opposite ends of the spectrum (Bass, 2008). Yaghi (2008) asserted that nonprofit leaders are most successful when transformational in nature because there is a need to translate the mission and vision of continual learning and networking into each member of the institution, a value that cannot be mandated (Yaghi, 2008). Pfeffer and Sutton (2006) supported this notion by stating that “a well-designed system filled with ordinary—but well trained—people can consistently achieve stunning performance (Pfeffer & Sutton, 2006, p. 96). LeRoux (2009) as well as Barros and Nunes (2007) called for nonprofit leaders to be transformational in nature because generally social service, arts, and other types of nonprofits are associated with charisma and sensitivity however as a complex system, transactional leadership should be developed as behavior and cultural expectations are established (Barros & Nunes, 2007; LeRoux, 2009). Furthermore, research shows an empowered team make more effective decision than one strong leader (Useem, 2010) Much of the research within the discipline of nonprofit management is dealing with simulation models. Due to the unpredictable and dynamic state of the world, leaders are being called upon more and more to participate in simulated decision-making in which possible solutions and alternatives are played out visually to help play out what could happen (Cornelius et al., 2011; Klein, 2009; Lee, Oh, & Pines, 2009;Tucker et al., 2005). Simulation exercises are effective ways for leaders to understand the cause-and-effect of their organization’s operations and gives them the opportunity to reflect on their own mental models when conducted as a group exercise (Tucker et al., 2005). The researcher asserts that mental simulation ties in to complexity as a learning organization as well as transformational/transactional leadership. Mauboussin (2009) warned that intuition is only effective in stabilized situations, losing relevance as the world becomes more complex (Mauboussin, 2009). While this may be true in certain circumstances, the researcher asserts that intuition plays a major part of the equation when looking at a complex adaptive system as we view leadership from a systems perspective (Uhl-Bien, 2010). The key is becoming a better decision-maker, developing the organization, and becoming an expert in their respective field. Again, there is a balance between becoming too much of an expert in which the leader becomes a detriment to themselves (Maubossin, 2009; Pfeffer & Sutton, 2006) and becoming aware of organization and environment enough so that behaviors become instinctively part of the leader and system’s mental model. The perfect blend of intuition and analysis comes by building skill capacity (Klein, 2009).