Current nonprofit sector research and recommendations for effective day-to-day practice from ASU faculty, staff, students, and the nonprofit and philanthropic community.
As public-facing and serving organizations, nonprofits are held to higher ethical standards than their business counterparts are. (“Ethics,” 2017). Given that nonprofits must operate in a wide variety of complex environments, they must work diligently to continuously create innovate strategies to meet the needs and expectations of their diverse stakeholder populations (Benjamin, 2012).
To avoid stakeholder resistance, or action caused by dissatisfaction by organizations’ responsiveness to stakeholders, nonprofits must actively pursue opportunities to gain the trust of their donor base (Meiksins, 2014). Organizational transparency, the disclosure of operational, financial, and decision-making information, remains a significant factor in the formation of the public’s trust in an organization’s mission and intent. Accountability, like transparency, is nothing new to the nonprofit sector, nor are the hard-hitting questions and demands put forth by donors. The accountability of organizations, defined as the obligation to deliver defined impactful results, is often up for debate as the sector grows, new donor expectations emerge, and funder conditions diversify (Ebrahim, 2003).
Preventative measures such as performance evaluations, self-regulation policies, effective donor communication approaches, ethical leadership, and social auditing serve as accountability enforcers in various capacities within an organization. Nonprofits have experienced benefits such as increased public trust, strengthened ethical conduct, increased donor confidence, and improved financial integrity as a result of applying accountability strategies within their organizational culture. As such, nonprofit organizations must be proactive in creating effective accountability strategies to recruit new donors and further engage current donors (LeRoux, 2009).
Below are the top five strategies that nonprofits need to create and sustain a robust and loyal donor base:
Like Bob Ottenhoff, CEO of Guidstar USA, said, “the era of assumed virtue in the nonprofit sector is over…people want to know how their contributions are being used (Rooney, 2011).” Nonprofits owe it to their donor base to hold their leadership, staff and programs to high standards in order to better meet the needs of their beneficiaries. Performance evaluations serve as vehicles to message organizational mission realization and impact. Annual reviews, staff surveys and beneficiary evaluations work to provide donors with the satisfaction of knowing their monies are being put to good use. Organizations that do not have effective evaluation systems run the risk of not only turning off high performing employees, but also putting their funds in jeopardy by not responding to donors’ pleas of high performance.
The nonprofit sector is undergoing a new wave of self-regulation in the United States due to the government’s increase of regulations on organizations and charities. Self-regulation refers to the legitimization of self-enforced bylaws that work to foster organization sustainability and development/relationships among the sector. While the number of nonprofits has grown significantly, the sector is still easily shaken by unscrupulous organizations. To battle such scrutiny it is recommended organizations practice strict financial protocols, fair compensation practices for staff, and enforcement of nonprofit bylaws to improve organizational governance and management (LeRoux, 2009).
While organizational mission is enough to entice some individuals to donate, many donors want more than an impactful sentence as proof of how their monies are being spent. Ideal donor communication encompasses factors of trust, recognition, and accommodation. Individual donations account for 72 percent or $281.86 billion in the US (“Giving,” 2016). What can organizations do for the benefit of their relationship with donors? The answer is clear. Communication must be utilized as an accountability messaging strategy to provide informative and appealing avenues that allow for donor retention. By engaging in consistent and impactful communication with donors, nonprofits provide a way for potential and current donors to build familiarity with the organization while fostering an environment of trust.
Honesty, the number one cited characteristic needed for leadership, also moonlights as a top value in the nonprofit sector. While this value is seen in leadership outside of the nonprofit sector, nonprofit leaders have a unique obligation to encompass traits of transparency to remain loyal to their supporters. Although the existence of nonprofits is based in public benefit, ethical leadership plays a significant role in the sustainability of organizations. Impactful leaders must therefore be conscious to embody their organization mission and values. As Jim Collins said, “effective leaders are those who attract followers, even when they have the freedom not to (Collins, 2005).
The process of evaluating a nonprofits’ performance in fulfilling ethical and financial philanthropic social responsibilities, it is critical to improving organization sustainability. Social audits are drivers of identification, which measure organization capacity, progress, and setbacks. Also known as, “corporate citizenship audits,” social audit reports are valuable for determining an organizations commitment to mission realization and its philanthropic efforts (Qiu, 2015). Documentation such as newsletters, annual reports, dashboards, and marketing strategies stand as effective methods for providing social audit information to a large supporter base.
The multiple avenues taken to foster nonprofit support have proven successful for nonprofits across the spectrum. For the sector, raising funds and creating lasting donor relationships is a process that never ends. The power of donor appreciation can be infinite if organizations apply meaningful accountability strategies to their cultivation process. If such measures are not taken, organizations run the risk of losing support and ruining their credibility to their most meaningful supporters.
Collins, J. (2005). “Good to Great and the Social Sectors.” Jim Collins. Retrieved from https://myasucourses.asu.edu/courses/1/2017Fall-D-NLM620 72314/content/_16708162_1/Collins%20J%20Good%20To%20Great.pdf
“Ethics and Accountability for Nonprofits.” (2017). National Council of Nonprofits. Retrieved from https://www.councilofnonprofits.org/tools-resources/ethics- and-accountability- nonprofits
“Giving Statistics.” (2016) Charity Navigator. Retrieved from https://www.charitynavigator.org/index.cfm?bay=content.view&cpid=42
LeRoux, Kelly. (2009). “Managing Stakeholder Demands.” Administration & Society, 41(2), 158-184.Retrievedfrom http://journals.sagepub.com.ezproxy1.lib.asu.edu/doi/pdf/10.1177/009539970933229
Meiksins, Robt. (2014). “Nonprofit Accountability: Upon, Down, and Sideways.” Nonprofit Quarterly. Retreived from http://nonprofit-accountability-up-done- and- sideways/
Ebrahim, Alnoor. (2003). “Accountability in Practice: Mechanisms for NGOs.” El Sevier, 31(5) 813-829. Retrieved from http://www.sciencedirect.com/science/article/pii/S0305750X03000147
Qiu, Chen (2015). How Do Directors of Nonprofit Organizations Perceive the Donor Evaluation Process?. Journal of Governmental & Nonprofit Accounting: December 2015, Vol. 4, No. 1, pp. 1-16.
Rooney, Patrick. (2011). “Evaluation Process.” The Nonprofit Times. Retrieved from http://www.thenonprofittimes.com/news-articles/evaluation-process/
Fernanda Torres Maqueda is a native of Phoenix, Arizona and has over 5 years experience in the nonprofit sector. She is the Sr. Program Manager for Public Allies Arizona, a program of the ASU Lodestar Center. She holds a B.S in Life Science and a Masters in Nonprofit Leadership and Management from Arizona State University. Ms. Torres Maqueda specializes in applying her expertise and knowledge to program development, data analysis and evaluation, and grant report management.