Unaccountable Nonprofits? This Study Finds against the Myth

Cockatoo Island – Sydney” by Chris Marchant

August 24, 2017; Phys.org

In the category of research that doesn’t tell any of us who know something about nonprofits anything at all new is this gem: Nonprofit executives are often fired when they’re not doing the job for which they were hired—in particular, when the budget starts imploding. The unfortunate thing about this research is that apparently the sole measurement used is the budget.

Turnover at the Top: Investigating Performance-Turnover Sensitivity Among Nonprofit Organizations” was published in the journal Public Performance & Management Review. The study examined 998 nonprofits in the arts, health, and human services looking for a correlation between executive turnover and annual expenditures, which were used as a proxy for success or mission advancement. What the researchers found was that if expenditures decreased by 20 percent over a three-year period, the organization was 50 percent more likely to part ways with the executive than others without such a fiscal crisis looming.

As we know, a downturn in funding is sometimes not entirely controllable by any executive, no matter how good. In general, budget size is a questionable proxy for effectiveness.

“The nonprofit sector has been critiqued as not holding its executives accountable, even when they are underperforming,” says Amanda Stewart, an assistant professor of public administration at NC State and lead author of a paper describing the work. “But this study shows that poor performance does lead to executive turnover in nonprofits.”

“Nonprofits are not motivated by profit, but this study tells us that the field still holds its executives accountable for effective action and outcomes,” Stewart says. “To the best of our knowledge, this is the first time this question has been addressed for the nonprofit sector.”

The authors are obviously trying to counter the mythology of the clueless and unaccountable nonprofit executive, so for that we have to thank them, but we are not sure that we need to take a defensive position. In any case, we would say that the case has hardly been made through this research, though it may be a small indicator in favor of the conclusion. As the researchers say, this will take more study. Still, as additional proof against cluelessness, you could look at this study, which shows that nonprofit executives generally rate higher than those at for-profits in 360-degree reviews and offers management guru Jim Collins’s explanation about why that makes sense.—Ruth McCambridge