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Cost Matters: A New Structure for Non-Profit Higher Education

—Co-written with Kimberly Handy | Teacher, Anchorage School District—

Public higher education institutions must reconstruct their organizational structure, modeling the blueprint laid out by other non-profit organizations, in order to be successful. Photo by Adimas.

As non-profit entities such as higher education institutions and community based companies look at how they prepare students for the future, they must also take into consideration such variables as cost, social conditions, decision-making influences, organizational interaction, but most importantly the human factors, which effect sustainability and growth of non-profit sectors. What can higher education institutions learn from other non-profit sectors?

The non-profit sector is a large and valuable industry in the United States and it contributes to the domestic economy by serving the welfare of individuals, families, and culture through philanthropic, social service, and religious activities (Burlingame, 2004; Grobman, 2005).  In 2008, the National Center for Charitable Statistics (NCCS) documented the non-profit sector to be over 1.4 trillion dollars in revenues and 1.34 trillion in total expenses.  In 2009, the NCCS reported those figures amounted to 20% from contributions, gifts, and government grants; 70% from program services revenues, to include government fees and contracts; and 10% from “other” sources, including dues, rental income, special event income, and gains from goods sold.  Those statistics demonstrated service revenues that received support from government fees and contracts as the major component of non-profit funding.  In 1999, the NCCS recorded that there were 492, 693 501(c) non-profit organizations, which accounted for 41% of all organizations.  By 2009, there were 453, 824 non-profit organizations, which accounted for 28.7% of all organizations.  Sustainability in corporate America seeks to be the main goal for profit and non-profit organizations.

Just as non-profits across the globe are adhering to the needs of its community and environment, higher education institutions must also become and remain cognizant of its community and the people it serves. The community based care organization (CBC) Circuit 12 have the responsibility to act in a responsible manner by displaying corporate social responsibility which is defined in the literature as a voluntary corporate action designed to advance social conditions (Mackey, Mackey & Barney, 2007), or corporate actions not required by law, which may benefit the organization (McWilliams & Siegel, 2000).  Therefore, organizations that do not meet the expectation of managing their monies responsibly fall short of forming a buffer, and stand exposed to potentially greater impacts (Sjostrom, 2009).  For community based care organizations (CBC) that new direction brought fresh opportunities for collaborating with other organizations, state, and local government to promote a positive community agenda.

Higher education must be community oriented and know the stakeholders they serve; they must have a genuine feel for the community and not take a happenstance approach to the needs of that environment. In addition, higher education must know the climate they serve: students, teachers, counselors, and other administrators and from that develop a gauge on which ways things may need to change or stay the same.  Drury-Hudson (1999) examined the decision-making between two groups of social workers with varying degrees of knowledge.  One group represented new workers and the other experts in the field of child protection.  The study particularly focused on what information the new would draw upon in order to base their decisions.  In relation to theory, Drury-Hudson (1999) focused on the relationship between theory and practice and analyzed that new workers only drew upon theory after a decision instead of using it as a basis for making a decision therefore, describing the use of theory as unconscious, rather than a conscious act.  However, during the study the experts tended to view theory as more of a tool within the trade that assisted in the background of understanding and interpretation (Drury-Hudson, 1999).

Dworkin (1990) pointed out that tension frequently exists between professional autonomy and the environment in which practice takes place because of decision-making.  The Dworkin’s study indicates discrepancies between professional and organizational expectations and goals developed from community expectations and organizational procedure.

Tracy and Phillips (2007) and Zietlow (2001) both found that as nonprofit organizations engaged in social enterprises, the intersection of the social service mission of the nonprofit organization and the business mission of the social enterprise might raise questions about understanding its uniqueness.  Mozier and Tracey (2010) found social enterprises had both social and commercial objectives that include managing a double bottom line, which demanded a careful balance between resource utilization and engagement with the community in order to build and maintain organizational legitimacy.  As a result, the failure to strike an appropriate balance between the two competing objectives threatens organizational sustainability.  Arguably, the manner and severity in which the organizational strain manifests would vary among organizations and influences.  For an organization to sustain there are several definitions in which to draw upon for clarification.

Moxley (2004) explains that strategic planning is a means to maintain organizational sustainability in human services noting that the objective is to align organizational behavior with organizational desires.  Moxley (2004) points out that the strategic planning model in non-profit organizations tended to be vision based, where future direction was defined, envisioned, and changes are implemented.  Austin, Stevenson, and Weick-Skillern (2006) argued sustainability should be an overriding objective for any kind of organization; but for social enterprise, it took on particular importance because of the uncertain and complex nature of their operating environment.  In their views, Austin et al. (2006) described that “corporate sustainability” might have been considered as a “company’s ability to achieve its business goals and increase long-term shareholder value by integrating economic, environmental and social opportunities into its business strategies” (Symposium on Sustainability, 2001).  Haugh and Talwar (2010) described organizational sustainability as a broad and evolving construct that defied an all encompassed definition.  Haugh and Talwar (2010) in contrast to Moxley’s (2004) view of sustainability had more to do with organizational behavior and desires rather than a broad nonspecific construct.  In addition, the research performed by Austin et al. (2006) was supportive of incorporating the economic, environmental, and social opportunities for business strategies to gain sustainability rather than behavior or broad concepts.  Moreover, within research there is emerging consensus that there are three pillars of sustainability, economic, social, and environmental (Elkington, 1998; Schmidheiny, 1992; Rondinelli & Berry, 2000; Bansal, 2005).

Higher education must also play a reoccurring role in the lives of the families it serves as well. Focusing just on the student not the entire student’s ‘family,’ which it brings with him or her as they walk through the front doors brings about a disenfranchised student and community. The literature shows that the human factor plays a large role in the implementation of services in type and cost.  Depending on the service needed an organization could in theory struggle with sustaining when tasked with providing a service that is not covered by a purchase of service agreement.  For non-profits, Kaplan (2001) focused on the financial outlook and recommends agencies spend within their budgets; however, budget variances did not provide an indication of organizational performance but was important for assessing said performance.  As such, financial processes often focused on increased funding levels, sustainability, efficiency, and cash flow.  Social return on the community could be the prime concern for social enterprises, and must accentuate financial measures as a means for sustainability, and move away from grant dependency.  Instead, making it grant supported but provide additional financial streams independent of government contracts.

Higher education sees the needs for an organizational evolution and strategic planning. Higher education can take a section from the lesion plans of local CBCs. Organizational evolution moves the organization from one phase in development to another.  Based on the study results, the CBC arguably is in need of new and innovative ideas that can stop the financial bleeding associated with decisions made regarding service choice.  Clearly, by simply dividing the issue into multiple sections with an attempt to fix each section separately may no longer be enough to effect a system wide change.  However, utilizing a systems thinking approach may benefit the organization as a whole and move it into a new developmental stage.  A systems thinking approach focuses on the part of the system that needs changing by studying how it interacts with the other parts of the system and how those elements interact to produce behavior of the process being studied (Aronson, 1996).  The CBC needs to look at how and what is affecting the budget and causing the organization to struggle financially and put in place a system that will allow it to address organizational needs at a stage less than critical.

Decision-making, staff edification and cultivation are paramount in ensuring that case workers are up to date with empirical information that can support decisions and communications held within the community.  Accompanying decision-making is the impact of outside decision makers such as the courts and child abuse investigators from other agencies and management policies and procedures that may order an action contradictory to current information.  These outside forces coupled with an already strained system impacts the CBC’s ability to fund areas appropriately.

The desire to make changes is derived from the viewpoint of a new system that centers on developing a plan of operation designed to increase the effectiveness of the organization.  Organizational activities that support change activities often involve large monetary investments and time to execute.  A successful organization can execute change and evolve by effectively implementing an aggressive and focused management team and gain favorable impact on organizational performance and effectiveness.  Rigorous studies have expressed very diverse outcomes without committing to any type of consensus methodology to apply and achieve effective change.

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