Center for Social Innovation

Our Key Findings:

The Stanford Project on the Evolution of Nonprofits’ report, “Managing Through Challenges: A Profile of San Francisco Bay Area Nonprofits,” provides baseline information for decision making in the nonprofit field that will be useful for practitioners and stakeholders, including philanthropists, in the Bay Area and beyond.

"The role of nonprofit groups in the Bay Area economy"

Denise Gammal on All Things Considered on KQED-FM 88.5 (NPR)
[listen now]

 

• Size. Nonprofits nationwide are mainly small, but most assets are concentrated among a few, very large organizations.
  
  
• Economics. In 2000, Bay Area operating charities spent more than $41 billion, representing nearly 14 percent of the total regional gross domestic product (GPD) of $295 billion.
  
  
• Locale. Nonprofits depend on local communities for their volunteers, most of their financial resources, peer support, and professional development.
• Disparities. Some regional sectors are better off; San Francisco Bay Area nonprofits have higher budgets and spending than the state and nation.
  
  
  
  
• Resources. Human services organizations have differing resources available depending on location; although a typical budget is about $1.3 million, the Bay Area spends nearly five times what Los Angeles does on residents living in poverty.
• Personnel. Most nonprofit leaders in the Bay Area feel their organizations are financially stretched and pay poorly.
• Professionalism. Many nonprofit leaders are working to professionalize their boards, build organizational capacity, diversify funding, and enhance their professional development.

Implications:

• Action. The challenges posed by limited organizational capacity must be addressed.
• Mapping. Nonprofit stakeholders should map their sectors so as to better identify challenges and opportunities.
• Strategy. Managers must focus on specific strategies and practices appropriate for their needs, not one-size-fits-all solutions.

Despite the challenges of a resource-stretched sector, our report concludes that nonprofits have much at their disposal in terms of human capital and personal commitment.

Operating Charities Profile

Facts at a glance

• There are 1.1 operating charities for every 1,000 residents of the Bay Area while there are 0.7 operating charities for every 1,000 residents across the United States.
• More than 80 percent of Bay Area operating charities are concentrated in four major areas. Similar proportions are observed at the state and national level.
  
  

• Nonprofits are overwhelmingly small with more than half having budgets below $200,000 per year, whether in the Bay Area, the state, or the nation.
• Median budget expenses for Bay Area operating charities is $184,117; for Los Angeles $141,168; and for the United States $164,148.
  
  

• For most operating organizations (80 percent) revenues outpace expenditures in 2000; hospitals and human services nonprofits run deficits in the highest proportions at 39 percent and 26 percent respectively.
  
  
• Most operating nonprofits are quite young, with close to half of operating charities 10 or fewer years old.
  
  

Philanthropic Sector Profile

Facts at a glance

• When we aggregate all revenues to California operating charities in the year 2000, the largest share of total revenues (62 percent) comes from program fees, such as admissions, tickets, or clinic charges.
• 81 percent of operating charities receive some form of donation; 79 percent receive individual gifts; 59 percent receive foundation grants; and 50 percent receive support from corporations or corporate foundations.
  
  

• 46 percent of Bay Area supporting organizations support a single nonprofit, 10 percent focus on a single activity such as education, and 44 percent provide general fundraising or other support for the public benefit.
  

• The typical Bay Area nonprofit funder is even smaller than the typical operating charity; 60 percent of supporting organizations and 74 percent of private foundations expend less than $200,000 annually (including grants given).
  
  
• The 12 largest supporting organizations in the Bay Area account for 55 percent of the total expenses by all supporting organizations; similarly, the nine largest private foundations account for 53 percent of the combined private foundation expenses.
  
  

Managerial Practices in the Nonprofit Sector

"The Nonprofit Accountability Trap"

The inherent tensions between the high resource costs of evaluation and the demands of service delivery are a challenge for nonprofits and foundations alike. Denise Gammal, managing director of the Stanford Project on the Evolution of Nonprofits presents results to foundation professionals. [Listen now]

Facts at a glance

• A sizable number of operating charities (14 percent) are structured as franchises or chapters of another organization; another 13 percent operate as subsidiaries or affiliates of larger organizations, creating large organizational families.
• In the Bay Area, 74 percent of operating charities have paid staff with a median of 2.4 full-time equivalents.
• Volunteers are a resource mobilized by 85 percent of organizations; these nonprofits enlist the help of two to 2,000 volunteers over the course of a year and the value of their contribution ranges from $7,000-$800,000 annually.
• Among staffed organizations, 31 percent have at least one paid position dedicated to fundraising.
• Reflecting the high-tech environment of the Bay Area, 76 percent of organizations have a web-site; this compares to 27 percent nationally.
• Mergers are not new to this field; 9 percent of operating charities in the Bay Area have already been through some type of merger and/or acquisition in their history.
• Even though most nonprofits are small, 46 percent now develop a strategic or business plan; among those that receive government or foundation funding, the number rises to more than 60 percent.

Research Objectives & Methodology

SPEN seeks to advance scholarship regarding the management of nonprofits, exploring in particular how nonprofit leaders appropriate, adapt, or reject management ideas and practices as they create and shape social purpose institutions. We consider how these ideas circulate among nonprofits and how nonprofits acquire them from business or government. The research has deepened our understanding of organizational and philanthropic issues facing the social sector.

In order to better understand how nonprofits are managed, we utilized a multi-method approach in two complementary projects conducted from 2002 to 2005.

• First, we profiled the social sector landscape and set it within the socioeconomic context, using IRS data on nonprofits at the regional, state, and national levels.
• Second, our researchers completed extensive interviews about the founding, funding, leadership, and management of nonprofit organizations.

SPEN Interviews

Our interview protocol covered a broad array of organizational topics, eliciting both quantitative data and discursive qualitative responses.

The protocol was tested and improved through more than 20 pilot interviews, with an emphasis on collecting data that is comparable across organizations.

Researchers used the protocol in extensive six to 120-minute interviews with the leaders of a randomly selected, representative sample of 200 operating charities in the San Francisco Bay Area:

• Organizations represent the full spectrum of nonprofit activity.
• They range from volunteer-based grassroots organizations to multimillion-dollar organizations with more than 100 employees.
• They are distributed in urban, suburban, and rural settings across the 10-county Bay Area.

We interviewed executive directors for the staffed organizations and board presidents for the volunteer-based organizations. Our thanks go to these leaders for so generously sharing their time as well as their perspectives and information about their organizations.

Information on the following areas was collected:

Organizational Founding & Structure

• Founding catalyst
• Initial financing
• Structure, including chapters, affiliations, multiple sites
• Staffing, paid and volunteer
• Mergers, acquisitions, or spin-offs and other changes over time

Identity & Programs

• Mission and niche
• Programs
• Clients and membership
• Competition and benchmarking
• Reach
• Religious affiliation

Leadership and HR

• Leader's education
• Leader's career trajectory
• Management team and key staff
• Recruitment and retention
• Fundraising staff
• Volunteers

Management Practices

• Evaluation and grant reporting
• Advocacy
• Use of consultants
• Auditing
• Strategic planning
• Key management challenges, internal and external

Financing

• Revenue sources
• Fundraising activities
• Donor relations
• Revenue generation activities
• Effects of economic downturn

Governance

• Board structure and role
• Board composition
• Communication with the board
• Board chair's background and affiliation
• Financial support and fundraising
• Governance challenges

External Relations

• Marketing, reporting, communication, and media
• Web site purpose and functionality
• Collaborations
• Networks and professional associations
• Professional development
• Leader's board affiliations

Papers

Publications

• Gammal, D.L. (2007). “Before we say ‘I do’: Mergers in the Nonprofit Sector.” Stanford Social Innovation Review, v.5, n.3
• Suarez, David, and Hwang, Hokyu. (2008). “Civic Engagement and Nonprofit Lobbying in California.” Nonprofit and Voluntary Sector Quarterly 37(1): 92-112.
• Suarez, David. (2009). “Nonprofit Advocacy and Civic Engagement on the Internet.” Administration and Society, forthcoming.
• Hwang, Hokyu, and Walter W. Powell. (2009). “The Rationalization of Charity: The Influences of Professionalism in the Nonprofit Sector.” Administrative Science Quarterly, forthcoming.

Book Chapters

• Hwang, H. and Powell, W. (2005). “Institutions and Entrepreneurship.” In Handbook of Entrepreneurship Research, edited by Sharon Alvarez, Rashesh Agarwal, and Olav Sorenson, Springer Press.
• Powell, W.W., Gammal, D.L. and Simard, C. (2005). “Close Encounters: The Circulation and Reception of Managerial Practices in the San Francisco Bay Area Nonprofit Community.” In Global Ideas: How Ideas, Objects and Practices Travel in the Global Economy, edited by B. Czarniawska and G. Sévon, Liber & Copenhagen Business School Press.
• Hwang, H. and Suarez, D. (2005). “Lost and Found in the Translation of Strategic Plans and Websites.” In Global Ideas: How Ideas, Objects and Practices Travel in the Global Economy, edited by B. Czarniawska and G. Sévon, Liber & Copenhagen Business School Press.
• Minkoff, D. and Powell, W.W. (2006). “Nonprofit Mission: Constancy, Responsiveness, or Deflection?” In The Nonprofit Sector: A Research Handbook, 2nd edition, edited by W.W. Powell and R. Steinberg, Yale University Press.

Report

• Gammal, D.L., Simard, C., Hwang, H. and Powell, W.W. (2005). Managing Through Challenges: A Profile of San Francisco Bay Area Nonprofit, Center for Social Innovation, Stanford Graduate School of Business.

Working Papers

• Gammal, D.L. and Simard, C. (2007). “The Effects of Resource Uncertainty on Organizational Behavior: The Case of the Nonprofit Sector.”
• Simard, C. and Gammal, D.L. (2007). “Signaling Legitimacy: Accountability Practices in the US Nonprofit Sector.” Draft paper being prepared for submission.
• Hwang, Hokyu, Tricia Martin, and Walter W. Powell. (2009). “Motives and Meanings: Whose Clay and Which Hands Shape Strategic Planning in Nonprofit Organizations?”
• Hwang, H, and Suarez, D. (2009). “Institutional and Environmental Influences on Advocacy among Service-Providing Nonprofits.”
• Suarez, D. (2009). “Collaborative Public Management? Public Sector Relationships with Nonprofit Organizations.”
• Suarez, D, and Hwang, H. (2009). “Find a Corporate Partner. Nonprofit Organizations and the Culture of Collaboration.”
• Suarez, D. (2009) “Street Credentials and Management Backgrounds: Careers of Nonprofit Executives in an Evolving Sector.”