PADP 7210 Chapter Notes - Chapter 18: Human Services, Product Differentiation, Social Capital
19 Nov 2020
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PADP 7210 Intro to NonProfit
Reading 18: Strategies for Nonprofits in Increasingly Competitive Environments
Citation:
Frumkin, Peter, and Alice Andre-Clark. “When Missions, Markets, and Politics Collide:
Values and Strategy in the Nonprofit Human Services.” Nonprofit and Voluntary
Sector Quarterly 29, no. 1 (2000): 141–63.
https://doi.org/10.1177/0899764000291s007.
When Missions, Markets, & Politics Collide
I. Introduction/Background
• Growing business theme in books about managing nonprofits – suggesting lag
between sectors can be closed with direct transfer of managerial technology
o But reason to suspect nonprofits might not be well served by push for
increasingly greater operational efficiency
• Most critical work for nonprofits is clarifying organization’s overall strategy,
defined as unique mix of activities & values that make nonprofit stand out
from others
o Neglected core of nonprofit strategy lies in sector’s expressive, non-
instrumental dimension
▪ This expressive character significantly differentiates one
nonprofit from another & nonprofit sector from other sectors
o “Recapturing the value-driven side of nonprofits, and demonstrating
how those values will ultimately lead to better outcomes for service
recipients, is a crucial part of developing a sustainable, competitive
strategy.” (142)
• Differentiating between operational efficiency & strategy has important
consequences in nonprofit sector
o Nonprofit sectors’ increasing focus on efficiency results in neglect of
value-laden feature of nonprofit activity
• Forces Pushing Nonprofits toward Operational Efficiency
o Rise of commercial activities within nonprofits
▪ BUT – non-distribution constraint & need to rally volunteers &
donors around social missions mean nonprofits cannot ever
focus exclusively on profitability of enterprises
o Professionalism trend in employment of nonprofits
o Institutional donors & drive for documented outcomes
• Argument for Renewed Emphasis on Strategy
o Recognize significance of non-distribution constraints for services
provided under high levels of uncertainty → nonprofits can be trusted
not to achieve appearance of efficient performance
o Recognize how nonprofits’ special values can be cornerstone of
competitive advantage → values can be translated into potent tool of
product differentiation from for-profit products (values as competitive
strategy)
• This Article
PADP 7210 Intro to NonProfit
o Explores nonprofit competitive strategy in human services through
examination of challenges facing organizations working in fast-
growing field of welfare-to-work transitions
o Illustrates one way in which values can be linked to strategy & how
this approach differs from one focused on economizing & efficiency
II. Battling the Corporate Social Worker: Growing Competition with For-Profits
• As welfare reform takes root in state & local governments, public managers
increasingly look to outside contractors to provide welfare-to-work
o Contracting lured substantial growth of for-profits in human services
realm
o Early on, for-profit participation in provision of welfare services took
form of information technology & administrative support . . . today,
for-profit providers of welfare service seeking opportunities to provide
direct human services
• Reasons for Nonprofits’ Disadvantaged Position when Competing
o The limitations of nonprofit financial & human resources
▪ 3 main areas of resource deficiency relevant to welfare-to-work
competition with for-profits:
(1) Lack of large-scale information technology &
management experience
o Successful bidders for service contracts must be
able to scale up quickly . . . to win contract,
nonprofit would have to demonstrate it could
meet high performance standard to justify extra
expense of coordinating information interchange
with private firm
(2) Inability to absorb risk & raise capital
o Nonprofits do not have at their disposal, some
resources readily available
(3) Difficulty in recruiting & retaining very best
management talent
o High-profile welfare expertise likely to be less
available to nonprofits – undercapitalized
nonprofit cannot offer comparable salary
o The limitations of nonprofits & the political environment
▪ Legal constraints on nonprofits mean for-profits have greater
ability to shape political environments through direct lobbying
o 501(c)(3) charitable organizations are limited on
amount of activities toward lobbying
▪ Fiscal constraints prevent nonprofits for lobbying for share of
funding
▪ “business knows business” claims of for-profits
o Government officials receptive to claim that profit
incentive will help government say taxpayer money
o Nonprofits face challenge in linking competencies to
community benefits that are every bit tangible as cost
