Managing a Good Cause.

Voluntary organizations touch us at every stage of our own lives and are the principal means through which we seek to better the lives of others. In recognition of the increasingly important role of the voluntary sector, the United Nations has designated 2001 as the Year of the Volunteer. Leaders of voluntary organizations will need successfully to address a daunting strategic management agenda if the voluntary sector is to fulfil its promise on our behalf.

Organizations based upon voluntary purposeful association touch us at every stage of our lives. Internationally, through agencies such as the International Red Cross, they represent us in places where it is impractical for us to go ourselves. Domestically, a competent voluntary sector is vital to the well being of innumerable individuals, families and communities. In recognition of the increasingly important role of the voluntary sector throughout the world, the United Nations has designated 2001 as the Year of the Volunteer.

The American management expert, Dr. Peter Drucker, describes the sector: "Its product is neither a pair of shoes nor an effective regulation. Its product is a changed human being. The non-profit organizations are human-change agents. Their product is a cured patient, a child that learns, a young man or woman grown into a self-respecting adult; a changed human life altogether."

A strategic management agenda

The voluntary sector may well have a nobility of purpose that few Canadians would doubt, but informed commentators suggest that the sector's capacity to realize its mission is in question. There is therefore a need for these organizations to consider a strategic management agenda, which they might successfully address if they are to prevail. The elements of this agenda include accountability, marketplace differentiation, comprehensive performance management, strategy implementation and financing.

Accountability

In the North American commercial and government sectors, the need for enhanced accountability continues to be a topic of legitimate interest. However, both sectors have legal, managerial and cultural mechanisms that function comparatively well. In contrast to the government and private sectors, accountability measures in the voluntary sector are arguably both underdeveloped and under-utilized; this situation is all the more critical in that voluntary organizations are by their nature trust-based.

Dr. Regina Hertzlinger of the Harvard Business School has written extensively on problems in the quality of accountability mechanisms in American voluntary organizations. She has pointed out that these organizations lack the three motivations that animate private sector accountability. These include: enlightened self-interest that arises from having a financial interest in the performance of the company, a comparative lack of market-based competition, and the absence of the profit measure as an unambiguous standard for assessing performance. She goes on to cite numerous breakdowns in accountable management within the voluntary sector -- ineffective organizations, inefficient organizations, private inurement and excessive risk -- examples of which all came to light after public exposure of the problems rather than as the result of well-functioning accountability mechanisms.

Herzlinger likens the current situation of voluntary organizations in America to that of the private sector before the establishment of the Securities and Exchange Commission (SEC) in 1933-34. As much as the new regulatory regime over business broke down the culture of secrecy and distortions in external financial reporting, so too, she argues, there is a need for an SEC-like body required to establish and enforce appropriate levels of consistent accountability reporting for voluntary organizations. Her point is that the leadership of voluntary organizations will not voluntarily regulate themselves.

This viewpoint on the American situation is consonant with some of the current thinking in Canada. For example, Mr. John Bryden, a politician who has focused on the voluntary sector, has expressed the following perspective: "This is a huge sector that is completely lacking in accountability...Ask the questions 'do we know that the dollars Canadians are giving to charities are being used in a reasonably effective way?' 'Do we have effective ways of knowing whether or not a charity is reputable?' 'Do we have a way of knowing that donations made by Canadians stay in Canada and are not sent down to a charity's head office in the United States?' 'Do we know how an international charity raising funds in Canada is handling itself abroad?"'

Increasing donor specificity has become a challenge for charitable organizations like the Salvation Army, which provides a wide range of social services on an international level. "Donors now are getting more concerned about how and where their money is being used," says Paul Goodyear, CMA, assistant financial secretary at the Salvation Army headquarters in Toronto. As one of the largest private social services in Canada, being accountable to donors is putting financial stress on some of the less fruitful Salvation Army operations across Canada. Ontario, British Columbia and Alberta are the net providers of resources to the other provinces that are unable to sustain the level of funds needed to support the work they are doing. Donor specificity, in terms of geographical allocation of funds, is making this increasingly difficult to do.

In the Canadian voluntary sector context, recent proposals from the Panel on Improving Accountability and Governance in Canada's Voluntary Sector (the Broadbent Report) may prove useful to addressing concerns. A noted Canadian medical geneticist, Dr. George Ebers, has posited that the desire to evade accountability is a universal human trait that is rooted in the most fundamental quest in nature -- the struggle to survive. Nonetheless, is it reasonable to expect lower levels of accountability from our voluntary organizations than we do from comparably sized government agencies and private sector corporations?

Marketplace differentiation

Individual voluntary organizations are finding it increasingly important to define precisely their strategic missions with regard to players in all three sectors -- government agencies, corporations, and within the voluntary sector itself. Governments can be much more than a source of funding for voluntary organizations. As a collaborator, voluntary organizations can be a substitute for governments. In many developing world contexts, there is inadequate infrastructure to provide educational or healthcare services and so the expertise of a voluntary organization fills the vacuum. Substitution can also arise in extra-jurisdictional situations such as aid to refugees

In many instances voluntary organizations are a supplement to governments. In this role, the voluntary organization builds upon the capacity or willingness of government; for example, in rendering social services, governments typically define areas and levels of their own service while voluntary organizations seek to meet unsatisfied needs. A government might provide services for the unemployed, but do so with attentiveness to individuals' marketability. A voluntary organization, however, could assist by a focus on persons with special needs, such as those with physical limitations, senior citizens in need of paid employment or those with a personal history of substance abuse. The voluntary organization, in this instance, takes on the most challenging area of service as its niche strategy.

It once might have been said that businesses are a source of capital for voluntary organizations and that there is no other significant relationship between these sectors, but recent developments have raised considerations with regard to business becoming a partner -- or even a competitor -- for voluntary organizations.

The American consultant William P. Ryan has described how business can work in formal partnership with voluntary organizations: "Consider the YWCA of Greater Milwaukee. Large and sophisticated by any non-profit standard, this YWCA concluded that it could not go it alone. To handle the demands of a comprehensive $40 million welfare-to-work contract, it created a for-profit limited liability corporation with two for-profit partners...The new company, YWCA Works, provides services from 7 a.m. to 7 p.m., staffs a 24-hour resource line, provides transportation assistance, emergency loans, and job site clinicians, and has better assessment and placement programs with improved information technology. In short, YWCA Works provides almost every service needed to help someone find a job." Such joint ventures require an approach to strategy formulation that reflects the objectives of both the volunteer and for-profit partners in appropriate proportion.

In some circumstances, voluntary organizations and business can become competitors. Privatization of services by governments in both the developing world and domestically has created a demand for non-governmental organizations -- for-profit and non-profit -- to deliver social services. Ryan cites an American case: "Maximus, for example, a provider of welfare-to-work services, informs in its prospectus that the administration of social programs is a $21 billion market."

For organizations like the Salvation Army, the competition for funds in Canada has been fuelled even more by the introduction of for-profit operations such as Value Village thrift stores and various recycling operations. Goodyear comments that from the late 1970s to mid-80s, the Salvation Army enjoyed double digit growth in their annual fund raising drive "The National Red Shield Appeal." Since that time, however, those fundraising results have plateaued while the cost of raising money continues to get higher. "In the last couple of years we have had to re-tool our whole program -- our approach to how we try to raise money," he says. And to further add to the challenge, with the GST, the whole basis of taxation has changed. For-profit and not-for-profit operators in competition with one another are weighed on the same tax scale.

Laurence Dabin, CMA, senior associate manager of finance and operations at the Heart and Stroke Foundation of Ontario, says that competition for donor dollars has forced the foundation to continually re-evaluate their fundraising programs and to look at what has worked in the past. Last year, the Ontario foundation implemented a five-year strategy-planning project to review the organization's long-term goals toward their mission of research funding and health promotion.

Each voluntary organization must differentiate itself with increasing sophistication from other members of a crowded voluntary sector. This is essential for two reasons: satisfying a legitimate unmet social need and because of the necessity to compete for scarce funding.

Comprehensive performance management

As early as 1991, Dr. Robert Eccles of the Harvard Business School observed that in business "more and more managers are changing their company's performance measurement systems to track non-financial measures."

In the government sector, comprehensive performance measurement systems were used as early as the 1960s and received reinforced attention in the 1980s, In terms of sheer scale, perhaps the largest example from government is the program American Performance Review wherein all federal government agencies are to use measurable objectives for purposes of both planning and control.

During the past several years, the so-called "balanced scorecard" has become pre-eminent in the field of comprehensive performance management. (For a comprehensive overview of the balanced scorecard, please refer to "Measure for Measure" in the September 2000 issue of CMA Management magazine.) The Gartner Group has estimated that by the end of the year 2000, at least 40% of Fortune 1000 companies will have undertaken initiatives to implement the balanced scorecard.

In contrast to this private sector enthusiasm, there is comparatively limited public reporting of the take up of the balanced scorecard within the voluntary sector. Moreover, in those instances that have been reported, success with implementation has been somewhat problematical. In "Measure for Measure," authors Atkinson and Epstein, for example, discuss the experience of the Ontario Hospital Association, in which a union spokesman for some 10,000 employees took a public position that the association's scorecard had limited validity because his union's membership had been inadequately engaged in its creation.

This endemic voluntary sector issue of needing to balance multiple and complex stakeholder interests may make it necessary to modify the base balanced scorecard. The scorecard has four elements: financial, internal business process, learning and growth, and customer. The first three of these may travel well to voluntary sector application but while "the customer is king" in a corporate context, it can be difficult to agree upon even the identity of the customer in a voluntary organization context. One urban United Way has reported that in developing the "customer" dimension of its scorecard, the organization saw itself as being primarily donor-focused over the options of communities or agencies, and designed its customer measures accordingly.

Given these complexities in the work environment, one appropriate alternative to the balanced scorecard for the voluntary sector might be a stakeholder-based model such as that employed by the Bank of Montreal, as described by Atkinson and Epstein. As another option, extensive work with voluntary organizations by Lawrence Gustafson, a United Kingdom based management consultant, has caused him to favour a three-element scorecard based around the dimensions of mission, service, and financial soundness.

Beyond important issues of scorecard technical design are some behavioural obstacles to implementation that can be of particular importance within the voluntary sector. The culture of voluntary organizations is typically mission-driven; people choose to join the organization -- as either volunteers or paid staff -- to better some aspect of society. A volunteer-dominated organization focused on a noble mission may not be disposed towards the rigour and formality associated with the balanced scorecard -- informality and trust are more likely to be the dominant values.

Power and politics are at play in every organization but can take on a particular character in the voluntary sector. The first consideration involves the politics of personality, which could be akin to that encountered in a family business. It is not unusual for a voluntary organization to be the creation of a single driven and charismatic leader. If this founder is still on the scene, it would not be surprising for she or he to resist comprehensive performance management.

The second consideration involves the relative power of the voluntary organization's many stakeholders. Beneficiaries must be an important area of focus in a mission-driven organization, but these beneficiaries can be expected in some significant way to be comparatively lacking in power and wealth in relation to other stakeholders such as sponsors, regulators or even the paid staff of the voluntary organization. This creates challenges for implementing the balanced scorecard from two perspectives. On one hand, beneficiaries simply may not have the capacity to participate in the development of the scorecard; on the other hand, the competing interests of stronger stakeholders may simply overwhelm them.

Perhaps the most important behavioural obstacle to voluntary sector implementation of a comprehensive performance management system such as the balanced scorecard is the problem of accountability avoidance, as raised earlier. It has become commonplace to discuss the balanced scorecard as an instrument to facilitate strategy implementation, but its importance as a tool to exact accountability is also compelling. It is very difficult, if even appropriate, to uncouple these two associated applications.

Strategy implementation

In their seminal 1991 Fortune magazine article "Why CEOs Fail," Ram Charan and Geoffrey Colvin addressed the issue of why, according to their estimates, some 70% of corporate CEOs fail in their jobs. The culprit was not a lack of a stirring vision and concomitant strategy; rather, it was simply a matter of inadequate execution -- not successfully doing the agreed upon job. Although Charan and Colvin based their work exclusively on private sector cases, it is useful to consider how the underlying factors to corporate CEO failures might be instructive for voluntary sector strategy implementation.

Failures in human resource management were by far and away the principal reason for corporate CEO failure -- namely the unwillingness or inability to remove a few key subordinates whose sustained under-performance in vital roles eventually did irreparable damage. Interestingly, the reported CEO shortcomings were not due to inadequate or untimely relevant performance information; rather, it was typically a case of insufficient "emotional strength" to deal with the non-performing executive(s).

If anything, human resource management challenges in the voluntary sector may be an even greater obstacle to effective strategy implementation. From a cultural standpoint, the kind of social Darwinism implicit in Charan's and Colvin's diagnosis may simply be too alien for the voluntary organization -- "emotional strength" could be seen as nothing more than a euphemism for expediency, disloyalty or even cruelty in the treatment of colleagues.

Beyond this issue of the expeditious removal of key underachievers, there are several other important aspects to successful human resource management in the voluntary sector. Notable among these is that the emerging economic prosperity in the United States and in Canada, in combination with social and demographic considerations, will create pressures on the supply and the retention of both volunteer and paid staff.

"We are now competing in a different kind of environment and as a result, the kind of people we need to recruit come at a higher price and they're in relatively short supply," says the Salvation Army's Goodyear. "It's no longer adequate for us to take good people -- we need the best people."

Volunteers are the lifeblood of this sector. From a demographic perspective, in North America the median age for a baby boomer is now approximately 45 years and so this group is fully engaged in the paid workforce; the oldest boomer will not attain the nominal retirement age of 65 for another decade, causing the supply of volunteers to be constricted for many years to come. In addition, the increasing participation rate of women in the paid workforce has reduced the availability of volunteers from this traditionally important source, and a lowered unemployment rate in the paid workforce further reduces the supply of volunteer workers. If voluntary organizations must increasingly turn to paid staff to execute their missions, they will do so in a competitive marketplace for scarce managerial and technical talent. Furthermore, from a cultural perspective, as the mix of volunteer to paid staff changes, so too may the essential character of these organizations, making them more like government agencies or busines ses.

"Volunteers in the management area, especially with the expertise such as what CMAs have, are really important to these non-profit organizations," says Joyce Tomboulian, a retired CMA who donates much of her time to providing volunteer accounting and financial consulting support. Since retiring two years ago, Tomboulian has been volunteering at the Calgary Centre for Non-Profit Management, a resource centre that not-for profits can contact to obtain volunteer consultants to work with them on various business issues -- including accounting, human resource and strategic planning -- for a reduced hourly fee. The centre has a roster of professionals who work on a project basis and is in the midst of developing generally accepted practices in non-profit management, as a result of the work that the volunteers have been doing.

The Salvation Army is also doing its share to bring a higher level of financial support to some of their operations that lack the resources. Goodyear says that their move toward establishing regional accounting centres is to try to reap some economies of scale in terms of transaction processing, but also to make a qualified accountant available to smaller entities that otherwise couldn't afford to have that kind of expertise.

After human resource management shortcomings, Charan and Colvin cite "decision gridlock" as a source of CEO failure to implement strategy. In this instance, formal processes and informal networks combine to delay important decisions, rather than to promote their being made expeditiously. The voluntary sector, with its traditional culture of collegiality, may also find "decision gridlock" to be a barrier to effective strategy execution, particularly in the larger and more geographically dispersed organizations.

A third factor, although not addressed by Charan and Colvin, will be central to the success or failure of voluntary organizations in their strategy execution -- the competent use of information technology. It is a truism of our age that corporate competition is organized around comparative competence in the acquisition and use of information. In the government sector, the use of computer/network-based information has gone vastly beyond its initial military and civilian data processing applications. Modem governments use customer relationship management software in their taxation departments to maximize cash inflows, employ interactive Web sites to relate to constituents, and procure their goods through online databases and real-time auctions.

Voluntary organizations will have a formidable task to keep pace. The scale of financial investment may be beyond the means of most voluntary organizations, and the ability to access scarce specialized human resources in a sustained manner is highly questionable. Successful strategy execution has always been a challenge for voluntary organizations, but the very developments set out in the marketplace differentiation element of a strategic agenda -- substitution and collaboration with governments, collaboration and competition with corporations -- can be expected to make strategy implementation more demanding in the future.

Financing

If the voluntary sector is to play its vital role in our society, obtaining adequate levels of sustained funding must be a central part of the strategic agenda for the future. By adopting effective management practices and by conducting their operations in a fully accountable manner to all stakeholders, individual voluntary organizations will have done much to utilize and be seen to utilize their resources wisely.

Governments in Canada and the United States seem to have entered what will be an extended period of budgetary surpluses and may be willing to restore and augment funding for voluntary organizations, which do the work that governments might otherwise need to perform themselves.

Ultimately, it may be the commercial marketplace that offers the most promising funding opportunities. For example, initiatives in the area of cause-related marketing have already proven beneficial for both the corporation and the voluntary organization; at its essence, the corporation advertises that it will donate a share of its revenues for designated products to one or more voluntary organizations.

A prospect that has potentially vast potential, and associated risks, is the entry of voluntary organizations into commercial ventures. The notion at first may seem inherently inappropriate and perhaps naive, but who is unfamiliar with, say, the commercial products of the National Geographic Society, a renowned voluntary sector organization.

The underlying question may be whether the field of professional management is sufficiently advanced that a degree of commercial success -- perhaps defined as positive cash flow -- can be relied upon. J. Gregory Dees of Stanford University has researched this issue and refers to some interesting cases from university bookstores supplementing their product lines with clothes, CDs and other goods, to Save the Children selling men's neckwear.

Dees is also careful to point out the pitfalls of commercialization, including the obvious risks of financial failure, the potentially damaging effects on the voluntary organization's culture, the loss of reputation due to setbacks, the potential to distract management from its central mission, and resentment leading to retaliation from for-profit competitors.

A variation on pure commercialization might be the extensive use of investment income by voluntary organizations, as is the long-established practice with the endowment of university chairs. In this option, donations and otherwise sourced funds would go into a revenue generating pool rather than being consumed in the year in which they are received.

Next steps

As we enter The Year of the Volunteer, it is clear that voluntary sector leaders have their hands full. How might we, as general managers and CMAs, lend them a helping hand? In our organizations we might make a special effort to see if our work can incorporate the interests of the not-for profit sector. The Department of Industry, Government of Canada accomplished this by levering its know-how in networking scientists and businesses to create VolNet, an electronic network to link thousands of Canadian voluntary organizations.

As individuals, we might provide our professional services on a pro bono basis to implement the kinds of advanced management practices described in this article. The Heart and Stroke Foundation's Dabin, who also serves on various boards in the volunteer sector, stresses that being part of a board of directors or sub-committee is an important way to volunteer your skills. "Not-for-profit organizations really rely on their board and their subcommittees for the direction of their organizations. Volunteers are not just there to rubber stamp -- in today's environment they need to be active participants."

Tomboulian and Goodyear, who also serve on non-profit boards, agree that apart from volunteering, being a member of a board for a non-profit organization helps bring a level of expertise and skills to a charity that otherwise cannot afford it. "I find volunteering a very rewarding experience because I can use my skills and my expertise in a meaningful way to make a meaningful contribution," adds Tomboulain. "It's a way of giving back to your community."

George Willis, CMA does volunteer projects within CMA Canada. Kristin Doucet is volunteer projects within CMA Canada. Kristin Doucet is the editor of CMA Management magazine.

Editor's note: A complete bibliography for this article is available on CMA Management's Web site (www.managementmag.com). CMA interviews by Kristin Doucet.