Abstract
The chapter discusses major challenges for the third sector and its associations and assesses them on the basis of literature and a quasi-Delphi research with 37 experts. Five trends are identified as the most important: increasing managerialism as a way to gain legitimacy, changes in the relationship with the public sector due to financial crises and neoliberal ideology, blurring boundaries between the sectors, new demands on associations, and new forms of civic engagement.
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Keywords
- Challenges for the third sector
- Managerialism
- Relationship between state and the third sector
- Civic engagement
“Prediction is very difficult, especially about the future.”Footnote 1 Nevertheless, Zimmer and Priller assessed the “Future of Civil Society” (2004). The identification of trends and developments not only meets the general need for orientation (Foucault 1974), but also is a basis for managerial strategies, even if it is only howling into the dark to banish fear.
Are associations an outdated model or will they continue to be an essential part of civil societies? A first step to answer these questions is to assess developments affecting the third sector. Associations have always been an important part of the third sector as the most important legal form for nonprofit organizations (NPOs) in most European countries. Thus, we asked experts which trends challenged and changed the nonprofit sector and its associations over the last decade and which changes are to be expected for the coming years.
In addition to findings from literature, the following is based on a quasi-Delphi process in two turns. We asked experts from research and consulting two questions:
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1.
Which developments significantly influenced the nonprofit sector over the last 10 years?
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2.
What will be the most important developments in the next 10 years?
The Delphi method is a qualitative approach to forecasting, based on a systematic, multistage inquiry. First, experts are asked in a standardized way for their estimations of the respective trends. From the second turn on, the respondents are confronted with the anonymized estimations of the other experts to adapt their own view if appropriate (e.g., Häder 2002; Okoli and Pawlowski 2004).
In contrast to the classical method, we used open questions in the first turn to ask for past and future trends. In the second turn, we gave feedback about answers and frequencies and asked our respondents in standardized form for their estimations of the trends. Altogether 37 experts responded, 17 academics from all over Europe, and 20 Austrian nonprofit researchers, consultants, and managers. Five topics have been identified.
Managerialism: Legitimacy Through Management Logics
Today’s nonprofits apply business-like methods (see Hammack and Young 1993; Dart 2004). While many scholars and practitioners welcome this, others fear that the adoption of a business-like organizational form may entail a drift toward business-like substance, and NPOs will lose their nonprofit spirit .
On the one hand, it is the basic assumption of nonprofit management scholarship that management methods will help NPOs to fulfill their philanthropic missions better. On the other hand, critical research names two threats: First, the concern about commercialization: The central argument was developed by Weisbrod (1998a). If NPOs engaged in the production of private goods in return for fees, economic considerations would override mission considerations (Young and Salamon 2003). Guo (2006) finds that commercialization does not have a positive effect on mission achievement. Backman and Smith (2000) outline potentially negative effects of commercialization on NPOs’ contribution to social capital.
Second, the concern about business-like organizational forms: Bush (1992) argues that business-like methods instill a spirit of competition and conflict into the nonprofit sector, thereby threatening its values of philanthropy , charity, and voluntarism. Similarly, Billis (1993, p. 336) cautions that by mindlessly aping businesses, NPOs may diminish the place of stakeholders , notably of volunteer workers and board members. A number of empirical studies reveal that business-like methods may conflict with voluntarism, member orientation, and community participation (Alexander and Weiner 1998; Brainard and Siplon 2004; Kelley et al. 2005; Leonard et al. 2004; Skocpol 2003).
In Europe, Zimmer was among the first who addressed this issue. Together with Nährlich, she not only provided an introduction into management for NPOs for practitioners (Nährlich and Zimmer 2000), but also critically discussed the opportunities and threats of implementing management tools in NPOs (Zimmer and Nährlich 1993, 1997). A tendency toward convergence of sectors and systems is also facilitated by the use of new public management ideas and techniques for “reinventing government” by adopting market solutions to public problems (Henriksen et al. 2012), which forces nonprofits to act with similar logics (in the sense of coercive isomorphism, see DiMaggio and Powell 1983) .
Managerialism in NPOs is sometimes confused with professionalization (e.g., by Hwang and Powell 2009). Hereby, it is often neglected that there are mainly economic and political pressures which foster managerialism and repress classical professions (Evetts 2003). This retreat of classical professions goes hand in hand with the inflationary use of the normative “being professional,” which is used by NPOs to gain legitimacy : they refer to efficiency and effectiveness, to stakeholders’ needs and innovation (Meyer et al. 2013). Framed like this, being “professional” has little in common with the traditional notion of professionalism , which is coined as a third logic beyond market and bureaucracy and encompasses “occupational control of the work” through professional associations (Freidson 2001). In managerialist NPOs, this control is widely executed by management boards. Thus, “professional bureaucracies” become managed organizations (Mintzberg 1983).
Since the 1990s, NPOs have increasingly applied management methods and hired management staff (Clarke et al. 2000; Manville 2006; Roberts et al. 2005; Symonds and Kelly 1998; Weisbrod (1998b). Meanwhile both practitioners and academics have begun to discuss which benefits can be drawn from managerialism and which alternatives are available (Hailey and James 2003, p. 4). A first phase of naïve adoption has been followed by more tailor-made methods and a more selective application (Young 1997), and the dissemination of management methods and ideologies has been well explained (Nelson 1997; Ruef and Scott 1998; Suchman 1995): Legitimacy plays a crucial rule.
Two of the main drivers toward normative isomorphism (DiMaggio and Powell 1983) are educational institutions and management consultants which increasingly specialize in NPOs. In the last 20 years, there was an explosion of educational programs for nonprofit management , and the same seems to be true for consultants. In the German-speaking countries, more than 100 programs in nonprofit management have been established (Fröse 2009, p. 226). Management approaches become more and more tailored to NPOs and are now applied to volunteers, fundraising , public relations, etc.
Finally, it is the pressure toward accountability which boosts managerialism (Christensen and Ebrahim 2006; Ebrahim 2005, 2009; Hittleman 2007). NPOs are not only expected to act in accordance with accounting standards and management control, but they are also more and more forced to prove their impact (Edwards 2011; Moxham and Boaden 2007; Olsen and Galimidi 2009). Philanthropy is no longer based solely on trust and compliance with an NPOs’ mission; it has been increasingly presented as social investment or impact investment (Nicholls 2008). Philanthropists apply Social Return on Investment (SROI) as their major rationale (Lingane and Olsen 2004), thus forcing NPOs more and more to apply corresponding managerialist methods.
Opportunities and threats of managerialism are widely obvious: On one hand, NPOs can strengthen their efficiency , effectiveness, and legitimacy by wisely applying management methods and approaches, thus helping them to reach their targets even in times of scarce resources. On the other hand, managerialized NPOs have to be permanently aware of the danger of mission drift (e.g., Jones 2007). Advocacy and community building, in particular, might take a back seat to service provision which fits much better into managerialist logics.
Nonprofits and the Government—More Work for Less?
In many European countries, the public sector has traditionally been the most important partner for nonprofits; most probably this will not change in the near future. Especially in corporatist nonprofit regimes , e.g., in the German-speaking countries, the public sector is the most important funder for nonprofits (Zimmer et al. 2013). Thus, developments of the public sector are directly affecting the nonprofit sector. Two trends are crucial: First, concepts of public management that focus on service contracts instead of subsidies; second, empty coffers, which is especially true for the regional and the municipal level in Germany and Austria (e.g., Biwald et al. 2010; Dahlke 2010). Zimmer often emphasized the ambivalent relationship of many nonprofits with public authorities (Frantz and Zimmer 2002) especially in the context of economization (Nährlich and Zimmer 2000), increasing public debt and fiscal constraints (Henriksen et al. 2012). One of her conclusions is that nonprofits must decide whether to continue to act in the spirit of corporatism and semipublic service provision or define a new role (Zimmer 1999).
Service Contracts Instead of Subsidies
In the public sector, contracting out has been one of the megatrends during the last decades. This has led to a delegation of formerly public services to private organizations on the basis of target agreements and service contracts. Compared to the former regime of subsidies, this not only brings specific challenges for management, but has also political effects, coupling nonprofits tighter to targets of public authorities than to needs of clients and members (Smith and Lipsky 1993).
Nonprofits will also adapt to the culture and structure of public organizations, as they have to comply with processes of public authorities, e.g., in budgeting or accounting (Smith and Lipsky 1993, p. 88). Target agreements lead to more administrative work and consequently to NPOs expanding to handle the additional workload. Furthermore, contracting out often leads to crowding out of volunteers, as bureaucratic processes become more demanding, legal or moral responsibilities more severe, and the tasks cannot be accomplished by volunteers any more—a paradox, as government often aims at saving money by employing more unpaid staff. In tenders, nonprofits may suffer from public organizations’ deficient capabilities to determine the best value (Alexander et al. 1999).
Nonprofits are more and more seen as agents of government . Especially in situations with diverging goals, this is problematic for nonprofits’ strategic position (van Slyke and Roch 2004). We assume that competition will be implemented even more radically: Social services are increasingly financed by grants given to clients instead of organizations. Given the inadequate sovereignty of many clients, this competition must be supplemented by general rules to guarantee clients’ interests (Epple and Romano 1998; Levin 1998). Also, developments of the European competition law might lead to further liberalization and increased competition between for profit and nonprofit organizations and thus might have even more severe effects on the sector (Herzig 2006).
Effects of the Financial Crisis
Financial shortages have been challenging the nonprofit sector for the last decade, and we expect that the situation will worsen in the future. Respondents regard public austerity as the crucial bottleneck for the development and viability of NPOs. The trend over the last years was evident: A rising demand for the services of nonprofits was accompanied by invariant or even decreasing public funding . Moreover, arrangements have become more short term and therefore less reliable. Thus, the tradition of corporatist cooperation between welfare states and nonprofits has been shaken (Rauschenbach and Zimmer 2011, p. 21). This is also due to the deregulation and privatization of social tasks, the “worldwide shift toward market solutions for solving public problems” (Wijkström and Zimmer 2011, p. 10). Due to the financial crises , public expenditures have been rather directed to subsidize the financial sector than to social policies (Fellner and Grisold 2010). Consequently, the GDP share of social expenditures was stable or even reduced in Germany, Austria , and many other countries (OECD 2010). Generally, welfare security and solidarity has lost importance in favor of individual responsibility (Penz 2010).
So far there are no reliable macro-data on financial cuts, but different findings all point in the same direction. In the UK , parts of the nonprofit sector suffered severe cuts in public sector sourcing that led to a drastic downsizing of the sector (Taylor et al. 2012). Evidence from Austria reveals that nonprofits are affected very differently, depending on size, region, field, and relationship to public authorities. In Germany , public support has also declined during the last decade in the fields of public infrastructure, services for the general public, social security, and welfare (Jirku 2011). Rauschenbach and Zimmer (2011) trace this development for the fields of social services, culture, and sports. Despite a lack of reliable data, we may state that public funding for nonprofits does not meet the increasing public demand for nonprofits’ services any more. The share of public money which goes into the funding of pension systems and health care has increased dramatically due to demographic changes and technological advances. If overall public expenditure into social welfare remains stable, the share that remains for nonprofits in other fields (e.g., for the unemployed, the homeless, the handicapped) will shrink.
In this situation, the role of nonprofits as actors of civil society, as advocates of minorities , and somewhat as a utopian counter draft is endangered (Simsa 2013; Zimmer and Priller 2004, p. 11). Quite contrary to political rhetoric which still praises civil engagement in its soapbox oratory, civil society is in danger of losing its political, critical, and innovative character and instead might become an agent for inexpensive service provision (Leif 2011).
Blurring Boundaries: The End of the Third Sector as We Know It?
Do the boundaries between the public, the nonprofit, and the business sectors really blur (Park 2008)? Questions like this, e.g., those addressing hybrid organizations (Brandsen et al. 2005; Cooney 2006; Evers 2005; Evers and Laville 2004), have become quite prominent within third-sector research. The third sector has always been characterized by fragmentation, fuzziness, and constant change. Meanwhile, the boundaries of community, market, and state are even more difficult to define. The fringes of the traditional sectors attract more interest than the core and are assumed to be the hatcheries and testing fields of social innovation : Social entrepreneurship, social businesses, venture philanthropy , and public–private partnerships (Zimmer 1997). These “hybrid” actors conceive their activities as investments in society that have to yield a financial and a social return on investment (Nicholls 2008; Dees 2001).
There are developments in all sectors which point toward convergence: First, NPOs are becoming more and more managerialized as discussed above. Second, public authorities are applying methods of new public management , e.g., tendering and management buyout (MBO), thus replacing political and bureaucratic governance through market-like processes. Third, business organizations are finding themselves under pressure of expanded accountability and are challenged by the so-called triple bottom line. Investors and customers not only look at their economic performance and at the benefits of their products and services, but also appreciate social and ecological impact. Corporate social responsibility and sustainable development have become issues for organizations in all sectors (Wadham 2009), and business companies have not only increased their donations to NPOs (Webb 1996), but are also engaged as venture philanthropists, though their impact on civil society still must not be overestimated (Edwards 2008, 2011).
Furthermore, competition between NPOs and business organizations accelerates. Even in Europe, deregulation efforts have reached the social welfare field, thus encouraging more and more forprofits to offer social services. For the USA, Dees and Battle Anderson (2003) have described this phenomenon much earlier: On small and large scales, in local communities and across the country, forprofits and nonprofits move into new territories and explore uncharted waters. While this kind of sector bending is not entirely new, it is certainly growing in importance. Nonprofits and forprofits increasingly act as competitors, as forprofits are playing a greater role in arenas formerly dominated by nonprofit and public-sector organizations. They cooperate as contractors, when forprofits are contracting with nonprofits for both “nonprofit-like” goods and services as well as goods and services that were traditionally provided by other businesses (e.g., universities and business companies in research, insurance companies with nonprofits to provide elderly care) . They act as collaborators, when nonprofits and forprofits are entering into strategic partnerships and joint ventures that aim to be mutually beneficial to both parties.
Not only do the boundaries between sectors blur, but also the distinction between welfare and nonprofit regimes (Esping-Andersen 1990; Gallie and Paugam 2000; Neumayr et al. 2009) vanishes gradually. Henriksen et al. (2012) argue that this trend toward convergence is facilitated by the widespread use of new public management ideas and by adopting market solutions to public problems. In a recent study of social services and health care systems in Denmark , the USA and Germany , they show that trends of convergence can be identified across the three cases.
Boundaries are also blurring in discourse. There is a “global expansion of moral communication” (Weber 2011, p. 369), as the value-driven discourse of social responsibility which has been monopolized by the public and the nonprofit sector for a long time is subsequently conquered by business. Stehr (2007) claims that morality and ethics have entered markets, as business organizations have to deal with consumers which are eco-conscious and socially minded.
New Demands
In recent years, many policy fields in which nonprofits are substantially engaged have gained importance, e.g., sustainability , ageing and care, migration, health, social inequality, youth, and education. Demographic changes will further accelerate these developments (European Commission 2012) .
Generally, these trends probably will lead to further specialization and decentralization of nonprofits. Big organizations that offer many different services might not be competitive with smaller and more specialized NPOs, which react more flexibly to new demands. It remains open, whether multifunctional organizations comprising service, advocacy and community building will be viable in the future.
Two general trends are evident: First, in the field of social services, demands of clients for quality will further increase (Simsa et al. 2004). Clients and their relatives expect professional services, tailored to their needs. Second, as a consequence of growing social inequality and structural unemployment as well as reduced public infrastructure, new demands will arise (Maaser 2009, p. 216). In any case, nonprofits will not run out of work.
Expansion of nonprofits’ tasks will also result from further internationalization. Within the European Union (EU), the extension of NPOs’ activities across national borders is an appropriate answer to the demands of multilevel governance (e.g., Eising 2004): The formation of European umbrella organizations and various collaborative efforts of nonprofits within projects initiated by the European Commission are only two aspects of this development (see Brandsen and Sittermann in this volume).
Civic Engagement: More Diversity, but Less Stability and Loyalty
Civic engagement has become multifaceted. Traditional forms comprise volunteering, donating money, membership, and various forms of political engagement (voting, signing petitions, demonstrating, etc.). This spectrum has been enriched in at least three dimensions:
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Completely new forms of engagement, e.g., political consumerism (Strømsnes 2009) or the widespread participation in creating knowledge bases like Wikipedia (Gears 2012) or weblogs;
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modifications of traditional behaviors, e.g., project-based volunteering and volunteering during specific biographical periods (Hustinx 2010);
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the strong impact of Web 2.0, e.g., on the emergence and growth of social movements like the Occupy Movement and Arab Spring (Berkhout and Jansen 2012; Kan 2012), and also on the acquisition of new supporters (e.g., Fine 2009) and even on the success in elections (Graff 2009).
The respondents in our study assume that Web 2.0 and social networks in the Web will even increase their impact on the third sector, especially for younger cohorts. Practitioners already make use of Web 2.0’s various applications like social networks , Twitter, weblogs, podcasts, and platforms for discussions and consultations. They can be applied for online fundraising (crowd funding; Ordanini et al. 2011), maintaining relations with volunteers and supporters, mobilizing supporters, or generally for knowledge and information exchange (Matschk et al. 2012). These tools fit well with the culture of many nonprofits—openness, democracy, and innovation—facilitate network building, and strengthen social capital. Beyond this, two fundamental changes in civic engagement will affect nonprofits: First are quantitative shifts, mainly due to urbanization and the lower engagement rates in cities compared to rural areas (e.g., for Austria, Rameder and More-Hollerweger 2009) . Second is a basic shift in individuals’ motivation to volunteer which is ante portas. Civic engagement and volunteering has become more project oriented and increasingly linked to individual goals and values. Organizational commitment and loyalty decline, and now forms of episodic volunteering become more important (Hustinx 2010, p. 236).
Conclusion
At the beginning of this century, Priller and Zimmer (2001, p. 11) argued that fundamental changes in society would lead to a new role for NPOs, thus entailing the chance of becoming more active in creating their relevant contexts. As one indicator for this assessment they saw the increase of both grassroots initiatives and international NGOs . A decade later the situation is even more open, if not less optimistic. Nonprofits have become a widely acknowledged part of society, yet the challenges ahead are significant.
On one hand, we have seen a significant increase of management capacity in the sector. NPOs and their managers are working professionally, in terms of business methods as well as social competence, the design of organizational structures , the management of diversity, contradictions, flexibility, and external relationships. Commercialization and business management have arrived in the sector. As a consequence, balancing between mission and money seems to have changed: While some decades ago, management competencies were claimed to increase nonprofits’ efficiency and impact, it is now the specific values culture and the mission of civil society organizations that are jeopardized. Maybe a shift of balance between “doing the right things” and “doing things right” has taken place in the last decade.
On the other hand, the third sector seems to be at a turning point. The economic crisis has shown that the dominance of market values is not even rational economically. Increasing social and economic disparity might lead to political radicalization. Thus, today’s civil society might actually be facing a situation comparable to the aftermath of the first industrial revolution in the nineteenth century. At this time, tremendous social problems led to the formation of the first innovative NPOs. Today, such a turning point could be characterized for the whole sector as a crossroads of two alternate futures: One, nonprofits will be further functionalized in accordance with neoliberal economic and social politics. In this understanding, their core function is to supply services which are not supplied by market or government. Then, fewer resources will be available for advocacy and community building. In this case, associations as a specific form of social action participation and integration will indeed lose efficacy and attractiveness. Two, this turning point could lead to a reinvention of civil society as a courageous and innovative force. At the moment, losers of the crisis tend toward extremist and populist parties or to political passivity, but the situation could also be taken as impetus for reinventing civil society as an advocate for social development and an attractor for disappointed citizens. Thus, by the way of strong and forward-thinking cooperation for solidarity , sustainability, and social justice the third sector could contribute significantly to the development of society by proving that economic and social rationalities need not be contradictory. In this case, associations and their organizational descendants will gain importance for active citizenship , constructive criticism, and the elaboration of visions.
Annette Zimmer argued at the end of the last century, that “there is a vital need for a new role and more specifically for a new identity for the nonprofit sector” and that the sector “must define a new role of nonprofit activism that is rooted in the tradition of social movements and societal change” (Zimmer 1999, p. 47). Today, this plea is even more striking than 14 years ago.
Notes
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Among others, this saying is accredited to Niels Bohr, Karl Valentin, Mark Twain, and Winston Churchill.
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Meyer, M., Simsa, R. (2014). Developments in the Third Sector: The Last Decade and a Cautious View into the Future. In: Freise, M., Hallmann, T. (eds) Modernizing Democracy. Springer, New York, NY. https://doi.org/10.1007/978-1-4939-0485-3_17
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