11 Mar 2010  Working Papers

The Many Faces of Nonprofit Accountability

Executive Summary — Nonprofit leaders face multiple, and sometimes competing, accountability demands: from numerous actors (upward, downward, internal), for varying purposes (financial, governance, performance, mission), and requiring differing levels of organizational response (compliance and strategic). Yet is it feasible, or even desirable, for nonprofit organizations to be accountable to everyone for everything? The challenge for leadership and management is to prioritize among competing accountability demands. This involves deciding both to whom and for what they owe accountability. HBS professor Alnoor Ebrahim provides an overview of the current debates on nonprofit accountability, while also examining the tradeoffs inherent in a range of accountability mechanisms. Key concepts include:

  • Accountability is not simply about compliance with laws or industry standards, but is more deeply connected to organizational purpose and public trust.
  • Nonprofits will continue to face multiple and competing accountability demands, so they must be deliberate in prioritizing among these demands. A critical challenge is to find a balance between upward accountability to their patrons and remaining true to their missions.
  • Few nonprofits have paid serious attention to how they might be more accountable to the communities they seek to serve.
  • Juggling the many expectations of accountability—for finances, governance, performance, and mission—requires integration and alignment throughout the organization.
  • Numerous mechanisms of accountability are available to nonprofits, such as greater transparency and disclosure, performance assessment, industry self-regulation, and adaptive learning. But leaders must adapt any such mechanisms to suit their organization.
  • The greatest payoffs rest with strategy-driven forms of accountability that can help nonprofits to achieve their missions.

 

Author Abstract

What does it mean for a nonprofit organization to be accountable? Nonprofit leaders tend to pay attention to accountability once a problem of trust arises - a scandal in the sector or in their own organization, questions from citizens or donors who want to know if their money is being well spent, or pressure from regulators to demonstrate that they are serving a public purpose and thus merit tax-exempt status. Amid this clamor for accountability, it is tempting to accept the popular view that more accountability is better. But is it feasible, or even desirable, for nonprofit organizations to be accountable to everyone for everything? The challenge for leadership and management is to prioritize among competing accountability demands. This involves deciding both to whom and for what they owe accountability. This paper provides an overview of the accountability pressures facing nonprofit leaders, and examines several mechanisms available to them: disclosures, performance evaluations, self-regulation, participation, and adaptive learning. Nonprofit leaders must adapt any such mechanisms to suit their organization - be it a membership-based organization, a service-delivery nonprofit, or an advocacy network. More crucially, they need to pay greater attention to strategy-driven forms of accountability that can help them to achieve their missions. 33 pages.

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