Article

SUMMARY

So who will be the winners and who will be the losers in this rough and tumble competition for shrinking resources? In general if all else is equal, large companies will do better than small ones. They have the ability to spread shockwaves that hit a particular sector of their market over a larger area, thus diminishing the intensity of the impact on any single point. They also can have the benefits of economy of scale. However, there are two main exceptions. Small operations will often beat larger organizations if the larger ones are new to the geographic area, and more importantly, to the people who are the decision makers in that area. Hager, Galaskiewicz, and Larsen addressed this matter in detail in Structural Embeddedness and the Liability of Newness Among Nonprofit Organizations; Public Management Review, © 2004 Taylor and Francis, Ltd; http://www.tandf.co.uk/journals. One should never underestimate the impact of personal relationships. The other exception is diseconomies of scale. In this situation, put simply, the organization is so large and inefficient that it cannot get out of its own way.

Finally, if this writer were to compare two competitors and attempt to choose which was more likely to fail, he would look for the following:

A high debt load with poor liquidity

A small or nonexistent endowment

Routinely drawing clientele from the margin, rather than the core of the market

A culture of fear among employees

Alienated funding agencies

Poor communication among decision makers

Serious legal or regulatory issues

"Ponzi scheme" long-term finance planning (in which it will only remain solvent with growth - please see previous article here)

Upper level management with an "us vs. them" approach to managing their own personnel.

High staff turnover rates

Complete knowledge of what causes organizations to fail is impossible due to the myriad forms and settings in which they exist. Even if a perfect model was available, it would not prevent the loss of many nonprofits in the current environment.

However, it is the hope of this writer that a better understanding of the processes that lead to organizational distress will help to reduce unnecessary loss of valuable nonprofit entities. Therefore, much additional research is encouraged and managers are urged to acquaint themselves with the body of knowledge that is currently available.