Multitasking NPOs: An Analysis of the Relationship Between Funding Intentions and Nonprofit Capacities

Abstract

Nonprofit organizations (NPOs) often find themselves under pressure to invest all of their available income in mission-related activities rather than in capacity building. We investigate one factor that can influence the decision to invest in such capacity-building tasks: funding sources pursued by an organization. Drawing on the benefits theory of nonprofit finance, we take these funding sources as predetermined by an organization’s mission and propose an extension of the theory by linking it to economic multitasking theory, which states that organizations prioritize tasks that offer greater and more measurable rewards. Through regression analyses of survey data from Swiss nonprofits, we analyze the extent to which funding sources sought affect the amount of effort invested in three areas of capacity building: public relations, impact focus, and resource attraction parameters. The results support the predictions of multitasking theory by showing that the effort invested in certain capacity-building tasks is affected considerably by seeking a specific funding source. The effects are stronger for resource attraction-related tasks than for tasks closer to the service delivery of NPOs. The results indicate that an organization’s mission affects not only the available funding sources but also the extent to which an organization invests in its capacities, which can lead to a ‘lock-in’ status for organizations.

Nonprofit capacity and social performance: mapping the field and future directions

“…In other words, capacity must be built to meet the needs and demands of stakeholders. However, capacity building incurs costs or investments, such as new knowledge, infrastructure, and hired professional staff (Miller 2018 ; Stuhlinger and Hersberger-Langloh 2021 ; Zahra and George 2002 ). In addition, the changes in government tools, such as vouchers, evaluation, and accountability tools, also incur costs in strengthening their capacity (Fang et al 2020 ; Wei 2020 ).…”

“…The first and most prevalent capacity dimensions are human and financial resources. Human resource capacity refers to the board directors, executives, staff, and volunteers (Gazley and Nicholson-Crotty 2018 ; Moldavanova and Wright 2020 ; Stuhlinger and Hersberger-Langloh 2021 ). Human resources can be measured using the numbers of paid staff or volunteers (Carman 2009 ; Wicker and Breuer 2013 ) or using attitudes, competency, expertise, capabilities, and leadership (Cairns et al 2005 ; Wicker and Breuer 2011 ).…”

“…However, previous studies have asserted that nonprofits in developed and developing countries face funding insecurity, which leads to resource shortages (Battilana and Dorado 2010 ; Wicker et al 2015 ; Zhou and Ye 2019 ). Hence, insufficient funds have adverse effects on nonprofits’ social performance (Stuhlinger and Hersberger-Langloh 2021 ; Walters 2020 ).…”

“…The increasing cost on others than what funders or government contracts stipulated might cause the nonprofits not to be elected for future funding (Cazenave and Morales 2021 ). Thus, some scholars have suggested that nonprofits are involved in projects with immediate and quantifiable rewards, such as money (Stuhlinger and Hersberger-Langloh 2021 ), which may seem a good idea.…”

“…Some studies have applied a resource-based theory in explaining the importance of capacity (Cheah et al 2019b ; Jain and Dhir 2021 ; Lee and Chandra 2020 ) . Most scholars have discussed that capacity is multidimensional; however no consensus on the dimensions has been made (Christensen and Gazley 2008 ; Millar and Doherty 2021 ; Stuhlinger and Hersberger-Langloh 2021 ). The discrepancies are due to broad definitions, and the typical descriptions of capacity are resources and capabilities.…”