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Drivers for non-profits' success: Volunteer engagement and financial sustainability practices through the resource dependence theory

Ilyas, Sehrish,Butt, Mattiullah,Ashfaq, Fouzia,Acquadro Maran, Daniela

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Ilyas, Sehrish; Butt, Mattiullah; Ashfaq, Fouzia; Acquadro Maran, Daniela Article Drivers for non-profits' success: Volunteer engagement and financial sustainability practices through the resource dependence theory Economies Provided in Cooperation with: MDPI – Multidisciplinary Digital Publishing Institute, Basel Suggested Citation: Ilyas, Sehrish; Butt, Mattiullah; Ashfaq, Fouzia; Acquadro Maran, Daniela (2020) : Drivers for non-profits' success: Volunteer engagement and financial sustainability practices through the resource dependence theory, Economies, ISSN 2227-7099, MDPI, Basel, Vol. 8, Iss. 4, pp. 1-17, https://doi.org/10.3390/economies8040101 This Version is available at: https://hdl.handle.net/10419/257150 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ economies Article Drivers for Non-Profits’ Success: Volunteer Engagement and Financial Sustainability Practices through the Resource Dependence Theory Sehrish Ilyas 1, Mattiullah Butt 2,* , Fouzia Ashfaq 3and Daniela Acquadro Maran 4,* 1School of Business Administration, National College of Business Administration & Economics (Main Campus), 40 E/1 Gulberg III, Lahore 54660, Pakistan; [email protected] 2School of Business Administration, National College of Business Administration & Economics (Front Lane Campus), 168 Shadman II, Canal Road, Lahore 54610, Pakistan 3 Department of Management Sciences, Lahore College for Women University, Jail Rd, Lahore 54600, Punjab, Pakistan; [email protected] 4Department of Psychology, University of Torino, Via Verdi 10, 10124 Torino, Italy *Correspondence: [email protected] (M.B.); [email protected] (D.A.M.); Tel.: +39-011-670-2262 (D.A.M.) Received: 28 September 2020; Accepted: 13 November 2020; Published: 18 November 2020   Abstract: The strategies that non-profit organizations choose for volunteer engagement and financial sustainability are of the utmost importance for successful work. The main purpose of this study was to investigate feasible strategies for volunteer engagement and financial sustainability. Interviews were conducted to obtain data on the experience of volunteer managers in dealing with volunteers and financial matters together. Qualitative data analysis methods were used to code and analyze the data. Significant themes emerged from the data gathered through interviews that highlighted the strategies for volunteer engagement and financial sustainability chosen by the managers of non-profit organizations. From the manager’s perspective, the following strategies were considered important for engaging volunteers at non-profit organizations (NPOs): ‘building the skill sets of volunteers’, ‘fulfilling ulterior motives’, and ‘administering a culture of administrative support’. Moreover, ‘local fundraising preference’, ‘transparency’, and ‘building trust’ were regarded as successful strategies for maintaining financial sustainability. The findings of this study showed that, to function smoothly, non-profit organizations need to follow certain strategies to be cautious about volunteers as well as finance. The findings provide fruitful implications for practitioners and policy makers, and these are discussed in the paper. Furthermore, the limitations addressed in the study suggest a future direction for research in terms of study design and more focus on study informants. Keywords: volunteer engagement retention; non-profit organizations managing volunteers; financial sustainability; managing non-profit organizations; formal volunteering; thematic analysis 1. Introduction The survival of non-profit organizations (hereafter: NPOs) has been identified as an important prerequisite for measuring their success in terms of the realization of their mission (Sun et al. 2019). The determinants of non-profit success have long been a focus of the literature on strategic management. One stream of research comprehends the success and failure of NPOs as a dependent variable, whose financial (i.e., liquidity, fundraising cost, working capital etc.) and non-financial determinants (i.e., number of volunteers) can be identified through case study methods or statistical techniques (Grunert and Hildebrandt 2004;Mellahi and Wilkinson 2004). Economies 2020,8, 101; doi:10.3390/economies8040101 www.mdpi.com/journal/economies Economies 2020,8, 101 2 of 17 1.1. Background of Study Due to acute competition for volunteers, the recruitment, retainment (Bussell and Forbes 2002), and management of volunteers (Carvalho and Sampaio 2017) is becoming a key concern for volunteer managers. In order to attain the strategic goals of their organizations, the leaders and executive directors of NPOs need to engage their volunteers to attain meaningful outcomes that also align with volunteers’ motivations and needs (Rehnborg et al. 2005). Although NPOs do not aim for profit maximization, but for the smooth function and provision of facilities and benefits to society at large, funds are of paramount importance (Choudhury et al. 2014). Due to competition for sources of public funding, NPOs are challenged to devise workable strategies for fundraising such as the development of professionalization as well as the forming of strategic alliances through business/non-profit partnerships (Sanzo-P é rez et al. 2017). There is also a lack of known strategies for diversification that NGO executives and finance managers may practise to generate revenue (Gunnerson 2019). Furthermore, the seeking of fundraising from volunteers is prone to a spillover cost that may result in a reduction of their time with NPOs (Yeomans and Al-Ubaydli 2018), thus hampering the spirit of volunteerism. 1.2. Novelty of the Study: Theoretical Contribution Although there is extant literature from the members’ perspective on the engagement of employees (Saks 2006;Rao 2017) and volunteers (Manuel et al. 2011;Vecina et al. 2012), as well as the antecedents (Oostlander et al. 2014;Hyde et al. 2016) and consequences of volunteer engagement on intention to stay and retainment (Cuskelly et al. 2006;Hyde et al. 2016), there are few studies exploring the practices of volunteer resource management (Intindola et al. 2016). We intend in this study to fill this gap by enlisting formal strategies for volunteer engagement combined with practices for financial sustainability that the leaders of successful NPOs have chosen to make their NPOs growth-oriented, thus unfolding the gems of success for NPOs. However, there is sparse literature from a management perspective that explores the underlying efforts of NPO managers to enhance the engagement of their volunteers (Intindola et al. 2016), and this issue can be observed until now. 1.3. Purpose of Study In light of the challenges faced by non-profits and communities, we also intend in this study to explore the avenues employed by NPO managers to maintain financial sustainability. This study will indeed contribute to third-sector literature on third-world countries. To the best of our knowledge, few studies have been conducted on the strategies for volunteer engagement and practices for financial sustainability chosen by the leaders of NPOs operating in local settings, specifically in South Asia. There are a number of studies on volunteering in America, Australia, and Europe (Kim and Kim 2015). However, most Asian countries have rich traditions of philanthropy (Lyons and Hasan 2002), demonstrating that research is still needed, especially on third-world countries. South Asia is described as the ‘NGO capital of the world’ because of the favourable political and social conditions for the civil society sector (Singh 2018). Some researchers thus hold the opinion that the success of NPOs should be measured by the efficacy and efficiency of fulfilling the needs of varying stakeholders (Sales 2013) as part of their mission. In contrast, the dissolution of NPOs and their loss of control over mission accomplishment lead them towards failure (Helmig et al. 2014). Hence, in order to assess how NPOs accomplish their missions successfully, we focus in this study on identifying the strategies that volunteer managers choose to engage their volunteers and develop sound, sustainable financial plans. To achieve this objective, we chose for this research an inductive approach, through which a researcher derives a concept and theme after detailed readings of raw data (Thomas 2006). Economies 2020,8, 101 3 of 17 2. Literature Review 2.1. Understanding Volunteerism with Resource Dependence Theory According to the Resource Dependence Theory (hereafter: RDT), organizations are dependent on multidimensional resources for their survival. Therefore, non-profit organizations not only face external pressures, but also internal pressures from management that affect their resource acquisition (Pfeffer and Salancik 2003). RDT posits that the diverse functions of organisations are influenced by their dependence on vital resources. This dependence in turn brings uncertainty, thus hampering the efficiency and effectiveness of an organization (Hillman et al. 2009). In order to operate effectively, NPOs rely on volunteers besides regular staff(Wisner et al. 2005) and limited resources to deliver sustainable service to the community (Kang 2016). Volunteers work for NPOs and welfare organizations without any need of personal gain, such as remuneration, in exchange for their services (Millette and Gagn é 2008). Volunteerism is said to prosper when it enhances the overall satisfaction of motives and well-being of volunteers (Lewig et al. 2007). Thus, regardless of their time, volunteers join the cause of an NPO without requiring any monetary gain; they have varying motives behind their volunteering behaviours (Clary et al. 1998). 2.2. Role of Volunteers and Donors in Sustainable NPOs According to RDT (Pfeffer and Salancik 2003), organizations operate under a constrained environment, and in order to survive and operate effectively, they tend to reduce uncertainty by managing their environments. Considering this theory from the perspective of NPOs, it is obvious that these organizations work with limited resources. The social cause and mission exhibit the demand side of an NPO, whereas volunteer engagement and financial sustainability demonstrate the supply side. Fulfilling the demand side—that is, accomplishing the mission—fosters the success of an NPO. In order to fulfil the demands on an NPO and declare it successful, a continuous stream of supply is needed. Sustained volunteering as well as a continuous stream of donations fulfil the supply side of an NPO, enriching it with an uninterrupted stream of funds and devoted individuals working with free will to attain the social cause. Thus, enhanced volunteer engagement and pertinent financial soundness will facilitate the continuity of an NPO and the accomplishment of their mission. In this way, volunteer engagement and financial sustainability become the drivers of a non-profit’s success. Thus, with a continuous stream of funds and engaged volunteers, an NPO is able to foster sound planning that leads to success in terms of impact, activity, and capacity (Sawhill and Williamson 2001). 2.3. Financial Sustainability and NPO Success Financial soundness is of the ultimate importance to ensuring the sustainability of NPOs (MacMillan et al. 2005), which is said to be financial sustainability. Competition for donations mitigates the sustainability of NPOs (Lyons 2003). NPOs and charitable welfare organizations look for additional revenue through alternate means, thus highlighting the importance of financial sustainability (Doherty and Murray 2007). Moreover, it has also been contended that NPOs earn a majority of their revenue from donations and public support and through their operations. NPOs are prohibited by laws regulating non-profit corporations from distributing income to managers or shareholders, termed as non-distribution constraint (Hansmann 1980). However, NPOs are mission-driven rather than profit-driven (Helmig et al. 2014) and said to exist predominantly for achieving their cause in a sustained manner; they need funds to fulfil their social causes. It is therefore a challenge for NPOs to operate within financial constraints and to manage and engage volunteers. The success of NPOs is measured in terms of mission accomplishment (Sawhill and Williamson 2001), although this is difficult to measure (Herman and Renz 1997). Sawhill and Williamson (2001) highlighted that while focusing on the success factors of NPOs, the focus should be towards the extent of mission accomplishment, not on the short-term, wrong proxies that are based primarily on financial measures (Helmig et al. 2014) due to their ease of access. Such financial indicators, when taken as the basis for measuring the Economies 2020,8, 101 4 of 17 success of NPOs, often provide misleading data on the strategic and long-term performance of NPOs (Sawhill and Williamson 2001). In addition, if NPOs fail to achieve their missions, this failure may be considered success because their mere existence represents the consistent demand for NPOs in the community (Seibel 1996). Moreover, mere dissolution does not mean failure because NPOs often cease operations when they accomplish their missions, and their members lose commitment due to the lack of a new mission, thus indicating success (Duckles et al. 2005). 3. Methodology In the current study, we adopted a qualitative approach to collect data from experienced volunteer managers dealing with both volunteers and donors. A total of 17 participants completed the in-depth interviews. We selected the participants in the sample because they could provide practical insight into their managerial skills for enhancing the engagement of volunteers as well as attaining financial soundness. We collected the data in respondents’ offices after receiving their consent via telephone. The study was approved by the university ethics committee, and a letter of recommendation was issued to confirm the authenticity of this study and to facilitate data collection. Respondents were assured of the anonymity of their responses through fulfilment of ethical guidelines for conducting interviews. Participation in the survey was voluntary, and participants did not receive any reward for their participation. The research conforms to the provisions of the Declaration of Helsinki (WMA 2000), and all ethical guidelines were followed as required for conducting human research, including adherence to the legal requirements of the study country. 3.1. Context Setting for the Current Study The study was carried out in Pakistan, which is a developing country and the second largest economy in South Asia. NGOs play a part in the development of the economy. According to a report by the Pakistan Centre of Philanthropy (2019), the total volume of corporate donations was 1.03% (12.77/12,343.5) of the gross domestic product (GDP) in 2018. This was apart from the numerous donations given privately to NGOs by the public. According to a report on the World Giving Index by the Charities Aid Foundation (2018), Pakistan ranks eighth in the number of people who have donated money (34 million). There are also other developing countries in the list where the public gives very large donations. NGOs supporting the poor in developing countries need to learn how donations help them to resolve their financial issues and survive. Over the last ten years, although Pakistan has ranked 41st in donations, with 32% of the population donating, it has ranked 93rd in volunteerism, with only 13% of participants volunteering. In countries with high unemployment rates and a public that has a mind-set to give donations, NGOs need to play their part in effectively engaging people as volunteers. 3.2. Participants To conduct interviews with experienced volunteer managers, we selected a two-stage sampling technique. In the first stage, from the sampling frame of registered NPOs, we drew a sample of the NPOs that fulfil our criteria as outlined in the study. This was a preliminary exercise before delving into the field. In this way, we selected only the NPOs that have operated for more than 15 years. We tried to take the number of organizations in an area based on the area’s percentage of total listed NPOs (961). In the second step, we contacted experienced volunteer managers from the selected NPOs. Participant selection therefore follows a two-stage sampling procedure as outlined below: 3.2.1. First Stage: Selecting Sample NPOs The NPOs included in the current study fulfilled the following criteria: (1) NPOs must have more than 15 years of operation as it is evident that older organizations are able to attract more support and donations (Arnold and Tapp 2001). (2) As geographical location has an effect on increased social network (Mano 2010), NPOs selected for this study were operating in Pakistan in order to get representative data. (3) NPOs must have volunteers in their workforces besides regular paid Economies 2020,8, 101 5 of 17 workers so that we could gain insight into the strategies chosen by managers to engage their volunteers. According to Roza et al. (2017), there a total of 3184 registered NPOs in Pakistan. However, we have included 13—or 0.4 % of the total—to achieve variations in scope and activity. As some NPOs are involved in diversified activities, they sometimes covered more than one area (see Table 1). Hence, the 13 selected NPOs covered seven areas: Five provided healthcare services; two provided microfinance; seven managed primary and secondary education; two were involved in human and civil rights; three facilitated community-oriented projects; and one worked in disaster risk management (along with Micro-finance) and water, sanitation, and hygiene (along with community development). The details of the selected NPOs, including their primary areas and sub-areas of specialisation, are described in Table 1. Table 1. Selected non-profit organizations (NPOs), areas of specialisation, and number of interviews conducted. ID Number NPO Interviews Conducted Primary Area Sub-Area 1 Akhuwat 3 Micro-Finance (Poverty Alleviation) Disaster Risk Management 2 Kashaf Foundation 1 Education Human and Civil Rights 3Care Foundation School 1 Education 4 TAC school 1 5 Ferozsons Trust 1 Health 6 Door of Awareness 1 Human and Civil Rights 7Zararshaheed Welfare Trust 1 Health 8Sundus Foundation 1 9 Pink Ribbon 1 10 Fatima Memorial Hospital 2 11 Rotary Club 2 Community Development 12 Help in Need 1 Education WASH 13 Saylani 1 Education 3.2.2. Second Stage: Selecting Experienced Volunteer Managers After selecting NPOs from sample sectors, we contacted volunteer managers at the NPOs. Because our aim was to investigate strategies for enhancing the engagement of volunteers and attaining financial soundness, and thus success over time, the criterion for selecting participants was the role of the senior managers. These managers were responsible for directing, planning, monitoring the team’s work, and, when necessary, suggesting corrective actions; overall, they were responsible for ‘managing the systems required to link and control the company’s parts’ (Bartlett and Ghoshal 1995, p. 133). We conducted a total of 17 in-depth interviews. To diversify our results and obtain better understanding, we conducted sector-wise interviews—that is, from each sector, we held 2–3 interviews. Among the participants, seven (41%) were female aged 41.86 years on average (range: 26–59), with an average Economies 2020,8, 101 6 of 17 work experience of 18.43 years (range: 4–34 years); 10 (59%) were male with an average age of 44.5 (range: 35–68 years) and an average work experience of 20.3 years (range: 12–46 years). 3.2.3. Interviews and Time Horizon of Interviews We used an interview guide consisting of open-ended questions as a tracking tool to keep the interviews on track (Denzin and Lincoln 2012). To ensure reliability across interviews, we designed a guideline that included all topics of concern, followed by an introductory and background overview of the research. Interview questions addressed the topics of NPO success to provide a focused start, followed by volunteer engagement and strategies for financial sustainability. In order to reduce social desirability bias, questions relating to NPO success were phrased in a way that would extract measurable outcomes in terms of impact, activity, and capacity (Sawhill and Williamson 2001) rather than financial proxies for success such as fundraising ROI or donor growth. We also presented face-saving alternatives to participants in order to reduce social desirability bias (Neuman 2019). The interview questions were developed in view of the study’s purpose, focusing on how managers engage volunteers by working with them and how they develop sound financial plans for their NPOs. Due to time constraints, the time horizon for interviews was cross-sectional and, as per Saunders et al. (2007), was limited to specific time frame. The interviews took approximately 30 min. 3.3. Procedure In order to perform thematic analysis, we first recorded all interviews and then transcribed them verbatim; in order to ensure reliability, two authors analyzed the data. Moreover, we utilized an inductive approach (Thomas 2006) to analyze the qualitative data. We gave transcripts repeated readings to familiarize ourselves with the data content. Once transcription was completed, the next stage was to code the data through the qualitative data analysis software NVIVO v. 12.0. We applied the coding by identifying the keywords employed to organize and categorize the text (Sarantakos 2012). During the coding process, the data were organized and categorized into themes and sub-themes. The emerging themes were titled with specific codes. Later, data were screened for identification of themes and categorization of NPO success factors in terms of managerial practices for engaging volunteers and achieving financial soundness. The final step included the verification of data by rechecking the transcribed data and codes. 4. Results Findings are presented in two major sections—strategies for volunteer engagement and practices for financial sustainability—with eight strategies for volunteer engagement and four strategies for financial sustainability emerging from the interviews during data analysis (see Table 2). Table 2. Volunteer engagement and financial sustainability strategies chosen by successful NPOs. Volunteer Engagement Strategies Financial Sustainability Practices Increased interaction Local and self-funded donation Fulfilling ulterior motives Information disclosure Flexibility Building trust Establishing fellowship Diversification Building personality traits and skill sets Age-differential context Emotional support Leader charisma Economies 2020,8, 101 7 of 17 4.1. Volunteer Engagement Strategies Participants in this research were experienced volunteer managers, and they held the view that engaging volunteers was a challenge for them. They chose a variety of strategies to engage volunteers, not only physically, but also psychologically. Increased interaction. Two respondents indicated that in order to engage their volunteers, they interacted with them on a regular basis. Moreover, our findings revealed that helping beneficiaries in an interactive way convinces them to pay back and serve society, which results in a later enhancement of their engagement. Helping in interactive ways consisted of teamwork, which builds cooperative working bonds between volunteers and NPOs. A supportive and interactive culture enhances the dedication of volunteers to sustain their involvement, which is deemed to be a proxy for volunteer engagement (Alfes et al. 2016). ‘Borrowers become donors in later stages of interaction with our NPO. Borrowers put their nominal savings in the donor boxes’. (NPO1) ‘We assign supervision to volunteers. We always used to have feedback to projects on a regular basis so that we could incorporate the desired changes afterwards. This is how we let our volunteers become engaged and committed’. (NPO3) Fulfilling ulterior motives. More than four respondents believed that in order to engage volunteers, NPOs should strive to screen them for the ulterior motive of serving society. Ulterior motives are said to be the reason for one’s behavior. Literature also supports the premise that in order to have engagement in the workplace, individuals need to have connection between internal motives and the external roles they are performing; disconnection between these two leads to disengagement in the workers (Kahn 1990). Behaviors are thus guided by individuals’ internal motives, through which volunteers channel their efforts toward noticeable societal change; in turn, these volunteers exhibit greater emotional attachment to NPOs (Clary et al. 1998). It has also been suggested in the literature that fulfilment of career motives among volunteers encourages repeated participation (Grant 2012), which in nominal terms entails engagement with their NPOs. Two NPO managers agreed with this premise: ‘We offer people who have motives to serve society. Besides, people who come to our NPO also want to really change the system of education. Our NPO adopted a school that has only seven children. Now it has more than 100 children’. (NPO2) Due to this alignment of personal goals with the NPO’s goals, volunteers tend to engage highly and to dedicate themselves for a longer period of time: ‘There are a lot of volunteers who work with us throughout the year because of their passion and interest’. (NPO1) Flexibility. Three respondents perceived that providing flexibility to volunteers increased their tendency toward engagement. Successful NPOs are working to achieve their cause through flexible time and dedication from volunteers according to their time plan and via employer-supported volunteering (Booth et al. 2009), as illustrated by 10 NPOs: ‘The mechanism varies from volunteer to volunteer. Those who are interested in fundraising are given proper receipt books to generate funds, those who want to collect clothes will be given our NPO labelled baskets’. (NPO1) Providing creative environments and flexible roles for volunteers does positively affect volunteers’ work behavior and influences their attraction to work and their retention (Barnes and Sharpe 2009). Thus, volunteers opted for a plug-in style of volunteering identified by sociologists (Lichterman and Eliasoph 2014) as having a short-term nature whereby volunteers are not bound to stay on site for long Economies 2020,8, 101 8 of 17 periods of time. Hustinx and Lammertyn (2003) also refer to this as a reflexive style of volunteering in which—instead of embedding volunteers in organizational routines—volunteers’ work is more episodic. With a flexible environment, volunteers have greater engagement levels, as indicated by one respondent: ‘We provide them the full ground to use their capacities . . . . In this way they get mentally, spiritually and physically attached with us’. (NPO4) Our findings are supported because granting flexibility to volunteers has more astounding benefits compared to dealing with volunteers formally. Establishing fellowship. Three respondents indicated that fellowship relationship with volunteers, increased engagement, and devotion of volunteers to the NPO they are working with. This aspect also supports previous studies showing that psychological bonds with other members makes volunteers feel highly engaged (Millette and Gagn é 2008;Alfes et al. 2016). Engaging volunteers through a fellowship program by letting volunteers get closer to each other thus creates an environment of association and emotional attachment within volunteers (Doherty and Murray 2007). Emotional bonds with organizational members enabled greater attachment with the NPO and influenced volunteers’ engagement (Gratton and Ghoshal 2003). Thus, employer-supported volunteering (Booth et al. 2009) also enabled NPOs to establish fellowship among their volunteers. Our findings also promote this notion: ‘The second major function of our NPO is fellowship that brings together volunteers through sharing common passion... Members (volunteers) tend to combine their businesses’. (NPO7) ‘We invite them for core committee meetings, occasionally on a cup of tea and have a useful exchange of ideas for the betterment of our projects. In this way they get become more committed with us’. (NPO4) Our findings thus demonstrate that a plug-in and reflexive style of volunteering is promoted, but to engage volunteers without affecting their flexibility, their emotional attachment with the NPOs is built through fellowship and informal relationships with volunteers. Building personality traits and skill sets. One strategy mentioned by two NPO managers about engaging their volunteers is continuously working on their personality traits and leadership skills, which provides them with a sense of accomplishment. The personality traits tend to enhance the civic engagement of volunteers (Erez et al. 2008). This occurs because the development of personal traits can motivate volunteers as an intrinsic reward. By improving their well-being, volunteers are more emotionally involved with the NPO, which also triggers their engagement. Our findings also suggest that volunteers tend to engage and stay with NPOs upon developing leadership skills: ‘Our NPO’s major function is to develop leadership qualities. . . . In this way, the personality of volunteers is developed in our NPO at national- and international-level conferences’. (NPO7) ‘We provide an enabling environment to volunteers; they are taught first then given tasks, and then we monitor their performance because when they actually go in to field after in a particular sector, they must have on hand skill sets required by the organizations like report writing, monitoring, etc.’. (NPO1) Considering age-differential contexts of volunteers. 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