Why charities focused on the money, not the mission, should listen up

Nonprofit organizations (NPOs) have distinct identities: Some are more motivated by mission, others by money. Now, new research finds these preferences can affect an NPO’s identity, particularly how receptive it is to feedback.

What the researchers say: “For an organization whose utilitarian identity is dominant, in that it emphasizes budgets and the bottom line, leaders might have the intention to listen to ideas but not necessarily to act on them,” said the lead author of the study published in the journal Communication Research. “By contrast, normative or mission driven NPOs not only have the intention but often the desire to build a culture to actualize the suggestions they receive.”

Organizational listening is the practice of soliciting and implementing input from stakeholders – such as employees, donors, board members and volunteers – when making policies or decisions that shape the direction of a charity. Good listening practices involve both learning stakeholders’ needs through dialog and demonstrating a willingness to act on what is learned.

Despite the value in organizational listening, past research has shown that NPOs tend to listen infrequently and poorly.

To help understand why, the researchers conducted a mixed-method national study drawing on Internal Revenue Service data for medium-sized and large nonprofit organizations in the United States. In the first phase, 122 NPOs from 36 US states completed surveys related to their organizational listening practices. Nonprofit sectors included education, arts and culture, environment, human services and health. Survey questions focused on listening motivation, culture, and information collection, analysis and integration.

During the second phase, virtual interviews were conducted with leaders from 38 of the NPOs. Questions were designed to understand how participants’ views on organizational listening related to NPO identities and shaped organizational changes.

Based on the responses, utilitarian and normative identity scores were calculated for each NPO. These two values were further evaluated to assess how likely an organization was to implement organizational listening results.

The research team found that NPOs with a stronger utilitarian identity generally acknowledged the importance of listening, but the recommendations usually weren’t implemented because decisions were often made through a top-down process to address bottom-line needs.

By contrast, NPOs with a stronger normative identity made decisions about their programs or services primarily based on stakeholder inputs and interests, even if they knew doing so wouldn’t directly contribute to their financial health.

Nonprofit organizations are multidimensional and manage dual identities composed of contradictory elements, the lead author explained. But these values don’t have to be mutually exclusive.

“NPOs are the motors of progress and social change, and organizational innovation is the driver of broader societal progress,” she said. “For any leader of an NPO, you can’t only focus on social impact – you must invest efforts in your financial health. Fortunately, the two identities can be mutually reinforcing and synergistic.”

So, what? Alicia and I have worked with many NGOs in the US, the UK and Australia. We have found—as the present researchers have—that the best of them are equally concerned with their financial health as with their mission. In these NGOs the two are, in practice, inseparable. The mission is impossible without financial stability and financial health is probably impossible in the long term without an enduring and widely accepted sense of mission.

My favorite example of a well-run and enduring NGO is the Sir Richard Whittington Charity founded some 600 years ago by the famous medieval Lord Mayor of Lonon.