The organizational transformation of a nonprofit organization includes factors that are antecedent to the process and other elements that are part of the process (see Figure 24.1).
Organizational transformation does not occur in a vacuum. It is the consequence of other factors or elements, which must be taken into consideration in future plans of action.
FIGURE 24.1 Process of organizational transformation.
These factors include, but are not limited to, life cycles, internal environment, and external environment.
As the previous paragraphs indicated, organizations go through life cycles. Organizational life cycle theories explain that the characteristics of an organization may change based on life-cycle stages (Merchant, 1997; Moores & Yuen, 2001). One of these cycles is decline. Therefore, an organization can experience a normal stage of decline, which must be addressed in order for such organization to survive.
The external environment of a nonprofit organization encompasses the external stakeholders, such as clients or customers, suppliers, partners, donors, and the community or the public. The external environment also includes the social, political, and economic events that have the potential to affect the life of an organization as an entity in a community or society. The external environment can be a source of decline in an organization. For example, if the external stakeholders lose faith in the vision of an organization, they will withhold their support, and this can trigger a decline or a crisis.
The internal environment includes the board of directors, executives, managers, staff, and volunteers, as well as the administrative and coordination systems. The lack of a transparent and participative decision-making culture, the level of stewardship and accountability, and the mismanagement of resources can be sources of decline for a nonprofit organization. In fact, an organization can become so attached to its own status quoit fails to anticipate or recognize the need for a change.
In one form or another, decline is a constant in almost all theories or conceptual frameworks on organizational life cycles. Decline can happen for various reasons. It can be triggered by the inability of an organization to anticipate, recognize, neutralize, overcome, or adapt to internal or external factors that constitute a threat to its survival. Other organizations may experience a decline because they grew too much or too fast or both, and were not able to control the implications of their growth. A nonprofit organization in decline may find it more difficult to make strategic decisions, because key members or leaders are looking in different directions. A nonprofit organization in decline may see its expenses increasing and income decreasing in a consistent way, because donors are not as excited to donate or there is not enough diversification in revenue streams. A nonprofit organization in decline might see a significant decrease in positive outcomes that can be reported. A nonprofit organization in decline might see increasingly negative reports in the press about its reputation and credibility in the eyes of the community or the public.
According to Seeger, Sellnow, and Ulmer (1998), an organizational crisis is a "specific, unexpected, and non-routine events or series of events that [create] high levels of uncertainty and threat or perceived threat to an organization's high priority goals" (p. 232). As this definition suggests, a crisis is an event or a series of events that are out of the ordinary, and which constitute a threat to the core of what an organization aims to accomplish. In other words, a crisis has the potential to completely destroy an organization, if not solved in time. As Venette (2003) argued, a crisis usually puts an organization in a situation where something has to change. A nonprofit organization is in crisis if, as a result of an event, the organization
- Cannot make strategic or operational decisions
- Cannot conduct normal operations of business in a peaceful atmosphere
- Cannot meet its regular financial obligations
- Sees either internal or external stakeholders or a combination of both turn against key decisions made by the leadership
Any combination of two or more of these factors or similar elements would be a sign of an organizational crisis or an imminent organizational crisis.