Nonprofit Governance 01: The Basics

My current research and online studies have largely focused on the governance of nonprofit organisations. Hence, I have actually decided to work on a series of articles on this topic as a means of reviewing the work I have been involved in for nearly a decade and also to understand the developments of the contemporary discourse on the subject.

Lets begin with the very basics, primarily by understanding what is meant by nonprofit sector and analysing how important is it in the world economic landscape today.

What do we have a nonprofit sector? Historically communities formed way before governments existed, people joined together to solve their problems. As the public and private sector grew and take a significant proportionate of the formal governing structure, it came to be realised that they are not able to or willing to resolve all the problems and concerns in the community. The failure of market and governments paved the way for the formal rise of the nonprofit organisations.

Their existence become more significant within the liberal system where market and government generally tend to ignore the unpopular issues among the communities. Nonprofit sector therefore have a niche market where they can help those with interests not large or popular enough to be of concern to the state or profitable enough for the markets.

What do we call the nonprofit sector? They are variety of terms used as a third sector of the economy including, social sector, social economy, civil society, non governmental sector and many more.

What types of organisations do fall into this category? They are mostly established organisations (incorporated) considered to be private and not controlled by the government. They are also organisations that do not share profits with the owner but invest in the mission instead. Generally management or employees of these organisations have a higher representation of volunteers.

How big is this sector by today? The nonprofit sector is large and diverse in terms of the numbers, types and sizes of the organisation. In the US nonprofit sector accounts for 5-10% of the national economy. Compared to national economies, the global nonprofit sector is equal in size to the 8th largest economy in the world.

As a sector of the economy where does the nonprofit sector fit in, particularly in relation to the public and private sector? One way to think is along the public private goods and services. Nonprofit sector that falls in between these two are diverse in nature, exempted from taxes, does not distribute its profits among members with self-governing volunteer boards. These organisations serve not only the niche communities but also the public and private sectors.

In addition to the use of significant number of volunteers, these organisations also depend mainly on government funding, gifts and donations. In Australia almost 50% of the revenue for the nonprofit sector organisations are generated through gifts and donations.

Role of these organisations are also another key aspect to look into. Their roles mainly include, influencing public policy and policy makers (advocacy role), providing public and private goods and services (service provider role), organising and empowering community through action (community development role), informing and resolving complex issues by working collectively with government and other actors (problem solving role).

Leave a Reply

Your email address will not be published. Required fields are marked *