Examining Accountability in Socially Focused Non-Profit Organizations

Over the past 30 years, as governments have outsourced to non-profit organizations many of the services previously delivered by public agencies, demands for these organizations to be accountable have grown. These demands have come from government, as well as from other funders and stakeholders. The challenge for non-profits is deciding what to track and measure in order to demonstrate accountability. These decisions are especially challenging because many socially focused non-profit organizations have difficulty observing both the efforts of employees and the outcomes of their work. In practice, many non-profits focus on a combination of process and outcome accountability. Process accountability refers to the tracking of practices used in an organization, while outcome accountability involves setting quantifiable targets to determine success. The board chair, who provides leadership to the board of directors and is the primary contact with management, has the opportunity to observe accountability decisions. This thesis investigates the accountability approach used in socially focused non-profit organizations by examining the board chair’s perspective on accountability choices and decisions. Based on semi-structured interviews with the board chairs of 21 non-profit organizations, the study examines the board’s perspectives on the accountability challenges facing the organization and explores the relationship between board characteristics and the accountability approaches used. One of the insights of this thesis is that boards use incentives and controls consistent with a principal-agent approach while still maintaining they have high trust in management, a belief that is consistent with stewardship theory. The prevalence of this dual approach is at odds with the predominant view that only one approach is used. The research also revealed that a board member’s influence in matters of accountability depends on how relevant to the task at hand their knowledge and skills (professional or otherwise) are perceived to be by the other board members. In both high- and low-trust boards, board members may be willing to accept the status quo rather than question if the accountability approach needs to change. Additional insights from the research include: 1) board chairs are highly aware of the non-observability challenges that non-profit organizations face; 2) assessing performance in light of this non-observability is almost impossible; 3) decisions about accountability are often the result of informal dynamics; and 4) the board chair emerges as a key figure in assisting non-profits with accountability