The Indianapolis Nonprofit Sector:
Management Capacities and Challenges

A Preliminary Report Prepared for
The Central Indiana Community Foundation
February 2003
Kirsten A. Grønbjerg, Project Director
Richard Clerkin, Research Associate

A Joint Product of the Center on Philanthropy at Indiana University and the School of Public and Environmental Affairs at Indiana University


Click to read the press release for this study and to access the full report. Note: you will need a free copy of Adobe Reader to open the full report.

Executive Summary

Nonprofit organizations are extraordinarily diverse in their missions, but all must adapt to changing community and policy conditions if they are to survive. Their capacity to do so depends on their organizational capacities and the management tools available to them.

Introduction

This report presents preliminary findings on the organizational tools available to nonprofits in the Indianapolis area and highlights the challenges they face in adapting to changing conditions. The report is based on a statewide survey of 2,148 Indiana nonprofits completed in the spring and early summer of 2002.

The survey included charitable, religious, advocacy, and member-serving nonprofits. For purposes of this report, we have classified responding nonprofits into eight categories based on their mission and primary activity: (1) arts, culture, humanities, (2) education, (3) health, (4) human services, (5) public/society benefit, (6) religion/spiritual development, (7) mutual-benefit, and (8) all other. For some fields, the findings should be interpreted with caution because of the relatively small number of respondents. Although this report focuses on nonprofits located in the nine-county Indianapolis region, we include comparisons to nonprofits across the state.

Management Capacities: Policies and Tools

Part I of the report examines the management capacities of Indianapolis nonprofits in terms of the operational policies and technical tools in place. These structures reveal the ability of nonprofits to recognize, understand, and respond to changing community conditions.

Formal Organizational Policies

Formal organizational policies are designed to facilitate organizational decision-making. We examine the presence of six such policies and found a great deal of variation in the extent to which Indianapolis region nonprofits make use of them. We find widespread use of governance policies and by-laws, intermediary levels of formal personnel policies, but major gaps in the use of conflict of interest statements and formal volunteer recruitment and training programs. Moreover, the prevalence of these policies varies greatly among major nonprofit fields of activities.

  • Formal governance policies and/or by-laws - 89 percent
  • Written job descriptions - 68 percentWritten personnel policies - 55 percent
  • Written conflict of interest - 34 percent
  • Formal volunteer training programs - 17 percent
  • Formal volunteer recruitment programs - 17 percent

Reporting Practices

The presence of various types reporting practices indicates whether organizations routinely take stock of key activities. We find fairly widespread use of annual reports and audited financial statements, with less widespread use of program outcome or impact assessments. These practices vary considerably among major nonprofit fields.

  • Annual report during past two years - 73 percent
  • Recent audited financial statement - 69 percent
  • Evaluation or assessment of program outcome or impact during past two years - 38 percent

Use of Information and Communications Technology

Information and communications technology allow organizations to monitor their own activities and to track changes in their environment. We find widespread use of information technology for internal operations and for monitoring the environment, but relatively low incidence of using such technology for communicating with external audiences. We find evidence of a digital divide among Indianapolis area nonprofits. Health, education, and religious nonprofits consistently rank high in their technological capacities, while public/society benefit and mutual benefit nonprofits rank low.

  • Computers available for key staff/volunteers - 73 percent
  • Computerized financial records - 73 percent
  • Computerized client/member/program records - 71 percent
  • Direct internet access for key staff/volunteers - 67 percent
  • An email address for the organization - 60 percent
  • A web site for the organization - 49 percent

Financial Reserves

Dedicated financial reserves for special purposes allow nonprofits to plan major outlays and negotiate the uncertain funding environment under which they must maintain, and hopefully expand, their organizational infrastructures. We find relatively few nonprofits to have certain minimal components of financial planning in place. These practices vary widely among nonprofit fields.

  • Financial reserves for maintenance and equipment - 44 percent
  • Financial reserves for capital improvements - 31 percent

Management Challenges

Part II of the report examines the extent to which the nonprofit managers and executives who completed our survey report that they face challenges (major or minor) in planning their activities or managing key aspects of their operations.

Mission/Planning Challenges

To determine whether Indianapolis area nonprofits appear to face challenges in meeting their overall mission, we look at how they assess their own strategic planning capacity and other activities that may indicate planning effectiveness - managing relationships with members or clients and positioning the organization in the external environment. There are notable differences in the extent to which these activities present major challenges, although substantial proportions find that they present at least minor challenges. There are also significant variations among major nonprofit fields.

  • Attracting new members and clients: a major challenge - 58 percent
  • Meeting needs or interests of current clients or members: a major challenge - 43 percent
  • Enhancing the visibility or reputation of the organization: a major challenge - 42 percent
  • Strategic planning: a major challenge - 32 percent
  • Communicating with clients or members: a major challenge - 30 percent
  • Forming and maintaining good relationships with other entities: a major challenge - 13 percent

Challenges in Delivering and Assessing Programs or Services

To improve relationships with clients or members, nonprofits must enhance the quality of their programs or service. This appears to present a major challenge for about a third of nonprofits, but at least a minor challenge for 80 percent or more. There are again notable variations among fields.

  • Delivering high quality programs and services: a major challenge - 38 percent
  • Evaluating or assessing outcomes or impacts of programs: a major challenge - 35 percent

Challenges in Managing Human Resources

To undertake strategic planning and deliver effective programs nonprofits need high quality leadership, staff, and volunteers. About 70 percent report facing at least minor challenges in managing some aspect of human resources and substantial segments face major challenges especially in the area of volunteer management. There are substantial differences among nonprofit fields.

  • Recruiting and/or keeping qualified and reliable volunteers: a major challenge - 42 percent
  • Recruiting and/or keeping effective board members: a major challenge - 41 percent
  • Recruiting and/or keeping qualified staff: a major challenge - 26 percent
  • Managing human resources (staff and/or volunteers): a major challenge - 23 percent
  • Managing or improving board-staff relations: a major challenge - 8 percent

Challenges in Obtaining Funding or Managing Finances

Efforts to improve the quality of programs or to hire and keep qualified staff are inevitably limited by lack of financial resources and (less obviously) threatened by problems in managing finances. Almost all (89 percent) Indianapolis area nonprofits find it at least a minor challenge to obtain funding, while less than two-fifths (38 percent) say it is no challenge at all to manage their finances. There are major differences among nonprofit fields on both of these dimensions.

  • Obtaining funding: a major challenge - 59 percent
  • Managing finances and accounting: a major challenge - 16 percent

Other Challenges

Finally, we look at challenges associated with the effective use of information technology and with managing facilities. While 78 percent consider the effective use of information technology to be at least a minor challenge, only 49 percent give the same assessment to managing facilities. There are again notable variations among nonprofit fields.

  • Using information technology effectively: a major challenge - 22 percent
  • Managing facilities: a major challenge - 19 percent

Summary and Conclusion

Part III of the report summarizes findings for each of the six major fields included in the analysis. For each field we highlight the three activities that present major challenges to the largest percentage of nonprofits in the field and the three that present major challenges to the smallest percentage of nonprofits in the field. We also report on the three most pervasive operational policies or technical tools and the three least prevalent in the field. For some fields, the findings should be interpreted with caution because of the relatively small number of respondents.

More detailed, separate summaries for each of the major fields is available here (you will need a free copy of Adobe Reader to read these documents).

Acknowledgements

We express our deep-felt gratitude to the many Indiana nonprofits that completed our survey. Without their cooperation, we would have nothing to report. We are also grateful to the Center on Philanthropy at Indiana University for its major financial support of the survey of Indiana nonprofits on which this analysis is based and to the Aspen Institute's Nonprofit Sector Research Fund and the Central Indiana Community Foundation (through its support of the Efroymson Chair in Philanthropy) for support of survey follow-up, data analysis, and dissemination efforts. Additional funding and in-kind support has been provided by WBH Evansville, Inc.; The Center for Urban Policy and the Environment at I.U.P.U.I.; the School of Public and Environmental Affairs at Indiana University on the Bloomington, Indianapolis, South Bend, Northwest, and Fort Wayne campuses; Ball State University; and the University of Southern Indiana.

The survey instrument is based on key concepts developed by the Donors Forum of Chicago. Laurie Paarlberg did much of the initial work in developing the survey instrument and we received much valuable feedback on several versions of the instrument from a large number of individuals. We also acknowledge the work by Ange Cahoon, Amy Horst, Hun Myoung Park, Allison Leeuw, Julie Schaefer, and Erin Nave in carrying out a variety of follow-up tasks to the survey and by the Center for Survey Research at Indiana University for managing the survey process itself. The support and efforts of all of these strengthened this work enormously and we are grateful to them all. Of course, any remaining problems remain our responsibilities entirely.