Indiana University      Research & Creative Activity      January 2000 Volume XXII Number 3

Managing the Stakeholders

by Deborah Galyan

Consider, if you will, this fictional scenario of a day at a small, nonprofit organization:

It’s a sun-dappled morning at Willowbend, a nationally known artists’ colony. Birds sing in the apple trees as the artists work in their rustic studios, each facing a picturesque courtyard on a country estate donated by the colony’s founder.

Suddenly, a large delivery truck backing into the courtyard shatters the peace and quiet. One by one, sculptors, composers, and novelists leave their studios to watch a crew unload 300 folding chairs, fifteen buffet tables, and nine crates of china, shouting as they work. Another truck arrives. Two men jump out and proceed to assemble a sound system on a portable stage. One tests the system by singing “Beautiful Dreamer” for an annoying length of time.

A coalition of exasperated artists marches up to the main office to complain to the executive director. He has been up most of the night, struggling to make a grant deadline. Astonished by their story, he walks down to the courtyard to see the stage, the sound system, and the chairs with his own eyes. He apologizes profusely and promises the artists they won’t be disturbed again.

Back in his office at 10:45, the director calls the rental company, whose name and phone number are conveniently stenciled on the bottom of each chair. He learns that the company does possess a signed rental agreement for the delivery.

“Who authorized it?” he asks

“Susan Goodheart,” the secretary replies.

The director is dismayed. Mrs. Goodheart is the president of Friends of the Colony, the organization’s devoted volunteer group. Their fund-raising efforts are crucial now that government funding is growing unpredictable. They work so well independently that lately he hasn’t attended their monthly meetings. He takes a deep breath and calls Mrs. Goodheart.

“Oh my!” Mrs. Goodheart replies. “Didn’t any of the ladies call you? Well, someone should have! It’s for the wedding in the courtyard tomorrow. It’s going to be a lovely event, and very lucrative. Can you believe that couples are willing to donate more than $5,000 to hold their weddings in our little courtyard? It must be the prestige of all the famous artists! We’ve already scheduled three more weddings."

At 12:30, the director stares at his unfinished grant application. The postmark deadline has passed, and his head is pounding after a furious argument with Mrs. Goodheart, who just did not see that weddings in the courtyard are not appropriate fund-raising projects because they violate the peace and quiet the artists require. “Well!” she had shouted. “I’m sure there are other worthy organizations that would appreciate my time and efforts, if you don’t!”

By mid-afternoon, the director has racked up two more arguments with members of Willowbend’s board of directors, one of whom challenged: “How could the volunteers plan this fiasco without you knowing it? You’re supposed to be managing them, not the other way around!"

“I absolutely agree with Sue Goodheart!” another board member had declared. “The budget is in terrible shape! So what if we disturb the artists once in a while? How bad can that be?”

I can cope with this after I’ve had some lunch, the director decides. At 2:45, he stands up to leave. The phone rings. He hesitates, but decides to answer. It’s Roger Strong, the colony’s wealthiest and most loyal donor. “I’ve just received a call from my sobbing niece who has just received a call from Mrs. Goodheart,” he says. “Please explain to me why you object to my only niece holding her wedding on the grounds of an organization that I’ve generously supported for almost twenty years?”

The director opens the top drawer of his desk and desperately clutches a bottle of aspirin.

“Well?” Strong says, “I’m waiting.”

The director sighs and thinks to himself: It’s definitely one of those days . . .


Mary Tschirhart, associate professor of public and environmental affairs and philanthropic studies at Indiana University Bloomington, knows as much about “those days” described above as perhaps anyone in the country. She lived a few of them herself as executive director of a small nonprofit arts organization in Michigan in the mid-1980s. Since then, she has gone on to build an impressive scholarly career around the study of problem management in nonprofit organizations. “I’ve always been interested in organizations with mission statements related to making a better society,” Tschirhart says.

Such mission statements unite an otherwise chaotic universe of nonprofit organizations that include sculpture gardens, food banks, Elks clubs, circus museums, professional societies, and homeless shelters. Tschirhart’s studies of these groups focus on stakeholder problems—conflicts that arise between the various individuals and groups who have “stakes” in a particular mission-based organization. Her studies have contributed to a growing body of philanthropic research with important practical implications for nonprofit leaders. Just as the fictional director of Willowbend finds himself at odds with important stakeholders—volunteers, board members, artists, and an important donor—leaders across the vast nonprofit sector often find their greatest common challenge in the day-to-day management of stakeholder groups.

“Many nonprofits are beginning to see the benefits of scholarly research regarding aspects of management and structure,” Tschirhart explains, “and they are using our research to guide them through reorganizations.” After earning an M.B.A. in arts administration at Binghamton University, State University of New York, she worked as an aide for the Congressional Arts Caucus, in the midst of the National Endowment for the Arts’ crisis during the congressional budget debates of 1984. “That was the experience that made me fascinated with the issues of stakeholder management,” Tschirhart recalls. While Congress debated issues from the NEA’s policies to the definition of art itself, Tschirhart watched and analyzed the drama. At stake was the NEA’s future, continued existence as a government agency. The stakeholders were numerous: legislators, voters, nonprofit agencies, the NEA staff, conservative coalitions, free speech activists, lobbyists, art consumers—not to mention artists themselves. “I was one of the people whose job it was to juggle all these different constituent groups. The ultimate question was: Which groups would end up satisfied and which would remain unsatisfied? I wanted to learn more about those dynamics.”

One way Mary Tschirhart (third from right), Associate Professor of Public and Environmental Affairs and Philanthropic Studies, Indiana University Bloomington, demonstrates her commitment to public service is to lead a team of IUB colleagues walking their dogs to raise money for the Monroe County Humane Association. Team members (with their accompanying canine companions) include: (left to right) Lynn Duggan, Assistant Professor of Labor Studies (with Andy); Philip Stevens, Assistant Professor of Public and Environmental Affairs (with Starskee); Genia Asher, Secretary, School of Public and Environmental Affairs; Tschirhart (with Coda); and Diana Gant, Assistant Professor of Accounting and Information Systems, and Jon Gant, Assistant Professor of Public and Environmental Affairs (with Nikki).

Shortly thereafter, Tschirhart took a job as the director of Young Audiences of Michigan, an organization that places professional performing artists in schools to present performances and workshops. “I thought: where better than a small, struggling organization to find out what nonprofit management is really all about? That’s where I really learned stakeholder management.” At Young Audiences, Tschirhart encountered formidable challenges in fund raising and other areas. “I realized that my M.B.A. hadn’t taught me enough of the right kinds of things, and yet, I had a background in basic business management that many of my colleagues in arts administration lacked. I spent a lot of time helping out other organizations, and that’s when I decided that my calling might be more on the teaching side. I decided to pursue a Ph.D.”

Tschirhart’s mentors in the Graduate School of Business Administration at the University of Michigan were skeptical, at first, of her plans to focus on nonprofit organizations. “I shocked them all by saying that I wasn’t interested in studying General Motors or IBM. I wanted to look at the ways in which business management concepts could be applied to nonprofits.” But Tschirhart’s dissertation committee was reassured when her research attracted the interest of the IU Center on Philanthropy. The center named her a dissertation fellow in 1990, in conjunction with its National Governance Project. “They helped to fund my dissertation, but more importantly they gave legitimacy to my dissertation topic,” she recalls.

It was through the Center on Philanthropy that Tschirhart first understood that she was part of a community of scholars in the burgeoning field of nonprofit studies. “The center has played an important role in strengthening the lines of communication among scholars of philanthropy,” she explains. “It has played a vital role in the field.”

Hands-on experience served her well as she planned her dissertation, applying the concept of stakeholder management to nonprofit organizations. “I went out in the field and conducted interviews with leaders and stakeholders in arts organizations. I wanted to uncover some strategies that were being used to manage problems and to learn how stakeholder influences were affecting decision making in nonprofits.” Tschirhart devised a model of problem management that describes several types of stakeholder problems, as well as the ways nonprofit managers responded and the factors that serve as potential predictors of those responses. This research forms the backbone of her book, Artful Leadership: Managing Stakeholder Problems in Nonprofit Arts Organizations, and holds strong implications for helping nonprofits select and manage their various stakeholders, as well as for anticipating and responding to problems.

Stakeholder problems arise in nonprofit organizations due to “lack of congruence” between the values or norms of stakeholder groups and an organization’s purposes, activities, and outcomes, Tschirhart explains. Congruence problems fall into identifiable groups that nonprofit leaders can consider and analyze before determining their responses. When the fictional Friends of the Colony decide to hold weddings in Willowbend’s courtyard, they create what Tschirhart identifies as a “stakeholder legitimacy problem,” a problem that occurs when a stakeholder’s purposes, activities, or outcomes are not congruent with the organization’s values or norms. Their event violates the values and norms of the colony as expressed in its mission to preserve an atmosphere of peace and quiet for the artists. This stakeholder legitimacy crisis reverberates through several other stakeholder groups (donors and board members) when they opt to support the volunteers’ actions, an indication of the real-life complexity that nonprofit leaders often face.

When an organization violates the norms and values of its stakeholders, it faces another type of congruence problem. Tschirhart refers to such situations as “organizational legitimacy problems.” The NEA crisis provided a model illustration of organizational legitimacy problems: When several stakeholders objected to the work of controversial artists like Karen Finley and Andres Serrano, they questioned not only the legitimacy of the artists, but also the legitimacy of the organizations that funded their art, including the NEA and the museums, galleries, and performance spaces it supported.

Understanding stakeholder problems is only the beginning step for organization leaders, who must move on to formulate solutions. Tschirhart’s model provides insights into the processes managers use to make sense of problematic changes in their relationships with stakeholders. She describes a variety of strategies managers apply, sometimes adapting their organization to a stakeholder demand, sometimes changing a stakeholder’s activities, and in some cases, even weakening a stakeholder’s tie to the organization. “By searching for patterns in these experiences,” Tschirhart explains, “we can uncover the assumptions, values, and norms guiding stakeholders and organizations. Those assumptions can be challenged, and they possibly can be changed.”

So, what should the director of Willowbend do about his crisis? The question posed by an angry board member seems appropriate: “How could a bunch of volunteers plan this fiasco without you knowing it?” The director could try to persuade the volunteers to cancel the wedding and thus suffer the consequences of slighting the volunteers, wedding party, and an important donor. Or, he might work to adapt the colony’s mission to include an occasional noisy wedding, evoking the certain ire of frustrated artists. Or, he might opt for some compromise between these two responses. Research suggests that the director has made a common mistake in volunteer management by allowing Friends of the Colony to work without regularly consulting the organization’s leaders. Willowbend’s stakeholder crisis probably could have been avoided if the management had made a practice of meeting with the group to discuss fund raising in conjunction with the organization’s mission.

“If volunteers don’t understand the mission, policies, and practices of their organization, it’s very difficult for them to work in sync with everyone else,” Tschirhart explains. “Volunteer management is something that is too often presumed to be easy. There are myths about human resource management practices that research is helping to dispel. For example, the idea that you should never ‘fire’ volunteers, even if their actions are somehow harming an organization. That’s absolutely wrong. Another myth is that an organization must accept every volunteer that shows up at its door. Another suggests that volunteers are never as reliable as paid employees, yet research has proven that they are just as reliable.” Above all, managers must develop ways for volunteers to participate in the decision-making processes of their organizations, Tschirhart explains. “The more engaged they feel, the more likely they are to understand the organization’s mission and to act accordingly.”

Because of the central role they play in nonprofit organizations, volunteers have been the subject of much of Tschirhart’s recent work. She has focused on one particularly understudied group: stipended volunteers. “Stipended volunteers, like those in the Peace Corps, for example, are individuals who don’t work primarily for financial gain, but who obtain some financial compensation for their work,” she explains.

Tschirhart has a special interest in the role of stipended volunteers in AmeriCorps USA, President Clinton’s national service program. “I’ve always been fascinated by the intersection of different sectors in philanthropy. AmeriCorps is interesting because it involves the federal government, community organizations, and private citizens coming together for a public good.”

This postcard advertises the ability of AmeriCorps members (stipended volunteers) to energize individuals and empower communities. Tschirhart's AmeriCorps research team is evaluating the outcomes of the national service program, including its ability to enhance individuals'public service motivation and strengthen communities.

AmeriCorps and other organizations have followed Tschirhart’s research closely as they search for answers to questions about volunteer motivation and management. Tschirhart has studied the effects of age-related differences in stipended volunteers’ interests, public service motivations, and satisfaction levels. With SPEA colleagues James Perry, Chancellors’ Professor of Public and Environmental Affairs and professor of political science and philanthropic studies at IUB, and Debra Mesch, associate professor of public and environmental affairs and philanthropic studies at IUPUI, she has also examined the factors that affect retention rates among stipended volunteers.

The research seems to point toward generational differences in volunteer interest and motivation. “The current generation of volunteers seems to be more interested in short-term commitments. They are more results-oriented and less likely to make lifelong volunteer commitments than their parents were,” she explains. Her studies also suggest that volunteers may be motivated by personal gain. “Many approach volunteering in a very instrumental fashion,” she explains. “They select experiences that they think might help them get a good job or get into college or make new friends.”

Tschirhart also is studying the effects of service-learning experiences on students’ long-term volunteer interests. With colleague Lynda St. Clair of Bryant College in Rhode Island, she recently devised a study to track a group of students over time to determine if involvement in service learning affects the types of companies and workplaces they will eventually select. “We want to see if they choose to engage in volunteer work through their companies as they have engaged in service learning through their classes with their universities.”

Tschirhart has incorporated service-learning initiatives in her graduate organizational theory course and in nonprofit management courses in SPEA. “Service learning is a natural match with the topics I teach,” she says. A board member of the local United Way of Monroe County and Community Service Council, Tschirhart has found her own involvements rewarding and integral to the success of her service-learning courses. “I’ve had students tell me that their involvement with community agencies through my course was life-transforming.”

In a recent organizational theory class, Tschirhart’s students planned and managed a free medical pre-screening program for preschoolers in Bloomington. “My students worked with all the various stakeholder groups involved in the project. They managed the budget, worked with corporate sponsors, set up the location, recruited health care professionals, coordinated volunteers, and ran the event. It was an invaluable experience because, while they were actually doing the work, we were analyzing each aspect of the event—the stakeholder issues, the management issues, all the things we talk about very abstractly in organizational theory. They saw it all, firsthand.”

Ultimately, Tschirhart believes that her scholarship and teaching, along with the work of her colleagues in nonprofit studies, will create a more professional approach to nonprofit management. Providing research, practical management tools, and hands-on experiences for future generations of nonprofit managers will, she hopes, increase their success and ensure the stability of the organizations they lead, perhaps even help to spare them a few “one of those days” experiences.