MSB 376 Midterm

Cross-Sector Collaboration

Cross-Sector Collaboration

voluntary linking of organizations in 2 or more sectors to share information, resources, activities, capabilities, risks and decision-making aimed to achieve an agreed to public outcome

Rationale for Engaging in Cross-Sector Collaboration

Pragmatic (Practical), Tactical (strategic evaluation), Economic (cost-benefit, budget constraints)

Principal-Agent to Principal-Principal Relationship

Moving from coordination to collaboration, actors agree to greater mutual influence over how they operate

Spectrum of service provision

Direct Public (Government) Provision on one side, and full Private Provision on the other. A spectrum of choices between

The Third Sector, or Civil Society (voluntary and donative organizations)

In the U.S., these are Non-Profit Organizations. In other countries, these are Non-Government Organizations

Non-distribution constraint

Nonprofits cannot pay dividends

Fair compensation constraint

Nonprofits cannot pay excessive salaries or benefits

Nonprofit Organizations are

1) formal entities 2) distinct from their officers 3) capable of holding property and making contracts 4) persist over time

Legal Characteristics of a 501(c)(3)

1) contributions are generally tax deductible 2) activities may not assist elections 3) expenditures for charitable purposes

In the U.S., IRS Tax Exempt Status drives these legal structures

501 c_ organizations

501(c)(3)s include

Religious, Education, Charitable

The two categories of 501(c)(3)

Public charity and Private Foundation

Public charity classifications

various legal IRS sub-classifications

Private foundation classifications

1) independent 2) family 3) corporate 4) international 5) private operating

Private foundations

make charitable grants to unrelated organizations for scientific, education, cultural, religious or other charitable purpose

Private Foundation Characteristics

1. Funded by one person, family, or corporation

2. Usually do not seek public donations

3. Makes grants, not directly running activities

4. Usually spend from investment income (an endowment or other investments)

5. Must distribute 5% of net assets each year

Public Charities Characteristics

1. Broad public funding support

2. Must have active programs

3. Meet an IRS test for qualifying as a public charity

4. “Public support test” required by the IRS - 1/3 of donations come from the general public

5. Board must be unrelated

Public Charities

1) Statutory (officially registered), 2) Public support through donations, 3) Public charities receiving tax exempt function income, 4) Supporting organizations (ex: philanthropic arm of university or hospital)

Governmental shift from grants

to using contracts and vouchers. Increased emphasis on competition and performance measurement for social services delivery

Negatives of Government Outsourcing

1. loss of control

2. relinquish direct contract with citizens

3. long-term PPPs reduce future decision maker discretion

Positives of Government Outsourcing

1. innovation

2. expertise

3. additional resources

Comparative Advantages

Private sector - unique approaches to efficiency, innovation, financial capital

Nonprofit sector - access to volunteers, grassroots community connections, voice to marginalized groups

Public/Government Sector - public responsiveness, local knowledge, equity concerns

Contracting

High formalization (lots of contract details) vs. Low formalization (more collaborative) types of cross sector collaboration

Rationale for Contracting

Acknowledgement (government perspective) that a private or nonprofit organization can be more efficient/effective than government (have competitive advantage). Nonprofit organizations also contract private organizations

Traditional contracting

detailed, arms length, bidding, monitor compliance, risk with government

Collaborative contracting

describe desired outputs, decision based on best value, government is partner, risks allocated/shared

Market Failures

Underprovision, overexclusion, contract failures

Underprovision

highways, airports, parks, public safety, where government pays to make available

Overexclusion

A good or service is over excluded, or where people who would want to consume the good or service are not able to. This can be caused because non-profits fear a loss or profits if they do not exclude some people

Contract failures

laws for truth in advertising, fraud, labeling, licensing, etc

Philanthropic particularism

the tendency of nonprofit organizations to focus on particular ethnic, religious, geographic, or ideologic groups, leading to duplication in some cases and gaps in coverage in others

Types of Cross Sector Collaboration

1. Short term (1-1 partnership, join efforts)

2. Intermediate Terms (deliver specific public goods and services)

3. Long-term (creation or renewal of major infrastructure)

Elements of Cross Sector Collaboration

1. Risk allocation

2. Costs and benefits

3. Social and Political Impact

4. Expertise

5. Partnership Collaboration

6. Measuring Performance

Public Private Partnerships

example: build - operate - transfer roads or bridges

Collaboration between nonprofits and businesses is

increasing and becoming more strategically important

Collaboration continuum

1. Philanthropic (charitable donor and recipient)

2. Transactional (resource exchange specific activities)

3. Integrative (missions, people and activities more collective; more organizational integration)

Alliance enablers

attention, communication, systems, expectations, accountability

Donor Advised Funds

a charitable investment account for the sole purpose of supporting charitable organizations you care about

Alliance drivers

1. Alignment of strategy, mission, and values: partners have shared understanding of goals and values. Strategies must be aligned for the alliance to be successful.

2. Personal connection and relationships: More success if strong personal relationships between key decision makers

3. Value generation and shared visioning: Shared vision for the alliance and commitment to creating value for each other and for society

4. Continual learning: Willing to learn from each other and to adapt the alliance as needed

Alliance - Collaboration Value Construct (how value is defined, created, balanced, and renewed in an alliance)

1. Financial value: economic value generated by the alliance, like increased revenue or reduced costs

2. Operational value: improved efficiency or effectiveness of the partners’ operations

3. Strategic value: enhanced competitive advantage or market position as a result of the alliance

4. Social value: the positive impact on society that is generated by the alliance

Value in Alliances: Value Creation

1. Value creation - Generic resource transfer: company gives money, nonprofit organization supplies good deeds and good feels

2. Value creation - Core competencies exchange: ex: CARE-Starbucks alliance

3. Value creation - Joint-Value Creation: not bilateral resource exchanges, rather join products and services from combining resources

Value in Alliances: Value Renewal

1. Relationships are dynamic, and subject to alteration. Environments and organizations change

2. Value of benefits may erode. Example: Purina and American Humane Society. Once connected, less need for collaboration

RFP

Request for Proposals

Voluntary failures

When a nonprofit cannot adequately provide a service or address a social problem at a scale necessary for its alleviation

4 voluntary failures

Philanthropic insuffiency

Philanthropic particularism

Philanthropic paternalism

Philanthropic amateurism

Philanthropic insufficiency

Not enough resources for the nonprofit to meet citizen’s demands