Financial Resources and Non-Profits

PARTNERSHIP STRATEGIES FOR FINANCIAL STABILITY IN THE NON-PROFIT SECTOR By CALVIN STACEY CRAWFORD A thesis submitted in partial fulfillment of the requirements for the degree of MASTER OF ARTS In LEADERSHIP AND TRAINING We accept this thesis as conforming to the required standard ……………………………………….…………….. Karen Laing, Project Sponsor ……………………………………………………… Marilyn Hamilton, PhD CGA, Faculty Supervisor ……………………………………….…………….. Linda V. Coupal, PhD, Committee Chair . ROYAL ROADS UNIVERSITY October, 2006 © Calvin Stacey Crawford

Financial Resources and Non-Profits 2 ABSTRACT The non-profit sector is changing as non-profit organizations (NPOs) face reduced funding and increased accountability measures within an increasingly complicated fiscal environment. As the challenge to become more self-sustaining increases, the development of more entrepreneurial means of generating revenue is emerging to meet non-profit social objectives. This action-based research study utilized an on-line questionnaire and individual interviews to evaluate leadership and internal financial management capacity while assessing the current and desired levels of access to financial products, services and resources. The findings within this study determined that NPOs would benefit from financial institution leadership that provides dedicated financial management assistance and training, as well as products and services tailored to the unique needs of the non-profit sector. Prospera Credit Union will use the findings of the research as a component of their Corporate Social Responsibility mandate in an effort to support the increasing fiscal challenges of sustaining non-profit service delivery.

Financial Resources and Non-Profits 3 DEDICATION I dedicate this thesis to my wife, Laura, and my kids, Hayden and Jamie. Thank you for your belief in me, your patience and understanding. This would not have been possible without your support.

Financial Resources and Non-Profits 4 ACKNOWLEDGEMENTS I owe a great debt of gratitude to the many individuals who assisted me throughout this major project. I am especially thankful to the research participants who gave so generously of their time to take part in my project. The depth of response from participants across Canada to the online questionnaire shaped the basis of my research study. I am particularly grateful for the participation of the interview participants who volunteered of their own accord to further explore and refine the questionnaire findings. They took the time to reflect upon and relate their experiences and insights to me, providing the perspective upon which the findings are based. Marilyn Hamilton, as my Faculty Supervisor, challenged me with some wonderful questions and provided me with invaluable feedback when I needed it most. Prospera Credit Union and my project sponsor representative, Karen Laing, who was always encouraging and supportive. Stacey Corriveau of the Fraser Valley Centre for Social Enterprise for her support, willingness to share resources, and for the help she provided in reaching out to non-profit groups across Canada. The faculty and support staff at Royal Roads University – your commitment to the learning process was exceptional and has influenced me tremendously. The entire MALT Cohort of 2005-1, who provided me with so many moments of inspiration and insight. And of course my Royal Roads triad, Rochelle Winterton and Lorna Thomson, who provided me with unwavering support in so many ways. To my family, you are my source of strength and the most wonderful people in the world. I look forward to making up for those moments when we couldn’t be together.

Financial Resources and Non-Profits 5 TABLE OF CONTENTS ...................................................................................................................................................1 ABSTRACT.....................................................................................................................................2 Table of Contents.............................................................................................................................5 Introduction................................................................................................................................11 The Opportunity.........................................................................................................................13 Significance of the Opportunity.................................................................................................17 Systems Analysis of the Opportunity.........................................................................................19 Organizational Context..............................................................................................................23 CHAPTER TWO – REVIEW OF THE LITERATURE...............................................................26 Non-profit Organizations...........................................................................................................26 Organizational Culture..............................................................................................................33 Corporate Social Responsibility.................................................................................................38 Organizational Leadership.........................................................................................................43 CHAPTER THREE – CONDUCT OF RESEARCH ...................................................................51 Introduction................................................................................................................................51 Research Methodology...............................................................................................................52 Tools.......................................................................................................................................55 Unobtrusive Tools...............................................................................................................55 Interactive Methods............................................................................................................55 Questionnaire..........................................................................................................................56 Individual Interviews..............................................................................................................56 Research Conduct.......................................................................................................................58

Financial Resources and Non-Profits 6 Project Participants..............................................................................................................62 Ethical Issues..............................................................................................................................64 Respect for Human Dignity....................................................................................................64 Respect for Free and Informed Consent.................................................................................65 Respect for Vulnerable Persons..............................................................................................65 Respect for Privacy and Confidentiality.................................................................................65 Respect for Justice and Inclusiveness.....................................................................................66 Balancing Harms and Benefits...............................................................................................67 Minimizing Harm ..................................................................................................................67 Maximizing Benefit................................................................................................................68 CHAPTER FOUR – ACTION RESEARCH RESULTS AND CONCLUSIONS........................68 Study Findings............................................................................................................................69 Questionnaire Findings...........................................................................................................70 Demographics.....................................................................................................................70 Organizational Trends.........................................................................................................73 Organizational Leadership..................................................................................................74 Entrepreneurial Traits and the Source of Organizational Vision...........................................81 Operational Mindset...............................................................................................................83 Strategic and Operational Planning and How it is Occurring................................................84 Challenges with Organizational Sustainability.......................................................................85 The Valuation of Goods and Services....................................................................................88 Non-profit Financial Management Capacity..........................................................................88 Non-profit Opinions of How They are Perceived by Financial Institutions...........................90

Financial Resources and Non-Profits 7 Study Conclusions...............................................................................................................91 Conclusion #1.........................................................................................................................92 The Ideological Difference.................................................................................................92 Differentiating Between Entrepreneur and Enterprising....................................................93 Conclusion #2.........................................................................................................................94 Conclusion #3.........................................................................................................................95 Conclusion #4.........................................................................................................................95 Desired Services..................................................................................................................96 Desired Products.................................................................................................................97 Conclusion #5.........................................................................................................................97 Conclusion #6.........................................................................................................................98 Operational Approach: Resource Management or Enterprise Development......................99 Conclusion #7.........................................................................................................................99 Scope and Limitations of the Research....................................................................................100 Methodology.........................................................................................................................100 Target Population.................................................................................................................101 CHAPTER FIVE – RESEARCH IMPLICATIONS...................................................................103 Study Recommendations..........................................................................................................103 Internal..................................................................................................................................104 Recommendation 1...........................................................................................................104 Recommendation 2...........................................................................................................105 Recommendation 3...........................................................................................................106 External.................................................................................................................................107

Financial Resources and Non-Profits 8 Recommendation 4 ....................................................................................................107 Recommendation 5 ..........................................................................................................108 Mechanisms and Leadership................................................................................................109 Recommendation 6...........................................................................................................109 Recommendation 7...........................................................................................................110 Recommendation 8...........................................................................................................112 Organizational Implications.....................................................................................................113 Implications of Recommendation 1..................................................................................113 Implications of Recommendation 2..................................................................................114 Implications of Recommendation 3..................................................................................115 Implications of Recommendation 4..................................................................................116 Implications of Recommendation 5..................................................................................117 Implications of Recommendation 6..................................................................................117 Implications of Recommendation 7..................................................................................118 Implications of Recommendation 8..................................................................................119 Implications for Future research..............................................................................................119 chapter six – Lessons learned......................................................................................................121 REFERENCES............................................................................................................................127 Appendix A – Online Questionnaire............................................................................................132 Appendix B – electronic letter of invitation................................................................................141 Appendix C – interview consent form.........................................................................................143 Appendix D – interview questions...............................................................................................145 LIST OF TABLES

Financial Resources and Non-Profits 9 Table 1 ...................................................................................................................................63 Table 2 .........................................................................................................................................71 Table 3 .........................................................................................................................................73 Table 4 .........................................................................................................................................74 Table 5 .........................................................................................................................................74 Table 6 .........................................................................................................................................75 Table 7 .........................................................................................................................................78 Table 8 .........................................................................................................................................79

LIST OF FIGURES Figure 1. A Four Step Action Research Approach (Adapted from Glanz, 1998).........................54

Financial Resources and Non-Profits 10 GLOSSARY List of Definitions Enterprising non-profits: Non-profit organizations who are interested in starting or expanding a business or enhancing their programs or services through the development of revenuegenerating enterprises as a way to stabilize and diversify their funding base. Mental Models: “Deeply ingrained assumptions or generalizations that influence how we understand the world and how we take action” (Senge, 1990, p. 8) Non-profit Organization: A nonprofit organization (abbreviated "NPO", or "non-profit" or "notfor-profit") is an organization whose primary objective is to support social issues or matters of public concern for non-commercial purposes. For this study “third sector” and “voluntary sector” are used interchangeably to represent the non-profit sector in its entirety, unless specifically addressed otherwise. Social Enterprise: An organization that applies an entrepreneurial approach to addressing social issues to creating positive community change, often through producing goods and services for the market and redirecting its surpluses into the continual pursuit of its social aims. Social Entrepreneur: Creative individuals with innovative solutions to society’s most pressing social problems.

Financial Resources and Non-Profits 11 CHAPTER ONE – FOCUS AND FRAMING Introduction “Although good, old-fashioned charitable assistance will always be a necessary part of the lifeblood of many social organizations, it is widely acknowledged that new approaches are needed to address growing problems” (Dees, Emerson and Economy, p. 13, 2001). The non-profit sector is changing. Operations within the non-profit sector are becoming increasingly complicated as non-profit leaders face reduced funding, increased accountability measures and the need for lessened dependence on traditional funders, requiring non-profit organizations (NPOs) to become more self-sufficient (Dees et al., 2001). This presents new challenges to the operation of NPOs whether they are mental health, youth, or poverty reduction programs. However, it also presents the opportunity for social entrepreneurism that addresses ongoing sustainability of the organization while meeting non-profit social objectives. Different from business entrepreneurs, social entrepreneurs are distinct in that, “social entrepreneurs set out with an explicit social mission in mind … the best measure for social entrepreneurs is not how much profit they make, but rather the extent to which they create social value.” (Dees et al., 2001, pp. 4-5). Recognizing that volunteers are at the heart of these organizations and are struggling to adapt to the changing nature of the voluntary sector, past Prime Minister, Mr. Paul Martin stated, “One of the best ways to do this is to get behind the remarkable people who are applying entrepreneurial skills, not for profit, but rather to enhance the social and environmental conditions in our communities right across Canada (Government of Canada, 2004). This study will examine the potential for innovative solutions that encourage new financial relationships between financial institutions and enterprising non-profit organizations.

Financial Resources and Non-Profits 12 As the call for “a new form of economic banking practice” (Buttle, 2003, p. 1) arises, NPOs are becoming more sophisticated and entrepreneurial in how they generate revenue to meet their social objectives. For example, the Enterprising Non-Profits Program (ENP Program) provides development or expansion assistance to non-profit organizations interested in entrepreneurial activities. In 2003, 14 organizations reported revenues to the ENP Program. One organization, Public Dreams, reported that it raises 60% of its revenues from its Celebration Services business (Gannitsos, 2003). During my career as a community development practitioner, I have had opportunity to work collaboratively with several non-profit organizations. As the levels of funding support have decreased over time, I have become more active in helping groups develop innovative ways to generate new funds in an effort to diversify their operational base and create greater organizational stability. In 2001, I drafted a paper outlining the potential for a new program to provide short-term loans and organizational expertise for the fundraising initiatives of NPOs. At the time, this was specific to capitalization of fundraising initiatives; nonetheless, it equates to a financial capitalization for the development of a product or service that generates revenue to support social objectives. Although funding support has diminished, the character and spirit of NPOs to address the pressing social needs of our communities remains strong. Their endeavours are designed to contribute to the social fabric of our communities and new ways to help them meet those needs is required. Research Question What innovative financial solutions and resources are required to meet the emerging needs of enterprising non-profits?

Financial Resources and Non-Profits 13 Sub-questions 1. What are the emerging challenges related to the financial sustainability of the non-profit sector? 2. What are the organizational challenges NPOs may need to manage when addressing the development of financial capacity within their organization? 3. What are the benefits to the organizational development and culture of financial institutions in providing new financial products and resources to support the non-profit sector? 4. What leadership characteristics are required within a non-profit to maintain social objectives while employing an entrepreneurial approach to generate revenue? 5. How will financial sustainability be evaluated? The Opportunity Prospera Credit Union (Prospera) is a full-service community-based financial institution with a strong history of supporting community initiatives and nonprofit groups. Membershipbased, their Annual Report states: “Our driving force is the enrichment of our members, and the achievement of their life goals and community legacies” (Prospera Credit Union, 2004, p. 3). After an unprecedented four years of market expansion, Prospera is now recognized as one of the fastest growing credit unions in Canada, having just celebrated its most profitable year in its 62 year history (Prospera Credit Union, 2004, p. 12). With this growth has come a recognized responsibility and increased desire to work more strategically with the community. As cited in the report of the Task Force on the Future of the Canadian Financial Services Sector (Task Force) (1998), the Voluntary Sector Roundtable discussed the changing business environment and asked us, “to look beyond traditional activities and consider new forms of

Financial Resources and Non-Profits 14 partnership between the financial and voluntary sectors that could help build stronger, healthier and more caring communities” (Government of Canada, 1998a, p. 168). It is within this partnership context that the opportunity to research innovative financial relationships between financial institutions and non-profit organizations arose as a research topic. Timing was also a consideration, as a community-based action research approach could become an important component of Prospera’s latest initiative, which is the development of a corporate social responsibility mandate. This important new initiative is largely conceptual at this time and is being discussed in general terms to mean sustainable economic activity, not only in the economic sense but also in the social and environmental sense (Laing, 2005). This major initiative will create a vision upon which daily decisions are based, combining the skills and expertise as a financial institution to engender a climate of positive change within the community. One area of focus will be to address the Task Force recommendations, which is to increase access to financial services that strengthen non-profit organizations (Government of Canada, 1998c). The Task Force also suggests that the time is right to examine the relationship between financial institutions and the communities they serve: Canadians should have confidence that their financial institutions are contributing to the community in a positive, constructive way. The Task Force also believes that it is timely to examine this relationship because it does not appear to be as healthy as it could or should be. (Government of Canada, 1998c, p. 7) Embracing corporate social responsibility as part of the operational mandate is a significant step that recognizes the importance of a balanced operational perspective from which everyone benefits. Focusing on the social aspect, “The voluntary sector is indispensable to the ability of society to address community needs. It plays a critical role in strengthening communities” (Voluntary Sector Roundtable, as cited by Government of Canada, 1998a, p. 168).

Financial Resources and Non-Profits 15 Philosophically it is important this occur; however, tangible mechanisms available to the nonprofit organization for stabilizing its own future require further exploration and development. In their book, Enterprising Nonprofits: A Toolkit for Entrepreneurs, Dees, Emerson and Economy (2001) addressed current trends in the social sector and the emergence of social entrepreneurism as, “more systemic ways of improving social conditions” (p. 13). Their justification of why social entrepreneurship is important was captured in their statement: The social sector has undergone massive change over the past several decades. Gone are the days of charitable relief -- cash handouts and subsidies that do more to create dependencies in program participants than to prepare them to take on the world themselves. Gone, too, are the days of easy money from government and foundation grants, for which results and accountability were rarely required or enforced. (Dees et al., 2001). As the challenge increases for the non-profit organization to become more self-sufficient, the development of more sophisticated and creative ways to generate revenue is required to meet their social objectives. This emergence of the social economy is represented by organizations that produce goods and services on a not-for-profit basis with surpluses going to social or community goals (Strandberg and Plant, 2004). For many, this may equate to accessing financial support to facilitate this change from the traditionally based external funding source to a more entrepreneurial approach, which is also causing a change in the language as we move from “nonprofits” to “social enterprise”. As recognized by Irene Gannitsos in her 2003 study of 33 organizations involved in the Enterprising Non-Profits Program, almost all reported that securing sufficient financial support was a “significant problem” (p. 20). Another challenge is the reluctance of financial institutions and NPOs to come together in a financial relationship. Recognized amongst both groups as issues: differing values; lack of business skills; and lack of management expertise are key limitations for most organizations in their desire to become more self-sufficient (Gannitsos, 2003; Dees et al., 2001).

Financial Resources and Non-Profits 16 Perhaps a greater challenge will be understanding the regulatory framework and complicated legal structures that will allow for a comprehensible financial relationship. Fortunately, federal policy is now engaged in a dialogue on the risks of financing non-profit organizations in an effort to combine social aims with financial objectives (Government of Canada, 1998b, p. 119). These new relationships will not be for everyone. The view of raising capital outside of the non-profit organization is contrary to the traditional reliance on government and foundation funding for operations and special initiatives. This research initiative may lessen the concern for some organizations as new understandings and fundraising alternatives for NPOs with entrepreneurial outlooks emerge and become more widespread. My challenge as a researcher will be to identify the complimentary values and strengths of the two groups in an effort to develop mechanisms that allow both to come together in a commercial relationship that is mutually beneficial. How the success of these relationships is measured will be an important aspect of the research. Current monitoring and evaluation of financial returns and social outcomes of enterprising non-profits is generally less than satisfactory (Gannitsos, 2003). Tracking social and economic returns on investments will be important facets of the research performed and tracking models will be discussed as a discretionary tool to demonstrate ongoing sustainability beyond the time-related confines of the research project. My responsibility as a community-based action researcher is to maintain an awareness of the research setting, paying particular attention to the social and personal dynamics of the situation “so that it is noncompetitive and nonexploitative and enhances the lives of those who participate” (Stringer, 1999, p.21). Although there is empirical research to support the development of financial services for non-profit organizations, there exists a level of resistance

Financial Resources and Non-Profits 17 that NPOs should not enter into commercial relationships. Indeed, values systems of key stakeholders may find the move toward entrepreneurial activities objectionable (Dees et al., 2001). Constructively addressing this resistance, the research concept provided an excellent opportunity to develop a collaborative and inclusive research process involving the major stakeholders (Glesne, 1999). Acting as an active facilitator within the process, I worked from the assumption that “cooperation and consensus making should be the primary orientation of the research activity” (Stringer, 1999, p. 21). I respectfully explored “the underlying value system, including norms, and conflicts which may be at the heart of problems identified” (Holter and Scwartz-Barcott, as cited by Mortin-Cooper, 2000, p. 20). In considering the potential benefits of the research for both the sponsor and the non-profit sector, I am confident this research approach respected the interests of the stakeholders while uniting what they hold as value in their respective sectors into a model of cooperation that respects the strengths each brings to the process. Significance of the Opportunity The non-profit sector in Canada is substantial, well positioned, and wonderfully diverse. My concern is that without innovative solutions and practices that encourage new pecuniary relationships between financial institutions and the non-profit organizations that deliver important social needs, the sustainability of this sector will be difficult. As observed by Banting (2000) in his edited works of the non-profit sector in Canada: The non-profit sector suddenly finds itself at the centre of social and political debates in Canada. Governments see nonprofit agencies as an alternative mechanism for delivering public services to citizens. Activists see voluntary organizations as a means of mobilizing local resources to tackle problems often ignored by others. (2000, p. ix)

Financial Resources and Non-Profits 18 For this reason, it is important to recognize that current trends in the non-profit sector are calling for innovative solutions that address the shift toward more entrepreneurial delivery models that allow for the sustainable provision of public goods and services (Dees et al., 2001). The intent of this research will identify how Prospera can play an important role in providing the financial resources and expertise required to stabilize the ongoing operations of enterprising nonprofits. As Prospera explores the development of a corporate social responsibility mandate, there comes with this a fundamental organizational transformation towards adopting values-based social objectives that necessitate an alignment of their economic values with the values of the larger community. As outlined in the Task Force findings, they believe that, “this is an opportune time for leaders of the financial and voluntary sectors to explore how new ways of serving Canadians can be developed” (Government of Canada, 1998a, p. 167). Prospera’s commitment to enrich the communities they serve and their commitment to corporate social responsibility places them in an opportune leadership position to shift an emphasis onto the blending of social and commercial methods that meet the different needs of each unique non-profit enterprise (Dees et al., 2001). For Prospera Credit Union and its members, this is a values proposition that goes further than pure economic gain. The value that they receive as a result of relating more closely with enterprising non-profits in a community will be relative to what is provided in exchange for it (Dees et al., 2001). For the enterprising non-profit organization, creation of an entrepreneurial focus has proven to benefit their organization through greater visibility, creating enhanced awareness and, more importantly, greater access to services and programs. Additionally, the

Financial Resources and Non-Profits 19 business development and business management skills have increased organizational confidence and enhanced the approach to the organizations other activities (Gannitsos, 2003). In exchange for providing financial resources and technical expertise to these social entrepreneurs, Prospera will have demonstrated leadership and corporate social responsibility to the benefit of the communities they serve, as called for by the Government of Canada (1998a). Although this activity may not be as profitable in the traditional sense of direct economic gain, the community does have expectations of financial institutions to play a leadership role in the community beyond more narrow business imperatives (Government of Canada, 1998a). As an example: American Express donated $.03 to Share Our Strengths (SOS) hunger relief efforts very time an American Express card was used during the holiday season…American Express gave more than $16 million to SOS, while increasing its own transactions volume, its card-holder satisfaction, and the number of merchants accepting its card. (Andreasen, as cited by Dees et al., 2001, p. 243) There is an incredible range of non-profit groups in Canada working to build a better society by helping those who are illiterate, infirm, a new immigrant, environmentalists, and countless other causes that are part of our society. The development of new financial services for the non-profit sector that adds to the strength of traditional involvement will build stronger, healthier, and more caring communities. In the end, the true benefactor of this project will be those who utilize these services, therefore strengthening the social fabric of our society. Systems Analysis of the Opportunity In 2002, Charity Bank, the world’s first general charity and authorized bank opened its doors in the United Kingdom to connect societal needs with the world of finance by using financial tools and products for the common good. Charity Bank’s mission is “to change

Financial Resources and Non-Profits 20 perceptions of how personal wealth can provide finance for the benefit of society, rather than just for the profit of business or self-interest” (Charity Bank, n.d., ¶ 2). The International Association of Investors in the Social Economy (INAISE) believes, “Charity Bank is a simple idea whose time has come” (International Association of Investors in the Social Economy, Structure and Activity [INAISE], ¶ 4). Although few examples of this nature exists, three private banks located in Denmark, the Philippines, and the U.S. have purposely developed financial products that focus on creating a positive social impact in traditionally underserved banking niches in their respective markets, and yet, they are also able to produce positive real returns for shareholders: “Using conventional measures of financial and social outcome, these banks have in fact achieved exceptional social impact while also surpassing their mainstream peers in financial performance” (Porteous, 2005, p. 1). The Canadian response to this emerging trend is encouraging. In 2004, the federal budget placed a special emphasis on social enterprise as a specific component of the social economy that it wishes to encourage (Government of Canada, 2004). The budget of that year assigned funds to the area and by the fall of 2005, methods were in place to distribute and administer these funds. As discussed in the introduction, developing new ways to become more self-sufficient is an emerging reality for many non-profit organizations. Nonetheless, the challenge of bridging the gap between a new vision of self-reliance to the current operational reality is largely viewed as a difficult, if not impossible, bridge to construct. In many instances, the idea of implementing a vision of self-sufficiency is simply unrealistic. Senge (1990) described this as a creative tension, where the vision is clear but responded to with great difficulty “because we are aware of the gaps between our vision and reality” (p. 150).

Financial Resources and Non-Profits 21 Of significant national interest are the efforts of Aaron Pereira, founder of Vartana Bank, a Canadian charitable organization whose mandate is “to research and develop Canada's first financial institution dedicated to meeting the needs of the voluntary sector” (Vartana, 2006, ¶ 1). Once established, Vartana Bank will provide financial products, advice, and support for Canada's voluntary sector organizations to come together to further control their own future (Vartana, 2006, ¶ 3). In Pereira’s case, Senge (1990) would suggest that he has recognized the creative tension, the gap between the vision and the current reality, and utilized it as a source of creative energy. It is a powerful source of energy that allows us to challenge existing assumptions to reveal the true causes of problems being faced. From a regional perspective, the well-being of our communities is in good hands as financial groups, NPOs, and corporate interests continue to work together to provide significant financial and non-financial support to those working for positive change in our communities: In January 2005, a group of Canadian financial co-operatives, including five credit unions (Coast Capital, First Calgary, Vancity, Meridian and Assiniboine), The Co-operators, CUMIS, Ethical Funds Inc., Concentra Financial and Credit Union Central of British Columbia, with support from Credit Union Central of Canada, joined forces to fund an international scan of best practices, standards and trends in CSR or sustainable finance. (Strandberg, 2005, p. 5) In keeping with international perspective on the growth of sustainable finance, Strandberg’s study (2005) states that the financial services industry “are key to sustainability as they raise, allocate and price capital, and provide risk coverage, influencing access to financing and risk protection and determining which government, business or individual activities get financed or protected against risks” (p.5). In addressing the important role financial institutions can play, the mental models of financial institutions assisting NPOs appears within this research study as limited, from both perspectives. Both NPOs and financial institutions will need to challenge their operational views,

Financial Resources and Non-Profits 22 confronting their assumptions and separate fact from fiction. It is a fundamental step to working together, for if they fail to check out what each other is thinking, “they will be limited to experimenting collaboratively with new ways of thinking” (Senge, 1990, p. 203). Prospera Credit Union’s inclusion into the exploration of these important industry developments will compliment the strong regional connections already enjoyed by them. Their organizational mindset is already entrenched in responsible corporate citizenry. In fact, a cornerstone of their policy is “to develop and maintain a grass roots connection with the communities it serves” (Freund and Potter, 1999, p. 99). As Strandberg’s study points out, many are already contributing resources to meet these objectives and, “it is only a matter of time before CSR goes mainstream with the financial sector” (2005, p. 6). In the midst of developing a new CSR mandate, Prospera is already well-positioned as a community leader to provide a valuable contribution to the efforts of developing and providing support to the voluntary sector. In this regard, non-profit organizations present the greatest analytical challenge. The number of organizations and the social causes they serve are very diverse, and while these organizations have the imagination, commitment, and enthusiasm needed to achieve their goals, they often lack the solid financial infrastructure and advisory support required to expand and sustain their work (Vartana, 2006, ¶ 3). A logical model for the exploration of the growing number of social entrepreneurs was the creation of the Enterprising Non-Profits Program. This Canadian initiative provides grant funding for business planning, organizational development, or technical assistance (Gannitsos, 2003). Although helpful in increasing capacity, successfully analyzing business opportunities and developing socially aligned business plans “is difficult to implement business and/or operational plans without financing to support the initial months of business operation”

Financial Resources and Non-Profits 23 (Gannistsos, 2005, p. 20). Using the common denominator for both interests as the desire to see non-profit organizations become more self-sufficient, this study will explore both perspectives in an effort to better understand the changing roles and their relationship to financial institutions and non-profit organizations. Underlying issues associated with NPOs and this research is substantial as it relates to the norms, values, and beliefs of traditional NPOs and the volunteers who provide the impetus for the work they do. For instance, entering into a financial partnership for the development of a product or service to generate revenue is contrary to the traditional values held by many volunteers. As observed by Gannitsos (2003), “Many still rely heavily on grants or donations, and the idea of borrowing money is not an option” (p. 20). This perspective needs to be explored, as the acceptance or denial of this new entrepreneurial model could be important in understanding the transformational complexity associated with developing new relationships between the non-profit and business cultures. For both sectors, the continued development of relationships and desire to understand one another is the key: “Relationships are the very heart of an organization’s ability to get any job done” (Short, 1996, p. 16). It is typical for individuals to want others to change before they do. Nonetheless, the relational systems between NPOs and financial institutions will remain a challenge until each recognizes that systems and structures are things, and that people are ultimately responsible for how those systems function (Covey, 2004, p. 235). The emergence of Corporate Social Responsibility (CSR), or sustainable finance, is an important trend that is gaining significant international attention (Gannitsos, 2003). Organizational Context

Financial Resources and Non-Profits 24 Prospera Credit Union is a full service community-based financial institution with a rich 62 year history in the Fraser Valley of British Columbia (BC). Today, they have expanded their presence within the province and are currently the 4th largest credit union in B.C., with combined assets of more than $1.8 billion under administration. Operating in B.C. communities from Agassiz to Vancouver and the Okanagan, they stand 60,000 members strong with 17 branches, nine insurance offices, a contact centre, six commercial banking centres and a virtual banking division (Prospera Credit Union, 2005). Governed by a member elected board of directors, Prospera is currently divided into three operational areas, in addition to operating its wholly-owned subsidiary, Ubiquity Bank of Canada, an online virtual bank. The three core functions will be included in the organizational context and include branch, insurance, and corporate operations. Branch interests include administrative duties, investments, lending, supervision and branch management. Insurance interests involve customer service, account management, commercial lines, administration, supervision and management. The generalized corporate duties involve branch operations, the satisfaction of membership, and the engagement of employees. Prospera’s grassroots beginnings were founded during the credit union movement by 14 individuals who came together to combine their talents and resources into one body that served one another and the communities they lived in (Freund and Potter, 1999). In the words of past Chairman Karl Noordam: “The Credit Union movement is a classic example of how this cooperative spirit still thrives in the 20th century” (1999, p. 3). Indeed, Prospera proudly states that “People are not only the strength of our foundation, they are also the stronghold of our future” (Prospera Credit Union, 2005, p. 1)

Financial Resources and Non-Profits 25 Originally started in 1943 as Edelweiss Credit Union, the 14 members founded the organization with assets totaling $58.50. Six years later Fraser Valley Credit Union was established. More than fifty years after that, Edelweiss Credit Union and Fraser Valley Credit Union announced a merger, and in 2001 Prospera Credit Union was founded. Prospera’s vision as a community based financial institution is dedicated to helping members attain financial freedom, through its unique blend of personal hi-touch service excellence and high tech banking products (Prospera Credit Union, 2005, p. 1). Prospera consistently demonstrates their values-based objectives, which include member empowerment, mutual prosperity, and the enrichment of members and communities (Prospera Credit Union, 2005). Through the empowerment of their members they empower the community. Prospera demonstrates the value of empowerment to members annually, sponsoring hundreds of community initiatives and non-profit groups. For example, Prospera was provided title sponsorship of B.C.’s 2nd largest sports facility in Kelowna, B.C., and shortly thereafter backed the new entertainment centre and recreational complex in Chilliwack, B.C., appropriately named Prospera Centre (Prospera Credit Union, 2005). In 2002, Prospera pledged $135,000 to the Gateway to Learning Project, a major initiative within the University College of the Fraser Valley (UCFV) to enhance online access for students, faculty, and community (University College of the Fraser Valley, 2002). These examples represent some of the more evident levels of community involvement, and are strongly indicative of Prospera’s ongoing commitment to maintaining the values upon which its grassroots beginnings were founded.

Financial Resources and Non-Profits 26 CHAPTER TWO – REVIEW OF THE LITERATURE This literature review examines four fundamental topics to create a context for the research question: What innovative financial solutions and resources are required to meet the emerging needs of enterprising non-profits? The literature review examines the themes from the premise of academic study that has already occurred on each of these topics, the scholarly review of current circumstances associated with the topics, and the application of these findings to the major project. The key topics reviewed are: non-profit organizations; the organizational culture of NPOs in relation to financial institutions; the potential associated with corporate social responsibility; and the leadership required to integrate the financial institutions and NPOs. Non-profit Organizations “For significant social change to occur, charities and businesses need to become more each other” (Hirschberg, as cited by Wallace, 2004, ¶ 1). In this review, I will examine the conventional role of the traditional non-profit organization and explore academic dialogue that questions the emergence of enterprising NPOs within the non-profit delivery model. The knowledge gained as a result of this academic exploration on the changing role of NPOs is directly related to the important societal need to continue these services and investigate whether the approach to do so should follow a traditional non-profit delivery model or adopt an entrepreneurial model that presents elements of risk. The reasons for the challenges confronting NPOs are also explored, using scholarly reference to address issues associated with increasing accountability, a growing need for financial self-sufficiency, and heightened service expectations

Financial Resources and Non-Profits 27 from government and the community. Finally, I provide an epigrammatic discussion on the relevance and relationships between this topic and the topic of my major project. Traditional Role “Many nonprofit organizations are feeling less secure about their role in society at the very time when it comes to occupy a more important role, particularly in service provision” (Anheier, Carlson, and Kendall, 2001, p. 1). Although funding and accountability are growing issues that are creating operational uncertainty, the character and spirit of non-profit organizations to address the pressing social needs within our communities remains strong. Their endeavours are designed to contribute to the social fabric of our society and as the sector evolves we must acknowledge the important contributions that NPOs have made. Every part of the world has witnessed an intense growth in the number of non-profit organizations during the last two decades. In fact, over 90% of nonprofit organizations currently in existence were created since 1950. Worldwide, most non-governmental organizations have come into being in the past 30 years. Nonprofits and NGOs are the most rapidly growing types of organizations in the world (Hall, 2001, p.3). The fundamental reason is that these are organizations “whose objectives are primarily to serve the public, act as an expression of collective identity, or represent the interests of particular social groups” (Miller, 1998, p. 3). In 1980, Indonesia had one environmental group; in 1995 it had over 2,000. In Slovakia, citizen groups grew from 10 to over 10,000 from 1989 to 1999. In the United States, non-profit groups have increased from 464,000 in 1990 to 734,000 in 1999 (Anheier et al., 2001). Reporting similar trends between 1960 and 1990, “the number of Canadian registered charities tripled, with particularly sharp rises in those concerned with

Financial Resources and Non-Profits 28 welfare, education, and benefits to the community” (Browne, as cited by Miller, 1998, p. 407). The significance of the increase during the past two decades is partly explained by Drayton (2002) as a prior separation in productivity growth between business and the social half of society. He explained that in the last century, business productivity grew well over 700% as a result of competition and the entrepreneurial spirit. Unfortunately, according to Drayton, the social half of society did not participate in this growth as it was easier to tax the wealth generated by business to build social infrastructure, such as schools and social programming needs. Nonetheless, Pal (as cited by Miller, 1998) explained that the social movements experienced by Canada in the 1960’s and 1970’s were turning points in this regard, as they were significant in the development of NPOs, social programs, and influencing social policy: “Where such organizations did not exist the state saw no difficulty in creating and supporting them” (Miller, 1998, p. 405). Decreased Funding The 1995 federal budget marked a critical turning point for Canadian non-profit organizations as “the federal transfer payments to the provinces were simultaneously restructured and reduced. This, in turn, meant that provincial funds flowing to non-profit organizations would also be cut, or terminated, and restructured as service contracts continued to replace grants” (Miller, 1998, p. 401). Miller (1998) explains that many of the NPOs at this time were “locked in the language and culture of the 1970’s” (p. 405), causing non-profit organizations to lose ground against a backdrop of changing government policy, competition, and ever decreasing budgets. As a result, many were unprepared for funding cuts. In Ontario:

Financial Resources and Non-Profits 29 The [social] sector had experienced cumulatively reduced funding since the mid1980s…it expected something like “business as usual” with the return of the Liberals (Phillips 1995). Instead, agencies were to be faced with a 20 per cent cut in grants for 1995/6, with further cuts, ranging between 10 and 25 per cent for each of the subsequent three years. For some organizations, particularly those concerned with advocacy and public education, this led to the immediate termination of their funding from federal government. (Miller, 2002, p. 409) Addressing the Call of Government and Community What was changing that required the non-profit organization to adapt? The social sector evolved sharply during the past two decades and NPOs suddenly found themselves at a crucial juncture. Nonprofit organizations needed to begin searching for a clearer identity in an effort to try and understand the specific competencies that set them apart from government, a mainstream market economy, and the community. Dees, Emerson, and Economy (2001) identified the period of change as one of heightened expectations of the non-profit sector: The social sector has undergone massive change over the past several decades. Gone are the days of charitable relief -- cash handouts and subsidies that do more to create dependencies in program participants than to prepare them to take on the world themselves. Gone, too, are the days of easy money from government and foundation grants, for which results and accountability were rarely required or enforced. (2001, p. 12). Fortunately the federal government, despite imperfect support, continued to recognize the value of the social sector: “The voluntary sector plays a critical role in strengthening Canada’s communities and, in light of reductions in governments’ role, its importance is increasing” (Government of Canada, 1998a). The first step for NPOs was to recognize the expectations set before them. The second was to accept the challenge of becoming more self-sufficient, accountable, sophisticated and creative in how revenue was generated to meet their social objectives. Thus, the emergence of social economy was represented by organizations that began to produce goods and services on a not-for-profit basis with surpluses going to social or community goals (Strandberg and Plant, 2004).

Financial Resources and Non-Profits 30 Meeting the Expectations Miller (1998) observed a growing critique of NPOs as “unaccountable, unrepresentative, professionalized, ‘special-interest’ groups, who used public funds largely to sustain themselves, and pursued causes that should not be subsidized by government” (p. 401). As a result, nonprofit organizations have begun to explore new ways to deliver services with fewer resources while countering the charge of being ineffective and unaccountable. In their book, Enterprising Nonprofits: A Toolkit for Entrepreneurs, Dees et al. (2001) address current trends in the social sector and the emergence of social entrepreneurism as, “more systemic ways of improving social conditions” (p. 13). In exploring entrepreneurial methodology, the approach taken by some NPOs was to look “beyond traditional activities to the development of new, innovative partnerships that would help build stronger, healthier, and more caring communities” (Voluntary Sector Roundtable, as cited by the Government of Canada, 1998a). Nonetheless, underlying issues associated with the norms, values and beliefs of traditional NPOs and the volunteers who provide the impetus for the work they do presents new challenges. Boschee (1995) observes the traditional perspective of NPOs that mixing of profit motives and the moral imperatives is suspicious (p. 20). For instance, some non-profit organizations allocating financial resources towards the development of a product or service to generate revenue may be contrary to the traditional values held by board members and volunteers. As observed by Gannitsos (2003), “many still rely heavily on grants or donations, and the idea of borrowing money is not an option” (p. 20). Although not for all groups, the rise of the enterprising non-profit and their achievements are hard to ignore. The Emergence of Enterprising Non-profits

Financial Resources and Non-Profits 31 “Once in a rare while, the fundamental architecture of a significant part of society shifts. Over the last two and one-half decades, the organization of the social half of society, led by its social entrepreneurs, has done so” (Drayton, 2002, p. 120). Drayton also suggests that “The changes now in motion have deep roots and have been building for a long time. They draw strength from an historic logic so persuasive that it feels almost like a law of nature." (p. 121). The non-profit sector is changing. Operations within the non-profit sector are becoming increasingly complicated as non-profit leaders face reduced funding, increased accountability measures and the need for lessened dependence on traditional funders, requiring NPOs to become more self-sufficient (Dees et al., 2001). This presents new challenges to the operation of NPOs, whether they are environmental groups, nursing homes, or community service programs; however, it also presents the opportunity for social entrepreneurism that addresses ongoing sustainability of the organization while meeting the NPOs social objectives. Different from business entrepreneurs, social entrepreneurs are distinct in that they set out with definite social mission, basing their success on the extent to which they create social value, not on how much profit they make. For this reason, it is important for NPOs to recognize that current trends in the non-profit sector are calling for innovative solutions that address the shift toward more entrepreneurial delivery models that allow for the sustainable provision of public goods and services (Dees et al., 2001). The federal response to this emerging trend is encouraging. In 2004, the federal budget placed a special emphasis on social enterprise as a specific component of the social economy that it wishes to encourage (Government of Canada, 2004). The budget of that year assigned funds to the area and by the fall of 2005 had entities in place to distribute and administer these funds.

Financial Resources and Non-Profits 32 The social economy transformation occurring represents a deep structural change. Drayton (2002) suggests the social arena has been taken over by independent, competitive, and competent social entrepreneurs who are changing the terms and pace of non-profit service delivery. Still, there are those within government, business, and society who resist social entrepreneurship. Boschee (1995) reminds us that this is uncomfortable territory for some individuals and groups who are concerned that “making money seems to run against the historical grain of ‘nonprofit’ activity” (p. 20). The non-profit sector is indispensable to the ability of addressing societal needs. It plays “a critical role in strengthening communities and, in light of reductions in governments’ role, its importance is increasing” (Government of Canada, 1998a, p. 44). The social entrepreneur offers a vision that looks beyond the traditional activities of the non-profit organization in an effort to not only address social needs within the community, but to do so in a way that increases accountability and provides sustainability to the non-profit. Application to the Major Project Exploring innovative practices and solutions that encourages relationships between financial institutions and non-profit organizations is the foundation of this major project. As cited in the Task Force on the Future of the Canadian Financial Services Sector (Government of Canada, 1998a), the Voluntary Sector Roundtable discusses the changing business environment and asks us, “to look beyond traditional activities and consider new forms of partnership between the financial and voluntary sectors that could help build stronger, healthier and more caring communities” (p. 168). The Task Force (1998a) also suggests that the time is right to examine the relationship between financial institutions and the communities they serve.

Financial Resources and Non-Profits 33 This literature review on non-profit organizations provides us with an important first step in understanding the critical role the non-profit sector has played over time in meeting the needs of our society. It recognizes the value the social movement has had in forming social policy and explored the traditional model for meeting those needs. It recognizes the challenges associated with changing policy and the emergence of new ways to address these concerns. Most importantly, it recognizes that the changing environment is providing an opportunity for NPOs to determine their functional readiness to enter into new forms of connected partnerships that are driven by an entrepreneurial mindset to meet their social objectives. Organizational Culture The purpose of this topic is to explore the organizational culture of NPOs and how the norms, values and beliefs of this culture will support or detract from the understanding or acceptance of working collaboratively with financial institutions in the development of financial management resources and products that support the social objectives of the non-profit sector. Defining Organizational Culture Beginning with the individual and expanding to the organization as a whole, organizational culture is defined by the collectively held norms, values and beliefs of its constituents. More overtly, the fabric of the organizational culture is also influenced by its “formal and informal policies and procedures, methods, practices, and ways of operating" (Anderson and Ackerman-Anderson, 2001, p. 98). These behaviours provide the context within the organization that influence or control how people communicate and interact, and how work is completed within the various work-related responsibilities. The function of organizational culture is to serve as "the basis for role expectations to guide behavior, let people know what is proper and improper, and help people maintain comfortable relationships with each other" (Yukl,

Financial Resources and Non-Profits 34 2002, p. 157). This suggests that being aware of organizational culture helps us understand the working atmosphere, whether positive or negative, and helps us determine how to appropriately respond to the daily circumstances of different organizational settings. Non-profit Organizational Culture Specific to the non-profit sector, functioning as a culture within a milieu of reduced funding and increased accountability measures has complicated the fiscal environment and created new operational complexity. Some of these challenges can be attributed to attempts to adopt more entrepreneurial means of generating revenue to meet non-profit social objectives and, based on the academic literature, this has been determined as a significant cultural challenge within the organizational structure, as most nonprofit organizations are governed and staffed by individuals focused on meeting social purposes that meet the needs of their community. These social missions are often at odds with the competitive realities of generating revenue through a business venture (Oster, Massarsky and Beinhacker, 2004). Rick Aubry (2004) suggests that "bringing a business venture to scale has proved to be one of the most difficult aspects of nonprofit enterprise" (p. 297). He explained the reasons for this lack of integration as embedded cultural and social expectations, "where social worker and community organizing types are often uneasy with the ‘ruthless’ coldhearted analysis undertaken by business managers" (p. 297). The transition, therefore, from the nonprofit mindset to a business perspective is a significant transformation, yet; "having an organizational culture that affirms entrepreneurial approaches to managing the challenge confronting the nonprofit is a crucial success factor to consider" (Dees at al., 2001, p. 137). The potential for internal organizational conflict exists for NPOs trying to address financial challenges with more of a business lens. Explained to a greater extent in their follow-up

Financial Resources and Non-Profits 35 book, Strategic Tools for Social Entrepreneurs, Dees, Emerson and Economy (2002) explain that running a business venture to generate profit requires a culture considered to be at odds with the organizational culture found in many nonprofits (p. 207). They described the level of discomfort felt by nonprofit employees as a concern that the business venture may “inadvertently pull nonprofits away from their core social mission, especially if business success is not directly aligned with the mission” (p. 207). Skeptical of the values and motives of people with business objectives, non-profit employees are also uncomfortable with the language and practices of business, offended by the idea that the non-profit organization is chasing dollars rather than focusing on its social objective. There is also concern that an earned income strategy will detract from core activities and negatively impact the current and future effectiveness of the social mission (Brinckerhoff, 2000; Dees et al., 2002). Where non-profit culture is largely defined by its social mission, the organizational culture of financial institutions is predominantly defined by the calculation of risk and return. David Bornstein (2004), of the Goldman Sachs Foundation recently, and very bluntly, stated that "Banks are willing to take very little risk. As a result, a bank wants to be able to see into the future and have several options to get out of the investment if things go wrong" (p. 134). Nonetheless, community reinvestment provisions or strategies are emerging within financial institutions that focus on assisting social missions, resulting in a "below market return in exchange for some social return" (Bornstein, 2004, p. 135). Integration of Organizational Culture Like leadership, organizational culture is not a function of technique; it is a function of attitudes and ideas (O’Toole, 1996). In keeping with international perspective on the growth of sustainable finance, Strandberg’s (2005) study stated that the financial services industry “are key

Financial Resources and Non-Profits 36 to sustainability as they raise, allocate and price capital, and provide risk coverage, influencing access to financing and risk protection and determining which government, business or individual activities get financed or protected against risks” (p.5). For the research study, it is important to recognize that the project sponsor, Prospera Credit Union, is a full-service community-based financial institution with a strong history of supporting community initiatives and nonprofit groups. As a credit union, they are more attuned to community issues and are also more inclined to become involved as an active stakeholder in supporting the resolution of social issues within community. Membership-based, their Annual Report (2004) states: “Our driving force is the enrichment of our members, and the achievement of their life goals and community legacies” (p. 3). How the community is engaged and the type of support offered is important to the organizational culture of both sectors. As NPOs work towards becoming more financially savvy, their relationship with financial institutions is requiring a more sophisticated level of support. Interestingly, the Federal Task Force recommendations recognize this transformation and recommend increased access to financial services that strengthen non-profit organizations (Government of Canada, 1998c). Furthermore, the Task Force also suggests that the time is right to examine the relationship between financial institutions and the communities they serve: Canadians should have confidence that their financial institutions are contributing to the community in a positive, constructive way. The Task Force also believes that it is timely to examine this relationship because it does not appear to be as healthy as it could or should be. (p. 7) Fortunately, these two differing organizational cultures can overcome the challenge of collaboration and indeed work together towards mutually beneficial outcomes. The question becomes one of determining what the relationship will be based on to create a foundation that allows for the exploration of overlapping benefits.

Financial Resources and Non-Profits 37 Anderson et al.. (2001) note that a difficult relationship can be made worse by the stress of entering into unknown territory together. In respecting organizational culture, one must also respect the human dynamics. Amid the uncertainty of the new relationship, these dynamics require development of a process to deal effectively with the unfamiliar territory experienced by the individuals. As explained by Covey (2004), the reason problems arise in such situations is because of the lack of systems or structures – a process. As Covey (2004) further explained, systems and structures are simply things. They are created by people who are ultimately responsible for those systems and “all organizations get the results they are designed and aligned to get” (p. 235). Consequently, the importance of process is that it provides the support the organization needs as the future is determined. Structure follows purpose; yet, as the organization evolves so must the individuals and the plan must also include personal transformation strategies. These will generally include personal growth plans, patient dialogue, appreciative inquiry, coaching, teambuilding, bench-marking growth experiences, and regular communication (Anderson et al., 2001). This topic explores the importance of recognizing cultural challenges to a non-profit organization’s norms, values and beliefs while working collaboratively to support development of resources that will help non-profit organizations become more financially self-reliant. Furthermore, it identified that there are expectations of financial institutions to respond in a leadership role that helps strengthen the abilities of non-profit organizations. Lastly, it determines this relationship must have a defined process that aligns shared values to shared objectives and that it will be most effective if this relational growth also includes personal transformation strategies.

Financial Resources and Non-Profits 38 Corporate Social Responsibility “To create new realities, we have to listen reflectively. It is not enough to able to hear the chorus of other voices; we must also hear the contribution of our own voice” (Kahane, 2004, p. 83). A new standard of corporate performance is emerging that encompasses both ethical and financial dimensions. In the midst of the misdeeds of Enron, Worldcom, and several other U.S. companies, a fundamental shift in values is colouring what we think of corporations and how we expect them to conduct their operations (Paine, 2003). These new standards of performance are consolidated into what is commonly referred to as corporate social responsibility (CSR). Although there is no definitive meaning of CSR, it generally refers to an enduring commitment to operate in an economically, socially, and environmentally sustainable manner (Canadian Business for Social Responsibility [CBSR], 2001). For many corporations, the implementation of CSR is a relatively recent phenomenon and there are varying reasons for why it is being adopted. In the boardroom, opinion is divided on the merits of CSR, with some corporate leaders believing it is nothing more than social rubbish, while the general public is largely ignorant of CSR and would likely be amazed at the efforts of companies that make becoming socially responsible a priority (Hilton and Gibbons, 2004). The CBSR (2001) explained that for small and medium-sized businesses, the choice to be a responsible corporate citizen is often the core philosophy of the owner and their desire to operate responsibly. This focus is typically fundamental to whom they are and affects decisions at all levels of the business; determining what a business does and how the business does it. For large corporations, the interest in being a responsible corporate citizen appears to have grown

Financial Resources and Non-Profits 39 “out of a recognition of CSR as a strategic imperative” (CBSR, 2001, p. 11). This implies that CSR is not at the heart of larger companies, but is part of the corporate identity that influences business practices. It also indicates that corporations are beginning to understand the internal and external benefits to the business, measured in both social and economic gains (CBSR, 2001; Greider, 2003; Hart, 2005; Kanter, 2001). Coming to the realization that there are benefits to commerce with a conscience is a significant change from the traditionally profit-centric bottom line perspective. The realization that CSR has commercial advantages may dishearten the values-based purist; however, the advantages of improved corporate standards far outweigh the traditionally single-minded motive of earnings per share. As supported by Hilton and Gibbons (2004): “either way, the overall outcome is better for society and better for business” (p. 54). As stated, the corporate benefits are felt both internally and externally and are manifested as “a function of processes and practices as well as products” (Cohen, as cited by Hollender and Fenichell, 2004, p. 11). The primary internal benefits of CSR to the business include improved morale, resulting in increased productivity, higher operational effectiveness, and improved communication. It is also important to point out that several studies convincingly demonstrate that there exists a profitable connection between socially responsible business and long-term shareholder performance (Greider, 2003; Hart, 2005; Hollender and Fenichell, 2004). Citing Paine (2004), Hollender and Fenichell emphasizes the bottom line benefits of CSR by citing the empirical evidence of Lynn Sharpe Paine and her recent review of 95 academic studies, of which 55 found “a positive correlation between better financial performance and better social performance” (p. 30).

Financial Resources and Non-Profits 40 The external benefits to the corporation also provide compelling arguments supporting the adoption of CSR best practices. Foremost amongst the academic literature, the external benefits most observed include increased customer loyalty, market differentiation, and an enhanced civic positioning (CBSR, 2001; Paine, 2003). Building loyalty is a complex undertaking with significant benefits to the business. A socially responsible business is perceived as “earning that loyalty and building trust with transparency and communication” (CBSR, 2001, p. 19). Although loyalty is often measured by community and other stakeholder support, CBSR research findings additionally state that a company will also strengthen internal loyalty through work that aligns with the employees values. With this improved corporate culture, attracting high quality employees and maintaining staff was another key loyalty building benefit of CSR (CBSR, 2001). Achieving market differentiation was recognized as a key benefit when guided by socially responsible corporate values. The importance of values in shaping corporate identity and reputation, developing brand identity, and earning the trust of customers, suppliers, and other business partners are important determinants in positioning the company amongst its competition (Paine, 2003). When considering the business case for the importance of CSR in market development, a common observation of business owners is that it “provides a competitive edge for their product or service” (CBSR, 2001, p. 18), resulting in increased financial benefit. When the community is viewed as an important stakeholder in the operational direction of a company, it enhances its civic positioning. Building relationships within the community fosters an awareness that is sensitive to the community’s culture and needs. The motivating factor appears to be less focused on economic considerations, and although meaningful community connections have a demonstrated effect on the company’s standing and reputation in

Financial Resources and Non-Profits 41 the community, the behaviour appears to be more focused on making the community a better place to live and conduct business (Paine, 2003; Goodell, 1999). Fully aware that their actions were felt by the community-at-large, this behaviour is viewed by the as a model for other businesses to follow (CBSR, 2001, p. 20). In contrast, there are several points of view that conflict with the belief that business has any moral obligation to society beyond their duty to maximize profits within the confines of the law (Hilton and Gibbons, 2004). The prevailing themes of those who question the role or function of CSR in business activities often include a refusal to accept any social responsibility that goes beyond the obligation to shareholders. There is also a question of legitimacy and motives of those who espouse themselves as good corporate citizens. This is based on the suspicion that it is simply hype, public relations or window-dressing to make the corporation look good through a few environmental or social initiatives as a means to generate positive public attention (Hilton and Gibbons, 2004; Hollender and Fenichell, 2004). Other views at odds with integrating CSR into the corporate world include the belief that CSR is a substitute for more effective government regulations (Hollender and Fenichell, 2004). The concern here is that corporate provision acts as a substitute to government provision (Hilton and Gibbons, 2004). From a monetary perspective, there is a cost-based opinion that CSR focuses the business on unaffordable luxuries that are “undermining the commercial performance of corporations by saddling them with unnecessary costs” (Hilton and Gibbons, 2004, p. 70). More of a drawback than a criticism, even when there is a corporate desire to become more socially responsible, it is a difficult process for today’s company as it requires the development of a business case to satisfy the multiple stakeholders. Should the stakeholders be satisfied, there

Financial Resources and Non-Profits 42 still exists the significant challenge of integrating and aligning the various best practices into the fabric of the business (CBSR, 2001). For some, the adoption of values needs no corporate justification. It is not about becoming a bigger, more profitable company; it is about becoming “a better company, a more values-driven company” (Roddick, 2005, p. 253). However, for most companies today, even if the formalization of a CSR mandate is not rationalized using commercial advantages, the literature suggests it is more palatable if supported by a strong business case. With so many CSR case studies demonstrating improved risk management, better morale and productivity, superior market position and enhanced civic standing, it is becoming an easier case to make. Nonetheless, Paine (2003) cautions us that businesses who view CSR as a financial strategy are misunderstanding the values proposition (p. 133). CSR is an important tool for connecting the corporate world with broader community issues. Many NPOs are addressing an overwhelming multiplicity of social issues and the emergence of corporate interest is a welcome adjunct to an already difficult task. A true benefit of CSR is that it creates a common framework and language for the two sectors to come together. It opens the door to dialogue that reflects the social imperatives of the community and allows the corporate citizen to act on its stated values. Indeed, action is the critical difference between the traditional approach of making a charitable donation to a worthy cause to the new paradigm of wanting to find ways to be actively involved to make a difference. To the benefit of all involved, when a company approaches social needs in this way, “they have a take in the problems, and they treat the effort the way they would treat any other project central to the company’s operations” (Kanter, 2001, p. 156).

Financial Resources and Non-Profits 43 The recent commitment by Prospera Credit Union to develop a corporate social responsibility mandate represents an attentive understanding of their community-based membership; their clientele. It is also indicative of how their organizational objectives can be strategically aligned to improve their financial performance while meaningfully connecting to and supporting the social objectives important to the communities in which they operate. The significant challenge identified as a result of the research was interfacing and integrating objectives across both the non-profit and financial sectors and it is expected the CSR initiative of Prospera will give both sides a values-based language and framework familiar to both, upon which the integration of shared social objectives can be developed. Recognizing that every community is different and that there is “no generic prescription for social responsibility” (Goodell, 1999, p. 2), any focus external to Prospera will require dynamic leadership that is capable of balancing the interests of multiple stakeholders. Organizational Leadership “The art of leadership requires us to think about the leader as steward in terms of relationships: of assets and legacy, of momentum and effectiveness, of civility and values" (DePree, 1987, p. 13). In addressing the responsibilities of leadership, Max Depree (1987) espoused that people "are the heart and spirit of all that counts. Without people, there is no need for leaders" (p. 13). In the context of exploring relations between nonprofit organizations and financial institutions, leadership collaboration from both sides will play a vital role in how these two organizational perspectives come together into an alliance to meet with changing financial resource needs of the nonprofit community. It is not possible to place the onus of leadership on one or the other; it is a mutual responsibility that recognizes the importance of what each perspective contributes to the

Financial Resources and Non-Profits 44 relationship and to how this is a mutual benefit. In my opinion, relationships begin through the identification of common interests and respectful appreciation. A relationship that transcends this standard to work together towards effecting positive change can only happen when the common elements of values and purpose of each is in alignment. In this review I will examine the responsibilities and characteristics of organizational leadership within the academic context of values-based leadership theory. I will explore how this framework allows for the encompassment of both moral and financial dimensions as a result of collaborative development that is mutually beneficial to both NPOs and financial institutions. Within this context, I will also take into consideration complimentary and contrary academic theories. In examining leadership philosophies within the non-profit sector and with the project sponsor, a shared desire to service the community in a responsible and sustainable manner can be clearly identified within the social objectives of the non-profit, and the operational mandate of the project sponsor. These observations are firmly planted in the ground of commonly held values. And although it can be argued that there is not one best approach towards effective leadership, there is significant quantitative and qualitative data to suggest that values-based leadership makes a difference to the realizable potential of any organization. In the words of James O’Toole (1996), “there is no alternative to the practice of values-based leadership” (p. 79). To understand the values-based leadership approach, one must understand and deal with the prime motivators of constituent behavior that determine performance. These motivators include norms, values, and beliefs. In my opinion, a leader who is consciously and emotionally aware of this relationship has a better understanding of the content and strength of the

Financial Resources and Non-Profits 45 organizational culture and is able to build a vision with the commitment and cooperation necessary to create an environment for success. Although the importance of creating and having a vision is a common theme within most leadership philosophies, it is my opinion that this is often a leadership pronouncement devoid of “consensus around shared values” (Kouzes and Posner, 2002, p. 80). A more pragmatic perspective might counter that as organizational leaders, a non-profit executive director (ED) or credit union manager provides the operational context and purpose for its personnel. However, it is the assertion of Kouzes and Posner (2002) that regardless of the context, “strategies, tactics, skills, and practices are empty without an understanding of the fundamental human aspirations that connect leaders and constituents” (p. 23). In building a vision, "One is hard-pressed to think of any organization that has sustained some measure of greatness in the absence of goals, values, and missions that become deeply shared throughout the organization." (Senge, 1994, p. 9). In the absence of a vision that does not have consensus on shared values, individuals become confused about what they should be doing and how they should be operating. Furthermore, leadership and constituent values may be incongruent, causing the loss of personal effectiveness and productivity (Kouzes and Posner, 2002). This scenario is an inherent failing of organizational leadership that does not incorporate constituent input and is likely to result in a crisis situation. Diametrically opposed to values-based leadership is the contingency philosophy. The theory suggests that “How the leader acts to effect change will depend on the situation” (O’Toole, 1996, p. 106). O’Toole (1996) also suggests that few leaders are successful at leading change because so many are adherents, either consciously or unconsciously, of situational

Financial Resources and Non-Profits 46 leadership. The reasons for being unsuccessful are that situational leaders need a situation to arise before they can apply their leadership solution. When leaders take a reactive approach, they respond automatically and unconsciously to the dynamics of transformation based on their conditioned habits, existing knowledge, and dominant leadership style. Their lens is filtered, causing critical people and process dynamics to go unseen. They can only apply their old management techniques, because their limited awareness offers them no other possibilities. (Anderson and Ackerman Anderson, 2001, p. 52) This very reactive approach is often in response to a crisis. When we are being reactive versus proactive, “the situational leader does not know where to look, what to look for, or how to look – because they do not believe that such things are even there to be discovered” (O’Toole, 1996, p. 108). In my opinion, the missing component is a values-based point of reference. Taking the time to build and affirm collectively held values and beliefs of a group or organization before a situation arises “give(s) purpose to your daily decisions” (Kouzes and Posner, 2002, p.394). This is the point of reference that allows a leader or constituent to make a decision without wondering what the decision depends on, as in contingency theory. Kouzes and Posner (2002) address the power of shared values as a common language upon which “tremendous energy is generated when individual, group, and organizational values are in synch” (p. 78). Values-based leadership also shares commonalities with the theories of transformational and servant leadership. Transformational leadership “appeals to the moral values of followers in an attempt to raise the consciousness about ethical issues and to mobilize their energy and resources to reform institutions” (Yukl, 2002, p.119). Servant leadership “encourages collaboration, trust, foresight, listening, and the ethical use of power and empowerment” (Greenleaf, as cited by the Greenleaf Center for Servant Leadership, ¶ 1). As a result of these commonalities, I posit that the fundamental difference between these three philosophies and the

Financial Resources and Non-Profits 47 theories of contingency, relativism, and realism, which are generally aligned with the pursuit of self-interest, are the significant long-term benefits of knowing at any point in time what to base your actions on, namely the shared values of the organization. This is not only a qualitative philosophical difference, but an important quantitative benefit where “there’s actually a logarithm that predicts that relationship: For every 1 percent improvement in the service climate, there’s a 2 percent increase in revenue.” (Spencer, as cited in Goleman et al., 2002, p. 15). This paper, presented in 2001 by Lyle Spencer at the meeting of the Consortium for Research on Emotional Intelligence in Organizations, quantifies that improvement in the service climate drives increases in revenue. According to Kouzes and Posner (2002), “Leadership decisions based on the collective values of the organization are investments in the organization's future” (p. xix), and “when there's congruence between individual values and organizational values, there’s significant payoff for leaders and their organizations" (p. 79). As it relates to the values of strong morale and effective interrelationships, contingency, and oft compared realist and relativist leadership styles, appear to garner short-term corporate results as a consequence of using a variety of leadership styles determined on a situation by situation basis. Perhaps more damaging, this inconsistency negatively affects the credibility of the leader. This credibility is based on their perceived trustworthiness, expertise, and dynamism, and when credibility is low, productivity, motivation, and dissatisfaction are significantly higher (Kouzes and Posner, 2002). In addressing the preferred leadership styles and their meaning, it is important to also understand the characteristic traits and competencies that are required as a leader to gain commitment from your constituents. Yukl (2002) summarized the requisite skills for leadership success as “cognitive complexity, emotional and social intelligence, self-awareness, cultural

Financial Resources and Non-Profits 48 sensitivity, behavioral flexibility, and the ability to learn from experience and adapt to change” (p. 79). For leaders in non-profit and financial institutions who are trying to explore new ways of working together, utilization of these skills begins with self-awareness and an honest reflection and understanding “of one’s emotions, as well as one’s strengths and limitations and one’s values and motives” (Goleman et al., 2002, p. 40). In this context, these two groups can bring forth the best of themselves and the requisite skills mentioned previously to create an environment open to interaction with individuals. Short (1998) abridged this perspective with his statement: “At the heart of our expertise is awareness” (p. 3). This awareness also allows us to “respond to the expectations of our constituents, underscoring the point that leadership is a relationship and that the relationship is one of service to a purpose and service to people” (Kouzes and Posner, 2002, p. 27). Relationships and an emphasis on interconnectedness appear to be driving forces, or at the very least, values that are being revisited in organizations today. As such, it is predicted that the economy of the new millennium, fluid and technologically driven, will be based on creativity and relationships. (RRU, 2005, p. 3) Yukl (2002) suggests the foundation of these skills lies in our cognitive ability and that these conceptual skills include “analytical ability, logical thinking, concept formation, inductive reasoning, and deductive reasoning” (p. 71). These skills represent conscious reasoning, and to support the importance of relationships, must be united with the appropriate mix of interpersonal skills (Yukl, 2002). Conscious reasoning enjoys the support of most traditional and modern management theories; however, the importance of interpersonal skills should not be underestimated: “Deficiencies in interpersonal skills were a major reason for managers who eventually derailed in their management careers" (CCL Study, as cited by Yukl, 2002, p. 73).

Financial Resources and Non-Profits 49 The fundamental interpersonal skills include emotional intelligence, social intelligence, and the ability to learn. Emotional intelligence allows us to understand our own feelings and the feelings of others. Social intelligence is the ability to determine the requirements for a particular situation, while selecting an appropriate response. The ability to learn allows us to analyze our own cognitive processes (Yukl, 2002). In recognizing values-based leadership as a leadership approach that is the key to a successful relationship between NPOs and Prospera, it will be important for the representatives to clarify and be aware of the principles that govern their organizations. It will be these principles will serve as the point of reference in the uncertain times that are all too prevalent in organizational settings. In managing relationships Goleman et al. (2002), suggests that “managing relationships skillfully boils down to handling other people's emotions" (p. 51). This approach recognizes values-based leadership as a philosophy that has a constant moral reference point when applying conscious reasoning to a leadership situation. It negates situational thinking, for if it all depends, what does it depend on? For non-profit organizations and Prospera, it will depend on a collaborative process to identify the collectively held values held within each organization, along with the relational skills to build common objectives and workable strategies to achieve those objectives. Summary In this literature review I have discussed the conventional role of the traditional nonprofit organization and the emergence of enterprising non-profits within the non-profit service model. In the context of this emergence, the changing nature of non-profit service delivery and its effect on the organizational culture of NPOs was reviewed. The topic of corporate social responsibility was explored to analyze how the fundamental shift in corporate values could serve

Financial Resources and Non-Profits 50 as a common philosophy and integration mechanism to bring together Prospera Credit Union and non-profit organizations in a mutually beneficial relationship. The final topic of leadership examined the different philosophies of leadership, settling on values-based leadership as the most appropriate approach to achieve a healthy integration.

Financial Resources and Non-Profits 51 CHAPTER THREE – CONDUCT OF RESEARCH Introduction In community-based action research, the role of the researcher is not that of an expert who does research but that of a resource person. He or she becomes a facilitator or consultant who acts as a catalyst to assist stakeholders in defining their problems clearly and to support them as they work toward effective solutions to the issues that concern them. (Stringer, 1999, p. 25) This study was conducted to create a greater understanding of what innovative financial solutions and resources are required to meet the emerging needs of enterprising non-profits. I encouraged these research participants to share their experiences within the realm of their organizational financial management capacity while also assessing their entrepreneurism and current level of access to financial products, services and resources. The insights provided by the non-profit leaders who participated will be used to inform Prospera Credit Union on ways to better serve the financial needs of non-profit organizations. The study also intended to create new knowledge that may be used to inform future policy relating to Prospera’s developing corporate social responsibility initiative. The methodology applied to this study was action research using a mixed approach that incorporated both qualitative and quantitative data analysis. Research Approach There are many different definitions of action research, which appear to be conceptualized through different scholarly viewpoints. However, understanding what distinguishes action research from other forms of research is the “process of inquiry” (Stringer, 1999, p. 5). He defined research as a meticulously thorough examination that helps those involved to understand the characteristics of the current challenges being faced, with three fundamental characteristics: a problem being examined; the process of examining and; an explanation that helps us identify with the nature of the problem (Stringer, 1999).

Financial Resources and Non-Profits 52 Generally speaking, all forms of research exist to investigate problematic events or phenomena; however, it is the process of inquiry that distinguishes the form of research. At the end of the investigation are the explanations that enable us to understand the nature of the problem. For instance, on its own, quantitative methodology would not employ a process that is concerned about “underlying value system[s], including norms and conflicts which may be at the core of problems identified” (Holter and Schwartz-Barcott, as cited by Morton-Cooper, 1993, p. 20). It is my opinion that these are the characteristics, in addition to an inclusive process, that distinguishes action research from other forms. To further support the mention of an inclusive process, I believe we are tasked as researchers with the function of assisting stakeholders to define their problems and help them develop solutions that overcome issues (Stringer, 1999). This was particularly evident in this study, as I worked to understand the perceptible divide between non-profit’s and their financial institutions. Furthermore, because the fundamental approach of action-based research is that "cooperation and consensus making should be the primary orientation of research activity" (Stringer, 1999, p. 21), it was imperative to make the effort to be as inclusive of the stakeholders, the NPOs and Prospera, as was possible. The end result of this collaborative approach allowed the representatives of both to define the complex challenges facing them, which then allowed us to develop a systematic approach that helped address the problems (Berg, 2005, p. 197). Research Methodology This community-based action research approach primarily used a qualitative data gathering method, though quantitative methods were also used to provide measurement and ratings within the online questionnaire. The quantitative data gathering methods provided factual and measurable information to address specific finance, resource, and organizational planning

Financial Resources and Non-Profits 53 questions. Within the context of the project sponsor, a financial institution, the use of both qualitative and quantitative data gathering methods added credibility to the findings and presented perspectives that would not be entirely possible by using a single approach (Palys, 2003). As stated by Palys (2003), the benefits of incorporating both types of data were beneficial to the research, as it not only allowed me to explore the qualitative experiential finance-related challenges, the quantitative approach allowed me to determine what the variables were for each organization. In order to determine what forms of financial products and services were required to meet the emerging needs of non-profit organizations, four distinct areas were researched and reviewed. The first area was to determine what the present financial needs of NPOs were and how those needs could be most effectively addressed. The second area examined how Prospera Credit Union, as a financial services institution, can serve in a leadership role to develop the appropriate financial services to suitably attend to these emerging needs within the third sector. The third area of research assessed the organizational proclivity of both parties to utilize newly developed financial approaches through an introspective assessment of organizational culture. The use of these multiple information-gathering approaches contributed to the trustworthiness of the data (Glesne, 1999) and were used for the final stage where associations were drawn using the results of the first three steps. From the results, recommendations emerged that are designed to inform the development of the new policies to be integrated into the corporate social responsibility mandate of Prospera Credit Union, which is under development as of the date of this publication. The intent of this policy development will work to close the gap identified in the literature review between the current and desired financial resources appealed for by enterprising

Financial Resources and Non-Profits 54 non-profits. It will also serve to fulfill the desire of Prospera to re-connect their corporate perspective to their social, or cooperative, interests in the communities they represent. The course of action abided by the cyclical nature of action research outlined by Jeffrey Glanz (1998). As shown in Figure 1, the action research approach developed for this research project included four steps, in addition to enriching the steps through continual reflection and adjustment.

1. Focus

Ongoing Reflectio 4. Take Action n& Adjustme nt 3. Analyze & Interpret Data 2. Data Collection

Figure 1. A Four Step Action Research Approach (Adapted from Glanz, 1998) The four steps were: 1. Selecting a Focus a. Knowing what you want it investigate b. Question development c. A plan to address the questions 2. Gather Data 3. Analyze and Interpret Data a. How the data is collected and how it will be analyzed to determine the possible answers to the research question

Financial Resources and Non-Profits 55 4. Take Action a. The action phase addresses the challenges and accomplishments involved with the development and implementation of a collaborative action plan During all stages and prior to implementation the research team collectively reflected and adjusted their analysis to ensure the recommendations reflected the most effective solutions available in addressing the research problem. Tools The research study used unobtrusive data gathering activities as well as interactive data gathering approaches: Unobtrusive Tools The unobtrusive data gathering for the research project originated with the literature review (Chapter 2), where archival studies associated with the more recent financial challenges identified by enterprising non-profits was completed. To further inform the unobtrusive data gathering approach, data was collected through personal notes resulting from preliminary research discussion with the project sponsor and the research advisory team. This approach allowed me to capture personal thoughts and various anecdotal data, such as comments, questions, or assumptions made by all research participants. Interactive Methods Utilizing the unobtrusive data gathering results, a preliminary assessment of limitations specific to financial resources, as well as possible solutions was theorized. This data and the proposed theories were shared and reflected upon by the research advisory team for further refinement and eventual use in the composition of questions for the online questionnaire and the individual interviews.

Financial Resources and Non-Profits 56 Questionnaire The questionnaire was a mixed method of 33 closed and open-ended questions (see Appendix A). The questionnaire was made available through an online invitation (see Appendix B) that required acknowledgment of informed consent prior to completing the questionnaire. The goal of the questionnaire process was to develop a context that eventually informed NPOs and financial institutions about the different perspectives they hold. As stated by Stringer (1999): The major purpose of the process is to achieve a higher level of synthesis, to reach consensus where possible, to otherwise expose and clarify the different perspectives, and to use these consensual / divergent views to build an agenda for negotiating actions to be taken. (p. 45) Within the online questionnaire were three main categories, defined as: organizational information, organizational leadership, and non-profit financial information. The questions asked were dichotomized into sub-categories that explored four areas related to organizational selfsufficiency, organizational capacity, the acceptance levels of blending business-like revenue generation with social objectives, and the general acceptance of capitalization of programs or services through structured loan or investment products. Incorporated into the online questionnaire, this framework helped to establish the different assumptions, values, attitudes, and beliefs that form the understandings and realities held by the participants and the organizations they represent. Furthermore, they established the foundation for the development of the individual interview questions, which allowed me to further examine and refine a number of online questionnaire findings. Individual Interviews The individual interviews were a one-on-one guided discussion involving seven EDs or managers. Prior to the interviews, I informed the participants how I would use the information in this research and that their participation was confidential. I also asked them to keep confidential

Financial Resources and Non-Profits 57 the conversation that occurred during the interview session. Before using the tape recorder, I informed the participants of its use and asked for their consent. I also informed them that they could abstain from questions or withdraw from the interview at anytime without prejudice. Upon providing this information the participants were asked to provide their written acknowledgement of having received this information on the informed consent form (see Appendix C). The interviewees responded to seven questions, each having three to five additional subquestions (see Appendix D). All the questions related to findings within the online questionnaire and were designed to further inform the research question and sub-questions. Serving as interviewer, the interviews were conducted in person or on the telephone, depending on geographic location and availability of the interviewee. For the in-person interviews I utilized a tape recorder, as well as capturing key notes on each response to the questions. This allowed me to maintain the conversational nature of the discussion while drawing out and ensuring a comprehensive and balanced level of contribution from the interviewee. The maximum allotted time for all the interviews was 45 minutes. The in-person interviews were held in locations sensitive to the geographic disposition of the individual involved. Phone interviews followed the same approach with the exception of recording equipment. This required a hands-free speaker phone, which allowed me to take extensive notes. The interviews addressed “a particular topic of interest or relevance to the group and researcher” (Edmunds, as cited by Berg, 2004, p. 123). The questions that guided the topic of conversation were designed around the research proposal and the aggregate data distilled from the completed questionnaires. The questions themselves were developed in collaboration with the research advisory team based on the collective analysis of the interview data. The individual interview questions refined certain generalized findings within the online questionnaire and

Financial Resources and Non-Profits 58 provided data rich in views that provided insight on the norms, values and beliefs of the organization and their relation to financial institutions. Through analysis I extracted questions, observations, and assumptions that were explored during the interviews to distil a greater understanding of what actions were needed in order for NPOs and the credit union to come together with a common understanding upon which recommendations can be made. This approach allowed me to hold a rich exploration of the stated beliefs, attitudes or opinions of potentially divergent perspectives without identifying the original questionnaire respondents. Patton (1997) supports the use of a one-on-one research approach, stating “the best way to ensure pertinence and responsiveness is thorough direct interaction with evaluation clients or stakeholders, facilitating their making decisions to represent their needs and interests” (p. 247). This took the focus and potential pressure away from a group setting and allowed for an unimpeded exploration of the stated opinions; opinions that may have originated from the questionnaire but remained anonymous as it was raised with the interviewee. Research Conduct In order to implement the action research approach outlined above, careful engagement of the processes was required as the potential for disturbing conscious or unconsciously aligned social settings was a risk. Asking individuals to participate in a research study is not a common occurrence and as outlined by Stringer (1999), “we are likely to engage approaches to work and community life that are at odds with the general conventions of the institutions and agencies that formulate the setting for much of our activity” (p. 62). Balancing these situations while performing action research required a clearly defined process for implementing the study. My approach incorporated and followed the principles established by Stringer (1999) in order to build a clear understanding of the research focus while

Financial Resources and Non-Profits 59 developing critical relationships and trust that helped the participants move to a deeper perspective on their organizational situation as it related to the research question (p. 62). With a clearly articulated concept proposal as my discussion tool, I defined the purpose of the research to familiarize the participants with the research context. The process for establishing a connection with the appropriate research subjects required me to introduce myself via e-mail. The participants were identified through their networked connection to the Fraser Valley Centre for Social Enterprise, and were categorized based on the size of their operational budget and social objective focus. I approached the EDs within these organizations and asked for their involvement in the research (see Appendix B). During this process, I clearly established my role as researcher, my position or bias as it related to the research and the individuals I asked, as well as establishing the roles and expectations of the research participants. All groups contacted who were willing to participate in the online questionnaire were also asked to participate in the individual interviews. The interviewees were selected based on the sub-categories outlined in Table 1 below, plus their interest and availability to participate in an interview. Prior to completing the questionnaire, the participants were required to read and acknowledge the free and informed consent page within the e-mail invitation (see Appendix B). The acknowledgement of the informed consent was structured into the questionnaire as Question 1, which was a required response acknowledging consent. The online questionnaire would not allow the participant to proceed without acknowledging this consent. While the questionnaires endeavored to ascertain the norms, values and beliefs of the organizations as they relate to the potential utilization of financial products and services to nonprofit organizations, the individual interviews explored the observations and assumptions

Financial Resources and Non-Profits 60 resulting from the questionnaire in an effort to determine the general levels of understanding and acceptance of such a relationship between NPO’s and financial institutions. Data Analysis The data analysis phase of the research project was where I began the process of organizing what the research advisory team and I observed, read and heard. As important stakeholders in the analysis process, the intent was to collectively interpret the information gathered to extend “their understanding of what is happening and how it is happening” (Stringer, 1999, p. 89), moving towards valued interpretations that resulted in a report that makes meaning of what has been learned while allowing for significant action on the issue being investigated (Stringer, 1999). During this process I worked with the research advisory team to identify and describe patterns, create explanations, pose hypotheses, develop theories about the data, and link all the various components. This required categorization, synthesis, pattern making and interpretation (Glesne, 1999). Kirby and McKenna (1989) talked about data analysis techniques that can be used to make meaning of my data: The general analytical design consists of examining how data items and groupings of data items generate specific and general patterns. This is done primarily through the constant comparison of data items with other data items until sections that ‘go together with’ or ‘seem to help describe something’ can be identified and located together in a category file. (p. 130) Based on the approach proposed by Kirby and McKenna (1989), I developed electronic tags for the various components of the data to begin to map the themes and their connections, “moving back and forth, between data and concepts, and between individual ideas and research explanations to fully describe and explain what is being researched” (p. 129).

Financial Resources and Non-Profits 61 In order for the analysis to be manageable the data was divided into portions initially based on the research question and later into bibbits. Kirby and McKenna (1989) suggested this process and refer to it as: “The continuous process of comparison and linking of bibbits [that] helps researchers to understand the specific and overall properties, patterns and relationships between data and between groups of data. These form the initial bases of the analysis” (p. 135). Once these bibbits were ascertained, I was able to define the connections and interpret how these connections related back to the research question. After this information was assembled, I utilized a data display approach to incorporate participant feedback into the analysis of the qualitative work (Glesne, 1999). In order to make meaning of the data, presenting it to the research advisory team helped to identify the elements that reflected potential cause and effect, which “permits conclusion drawing and action taking” (Miles and Huberman, as cited by Glesne, 1999, p. 141). This allowed me to further theorize, map and develop themes that informed the research question. The intent of this approach was to develop trustworthiness and a belief in the outcomes that created a sense of ownership in them. This was important as the research then had greater potential to be used and expanded upon within the organizational context being researched. The coding references were assigned to the research participants based on their involvement with either the questionnaire or individual interview. For example, those participants in the questionnaire received a code that began with the letter ‘Q’, indicating a questionnaire participant, and were also assigned a numeric identity. For instance, the second questionnaire participant that completed the questionnaire was assigned ‘Q2’. In order to reference specific data, I added the number of the question to their personal tag, in addition to a number designating which respondent within the question was associated with the specific

Financial Resources and Non-Profits 62 individual. I had to add this last designation, as not all respondents filled out every question, and I had to be able to associate the individual to the appropriate response for each question referenced. For example, Q2-27-1 tells me I referenced the second questionnaire respondents statement in question 27, and the response happened to be the first comment. The coding for those participants that were involved in the individual interview process received one code that superseded the questionnaire code. This designation was also genderbased, and was either an ‘F’ or an ‘M’. The second reference tag associated with their designation told me whether I was referencing their questionnaire response, as in the questionnaire, or if I was referencing their individual interview. The third tag tells me if I am referencing a specific questionnaire comment, or a page number in the summation of the interview. For example, F3-27-12 tells me that the third individual interview participant, being female, is being referenced on Question 27 of the questionnaire, specific to comment number 12. If the code was F3-S-4, I was referencing a statement made on page four of the individual interview. Project Participants For the online questionnaire, the research participants were largely representative of nonprofit organizations in British Columbia; however, 37 total responses were received from provinces across Canada. Response rate is discussed below in Chapter 4. Non-profit organizations are diverse in their purpose and structure and to ensure the adequate representation of this diversity in the subsequent interview process, nine non-profit organizations within the group of respondents were selected and classified into three groupings based on their reported operational budget levels and social objectives. As identified in Table 1, the categorization was determined by classifying the social objectives of each organization into health, marginalized,

Financial Resources and Non-Profits 63 and poverty related reference groups. Their operational budget classifications were assessed as those with an annual operating budget of less than $250,000; $250,001 to $500,000 and; greater than $500,000. Table 1 Categorization of Non-profit Organizations for Research Selection Purposes Annual Operating Budget Health Marginalized Poverty < $250,000 $250,001 to $500,000 > $500,000 Group A Group D Group G Group B Group E Group H Group C Group F Group I

In every instance the NPOs were represented by the ED or manager equivalent. The selection was also based on expressed interest, availability, experience, knowledge and appreciation of the research process. Applying Stringer’s (1999) criteria for inclusiveness, this level of stakeholder involvement with individuals from each of these representative groups ensured that the diverse views and experiences of these organizations was well represented as they defined and explored the research question under investigation. Through the creation of a research advisory team involving a non-profit sector representative, a Prospera Credit Union representative and the researcher, the approach presented a unique opportunity to link the social objectives of stakeholder interest within the two distinct non-profit and financial services sectors. This afforded both a voice and created an advantageous perspective that will develop a greater sense of trust, collaboration and ownership of the process and its outcomes. As summarized by Stringer (1999), “Community-based action research is a collaborative approach to inquiry or investigation that provides people with the means to take systematic action to resolve specific problems. This approach to research favors consensual and participatory procedures” (p. 17). To develop a consensual and participatory approach, the team

Financial Resources and Non-Profits 64 assisted in all but the preliminary research orientation discussions. Following the initial discussions, they assisted in all phases of the research, including questionnaire and survey development, data compilation, analysis and action. This cross-sector representation was essential to the successful acceptance and understanding of the research findings. In the role of researcher, I was focused on facilitating and supporting these activities, rather than determining their direction (Stringer, 1999). As well, it was my ethical duty to assure that all research participants were treated with care. As the principle investigator who designs and coordinates the research activities, balancing and combining these principles with the advisory team required a mutual understanding both individually and collectively that ethical considerations are the responsibility of all of us and can not be displaced onto the principle investigator (Palys, 2003). Ethical Issues A number of ethical issues were considered with respect to this project. All are in accordance with Royal Roads Ethics Policy (2000) and the Douglas College Research Ethics Policy (2003c). Community-based action research is a collaborative investigation that seeks to maintain inclusive and full participation of an individual, community, or group while they extend their qualitative understanding of a situation and move towards a specific action that will resolve the problem (Stringer, 1999). Respect for Human Dignity As researcher, I was cognizant of this dynamic and was also mindful of the ethical considerations associated with researching the commonly held values NPOs draw their intensity from. Respecting these ethical boundaries while engaged in action research refers to the

Financial Resources and Non-Profits 65 principles “that guide the way we interact with research participants and the commitments to safeguard their rights and interests” (Palys, 2003, p. 80). Respecting these boundaries was critical to a successful interaction with the research participants and I was constantly aware that my “ethical considerations should accompany plans, thoughts, and discussions about each aspect of qualitatitive research” (Glesne, 1999, p. 113). Closely aligned with the values we espouse in values-based leadership philosophy, an action-based researcher who is consciously and emotionally aware of how these principles will affect the research participants has a better understanding of how the social context will influence the responses during the process. Respect for Free and Informed Consent Working with the individuals in one-on-one situations presented some unique issues relating to informed consent, confidentiality and inclusiveness. As mentioned, the complexity and sensitivity of providing financial services to non-profit organizations covers a broad range of traditionally held values-based opinions that may not support such services. In contrast, there are proponents that support the emergence of enterprising non-profits and the exploration of financial resources to support entrepreneurial growth. My ethical responsibility within these oneon-one settings was to share these differing opinions identified within the questionnaire findings, while encouraging continual communication and interaction in a manner that empowered the research participant while respecting the right to their own individual opinion. Respect for Vulnerable Persons There were no vulnerable persons, as defined in the Royal Roads University Ethics Policy (2000), participating in this study. Respect for Privacy and Confidentiality

Financial Resources and Non-Profits 66 Associated with confidentiality, working with my project sponsor may have presented perceived research issues associated with friendship. I have worked intermittently with my project representative on a professional level for many years and our relationship has strengthened due to overlapping activities within our community development work. This relationship could have presented moments where “intimate information [may be] given…in the context of friendship rather than researcher role” (Glesne, 1999, p. 121). Fortunately, this did not occur as I was diligently committed to protecting confidentiality. I reiterated in at all stages of the research activities what this relationship was, and stressed in writing and verbally in every interview that confidential information relating to who the organization used for its financial services was not needed. This was an important approach in developing trust. Confident that the information I received at all stages was useful to the purpose of the research, I also consistently stressed the meaningful value as a result of participation and protected that value "through a shared understanding that their communication was, in fact, confidential" (Palys, 2003, p. 95). This is particularly evident in the recorded interviews. Respect for Justice and Inclusiveness The research methodology I chose was effective in working with non-profit organizations. In exploring sensitive organizational information relating to finance, using individual responses and one-on-one interviews helped me avoid ethical concerns relating to a group setting. Respecting that there was potential for ethical dilemmas as a result of sharing the differing perspectives and organizational policy interpretations, it was an important realization that regardless of the data collection method, complex challenges to my research required flexibility in approach, guided by underlying principles consistent with non-profit organizations.

Financial Resources and Non-Profits 67 Addressing these challenges began with consideration of “the impact of our research on the people whose lives we document” (Zeni, 1998, p. 14). In order to address these challenges, my ethical perspective as a researcher was grounded in “an obligation to consider things from research participants’ perspectives and to ensure participants’ rights are safeguarded” (Palys, 2003, p. 83). Although preparation and ongoing awareness are paramount, Smith (as cited by Zeni, 1998) broadened my point of view when he argued that “field research is different from the usual experimental approach that many individuals, even responsible professional educators, do not understand what…they are getting themselves into” (p. 15). As a result, I anticipated ethical dilemmas associated with confidentiality, consent, inclusiveness, and balancing harm and benefits. Balancing Harms and Benefits Participation in the online questionnaire or individual interviews were coordinated at the participants convenience. The online questionnaire required approximately 20 to 25 minutes to complete, and participation in individual interviews was limited to a maximum of one hour. Follow-up e-mail correspondence and review of transcripts required no longer than 30 minutes. All of these matters were taken into consideration when developing the online questionnaire and individual interview questions. Minimizing Harm My personal bias is reflected in a desire to “produce knowledge that will benefit the greater good” (Palys, 2003). Kirby and McKenna (1989) addressed the subjective nature of action research in their reference to conceptual baggage and they emphasize the importance of identifying when one’s own subjective thoughts, feelings and emotions “may be overly

Financial Resources and Non-Profits 68 influencing how your research is developing” (p. 51). What was important was to be able to recognize when my own subjectivity might be harmfully influencing or interfering with the research, rather than letting it unfold. While the research was unfolding, I maintained a conscious awareness of my role as researcher and how I was interacting with the research participants. I knew that if I was perceived to be influencing the research outcomes in favour of one sector over the other, I was jeopardizing my objective position of neutrality and would have negatively influenced the confidence of the research participants. Maximizing Benefit A copy of the research results will be given to all interested participants, made available on the Fraser Valley Centre for Social Enterprise Website. As well, I have committed to conducting a presentation for Prospera Credit Union once the study is completed. Summary In exploring the ethical considerations within community-based action research, I realize it is not enough to look at a set of ethical guidelines; rather, it is important to be aware of our own emotions, strengths and limitations throughout the research process. Although the environment in which I operated as a novice researcher was uncertain, Palys (2003) reminded us that our research must weigh the cost to participants against the benefits that may accrue (p. 104). Careful planning, conscious self-awareness and consistent reflection throughout the research process helped minimize the potential issues and helped me ensure that ethical principles were followed.

CHAPTER FOUR – ACTION RESEARCH RESULTS AND CONCLUSIONS

Financial Resources and Non-Profits 69 “There are five key variables that are absolutely critical in evaluation use. They are, in order of importance: people, people, people, people, and people” (Halcolm, as cited by Patton, 1997, p. 39). Study Findings Despite the many challenges that were identified by the non-profit representatives, there is no questioning the value of the contributions they make towards the betterment of our society and the resourcefulness they display in doing so. This study’s findings include data from 37 online questionnaires completed by EDs and non-profit managers from across Canada, in addition to seven individual interviews where data was gathered from EDs and managers within British Columbia. Following each stage, the findings were reviewed with the research advisory team to discuss observations, synthesize the data and identify themes. For the purposes of this summation, the ED and manager designation in the NPOs will be used interchangeably. Based on the research approach, the chapter is divided into two parts. Addressed first are the findings of the online questionnaire, followed by a further exploration of those findings during the individual interviews. In alignment with the structure of the questionnaire and the interviews, the findings are contextualized within the broad categories of (a) organizational demographics, (b) organizational trends, (c) organizational leadership, and (d) non-profit finance-related findings. The findings are based on the contributions from both the questionnaire and interview groups, with additional input from the research advisory team. Limitations of these research findings are summarized to ensure subsequent discussion and recommendations are practical, with consideration given to the methodology used and the demographics of the population studied.

Financial Resources and Non-Profits 70 Questionnaire Findings Utilizing the online network of the Fraser Valley Centre for Social Enterprise, the questionnaire was e-mailed to 636 recipients across Canada. The dissemination of this information and subsequent response was tracked using the e-mail tracking features of the database management software. Along with the original e-mail invitation to participate, one reminder e-mail was also sent at the beginning of the second week. Of the 636 originally sent, 596 were delivered successfully. The difference of 40 represents e-mails of addresses no longer in service. Of the 596 that were sent and received, 117 were opened during the two business weeks the questionnaire was accessible for response. Of these, 37 respondents (N=37) completed the questionnaire using the survey link to Survey Monkey embedded within the online e-mail invitation. There was diverse representation of organizations that responded to the online questionnaire, providing a balanced perspective for the research findings. Respondents had the option of providing their name and organization and also had the option of responding anonymously. Of the 37, 16 chose to remain anonymous and 21 provided their name and organizational information. As a percentage of the whole (596), the response rate was 6.2%. As a percentage of those who opened the e-mail (117), the response rate was 19.6%. Demographics The demographic data captured for each organization within the questionnaire responses included their organization name, legal operating structure, location, number of employees, segment of the population served, services provided, and annual operating budget. For those who chose to respond anonymously, the organization name and location remained blank. Registered charities and incorporated NPOs were representative of the majority of the

Financial Resources and Non-Profits 71 respondents. In reviewing the 21 identifiable responses, 19 were from B.C., with one from Quebec and another from Ontario. The anonymous responses were not geographically determinable. The number of employees reported was categorized into full-time and part-time groupings. There were 31 responses indicating full-time employees with 58% of these stating they have greater than six employees. The remainder reported one to five employees. The part-time employees have an opposite outcome, showing 66% of the 27 part-time employees were in the one to five part-time employee categories, with the remainder showing greater than six employees. The significance of this finding is that it demonstrates the majority of respondents to the questionnaire are larger NPOs. The segments of the population the non-profit organizations serve are all represented with multiple responses (see Table 2), adding to a balanced perspective.

Table 2

Financial Resources and Non-Profits 72 Respondent Representation of Population Segments Population Segment Response Percent (N=35) Community-at-large 71.4% Youth 57.1% Aboriginal 45.7% People with Disabilities 45.7% Women 45.7% Business / Business Members 42.9% People on Income Assistance 37.1% People on Employment Insurance 28.6% Senior 28.6% Immigrant or Refugees 25.7% People Involved in Criminal Justice 22.9% Other 17.1% Children and Family Services 11.4% Francophone 8.6% Total Respondents (skipped this question)

Response Total 25 20 16 16 16 15 13 10 10 9 8 6 4 3 35 2

It can be observed that the general needs of the “Community-at-large” received the greatest level of overall response, followed by a relatively balanced response for all of the remaining segments, with the exception of “Francophone” and “Children and Family Services”. There were six responses in the “Other” category, where six additional segments were identified. They were: Cooperatives; Tourism; Students; Health Professionals; Agriculture and Environment; and Services for Men. Similarly, every one of the 25 “Services Provided” category within the above population segments have significant representation, as well as six additional services that the respondents added in “Other”. Of note, three of the services provided were chosen at a level of approximately 3:1 over the remaining 22 services identified. In order, they were: Education and Applied Training at 42.9%; Community Development Services at 42.9% and; Business Services at 34.3%. The respondents checked all services that applied to their organization which resulted in 150 selections amongst 35 respondents (two skipped the question), with a finding that signified

Financial Resources and Non-Profits 73 an average of 4.3 services per organization. Within five possible ranges, the annual average operating budget was also determined. Table 3 illustrates the ranges and the outcomes based on the respondents answers. Over one third of the respondents report an annual operating budget of over $1,000,000. This finding corresponds with the employee finding, where most organizations that responded are considered larger in operational size.

Table 3 Average Annual Operating Budget Operating Budget Response Percent (N=32) Less than $100,000 12.5% $100,001 - $250,000 12.5% $250,001 - $500,000 21.9% $500,001 – 1,000,000 18.8% Greater than $1,000,000 34.4% Total Respondents (skipped this question) Organizational Trends The organizational trends were determined using 12 closed-ended questions (see Appendix A). These questions include the demographic questions discussed previously, in addition to asking questions about funding levels over time, their impact on program delivery, the sources of funding received, and the changes in accountability associated with funding received. Over the past ten years, 60% of the respondents thought their funding levels had declined (see Table 4), with an additional 17.1% saying it has declined only somewhat. To the contrary, 22.9% felt funding levels had not changed. Response Total 4 4 7 6 11 32 5

Financial Resources and Non-Profits 74 Table 4 Confirmation of Perceived Funding Declines Respondent Answer Response Percent (N=35) Yes 60.0% No 22.9% Somewhat 17.1% I don’t know 5.7% Total Respondents (skipped this question) Organizational Leadership Organizational leadership was explored using categorization and rating systems in five questions, in addition to one open-ended question on what EDs think is the most identifiable organizational challenge today that non-profit leaders need to address when managing the growth and development of their organization. The EDs were first asked to share the frequency of organizational planning that occurs within their organization. In answering this question 19 of the 31 (61.3%) respondents shared that planning or operational reviews occur at least once per year, with eight of this group performing reviews semi-annually and, in one case, quarterly. The remaining 38.7% shared that planning occurs every three to five years, or as required. Five respondents skipped this question. The questionnaire participants were also asked for their perception of what three leadership qualities are the most important traits for effective leadership of non-profit organizations (see Table 5). Choosing from a list of twenty traits, four of the traits in particular were selected more frequently than the others. In order, they were: Team-builder (56.2%); Entrepreneurial (50%); Visionary (43.8%) and; Integrity (40.6%). Response Total 21 8 6 2 35 2

Table 5

Financial Resources and Non-Profits 75

Identified Traits for Effective Leadership of Non-profit Organizations Leadership Traits Response Percent Response Total (N=32) Team-builder 56.2% 18 Entrepreneurial 50.0% 16 Visionary 43.8% 14 Integrity 40.6% 13 Communication 28.1% 9 Resourceful 25.0% 8 Inspirational 18.8% 6 Competent 18.8% 6 Problem solving 15.6% 5 Financial expertise 15.6% 5 Trustworthy 15.6% 5 Politically savvy 12.5% 4 Goal oriented 9.4% 3 Empathy 6.2% 2 Disciplined 6.2% 2 Respectful 6.2% 2 Authentic 6.2% 2 Other 6.2% 2 Humble 3.1% 1 Decisive 3.1% 1 Demanding 0% 0 Total Respondents 32 (skipped this question) 5 Using three separate tables, the participants were asked to rank themselves (see Table 6), their board of directors, and their organization as a whole within six specific leadership situations using ratings from poor to excellent, corresponding with a five-point scale. These six situations provided a comparative association with the participants stated leadership, entrepreneurial qualities, and financial management capacity to other areas of the questionnaire. In addition, the responses provided a broader organizational context in relation to the capacity and operational involvement of the organization as a whole.

Table 6

Financial Resources and Non-Profits 76

ED Leadership Capacity within the Following Leadership Situations Leadership Situation Poor Fair Average Strong Fosters relationships with philanthropic and public partners – while balancing authenticity and professional development Adapts to changing management prerogatives and techniques – while honouring foundational mission, vision and values Ensures accountability and lean operations – while achieving significant community impact Anticipates and avoids ethical dilemmas – while implementing innovative and often untried business practices Shapes a visionary future – while responding appropriately to emerging challenges Total Respondents (skipped this question) 0% (0) 0% (0) 21% (6) 55% (16)

Excellent 24% (7)

Response Average 4.03

0% (0)

3% (1)

20% (6)

53% (16)

23% (7)

3.97

0% (0)

10% (3)

17% (5)

43% (13)

30% (9)

3.93

0% (0)

0% (0)

20% (6)

67% (20)

13% (4)

3.93

0% (0)

10% (3)

23% (7)

40% (12)

27% (8)

3.83 30 7

Although the data shown only pertains to the self rating of the EDs, the situational questions remained the same when rating the board of directors and the organization as a whole. For every leadership situation, the EDs rank themselves highest in all categories. Of note, the highest ED rating based on response average is related to the third situation of fostering relationships with stakeholders. This corresponds with the most highly regarded leadership trait

Financial Resources and Non-Profits 77 of team-builder in Table 5. On the opposite end of the scale, the lowest self rating is the shaping of a visionary future. The EDs average rating for all categories is “Strong”. The range of responses to the six questions, on a scale of one to five, is a low of 3.83 and a high of 4.03. The average response for EDs and their leadership capacity within the leadership situations shown is 3.94. The board of directors also received an overall rating of “Strong”. However, they are the only group of the three to receive “Poor” ratings in all six situational categories. The range of responses to the six questions, on a scale of one to five, was a low of 2.94 and a high of 3.44. The average response for the board of directors and their leadership capacity within the leadership situations shown is 3.29. The highest rated situational category was their adaptation to changing management prerogatives and techniques while maintaining organizational values. The lowest ranked situational category was related to fostering relationships with stakeholders that, in comparison, were ranked highest with the EDs. For the third leadership assessment, organizations as a whole, the ratings were all in between the higher ED rankings and the lower board of director rankings. The average rating for the organization as a whole is 3.68, with a high of 3.75 and a low of 3.53. Non-profit Finance-related Information Financial management is a complex issue within NPOs and the challenges associated with the management of financial resources was explored in the online questionnaire (see Appendix A). The questions consisted of 11 closed questions and three open-ended questions, specifically designed to gauge perceptions relating to financial management ability within nonprofit organizations and the use of particular financial products and services.

Financial Resources and Non-Profits 78 Validating earlier findings that suggest the majority of respondents were larger organizations, 34.4% of the respondents had annual operating budgets of greater than $1 million, with an additional 18.8% operating at a level between $500,000 and $1 million per annum. Furthermore, combined assets are greater than $500,000 for 41.9% of all respondents, with an additional 22.6% of the participants revealing assets of $250,000 to $500,000. The questionnaire participants identified several challenges relating to managing and developing financial sustainability in their organizations today. Most evident was the uncertainty of funding and the challenge of adapting to new funding realities through entrepreneurial diversification while respecting the organizational mandate. Following closely to these two findings, the lack of hard skills in financial management and planning was also identified. Despite an indicated interest by the majority of EDs to explore loan products or other repayable investments in the development or maintenance of products, services or programs (see Table 7), a strong theme of resistance to funding diversification using products requiring capitalization through loans emerged at the broader organizational and board level. Table 7 Non-profit Perception to the Use of Loans Response Response Percent (N=32) It might be appropriate under 28.1% the right circumstances I anticipate there would be 21.9% strong resistance We already utilize such 21.9% services Not appropriate at all 18.8% We would seriously consider 9.4% such an approach Total respondents (skipped this question) Response Total 9 7 7 6 3 32 5

Financial Resources and Non-Profits 79 In exploring the reasons for this perception of resistance, four identifiable themes emerged from the consolidated data. First, a general lack of understanding of how such an arrangement would work was cited. Second, a fear of indebtedness and the risk associated with failure of the entrepreneurial idea. Third, the break from established or traditional non-profit practices was remarked upon as a significant barrier. Fourth, the belief that non-profit services should be free and not fee-for-service based. In relation to services, one closed and one open-ended question (see Appendix A) explored the current use of specific financial services and the products NPOs felt would be most beneficial to their organization. Most organizations use what would be considered a standard array of financial services. Demonstrated in Table 8, the most utilized services included chequing, insurance, and credit cards. Of note, 37.5% of the participants have a mortgage, 9.4% have a loan unrelated to the mortgage, and 40.6% of all respondents had a line of credit. Added to the “Other” category were payroll services.

Table 8 Financial Services Currently Used by Non-profit Organizations Financial Service Response Percent (N=32) Chequing 93.8% Insurance (property, liability) 90.6% Credit Card 68.8% Line of Credit 40.6% Investment Product (Term) 40.6% Mortgage 37.5% Overdraft Protection 34.4% Staff RRSP Program 28.1% Loan (not a mortgage) 9.4% Other 6.2% Equity Investment 3.1% Total Respondents (skipped this question) Response Total 30 29 22 13 13 12 11 9 3 2 1 32 5

Financial Resources and Non-Profits 80 Identified by NPOs as the most desired offerings they would like to see from their financial institution, the questionnaire findings showed four product and two service oriented outcomes. Two products in particular were consistently mentioned: that being (1) low interest and longer-term loans and no fees; or (2) low fee products such as chequing and payroll. On the services side, the two most mentioned services included an account manager dedicated to providing financial management advice and training, with packaged products and services specific to each organization. The second finding was a desire to see greater interest on the part of the financial institution to partner with the non-profit in conventional and unconventional ways to help the non-profit meet its objectives. For example, providing services specific to the needs of those with mental illness or who are less fortunate who need financial guidance and assistance, in addition to more conventional support that includes greater sponsorship of nonprofit activities (F2-S; M1-S). Interview Findings Following the online questionnaire, seven individual interviews were conducted. The individual interview data was gathered through two in-person interviews and five phone interviews. The interviewees responded to seven questions, each having three to five additional sub-questions, depending on the characteristics of their response. All the questions correlated to findings within the online questionnaire and were designed to further inform these findings, as well as the research question and sub-questions. The interview questions themselves were developed in collaboration with the research advisory team based on the collective analysis of the questionnaire data. As part of the stated research approach, all of the interviewees represented at least one of the population segments and levels of operating budget outlined in Table 1. All of the

Financial Resources and Non-Profits 81 interviewees were EDs or non-profit managers from within British Columbia. Six of the interviewees were female and one was male. The interview participants identified and refined several emerging challenges related to the financial sustainability of the non-profit sector. The knowledge gained in relation to the seven themes that emerged pertain not only to the NPOs, but to the perceived external perspectives of NPOs and their relations with financial institutions. The seven themes are (a) entrepreneurial traits and the source of organizational vision, (b) operational mindset, (c) strategic and operational planning and how it is occurring, (d) challenges with organizational sustainability, (e) non-profit financial management capacity, (f) the valuation of goods and services, and (g) non-profit opinion of how they are perceived by financial institutions. Entrepreneurial Traits and the Source of Organizational Vision The first question posed of the interviewees asked what being entrepreneurial meant to them. This question sought to refine the findings of the questionnaire where nearly all of the respondents identified entrepreneurial characteristics as important leadership traits and had also identified it as the second most important leadership trait in their ranking of 20 potential leadership characteristics (see Table 5). The responses were consistent. In four of the seven interviews the first response was that being entrepreneurial required a business-like focus, with several statements similar to “when I think entrepreneurial…I think business. And when I think business, along with that comes my notion of business owners and what is required to make a business go” (F1-S-1). In all of the interviews the language was consistent in supporting this mindset, suggesting in every instance that being entrepreneurial also meant “looking for revenue generating opportunities” (M1-S-1). Revenue generation was a key sub-theme related to sustainability and is discussed in more detail further on in the findings. In

Financial Resources and Non-Profits 82 addition to running the organization like a business and identifying new sources of revenue, the participants also identified the management of existing resources as an important entrepreneurial quality. In my view, it means going beyond simply managing resources that somebody might put in front of you. It's also not just taking the money somebody hands you and going and spending it carefully, it's looking at what you can do differently with the money received. (F6-S-1) Discussion of entrepreneurism within NPOs also resulted in several descriptors that helped recognize entrepreneurial qualities. For the participants, making the most of limited resources required creativity, knowledge, innovative thinking, risk taking and vision. In relation to vision, the source of organizational vision was a key finding associated with skilled entrepreneurs and leaders, yet where vision is coming from within NPOs was divided. Three of the interview participants felt that vision was a responsibility of the ED, while the remaining four felt it was the board’s duty. In all the interviews the participants felt the entire organization, and particularly the board of directors, had a role in shaping the organizational vision. In one interview, the participant suggested “the board provides the vision – I’m the one that has to be entrepreneurial and implement the vision” (F3-S-16). Although three other interviewees support this in theory, their organizational setting and those of the remaining interviewees suggests that in reality it is the EDs, and sometimes the staff, that are creating the vision. A very straightforward assessment of this finding comes from one of the interviewees: Ideally, it comes from a combination of staff, board of directors, and members. In reality it comes from the staff to the board for ratification, and then the expectation is that the staff will ensure that the vision is maintained. (M1-S-4)

Financial Resources and Non-Profits 83 Other interviewees mirrored this opinion. “I struggle to even get the board to the table to even develop a vision…If I asked the board members to recite to me what the vision was, I don’t think they could do it” (F2-S-9). Operational Mindset The operational mindset was a distinct finding where the interviewee discussions evolved from dialogue on the importance of entrepreneurial abilities and its relation to business aptitude to more specific comments that NPOs have to operate as a business. One participant stated that “Many non-profits are better run than for-profit businesses” (F6-S-5). In analyzing the participant comments, the perceptions can be distilled into two distinct business approaches. The first is a business-minded approach that is focused on operational accountability, financial efficiency, and “knowing how to make the most of limited resources” (F3-S-1). The second approach is more revenue-focused, looking to identify new opportunities and ways to generate new sources of funds. This approach was associated with language specific to addressing product and service accountability through the lens of marketability, other competition, and customer service. Furthermore, these respondents were critical of NPOs who fail to see the value of their products or services and suggest NPOs do not have a clear understanding of this value and are too quick to give their services away. They tend to want to give everything away, do everything for free, give more, and that others should support what we're doing because it's a good thing to do. NPOs need to understand that they have a product or service that they are selling to a particular marketplace, and that they need to offer customer service and need to understand positioning of that product or service. If your product or service is crappy, people stop buying it. NPOs still have this notion that because we deliver the service, that's enough. We don't have to offer customer service. We don't have to position a product. We don't have to, because from a value perspective, we're doing a good thing, and I don't think a good thing is enough. (F1-S-2)

Financial Resources and Non-Profits 84 More in line with the first approach and specific to NPOs that are health-related service providers, a contrary opinion is the belief that core health providers should not be selling their products or services to offset funding that they feel is a moral obligation of government to provide. “I think that there is a moral responsibility of the government to pay for the service because we are reducing the cost on the health-care system” (F2-S-8). However, this participant supported the notion of a business-minded approach. “I’m a strong believer that not-for-profits have to operate as a business” (F2-S-7). Regardless of approach, all participants maintained that business and entrepreneurial activities must be filtered through the lens of the operational mandate and adhere to the social objectives of the organization. Strategic and Operational Planning and How it is Occurring Strategic and operational planning questions in the online questionnaire produced results that showed 61.3% of the respondents did such planning at least once per year, and that the remaining 38.7% did these planning activities every three to five years, or as required. This finding stimulated discussion with the interview participants that suggested these findings were erroneous. In exploring this view with the interviewees, it became apparent that strategic and operational planning was occurring with all of them at least annually; however, not in the traditional sense. Two significant insights arose from these discussions. First, although the respondents shared varying levels of concern about funding, all agreed that it was difficult to perform longterm strategic planning activities as a result of the uncertainty associated with their short-term funding agreements. “It’s most frustrating because you can’t really do any three to five year projections on what else you need to be able to do if you can’t predict it [funding]” (F6-S-6).

Financial Resources and Non-Profits 85 The second finding was based on opinion that although formal planning sessions may not be occurring in the traditional sense, short-term planning and operational objectives were being captured on a regular basis through different methods and sources. Several interviewees explained these views as follows: I think most people are doing organizational planning multiple times per year. They may not call it that because they didn’t have a formal facilitator on every occasion to do it. I see it annually on a more formal basis, but also through informal processes throughout the year. (F6-S-7) I feel a little bit of a disconnect. It’s not that I am getting bad direction…I’m not seeing it implemented in reality. With our organization, I find that the strategic planning [objectives] come out in the minutes of our board meetings…and [annual] budget that we do. (F3-S-10) Although the feedback indicated that the process of planning “is not in a formal setting with a paid facilitator” (F4-S-6), there was unanimous agreement that planning was necessary to meet rising funding accountability requirements to maintain credibility with funders and stakeholders. “It is critical. In my observation, it is more critical today than it was ten years ago. Times are tough. Accountability is higher and resources, both human and financial, are less” (F1S-8). Challenges with Organizational Sustainability Organizational sustainability was a significant focus of much of the discussion with the participants. Several findings arose that connect to all facets of non-profit operational activities. Commentary focused heavily on funding and financial issues; however, prominent themes also emerged around challenges within human resources, rising costs, accountability, and the impact that becoming more entrepreneurial is having on traditionally held norms, values and beliefs. Becoming more financially sustainable was described by one interviewee as “a continual process of cultural adjustment” (M1-S-10). This adjustment aptly describes several issues

Financial Resources and Non-Profits 86 identified by the participants as challenges they are addressing when working to balance funding requirements with non-profit ideology. In cases where the participants have identified reduced funding as having a negative impact on their programs and services, the pursuit of new sources of funding is causing additional stress on the capacity of their organizations. They are spending a lot of time looking for new opportunities, in addition to a lot time dealing with the administration of funding reports for support they have already received; two activities that didn’t used to require so much attention. “What happens is that person gets so immersed in all the financial stuff, because it’s significant, that they don’t actually provide leadership for the service they exist for” (F6-S-4). When asked how current demands on their time influenced the achievement of their organizational objectives, the responses captured two additional, but different, impacts. Yes, absolutely it is time. Not lack of interest or ideas – change takes time and effort that we don’t have at the moment. Most of my time has to be focused on clients. I don’t have as much time for program [and] project development as I used to. (F1-S-11) Less focused on client delivery and more on meeting the expectations of funders, the second participant responded to the question of demands on their time by stating, “That is a big one with me, one hundred percent. I spend so much time doing administration and the reports and writing proposals every year for the exact same thing, over and over” (F5-S-9). The pressure to be more financially self-sustaining is also causing tension between those with a traditional non-profit ideology and those who want to charge for their products or services. One participant explained that, “we are fundamentally changing the kind of business we do into something more sustainable” (M1-S-3). However, in the process of facilitating this fundamental change, tension arose over non-profit ideology, causing a significant reaction. “We’ve lost staff because they couldn’t embrace the idea that we shouldn’t be giving things

Financial Resources and Non-Profits 87 away free” (M1-S-2). In this particular case, the non-profit has now raised its earned revenue to a level that represents 52% of their annual budget. Discussion around reduced funding also clarified the challenges associated with funding sources that are unpredictable, as well as the level of repetitive accountability associated with the funding that is received. As mentioned, the challenge of strategic planning is made very difficult when there are no long-term commitments from funders. “So here I am, my fiscal started April 1 and six months have gone by and I still do not have a commitment what my funding will be” (F6-S-6). Without the ability to plan longer than 12 months at a time, the effort of trying to become self-sufficient is a difficult task to accomplish. The finding associated with accountability demonstrated a level of frustration with all of the interviewees. In addition to the length of time previously discussed to deal with reporting in general, several participants expressed dismay over having to report continuously to the same funder over an extended period of time. “Why do you always have to justify your reason for being, especially when your track record is so good for so long?” (F4-S-5). Interestingly, a significant finding was that not all interviewees felt funding had decreased. In fact, two participants felt that it had stayed static, or in some cases, increased. The observation made by them was that although funding has definitely declined in some areas, replacement funding is there if you look for it. Furthermore, they both pointed out that the funding equation almost always overlooks the issue of rising costs. “Actually, it's very ironic, because what's happening is we have been getting more money every year. The problem has not been the dollars coming, the problem has been the costs rising faster than the dollars” (F6-S-2). Combining the issue of costs with the desire to be more business-like, a second interviewee shared with their board, “There has to be some changes, because the monies you have been able

Financial Resources and Non-Profits 88 to accumulate no longer support the services that you have [to deliver]” (F2-S-3). In this case, a decision was made to shut down a program to address the increase in costs over funding received. The Valuation of Goods and Services Another consistent finding with the interviews was that non-profit organizations that are generating revenue on the sale of products or on a fee-for-service basis stated they could use marketing and branding assistance, as well as help with the proper valuation of those goods and services. Two observations in particular illustrate this finding. [My] experience with not-for-profit has generally been that we like to think that we can put something on the doorstep and because it is a good thing, people just snap it up without realizing that there is a tremendous amount of competition with better products and a better price. So, I think the discipline of marketing forces you to do the analysis of the quality of your product and where it should fit in the marketplace. (M1-S-2) NPOs need to understand that they have a product or service that they are selling to a particular marketplace and that they need to offer customer service, and need to understand positioning of that product or service. For a lot of NPOs it's about understanding marketing and how you sell ideas and values. (F1-S-5) Non-profit Financial Management Capacity Addressing the development of financial capacity within their organization, the participant responses were collated into two themes. First, the perceptible financial needs of NPOs and, second, the non-profit skill sets required to lead and implement change. In exploring the actual financial needs of NPOs, several important findings arose. Within the interviews, discussion about loans to NPOs for the purpose of capitalizing or enhancing new programs or services was met with a mixed response. Those participants supportive of such an approach were nonetheless conservative in their views, suggesting that careful planning and extensive risk assessments would need to occur in order to provide a “pretty good sense that the borrowing the money would pay off” (F1-S-10). Nonetheless, if the business case was

Financial Resources and Non-Profits 89 convincing and the circumstances were right, another participant stated that they “would do anything, even take out a loan” (F4-S-8), to secure the future of their organization. For those organizations that were opposed to loans for such purposes, one finding specific to a health services perspective was that they “don’t feel any type of circumstances would justify taking out a loan” (F2-S-8). Furthermore, as was already stated, because they are providing a core health service, they felt that “there is a moral responsibility of the government to pay for the services” (F2-S-8). Unrelated to the health sector, a second interviewee felt the best approach to capitalizing a program or service was “certainly not going and borrowing it” (F3-S-4). They felt the development of financial resources needed to occur from within. A second finding relating specifically to financial products was the provision of low, or no cost banking services. This arose based on the perception that financial institutions do not need to make the usual level of profit on financial services provided to NPOs serving the social needs of the community. In one instance, a participant shared that they had taken out a substantial mortgage and that over time they had paid four and a half dollars for every dollar of principle they paid off during their term. “Financial institutions are making a fortune on these mortgages. I really wish they’d identify . . . that they don’t need to make that much money on a non-profit” (F6-S-8). The second theme, non-profit skill sets required to lead and implement change, was almost exclusively related to the financial management and analysis of non-profit operations. The significant finding was that most NPOs are not able to properly account for their financial situation and that this type of expertise is difficult for them to accommodate financially. Larger NPOs that have this in-house expertise feel fortunate, with one participant sharing, “we could hire someone who was virtually an accountant, and I don’t know how groups survive without

Financial Resources and Non-Profits 90 that resource” (F6-S-4). Similarly, a second interviewee stated, “that person is critical. When we didn’t have that person it was impossible to make really clear management decisions” (F4-S4). Another finding that was unearthed during the interviews was that most EDs thought understanding the financials was not entirely their responsibility. The view was that different levels of understanding were required at all levels of the organization. “It’s not just the senior administrator or the board, it’s also the general staff. I think that if you can train your staff about the financial operations of your organization, you’ll have a far stronger organization” (F2-S-5). As a final point, the perception of these financial management findings and their importance was also significant, in that the interviewee’s connected these responsibilities to their operational accountability. “We have to be good financial managers because [there is] more and more accountability for not-for-profits” (F3-S-6). Non-profit Opinions of How They are Perceived by Financial Institutions Pertinent to the research, several themes emerged when I asked NPOs how they think their financial institution views their organization and their ability to manage their financial resources. The majority finding of the interview participants was a sense of indifference from their financial institution. Interestingly, a mirrored theme was discovered in the NPOs thinking of the financial institutions. In a representative context, the majority of the interviewees expressed a minimal opinion of how they felt they were perceived by banks in general, simply suggesting “they are too big and we are too small, and that is all there is to it” (F5-S-7). Or, more concisely, that NPOs “are small potatoes and not worth the time” (F1-S-9). When further questioned as to why they felt this was the case, it was stated that “I don’t think we are on their radar-screens, but I don’t think they

Financial Resources and Non-Profits 91 are on ours” (F1-S-9). More indicative of four interview accounts of negative interaction, one interviewee stated; “I mean, the person we talk to is way off in [a city] and I hear from him once a year asking for financials, and that is it” (F5-S-8). One decades-old non-profit organization changed banks and withdrew hundreds of thousands of dollars when they requested a mortgage approval and were told it would take two months to review because they were a nonprofit organization (F3-S-6). When asked if there were any services that could be provided by a financial institution that would be deemed beneficial to their non-profit organization, an important insight surfaced. All but one interviewee had the view that financial institutions “could probably provide more sensitive financial management support” (M1-S-4). This opinion was common and more succinctly stated by another participant who stated, “I need a nonprofit account manager at the bank” (F3-S-6). In exploring this finding, it was apparent to these participants that the financial institutions are ignoring a key market segment, and that having a designated service representative who understood the non-profit sector would be a valuable asset that would be a financial benefit to both the non-profit organizations in this study and the financial institution. Study Conclusions The following conclusions are the result of maintaining a research focus on financerelated resource needs and leadership skills within NPOs. This was achieved through a review of literature on the traditional role of NPOs, corporate social responsibility, organizational culture, and organizational leadership. These were in turn combined with the findings from the questionnaire and interview responses, in addition to critical input and refinement from Prospera and my research advisory team. There are six fundamental conclusions as a result of this study.

Financial Resources and Non-Profits 92 The conclusions of this study encompass organizational culture viewpoints, finance-related perspectives, strategic and operational views. Conclusion #1 Although all the research participants professed to have the need to run their organization more like a business, not all NPOs have organizational cultures that want to be enterprising. The conclusion is based on the difference in organizational culture between traditional and enterprising non-profits. This becomes clear when one compares the ideology that supports the findings of the traditionally held norms, values and beliefs of conventional NPOs and the emerging values and entrepreneurial focus of enterprising non-profits. The Ideological Difference The research findings corroborate the literature (Dees et al., 2001; Paine, 2003), and clearly show that those NPOs with an organizational culture based on traditional non-profit values feel compromised when revenue generation through the sale of products and services is suggested or introduced into the organization (F6-S; F3-S). When the question of generating new sources of revenue through the sale of products or services within a non-profit was raised, several of the participants stated they do not believe NPOs should be required to earn revenue to meet their social objectives. “NPOs don’t generate income from activities” (F1-23-1). The importance of this conclusion is recognizing that these cultural challenges to a non-profit’s norms, values and beliefs do not preempt the desire to be more business-like and develop resources that will help the NPO become more financially selfreliant.

Financial Resources and Non-Profits 93 Differentiating Between Entrepreneur and Enterprising The research demonstrates that regardless of the ideology, the desire to be entrepreneurial exists within all the non-profit organizations in this study. As such, the understanding and use of the word “entrepreneurial” must be defined for each approach in order to gain a better appreciation of the differing organizational cultures. “There is a lack of understanding of what it means to explore a more entrepreneurial approach” (Q9-23-4). According to the findings, NPOs that believe they should not be generating revenue through their own products or services nonetheless state that they have to be entrepreneurial in their operational activities. For those with these traditional principles, an entrepreneurial business approach equates to maximizing resources, as well as “advice on how to better utilize banking services; advice on financial management policies and procedures; and funding for building organizational capacity around financial management” (A-25-3). As such, this is a business approach that considers being entrepreneurial as better utilization of existing resources and the development of general and financial management skills to achieve greater operational efficiency. NPOs that are striving to become more self-sufficient through revenue generating activities that include their own products and services also believe that they are being entrepreneurial. The difference in this non-profit culture is that their understanding of being entrepreneurial includes the identification of earned revenue opportunities that are independent of external funders and directly attributable to their own revenue generating initiatives. In summary, although both philosophies espouse their entrepreneurial nature, the differentiator of the two organizational cultures lay in their operational approach. One is entrepreneurial in how they maximize their resources to achieve optimum efficiency, and the

Financial Resources and Non-Profits 94 other is entrepreneurial as a result of being enterprising in their pursuit of new sources of revenue. Conclusion #2 As a result of the study and its correspondence to the literature review, there is no uncertainty in concluding that there is reluctance for financial institutions and NPOs to come together in a financial relationship (Dees et al., 2001; Scott, 2003). Regardless of the call from the Federal Task Force (Government of Canada, 1998c) that identified that there are expectations of financial institutions to respond in a leadership role to help strengthen the abilities of nonprofit organizations, some NPOs indifferently responded that they “simply don’t see them as a resource in that way” (F6-S-9). However, as the findings are unanimous that NPOs wish to become more businessminded and financially adept, their relationship with their financial institution is going to require a more sophisticated level of support and involvement. The challenge associated with this observation is the perceived indifference of financial institutions to work with NPOs, in addition to the mutual sentiments expressed by the NPOs in regard to the financial institutions. Nonetheless, there were three examples within the study of NPOs working successfully with their financial institution (F1-S; F3-S; F6-S). Interestingly, the initiator of all of these arrangements came from the individual NPOs. All were significant in financial commitment and had a significant impact on the community they were serving. In addition to the worthiness of the proposed deal, the common denominator was a willingness on the part of the financial institution to structure the appropriate products and services to make the relationship work. In one example, the regional vice president of a major bank flew to a community to structure the arrangement himself (F1-S-3). Although not a

Financial Resources and Non-Profits 95 common scenario, it is apparent in the research that this level of responsiveness is recognition of a market opportunity beneficial to both parties. Conclusion #3 Capitalization of non-profit ventures is less of a demand than identified in the literature review findings. This is a significant conclusion as it tempers the assertion in both the Canadian and American academic literature that access to capital is a major barrier to the growth and sustainability of NPOs (Gannitsos, 2003; Dees et al., 2001). The conclusion does not intend to state that there is no need for such support; it is an assertion that the profundity of the need is confined to enterprising non-profits that are fully engaged in revenue generating activity with the understanding and support of their board and staff. For those that would consider it, the study suggests that this type of financial support is a minor consideration for these respondents and would only be acceptable under ideal circumstances (F1-S; F5-S). However, within this observation it must also be noted that the results also show 37.5% have mortgages, 9.4% have loans, and 40.6% have a line of credit (N=32). This supports the finding that while external capitalization of ventures to generate new sources of revenue may not be the most desired means to achieve self reliance, there appears to be a tolerance of loan-related commitments for real estate and working capital. When asked why these were acceptable vehicles for debt versus capitalizing a new product or service offering to create a new source of revenue, the respondents were quick to point out the perceived risk of the enterprise failing, the associated indebtedness as a result, the general lack of knowledge to start a venture, and the perceived personal liability of directors associated with failure (Q9-23-4; Q13-23-9; Q15-23-11). Conclusion #4

Financial Resources and Non-Profits 96 NPOs desire mainly service-oriented support from financial institutions versus product-oriented support. The literature review identified that lack of business and financial management expertise presents key limitations for most organizations in their desire to become more self-sufficient (Gannitsos, 2003; Dees et al., 2001). This study supports that contention, and identifies that this expertise is a capacity building opportunity that NPOs would welcome from their financial institution, as illustrated by the following findings: They [NPOs] aren't getting appropriate analysis. They aren't getting appropriate guidance on a regular basis, on terms of how they are structuring their expenditures, their methods of delaying the processes they're involved in in an accounting fashion to show a more accurate financial statement (F6-S-4). Non-profits need to learn how to be more sustainable, how to come up with innovative ideas, understanding financials themselves, and end one of the big wonders, how do the banks actually even work to help you with making money on your money (F5-S-3). Nonetheless, as outlined in the following paragraphs, the study adds other service-related observations. Desired Services For the research participants, the services desired are delineated into two distinct types of assistance. As stated above, the first was identified as training or a sharing of knowledge to develop the financial management capacity of NPOs. The second is customer service from the financial institution that understands that the non-profit sector has legitimate business requirements and that the NPO requires guidance to structure the appropriate financial products and services. “The number one thing is trained staff who understand not-for-profit needs” (F325-11).

Financial Resources and Non-Profits 97 Desired Products In addition to service, NPOs stated that the provision of financial products remains relatively basic, yet all felt that low, or no fee products would help to maximize the resources of NPOs as they try to address important social issues within the community. The majority of the NPOs recognized that the provision of these products does not have to be free; nonetheless, they question the current level of profit being made on services provided to the non-profit sector. As an example, one participant shared that they had secured a mortgage of $5.6 million at 5.6% per annum. In the first 10 years, they will have contributed $4.5 million in principal and interest on that mortgage and will have paid down their principal by slightly over $1 million. The respondent questioned the financial institutions need to make $3.5 million in 10 years, while the non-profit increased the equity in the property by only $1 million (F6-S-8). Interestingly, another example repeated this scenario almost exactly, yet the financial institutions’ response in this case was to provide the mortgage at 3.75% off the posted rate, while also packaging the agreement with free chequing and payroll services (F1-S-6). Conclusion #5 As a result of short-term funding and uncertainty with funding in general, strategic and operational planning is occurring through more informal processes. The importance of this conclusion relates to the research findings where it was indicated in the questionnaire that strategic or operational planning is occurring infrequently with 38.7% of the respondents. Given the importance of operational planning identified consistently in open-ended feedback, the result appeared unusually high. Even the non-profit response to this finding was disparaging: But first, let me just say that if I was in a financial institution that was providing any kind of funding or loans to [non-profit] organizations, I would want to make damn sure they were assessing their environment on a fairly regular basis and that I wasn’t funding a dinosaur. (M1-S-6)

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After several discussions with interviewees, it became apparent that although planning was not occurring in the traditional sense of formal retreats and facilitated discussion, NPOs are indeed assessing and capturing the strategic information they need to make critical operational decisions. As discussed in the findings, it is occurring through less formal instances of budget planning and monthly staff meetings (F5-S; F3-S; M1-S; F6). The reason for this approach is the uncertainty of funding levels and the duration of funding contracts that do not allow for a longterm perspective. As well, NPOs have a hard time justifying the time and cost of formal planning sessions that are largely limited to a one year window of thought. “Every year they had to shake everything down and sort of redesign the organization. It was a very chaotic planning process” (M1-S-6). The result is a short-term operational focus versus a long-term strategic focus. As it relates to the research approach, this is particularly challenging from a financial management perspective and in the development of financial capacity within the organization. Conclusion #6 The financial sustainability of non-profit organizations is being challenged by reduced and uncertain funding, increased operational costs, increased accountability, and tension between traditional and enterprising non-profit values. With the majority of the research participants agreeing that funding support has decreased and accountability has increased, it would appear that the literature is correct in stating that NPOs need to become more self-sufficient as the sector becomes increasingly complicated (Dees et al., 2001). Yet, the research study also shows that the move towards enterprising selfsufficiency is not the only approach being adopted to respond to these operational challenges.

Financial Resources and Non-Profits 99 Operational Approach: Resource Management or Enterprise Development The approach to dealing with sustainability issues encompasses many of the findings and conclusions previously stated. For example, sustainability issues incorporate organizational culture, strategic and operational planning, financial management, and financial products and services because of the way it is being addressed operationally. As a result of the study, it is apparent that non-profit organizations are addressing sustainability issues in one of two ways. The first approach concentrates on resource management. In this instance, sustainability is more an issue of maximizing resources, both financial and human. This is a response that also pushes the integration of services, even collaborating with like-minded organizations to share resources and infrastructure costs (F1-19; F6-27). In short, it is about maximizing existing resources to increase operational efficiency. The second approach is more of a sustainability issue associated with balancing the operational mandate while creating new revenue generating initiatives. This is a delicate adaptation that one participant described as a “broad approach to revenue generation in accordance and respect to our mandate and mission” (Q3-27-11). The importance of recognizing that there are two equally represented approaches is that they both embody what the NPOs consider a business-minded approach; one characterizing resource management qualities; the other more enterprising qualities. Equally important, the opportunity to provide financial and business management assistance and specific products and services is available to both, so it will be important to both the NPOs and the financial institutions to recognize the business approach being utilized by each, as they will have different needs. Conclusion #7

Financial Resources and Non-Profits 100 Specific to enterprising non-profits, marketing assistance and the valuation of goods and services is sorely needed. In the words of one participant, the creativity that comes as a result of enterprise development must be “in tune with the marketplace” (F3-S-3). Although simple in principle, the reality according to the research findings is that most NPOs have a poor sense of the value of their goods and services, and an even worse sense of how there product needs to be positioned in the marketplace (M1-S; F1-S). The prevailing thought from the study was twofold. First, non-profit organizations don’t have the skills to valuate and market their offerings and, second, that they don’t need to because people will buy their wares because it is the right thing to do. Enterprising non-profits that are enjoying earned revenue that represents a significant portion of their operating budget strongly disagree, suggesting on behalf of all successful likeminded groups that there is tremendous competition out there. Furthermore, they suggest that if NPOs truly espouse a business approach, they need to create a business space that aligns them with the correct market, offering competitive products and services, supported with appropriate customer service, while providing the bottom-line accountability that goes along with running any business (F1-S-2). Scope and Limitations of the Research Although this study has provided insight into non-profit perceptions of emerging challenges within the sector, several limitations must be identified regarding the methodology and target population. Methodology The online questionnaire and individual interviews were limited to four factors related to non-profit organizations. Other factors, such as a financial institutions perspective of non-profit

Financial Resources and Non-Profits 101 organizations, communications, organizational change, and systems thinking may have influenced a different outcome to the study. The questionnaire was disseminated online through a social enterprise centre using the database of a nationwide non-profit network. This largely impersonal approach may have negatively affected the response rate. In the second stage of data collection, the individual interviews were too loosely structured and allowed for a plethora of story-telling. Despite some excellent data as a result, a more concise approach would likely have captured the same information. Target Population The diversity of the non-profit organizations and the services they offer provided for generalized findings that limit the scope of this study as it relates to the specifics of enterprising non-profits. The study could have been targeted more specifically to enterprising non-profits, which may have resulted in different findings. Considering the sector being explored, the absence of research questions specific to the impact of volunteer capacity, or expertise, as a leveraged resource within non-profit organizations was a possible oversight. The significance of volunteers is important within NPOs and exploring available capacity within the volunteers could have influenced the scope of the findings. A possible limitation to the study, the majority of the respondents represented larger nonprofit organizations. This may restrict the applicability of the findings to such groups, as the influence of smaller non-profit organizations may have also resulted in different findings and conclusions. Conclusion

Financial Resources and Non-Profits 102 Although the data was representative of a generalized sampling of NPOs and not specific to enterprising non-profits, the data gathered offered valuable insight into the perceptions and views of the challenges facing the resource development of this sector. Some data confirmed literature review findings and other data added new perspectives on the emerging needs of NPOs. These findings all addressed the research question and sub-questions, and will aid Prospera Credit Union in designing sector specific financial resources that will maximize resources, support enterprising interests, and build capacity to meet the complex needs of NPOs. Financial solutions called for tailored products and services sensitive to the unique circumstances of NPO operations. The resources identified pertained to dedicated account assistance with access to financial management training to build NPO capacity. Beyond access to capital, NPOs are looking to these resources as an answer to the long-term sustainability of their organizations. This will allow the NPOs to overcome organizational challenges associated with generally inadequate financial management aptitude. The efforts to build this proficiency will involve close contact between NPOs and Prospera, and may build a greater understanding and awareness of each that adds to the organizational culture of both. In both instances, the actions and their outcomes will have measurable social and economic benefit to the organizations and the community’s they serve.

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CHAPTER FIVE – RESEARCH IMPLICATIONS Study Recommendations “When a company reinvents itself, it must alter the underlying assumptions and invisible premises on which its actions are based” (Goss, Pascale and Athos, 1998, p. 86). In addressing the research question: What innovative financial solutions and resources are required to meet the emerging needs of enterprising non-profits? A series of recommendations have been developed for Prospera’s consideration. These recommendations concentrate on internal and external opportunities to the research question, in addition to recommendations on potential mechanisms to do so. These recommendations are intended to reflect only one of several components of Prospera’s developing CSR strategy. As a financial institution, Prospera has a perspective on community that enjoys the competitive advantage of being more attuned to local issues as a result of a credit union mandate that is strongly connected to the values of the communities in which they operate. In order to advance this perspective, Prospera’s adoption of a formal CSR mandate will provide the opportunity for enhanced community engagement. However, this will require a new organizational mindset, the introduction of new initiatives, and the tools and leadership to assure meaningful implementation. The success of their CSR mandate will be determined by how Prospera differentiates itself using its unique organizational capabilities to the benefit of the

Financial Resources and Non-Profits 104 community. Although the CSR mandate will encompass ideals beyond assistance to the nonprofit sector it is recommended, within the limited scope of this research, that their CSR initiative leverage what they are already good at to strengthen the non-profit sector; that being financial management expertise and the provision of financial resources. Although the following recommendations are sequential, they are categorized into internal and external applications, in addition to potential mechanisms and the leadership required for achieving these objectives. The internal recommendations are specific to what Prospera can do within their organization to facilitate the following recommendations, without abandoning the systems and tools familiar to their operational context. The external recommendations reflect how Prospera can connect their financial expertise and resources to capacity building activities within the non-profit community. The recommendations within the mechanisms and leadership segment represent the required tools and guidance that connect the systems and theories with actionable strategies. Internal Recommendation 1 Create a non-profit or CSR account manager position within Prospera’s CSR operating structure with the responsibility of developing the financial resource capacity of non-profit organizations, as well as actively structuring financial packages and services specific to individual non-profit needs. This recommendation originates from the overwhelming response from NPOs specifically appealing for this level of support from their financial institution. When participants were asked “If your financial institution was to provide financial management training to your organization would that be of use, and what would your expectations of this

Financial Resources and Non-Profits 105 training be?” one respondent summed up the majority by stating: “If the financial institution had it to offer, I think it would be awesome” (F4-S-4). The capabilities of a non-profit account manager must match the needs of Prospera’s CSR objectives, while also understanding and supporting the financial resource needs of the nonprofit sector. Although this role is related specifically to voluntary sector support and involvement, it will be most effective when integrated into the organizational management structure, where managers and leaders across multiple departments can learn and find ways to integrate and support CSR objectives into their own departments. Developing the capacity across several managerial roles simultaneously is described by Adizes (2004) as an optimal approach to maintaining balanced organizational growth that mitigates against problems and eliminates isolation felt by managers developing new roles on their own. Recommendation 2 Create a new pool of capital through the establishment of a community investment fund where individuals and organizations can make contributions to programs that support investments in socially responsible community projects. Often defined as the practice of socially responsible investment, the purpose of developing this kind of investment vehicle is to promote investment that integrates environmental, social and economic value with measurable returns (Emerson and Bonini, 2004). Some unique suggestions arose as a result of asking research participants what financial resources, services and products could be provided by their financial institution to help meet the social and financial objectives of their NPO. For example, one questionnaire respondent suggested financial institutions could “underwrite a percentage of customer service fees that would guarantee long-term investments for these clients into our services and programs” (A-32-

Financial Resources and Non-Profits 106 15). The American Express example provided above is an example where American Express donated $.03 to Share Our Strengths (SOS) hunger relief efforts very time an American Express card was used during the holiday season, resulting in a $16 million contribution to SOS (Andreasen, as cited by Dees et al., 2001, p. 243). Similar mechanisms could be developed by Prospera. Limited only by imagination, several examples exist across North America where communities and financial institutions have developed collaborative community investment mechanisms where the benefits of financial gain are invested into social projects either directly, or through non-profit intermediaries (Dees et al., 2001; Hollender and Fenichell, 2004). Recommendation 3 Develop appropriate social and economic measurement tools in order to monitor progress specific to assistance provided to the non-profit sector. In order to measure the activities and benefits of supporting the non-profit community, it will be necessary for Prospera to understand what it is it wants to measure, or the process will become vague and success difficult to determine. “If the principles of social responsibility define our goals, then we need milestones to tell us how far along we’ve gotten in achieving them” (Goodell, 1999, p. 66). The importance of measurement will allow Prospera to demonstrate its commitment to its stakeholders through clearly illustrating how it has transformed its values ideology into measurable outcomes that have resulted in a positive social impact. Although there is no universally accepted tool for measuring social impact, several methods exist to measure social return on investment. The selection of the measurement tool will depend to a great extent on the final content of the CSR mandate that is created by Prospera. Regardless, “performance measurement is about learning, and learning how to get better”

Financial Resources and Non-Profits 107 (Enterprising Non-Profits Program, 2005, p. 116). Also important, as pointed out in the literature review on corporate social responsibility, several studies convincingly demonstrate that there exists a profitable connection between CSR and long-term shareholder performance (Greider, 2003; Hart, 2005; Hollender and Fenichell, 2004). Although deemed a long-term benefit, the economic outcomes must be measured as well, as it will complete the measure of performance to total investment made. External Recommendation 4 Support and partner with existing community-based organizations currently providing financial management training. For example, in the Lower Mainland and Fraser Valley, the United Way provides periodic financial management training to non-profit organizations. Although the United Way is not the only organization to provide this service, it is representative of an opportunity for Prospera to offer enhanced financial management training; an area deemed by the research participants as vital to the future of running a successful non-profit organization (F3-S). Prospera could add significant value to these non-profit training initiatives through the provision of personnel and training materials, allowing Prospera to remain close to its functional expertise and service interests while meeting its CSR objectives. This approach allows Prospera to assist the host organization while helping to build the financial management capacity of multiple NPOs. In the process, Prospera builds reciprocal understanding and awareness within the non-profit community, while also promoting other products and services designed specifically to serve the financial and operational needs of the non-profit sector.

Financial Resources and Non-Profits 108 Recommendation 5 Within the province, become actively involved in existing economically aligned social transformation initiatives related to new sources of financial capital and policy development for the social sector. As demonstrated by the literature and the research findings, the sustainability of the nonprofit sector is being challenged by unpredictable funding policies. Scott (2003), describes the impact of changes in how NPOs are funded as a threat to the very future of many non-profit services, describing many organizations as “financially fragile because they are now dependent on a complex web of unpredictable, short-term, targeted project funding that may unravel at any time” (p. 3). The majority of the research respondents within the questionnaire and interviews stated that their non-profit organization does not have the financial management expertise and resources to knowledgably address these issues (F5-S; F6-S). In one response to the online question that asked respondents what financial resources, products or services could financial institutions provide to help you integrate the social and financial objectives of their non-profit organization, one respondent stated: “Advice on how to better utilize banking services, as well as advice on financial management policies and procedures and building capacity around financial management” (A-25-3). In response, several initiatives and organizations have been formed to address the social and economic challenges associated with their funding and operational strategies, such as the BC Social Economy Roundtable. These formal institutions recognize that the development of nonprofit financial capacity requires new relationships that include stakeholders with the ability to help develop operational and financial management skills (Dees et al., 2002; Scott, 2003). As a

Financial Resources and Non-Profits 109 result, these institutions welcome the interest and expertise of financial institutions as important stakeholders to the development of non-profit capacity. Involving itself in the exploration of new sources of investment for social innovation, Prospera will put itself into the position of broadening its CSR position and understanding as it relates to financial resources and the non-profit sector. Several important dialogues are occurring within the province, including the Enterprising Non-Profits Program, the BC Social Economy Roundtable, the Canadian Community Economic Development Network, and the Fraser Valley Centre for Social Enterprise, to name but a few. These networks have forged strategic alliances and developed a wide network of investment partners, leveraging more skills and resources into the Province. The network includes government, social enterprises, financial institutions, NPOs and businesses, and many would welcome the additional capacity offered by Prospera. Mechanisms and Leadership Recommendation 6 Provide customized loan finance to non-profit organizations and social enterprises that have been excluded from other forms of mainstream finance. Within this recommendation, Prospera will have to develop a context to assess the risks of lending to non-profit organizations that have unconventional and inconsistent funding sources, minimal assets, and a complicated legal structure. The problem is “not that there is a lack of capital, but a problem with the system of capital allocation” (Strandberg, 2006, p. 4). This will require a complex set of negotiations between Prospera’s social aims and its concern to remain financially viable, while negotiating the tensions of developing new loan products that are outside the realm of traditional risk acceptance.

Financial Resources and Non-Profits 110 Dees et al. (2001) and Gannitsos (2004) stated a heightened need for access to finance-related capital, yet the research outcomes determined the need for loan finance was not as widespread for this region as the literature suggested. However, several of the research participants stated they would consider a loan product for the development of a social enterprise activity should the loan have a flexible repayment structure and lower interest rate (F6-S-8). Recommendation 7 Create a micro-loan program as a fundraising support mechanism to help organizations who want to help themselves. Referenced hereafter as the fundraising assistance program, the purpose is to provide short-term micro-loans and organizational expertise to the fundraising initiatives of non-profit organizations active in the voluntary sector. This approach alleviates the concerns of NPOs who do not wish to establish programs or services through borrowed working capital, but who would entertain short-term financing to purchase more attractive prize offerings. One study participant supported the short-term lending approach, as they acknowledged they don’t have the extra resources to invest in more sophisticated fundraising initiatives: “How else do you get started when you don’t have the money financially to start it?” (F5-S-4). Most community based non-profit organizations lack the necessary monetary capital to purchase a marketable and attractive item for their fundraising initiatives. In most cases, volunteer-driven groups must therefore rely on less inspiring fundraising methods to raise money for their group. As stated by one research participant: “When you’re going after funding, you have to have a purpose for that request. If you can’t do that at a corporate level of understanding or planning, you’ll fail. Bake sales and 50/50 draws don’t hack it today” (F2-S-5). Addressing this need, the fundraising assistance program could provide financial assistance to purchase items of greater value and marketability.

Financial Resources and Non-Profits 111 This is a service that currently does not exist in Canada. It would be an innovative response to meeting social sector needs by Prospera, a financial institution, as called for by the Task Force on the Future of the Canadian Financial Services Sector (Government of Canada, 1998c). Fundraising support of this nature would be a distinct service for non-profit organizations and would allow the fundraising assistance program the opportunity to provide competitive lending structures to suit each individual group while maintaining a focus on profit for both the non-profit organization and Prospera. As most fundraising initiatives require approval from the applicable provincial gaming commission or licensing body, micro-loans could be structured around the available window for marketing ticket sales for the fundraising project. For instance, most provincial gaming licenses allow for ticket sales over four months. Micro-loans for this duration, plus processing and administration time, could be structured for re-payment at project mid-point and project completion. All micro-loans would be registered against the item through a legally registered security agreement on the item being used for fundraising, such as a car, in addition to a general security agreement on the licensed organization. As a lending program, loans are short-term and repayable in full upon completion of the fundraising project. An extensive preliminary assessment, community support measurement and thorough background and reference checks would be mandatory to all applications, and could be performed by the aforementioned account manager in Recommendation 1. It could also be a consideration that the program be designed as a service provided by an intermediary, such as a local community foundation or non-government community development organization. This level of added community development expertise provides for enhanced local understanding of the non-profit in question and also adds additional social capital and

Financial Resources and Non-Profits 112 administrative infrastructure that can provide ongoing technical support to these fundraising activities (Dees et al., 2002). Pre-screening and micro-loan application processing could also be the responsibility of the local community partner. Recommendation 8 Develop an internal and external leadership communication and integration strategy related to CSR. Internally, Prospera’s CSR initiative will engage management and staff in an exercise that will develop a strategy that adds tangible value to society and the organization. Externally, engaging community stakeholders and working closely with NPOs will require a significantly different communications approach. Paraphrasing Dees et al., (2001), the two cultures are quite distinct. Prospera can provide leadership that is aware of these differences, sensitively integrating both the internal objectives of Prospera’s corporate social objectives with the social needs of the community stakeholders. According to this study’s participants, the assistance would likely be greatly appreciated, provided it is actionable and meaningful and not deemed as a public relations move. This integration is perhaps the greatest challenge within these recommendations. As the previous recommendations addressed policy, service, and product development and support, the leadership structure during this organizational transformation will determine the success of the CSR initiative, particularly as it relates to the non-profit component addressed in this study. “In today’s business environment, significant transformation cannot happen without the simultaneous transformation of a critical mass of leaders’ and employees’ mindsets and behaviours” (Anderson et al., 2001, p. 27). This is a statement that stresses the need for new leadership skills and strategies that expand the knowledge of old approaches into new mental

Financial Resources and Non-Profits 113 models that will shape the leadership style and behaviour to accommodate the unique requirements of this new relationship with the non-profit community. Organizational Implications This study hopes to raise the awareness and understanding of non-profit challenges relating to financial management, and how the individuals who will shape the identity of Prospera’s CSR initiative can make a significant contribution to the social fabric of the communities in which it operates. Prospera’s consideration of developing and implementing a focus on meeting the financial resource needs of NPOs within their CSR mandate will be a significant commitment that will require patience, strong leadership, and considerable organizational input and support. Implications of Recommendation 1 Recommendation 1 suggests the creation of a non-profit or CSR account manager to help build the financial management capacity of NPOs, in addition to being empowered to structure products and services specific to that sector. The implications of doing so would address the most commonly called for need of NPOs of their financial institutions, as identified by research participants, who identified training and advice on financial management and how to better utilize banking services through an assigned account manager as the most desired approach to assisting NPOs (M1-S; F1-S). Having an account manager for such purposes will play an important role in stabilizing the operations of NPOs. Equipped with the appropriate resources, this will have a positive and immediate effect on the capacity of the non-profit sector, as well as the corporate reputation of Prospera. For the NPOs, having access to this level of financial involvement and guidance will add awareness and understanding around their financial situation and will provide them with the

Financial Resources and Non-Profits 114 training they need, as discussed in Recommendation 4, to help them make important financial decisions. An investment in hiring an individual who understands the unique requirements of both the non-profit sector and financial institutions will be required, in addition to the realization of the potential for lessened returns on the packaging of financial services and products to the nonprofit sector. As the focus shifts to service solutions that will build long-term sustainability for NPOs, Prospera will need to be aware that the short-term returns on these products and services may be less. However, the long-term benefits should demonstrate increased non-profit clientele and higher use of services to offset losses (Kaplan and Norton, 2004). It is also possible this investment may be partially offset on returns gained through the community investment fund, as mentioned in Recommendation 2. Not implementing this recommendation will result in a lost opportunity to meaningfully engage the entire membership and staff of Prospera in efforts that will result in a positive social impact. Furthermore, not implementing an account manager to work with NPOs is deemed by several of the research participants as “ignoring a key target audience” (F3-S-17). This is an implication that mirrors the observation by Porteus (2005) that financial institutions underserve a banking niche that will help them achieve social and economic gains. Implications of Recommendation 2 The purpose of recommending the creation of a community investment fund is to encourage innovative thought around the capitalization of programs and projects through unique financial mechanisms that address the social needs of the community. The implications of doing so would be to galvanize Prospera and its members towards a common cause to meet the social needs identified, utilizing the community investment

Financial Resources and Non-Profits 115 mechanism. Appealing to a common cause is meaningful and purposeful. Kouzes and Posner (2002) describe it as “a deep human yearning to make a difference. We want to know that we’ve done something on this earth, that there’s a purpose to our existence” (p. 152). Contributing positively to the improvements of the community meets this purpose, and is also an opportunity to connect with local members and stakeholders to promote the entirety of Prospera’s CSR objectives. Furthermore, as an innovative approach to raising, pricing, and allocating capital, it is recognition that financial institutions are an important key to the future of NPO financial sustainability (Strandberg, 2005). Not implementing this recommendation will result in Prosper maintaining the status-quo while NPOs continue the struggle individually to develop meaningful vehicles to raise funds to meet their social objectives. Based on current initiatives, such as those being discussed by the Canadian Business for Social Responsibility (2001) and the Enterprising Non-Profits Program (2005), it will only be a matter of time before other institutions evolve within Prospera’s geographic area of interest with programs and projects to address these opportunities. Implications of Recommendation 3 The implications of developing appropriate social and economic measurement tools in order to monitor progress specific to assistance provided to the non-profit sector will be critical to the continuation of any level of support from Prospera’s members and corporate leaders. It is an action that confronts assumptions about the blending of social and economic principles, using metrics that will help separate fact from fiction. In the words of Kaplan and Norton (2004), “You can’t manage what you can’t measure. You can’t measure what you can’t describe” (p. xiii). The development of tools to measure Prospera’s impact on the non-profit community will clearly demonstrate the social,

Financial Resources and Non-Profits 116 environmental, and economic benefits of their commitment. Corresponding roughly to the financial audit undertaken by public companies, an independent social audit is an example of one such measurement tool to demonstrate the commitment of Prospera and its CSR impact on the community (Goodell, 1999). As well, being able to share this impact with the community will create awareness, and encourage continued investment and support of Prospera’s successful CSR efforts. A failure to implement a measurement tool to determine the impact of these strategies will cause a loss of interest and support, and potentially credibility, as the outcomes of Prospera’s CSR objectives will not be clear. Implications of Recommendation 4 Based on the research, the implications of supporting and partnering with existing community-based organizations that currently provide financial management training recognizes the most important need identified by NPOs, that of “understanding financial management” (F5S-3). The additional resources of an expert financial manager will be a welcome addition to the organizations that currently provide financial management training to NPOs. This added capacity will improve the quality of training opportunities and allow Prospera the opportunity to make known first hand any new products or services that are available to the NPOs. Not implementing this recommendation will result in lessened accessibility of the NPOs to Prospera, with little to no access to this valuable training. It would also result in lost networking opportunities and the loss of product, service, and CSR marketability.

Financial Resources and Non-Profits 117 Implications of Recommendation 5 The intent of this recommendation is for Prospera to become actively involved in existing economically aligned social transformation initiatives related to new sources of financial capital and policy development. If this recommendation is adopted, the benefits of sitting at the same table as the leading innovators of social transformation will improve Prospera’s knowledge and understanding of the potential associated with CSR and the benefits of working with NPOs. It will also provide opportunities for Prospera to make important contributions, as well as team up with like-minded collaborators who wish to value-add their contributions through partnered efforts. Choosing not to adopt this recommendation will cause Prospera to work in isolation, bringing into question its understanding of stakeholder involvement and level of impact they can obtain on their own. Implications of Recommendation 6 There are significant implications to providing customized loan finance to non-profit organizations and social enterprises that have been excluded from other forms of mainstream finance. For the most part, Prospera would be associated with a very small group of financial institutions that have met the call of the Task Force on the Future of the Canadian Financial Services Sector to address the role financial institutions must play in creating greater access to financial capital for NPOs (Dees et al., 2001; Gannitsos, 2003; Government of Canada, 1998a). It also meets the call of those NPOs that would consider such a service if there was easier access to loan products with more flexible terms relating to repayment schedules and lower rates (Q125-2; Q9-25-5; F6-25-10).

Financial Resources and Non-Profits 118 Although the profile this support would generate would be substantial, there are potential negative implications that may challenge the successful implementation of this recommendation. As stated by Banting (2003) and Dees et al. (2002), most financial institutions view NPOs as high risk, which may cause a cultural conflict based on skepticism around the social motives and management capability of NPOs. Nonetheless, dismissing this recommendation will not dismiss the growing need for capital within more enterprising nonprofits, and Prospera would do better to explore lending mechanisms that would allow it to feel more comfortable with the risks that are of concern. Implications of Recommendation 7 The creation of a micro-loan program as a fundraising support mechanism to help organizations who want to help themselves. The potential implications of this micro-loan program may be that it is an acceptable compromise to longer-term loan relationships that may be deemed more risky. It may create a greater level of comfort for Prospera as it is secured against a marketable asset, such as a car, and has the potential for a quick return on investment while helping to meet the social aims of a local non-profit. Within the study, NPOs felt that fundraising initiatives needed to become more sophisticated, and felt financial institutions could play a role in helping this occur (F1-S; F5-S). Although this recommendation is untried at a financial institution level, if the recommendation is not adopted, the anticipated implications are the hesitant development of more traditional loan-related resources, with the potential for less of a return on investment over a longer period of time.

Financial Resources and Non-Profits 119 Implications of Recommendation 8 The implications of a communications and integration strategy are important, as they will determine the success of the entire CSR initiative. The implications reside in both internal and external factors. Internally, the leadership of Prospera will need to coordinate and integrate the activities and outcomes associated with the development and implementation of the CSR strategy and the recommendations associated with this study across all levels and departments. Externally, the implication will be an enhanced corporate profile that will enjoy the benefits of a newly minted identity that embraces CSR. Not sustainable on its own, this new identity will require significant human resources and financial investment to sustain. In today’s business environment, significant transformation cannot happen without the simultaneous transformation of a critical mass of leaders’ and employees’ mindsets and behaviour. Conscious transformation means attending to the consciousness of the people in your organization, including your own. (Anderson et al., 2001) The task of changing culture is immense. In this instance, commitment must parallel the long-term difficulty of turning the idea into a viable strategy. If the recommendation is adopted, it will be the lack of commitment that will destroy the initiative. (Adizes, 2003). Adizes further states that “if you want to gauge the viability of your organization, you should assess the commitment of all who are related or associated with it” (2004, p. 22). Implications for Future research Given the depth of the non-profit sector, the range of funding sources, the diversity of services, and the operational complexity, the resultant outcomes have only demonstrated that there are many potential paths that require further exploration. Many of the findings and conclusions confirm the observations in the literature, yet they also raise a number of matters whose exploration would significantly advance the dialogue on the resource needs of the non-

Financial Resources and Non-Profits 120 profit sector. The following questions would help create a greater context for understanding the perceived and actual challenges facing NPOs: 1. What are the views of the non-profit sector from the financial institution’s perspective? 2. How is the resource capacity of NPOs enhanced through like-minded partnerships and alliances? 3. What are the actual financial institution policies relating to financing a non-profit? 4. How is policy research related to strengthening the non-profit sector impacting the enterprising non-profit? 5. What capacity do volunteers add that could be utilized to develop the resources of the non-profit organization?

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CHAPTER SIX – LESSONS LEARNED Personal Learning Aside from the mechanics of the research study and the lessons I have learned as a result, the most significant learning occurred off these pages. I learned more about myself than I ever expected and I am grateful for the personal growth I have experienced. My journey began at RRU with a leadership philosophy that was largely based on integrity, fairness, a willingness to share my vision, and a lead-by-example approach. What I never thought to explore was why those principles were important to me, how they could be utilized to serve the values of those I was leading and, more importantly, how to utilize the knowledge in the manner intended. What I have come to learn is the importance of expanding and grounding these principles within a rigorous theoretical framework, recognizing the collective values of those I am working with, and how to consciously apply these principles within a socially and emotionally responsible manner. I have also learned that there is a responsibility with this new awareness. The awareness heightens my responsibility to own my behaviour and my assumptions in an effort to lessen misunderstandings and improve communication. I have a new understanding of how my actions often contribute to the very environment with which I struggle. During this learning and research

Financial Resources and Non-Profits 122 process, I have grown to understand myself and those around me with a deep appreciation that all of our actions have absolute meaning and purpose. Allocation of Time The scope of the work as a neophyte researcher and the limitations associated with the timeframe were not expected. It became apparent with about two months left in the process that there was no possible way to incorporate all of the dimensions of the research I felt were relevant to the study. A frustrating realization, it was important for me to clarify and refine the objectives as they related to the research questions and sub-questions and stay focused on the activities that moved me through the requirements of each chapter. The Inevitable Setback Although previous graduates had warned us of the unforeseen setbacks, I was completely blind-sided by a complete lack of response to my focus group invitation. In the hopes of securing seven to nine individuals, I sent out 14 invitations, which included all of the online questionnaire respondents who had expressed an interest in continuing with the focus group process. The best response to the request was two individuals at any given time, despite three different attempts to re-schedule. Compounding the time issue discussed previously, I had to change my methodology to individual interviews. This had a domino effect, as I had to re-design and re-write the methodology section, in addition to restructuring the questions to accommodate one-on-one interaction versus a guided focus group discussion. The lesson learned was significant, in that I could have started this process approximately three weeks earlier, had I remained a little more disciplined with my studies. This error on my part caused a two week delay in my data collection and a lot of avoidable stress.

Financial Resources and Non-Profits 123 Timing: The Online Invitation and Focus Groups As mentioned, the focus group never occurred due to lack of response, and I had a similar concern immediately after sending out the online questionnaire. I was fortunate to have the assistance of a social enterprise centre that was willing to disseminate the questionnaire to approximately 600 recipients across Canada. I had scheduled with the centre to send out the online questionnaire in the last week of June. However, I was having a difficult time getting feedback and finalizing the questions and ended up sending it out two weeks into July. It was ready to go on July 12th, and I asked to have it sent on the following Monday, July 17th. Unfortunately, the individual who was sending it for me was going to be away that week, so it ended up being sent out on Friday, July 14th. The e-mail sat in inboxes all weekend and was likely just one of many e-mails for individuals to read on Monday morning. The response to the questionnaire was poor and it wasn’t until a follow-up e-mail reminder was sent out the following Monday that a more significant response occurred. The lesson learned was one of appropriate timing as it related to my methodology; not only the time of year (summer), but also the time of week communications are most effective. Maintaining Realistic Expectations In mentioning the difficulties associated with getting feedback on my questions, it was an important lesson learned when I realized my schedule and my passion for the research were not in synch with all of the individuals helping me out. I also believe part of the problem was the volume of information I was sending. Had I scheduled more frequent opportunities to connect, providing smaller sections of information for feedback, I think it would have helped lessen what I perceived as an information dump on my advisors. Making time for more frequent interaction

Financial Resources and Non-Profits 124 will allow you to focus in on important topics, as well as help you avoid stressful moments involving people you are going to be communicating with for some time. Testing Your Questions It is very tempting to draft your questions and think that they are completely appropriate to your audience. Although this topic is likely covered by every student in the program, it can not be stressed enough that beta testing your questions before they are put into use is a very important exercise. Even after testing them, it amazed me how many times I had to rephrase a particular question to make it understood. Data Collection Although I had only one unforeseen minor problem with the online data collection, I spent a combined 46 hours re-writing notes and transcribing tapes from the seven individual interviews. I had two in-person interviews and five phone interviews. Only the two in-person interviews were taped, as I had forgotten to mention a request to tape the phone conversations when I had to revise my methodology. This lesson was significant as it was difficult to maintain a smooth phone conversation as I was writing so much, and it was difficult and time-consuming to transcribe my notes for the interviewee’s verification of the content. The one minor problem mentioned with the online data collection was a respondent who replied to all of the open-ended questions in French. This required translation for me and although not a significant problem, is something you should be prepared for should you be doing a broadcast invitation to participate in your research. Design of the Invitations to Participate in Research These documents have a lot of important requirements and the wording and structure are critical. I believe that the design of my invitation, although very professional according to one

Financial Resources and Non-Profits 125 participant, was dry and not terribly engaging. This may have also contributed to lessened response. It is possible to design more interesting invitations and this may result in greater participation. The Research Outcomes It is interesting when you think you have couched your bias and all of your pre-conceived notions, only to be surprised when what you thought would be a certain outcome turns out quite differently. This was a very tangible lesson for me, as I learned the true significance of how difficult it is to remain impartial, and how my views could potentially impact the data. In fact, I had to review one conclusion for this very reason, as I was concerned my pre-conceived notions had influenced my interpretation of the data. Conclusions The most compelling lesson I have learned as a result of my journey in the MALT program and the action research process is the power of communication. I continue to learn that how we communicate and the social and emotional awareness required of ourselves and our surroundings are the foundation of successful relationships. Although we communicate daily on many different levels, we may not take the time to review how our interaction is affecting those around us. Removing my assumptive approach and taking the time to appreciate, understand, and accommodate the participants and their perspectives during the research process improved my ability to communicate and reach mutual understanding. For me, this heightened awareness equates to a responsibility to own my behaviour and my assumptions in an effort to lessen misunderstandings and improve communication. Prospera Credit Union will be involved in many new relationships as they develop their interests in the service of NPOs within the development of their broader CSR mandate. This may

Financial Resources and Non-Profits 126 require a transformative departure from their traditional operational approach, yet the potential to add value to the communities in which they serve will be greatly enhanced through the active inclusion of local interest. The leaders within Prospera should seize every opportunity to communicate and learn from these community stakeholders, as many will provide important contributions. How these contributions are received and responded to is the communications lesson I have consciously incorporated into my ongoing personal and professional leadership journey.

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REFERENCES Adizes, I. (2004). Managing corporate lifecycles: How to get to and stay at the top. Santa Barbara, CA: The Adize Institute Publishing. Anderson, D. & Ackerman Anderson, L. (2001). Beyond change management: Advanced strategies for today’s transformational leaders. San Francisco: Jossey-Bass/Pfeiffer. Anheier, K., & Kendall, J. (2001). Third sector policy at the crossroads: An international nonprofit analysis. New York: Routledge. Banting, K. (Ed.). (2000). The nonprofit sector in Canada: Roles and relationships. Kingston: School of Policy Studies, Queens University. Bellman, G. (1990). The consultants calling: Bringing who you are to what you do. San Francisco: Jossey-Bass. Berg, B. (2004). Qualitative research methods: For the social sciences (5th Ed.). Boston: Pearson Education Inc. Boschee, J. (1995, March). Social Entrepreneurship. Across the Board, 32, 20-24. Brinckerhoff, P. (2000). Social entrepreneurship: The art of mission-based venture development. NY: John Wiley & Sons, Inc. Buttle, M. (2003). Inside a charity bank: An account of risk, ordering and performing a sociofinancial narrative. Paper given at RGS-IBG September 2003 conference session: Understanding Globalisation: Economics or Development. Retrieved October 20, 2005, from http://www.gees.bham.ac.uk/downloads/gesdraftpapers/mb_rgs2003.pdf Canadian Business for Social Responsibility. (2001). Socially and environmentally responsible business practices in British Columbia: Opportunities and realities. Retrieved October 12, 2006, from http://www.cbsr.ca/files/ReportsandPapers/SocialandenvironmentalBusinessPracticesinB C.pdf

Financial Resources and Non-Profits 128 Charity Bank. (n.d.). What is Charity bank? Retrieved October 19, 2005, from http://www.charitybank.org/# Covey, S. (2004). The 8th habit: From effectiveness to greatness. NY: Free Press. Dees, J., Emerson, J., & Economy, P. (2001). Enterprising nonprofits: A toolkit for social entrepreneurs. NY: John Wiley and Sons, Inc. Dees, J., Emerson, J., & Economy, P. (2002). Strategic tools for social entrepreneurs: Enhancing the performance of your enterprising non-profit. NY: John Wiley and Sons, Inc. DePree, M., (1987). Leadership is an art. NY: Currency Doubleday. Drayton, W. (2002, Spring). The Citizen Sector: Becoming as Entrepreneurial and Competitive as Business. California Management Review, 44, 120-132. Emerson, J. & Bonini, S. (2004, February 24).The blended value map: Tracking the intersects and opportunities of economic, social and environmental value creation. Retrieved November 20, 2006 from http://www.blendedvalue.org/media/pdf-bv-map.pdf Enterprising Non-Profits Program. (2005). The Canadian social enterprise guide. Vancouver: Author. Freund, A., & Potter, K. (1999). Serving the people and building the community: A history of the fraser valley credit union. Abbotsford, B.C.: Fraser Valley Credit Union. Gannitsos, I. (2003). Enterprising non-profits program: A report on non-profits and their social enterprises, 2000-2002. Retrieved October 18, 2005, from https://www.vancity.com/SharedContent/documents/ENP_Report_on_Social_Enterprise. pdf Glesne, C. (1999). Becoming qualitative researchers: An introduction (2nd ed.). NY: Addison Wesley Longman, Inc. Goodell, E. (Ed.). (1999). Standards of corporate social responsibility. Retrieved October 12, 2006, from: http://www.svn.org/Initiatives/PDF_standards.pdf Goss, T., Pascale, R., & Athos, A. (1998). The reinvention roller coaster: Risking the present for a powerful future. In, Harvard business review on change (pp. 83-112). Boston, MA: Harvard Business School Press. Government of Canada. (1998a). Task Force on the Future of the Canadian Financial Services Sector. Report of the task force: Change, challenge and opportunity. Retrieved October 15, 2005, from http://www.fin.gc.ca/taskforce/rpt/pdf/Main_E.pdf.

Financial Resources and Non-Profits 129 Government of Canada. (1998b). Task Force on the Future of the Canadian Financial Services Sector. Organizational flexibility for financial institutions: A framework to enhance competition. (Background paper #2). Retrieved October 15, 2005, from http://www.fin.gc.ca/taskforce/rpt/pdf/BG2_E.pdf Government of Canada. (1998c). Task Force on the Future of the Canadian Financial Services Sector. Canadian’s expectations and corporate conduct (Background paper #4). Retrieved October 15, 2005, from http://www.fin.gc.ca/taskforce/rpt/pdf/BG4_E.pdf Government of Canada. (2004). The Speech from the Throne of February 2, 2004. Retrieved October 22, 2005 from http://pm.gc.ca/eng/sft-ddt.asp?id=6 Greenleaf Center for Servant Leadership. (n.d.). What is servant leadership? Retrieved September 12, 2006 from http://www.greenleaf.org/leadership/servant-leadership/Whatis-Servant-Leadership.html Greider, W. (2003). The soul of capitalism: Opening paths to a moral economy. New York, NY: Simon & Schuster. Hall, P. D. (2005). Historical perspectives on the nonprofit organizations in the United States. In Herman, R. D. (Ed.), The jossey-bass handbook of nonprofit leadership and management (2nd ed.). San Franciso, CA: Jossey-Bass. Hart, S. (2005). Capitalism at the crossroads: The unlimited business opportunities in solving the world’s most difficult problems. Upper Saddle River, NJ: Wharton School Publishing. Hilton, S. & Gibbons, G. (2004). Good business: Your world needs you. Mason, OH: Thomson Business and Professional Publishing. Hollender, J. & Fenichell, S. (2004). What matters most: How a group of pioneers is teaching social responsibility to big business, and why big business is listening. NY: Basic Books International Association of the Investors in the Social Economy. (n.d.). Structure and activity. Retrieved October 22, 2005, from http://www.inaise.org/EN/fr_1.html K. Laing (personal communication, October 17, 2005) Kahane, A. (2004). Solving tough problems: An open way of talking, listening, and creating new realities. San Francisco, CA: Berrett-Kohler Publishers, Inc. Kanter, R. (2001). From spare change to real change: The social sector as beta site for business innovation. Harvard Business Review on Innovation (pp. 153- 177). Boston, MA: Harvard Business School Publishing Corporation. Kaplan, R. & Norton, D. (2004). Strategy maps: Converting intangible assets into tangible outcomes. Boston, MA: Harvard Business School Publishing Corporation.

Financial Resources and Non-Profits 130 Lee, T. (2002, Dec/Jan). Seeing communication as a process [Electronic version]. Strategic Communication Management, 6 (1), 10-11. Retrieved November 16, 2006, from the EBSCOhost database. McGill-Queens University Press. (n.d.). The nonprofit sector in Canada: Roles and relationships. Abstract retrieved October 22, 2005, from http://www.mqup.mcgill.ca/print_book.php?bookid=1000 Miller, C. (December, 1998). Canadian Non-Profits in Crisis: The Need for Reform. Social Policy & Administration, 32, 401-419. Morton-Cooper, A. (2000). Action research in health care. Oxford, UK: Blackwell Science. Chapter 1: Principles of action research design, pp. 7 – 27. Obtained from Royal Roads. (2005). LT 563: Leading systematic inquiry in organizations. Victoria, BC: Royal Roads University. Oster, S., Massarsky, C., & Beinhacker, S. (Eds.). (2004). Generating and sustaining nonprofit earned income: A guide to successful enterprise strategies. San Francisco: Jossey-Bass, Inc. O’Toole, J. (1996). Leading change: The argument for values-based leadership. Toronto: Jossey-Bass, Inc. Paine, L. (2003). Value shift: Why companies must merge social and financial imperatives to achieve superior performance. NY: McGraw-Hill. Patton, M. (1997). Utilization-focused evaluation: The new century text (3rd Ed.). Thousand Oaks: Sage Publications, Inc. Porteus, D. (2005). Private development banking: Managing the tensions. Retrieved October 23, 2005, from http://www.inaise.org/doc%20download/Harvard_Porteous_paper.PDF Prospera Credit Union (2005). 2004 annual report. Retrieved October 21, 2005, from the Prospera Credit Union Web site: http://www.prosperacreditunion.com/pdf/docs/454002D_AR_for_Client-001.pdf Roddick, A. (2005). Business as unusual. West Sussex, UK: Anita Roddick Publications Ltd. Scott, K. (2003). Funding matters: The impact of Canada’s new funding regime on nonprofit and voluntary organizations. Ottawa: Canadian Council on Social Development. Senge, P. (1990). The fifth discipline: The art and practice of the learning organization. New York: Currency Doubleday. Strandberg, C. (2005). The future of sustainable finance: Thought leaders study. Retrieved October 20, 2005, from http://www.corostrandberg.com/pdfs/Sustainable%20Finance %20-%20Future%20Trends.pdf

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Strandberg, C. & Plant, B. (2004). Scan of the community investment sector in Canada. National Round Table on the Environment and the Economy: Capital Markets and Sustainability Program. Retrieved October 23 from http://www.nrteetrnee.ca/eng/programs/Current_Programs/Capital-Markets/Documents/CommunityInvestment/Community-Investment_E.pdf Stringer, E. T. (1999). Action research (2nd ed.). Thousand Oaks, CA.: Sage Publications. UCFV Foundation News. (2002). Prospera opens gateway to learning at UCFV. Retrieved October 24, 2005, from the University College of the Fraser Valley Web site: http://www.ucfv.ca/dev/Aluminations/AluminationsFall02/FoundationNews.htm Vartana. (n.d.) A Unique Vision for the Voluntary Sector in Canada. Retrieved October 22, 2005, from the Vartana Web site: http://www.vartana.org/ Voluntary Sector Initiative. (2003). Voluntary sector task force final report. Retrieved October 17, 2005, from http://www.vsi-isbc.ca/eng/products/reports.cfm Wallace, N. (2004, March 18). Charities Debate Best Ways to Serve Society and Create New Sources of Revenue. Chronicle of Philanthropy, 16, 48. Retrieved July16, 2006, from the EBSCOhost database. Yukl, G. (2002). Leadership in Organizations, (5th ed.). Upper Saddle River, NJ: Prentice Hall.

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APPENDIX A – ONLINE QUESTIONNAIRE Partnership Strategies for Financial Stability in the Non-profit Sector On-line Questionnaire Thank you for your interest in the questionnaire and for helping to explore important leadership and financial capacity development issues within the non-profit sector. To review: As Executive Director or designate of your organization, you are invited to participate in a research project I am conducting as partial requirement for a Masters Degree in Leadership and Training at Royal Roads University. My affiliation with Royal Roads University can be confirmed by contacting Dr. Gerry Nixon, Committee Chair, School of Leadership Studies, Ph. xxx-xxx-xxxx. The purpose of this study is to explore and examine emerging leadership and financial challenges associated with the operation of enterprising non-profits. The research will evaluate leadership capacity and internal financial management capacity while assessing the current level of access to financial products, services and resources. My intent is to provide recommendations to Prospera Credit Union, my research sponsor, that look beyond traditional non-profit funding activities to allow for the consideration and potential development of mutually beneficial financial resources to the non-profit sector. You are not obligated to take part in this research project. If you do elect to take part, your responses will remain confidential and information collected will be presented as aggregate data only. You are free to withdraw at any time with no prejudice and your decision will be respected and maintained in confidence. The final report will be housed at Royal Roads University and will be publicly accessible. Organizational Information 1. As the Executive Director or designated respondent for your organization, please indicate your understanding and consent to participate in this research questionnaire by checking the consent box below: I have read the foregoing Letter of Invitation and research overview and I fully understand the contents and hereby acknowledge informed consent.

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2. Please indicate how many full and part-time employees your organization has. Full Time 1 2 3–5 6–9 10 + Part Time

3. Please indicate which segment of the population your organization works with. Check all that apply:

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Aboriginal Francophone People with Disabilities People on Social Assistance People involved in criminal justice Business / Business Members Community-at-large Other (please specify):

Seniors Youth Children and Family Services Women People on Employment Insurance Refugees or Immigrant

4. Please identify the goods or services that are provided by your organization. Check all that apply: Health care Social support Services Housing Employment Services Fundraising Services Recreational Services Legal Services Educational / Applied Training Government Services Business Services Finance Personal Services Addiction/substance abuse counselling Other (please specify): Wholesale / Retail products Youth Services Children and Family Services Services for women Environmental Services Transportation Services Agricultural Services Technological Services Community Development Services Manufacturing Services Arts and Culture Services Tourism Services

5. Please describe your organizational structure. Registered Charity Incorporated Non-profit Incorporated Co-operative Association (unincorporated) Other - please specify: 6. Do you think that levels of funding provided to your non-profit have declined during the past ten years?

Financial Resources and Non-Profits 135 Yes No Somewhat I don’t know

7. If you answered “Yes” to Question 5, in which of the following areas has funding contributions declined the most for your organization? Provincial Government Federal Government Foundations and other charitable organizations Philanthropic contributions Individual donor contributions Other (please specify): 8. How have accountability and reporting measures for funding that has been received by your organization changed during the past ten years? Increased Decreased No change I don’t know

9. Has your non-profit organization’s programs or services been negatively impacted during the past ten years as a result of changes in funding levels? Yes No I don’t know

10. If you answered “Yes” to Question 9, how have the delivery of services or programs within your organization been affected as a direct result of decreased funding levels? Check all that apply: We have experienced minimal change to programs and services We have had to consolidate some programs and services We have eliminated components of certain programs and services We have had to eliminate certain programs and services We are now collaborating with other organizations on program and/or service delivery 11. Does your non-profit organization currently generate revenue through membership fees? Yes No I don’t know

12. Does your non-profit organization currently generate revenue through the sale of products or services?

Financial Resources and Non-Profits 136 Yes No I don’t know

13. If you answered “Yes” to Question 12, does this revenue generating activity occur through an independently registered business entity that is owned by your non-profit organization? Yes No I don’t know

Organizational Leadership 14. How often does your organization conduct organizational planning sessions? At least once a year (annually) Twice per year Every three to five years Never Other (please specify): 15. In your opinion, what three leadership qualities are the most important traits for effective leadership of non-profit organizations? Visionary Communication Empathy Entrepreneurial Problem solving Financial expertise Goal-oriented Resourceful Respectful Trustworthy Other (please specify): Integrity Inspirational Competent Disciplined Team-builder Politically savvy Humble Decisive Authentic Demanding

16. How would you rate your Executive Director or Manager’s leadership capacity within the following leadership situations? Please check the appropriate box: Poor Fair Avg. Strong Excellent Organizational Role: Manager / Executive Director

Financial Resources and Non-Profits 137 Leads with expertise and decisiveness – while sharing responsibilities with a diverse team of staff and volunteers Shapes a visionary future – while responding appropriately to emerging challenges Fosters relationships with philanthropic and public partners – while balancing authenticity and professional development Adapts to changing management prerogatives and techniques – while honouring foundational mission, vision and values Ensures accountability and lean operations – while achieving significant community impact Anticipates and avoids ethical dilemmas – while implementing innovative and often untried business practices 17. How would you rate your Board of Director’s leadership capacity within the following leadership situations? Please check the appropriate box: Poor Fair Avg. Strong Excellent Board of Director’s Leads with expertise and decisiveness – while sharing responsibilities with a diverse team of staff and volunteers Shapes a visionary future – while responding appropriately to emerging challenges Fosters relationships with philanthropic and public partners – while balancing authenticity and professional development Adapts to changing management prerogatives and techniques – while honouring foundational mission, vision and values Ensures accountability and lean operations – while achieving significant community impact Anticipates and avoids ethical dilemmas – while implementing innovative and often untried business practices 18. How would you rate your Organization’s leadership capacity as a whole within the following leadership situations? Please check the appropriate box: Poor Fair Avg. Strong Excellent Organizational Role: Manager / Executive Director Leads with expertise and decisiveness – while sharing responsibilities with a diverse team of

Financial Resources and Non-Profits 138 staff and volunteers Shapes a visionary future – while responding appropriately to emerging challenges Fosters relationships with philanthropic and public partners – while balancing authenticity and professional development Adapts to changing management prerogatives and techniques – while honouring foundational mission, vision and values Ensures accountability and lean operations – while achieving significant community impact Anticipates and avoids ethical dilemmas – while implementing innovative and often untried business practices 19. Briefly describe what you think is the most identifiable organizational challenge today that non-profit leaders need to address when managing the growth and development of their organization? Comments: No-profit Financial Information 20. Please select the appropriate box below to indicate your average annual operating budget: Less than $250,000 $250,001 to $500,000 Greater than $500,000

21. Of the five following choices, how do you think your non-profit organization would respond to the use of commercial loans or other repayable investments in the development or maintenance of products, services or programs? Not appropriate at all I anticipate there would be strong resistance It might be appropriate under the right circumstances We would seriously consider such an approach

Financial Resources and Non-Profits 139 We already utilize such services Other (please specify): 22. At the Board or staff level have you experienced, or are you aware of, organizational resistance as a result of adopting or exploring a more entrepreneurial approach to generating revenue? Yes No I don’t know

23. If you answered “Yes” to Question 22, please describe the reasons for the resistance experienced. Comments: 24. Which of the following financial services does your non-profit organization currently utilize? Check all that apply: Line of Credit Overdraft Protection Loan (not mortgage) Equity Investment Investment Products (e.g. Term Deposit) Staff RRSP Program Mortgage Insurance (vehicle, property, liability, etc.) Chequing Credit Card Other

please specify:

25. What financial resources, products or services could financial institutions provide to help integrate the social and financial objectives of your non-profit organization? Comments: 26. Which of the following funding or revenue generating methods best describes your current organizational approach to revenue generation, as well as future approaches you would consider? Check all that apply: Current Funding Approach Future Approaches Government Funding/Programs Foundation Support Individual Donations

Financial Resources and Non-Profits 140 Loan Products Fee-for-service Corporate Sponsorship/Support Fundraising Activities Sale of Products 27. What do you think is the most identifiable organizational challenge to your organization today that other non-profits may also need to address when managing the development of financial sustainability within their organization? Comments: 28. In which of the following areas does your organization have assets in? Check all that apply: Real Estate (land & buildings) Investments Inventory Cash Machinery / Equipment Other

please specify:

29. What is the approximate value of all of your organization’s assets? Less than $25,000 $25,001 to $50,000 $50,001 to $100,000 $100,001 to $250,000 $250,001 to $500,000 Greater than $500,000

30. How would you rate your organization’s ability to manage financial resources within the following organizational roles?
Poor Fair Avg. Strong Excellent

Manager / Executive Director Board of Directors Staff

Financial Resources and Non-Profits 141 Organization as a whole

31. Please share any additional thoughts about this research topic: Comments: 32. To help further the research, a representative group of approximately nine questionnaire participants will be asked to participate in two additional Focus Groups to explore and further refine the findings of this questionnaire. Would you be interested in participating in these Focus Groups? Yes No 33. I would be pleased to keep you updated on the research process and to provide you with the results of the research study. To do so, please provide your name and contact information in the space provided below. If you answered “Yes” to Question 22, be sure to provide your contact information here. You are reminded that all information provided will be kept confidential and that you are able to withdraw your involvement at any time. Name: Organization: Position within the organization: Phone: E-mail: Thank you for participating! Stacey Crawford

APPENDIX B – ELECTRONIC LETTER OF INVITATION Letter of Invite to On-line Questionnaire Partnership Strategies for Financial Stability in the Non-profit Sector http://www.surveymonkey.com/s.asp?u=857762194034 Dear Potential Participant, July 14, 2006

As Executive Director of your organization you, or a designate, are invited to participate in a research project I am conducting as partial requirement for a Masters Degree in Leadership and

Financial Resources and Non-Profits 142 Training at Royal Roads University. My affiliation with Royal Roads University can be confirmed by contacting Dr. Gerry Nixon, Committee Chair, School of Leadership Studies: Ph. xxx-xxx-xxxx. The purpose of this study is to explore and examine emerging leadership and financial challenges associated with the operation and capitalization of non-profit organizations. Your participation in this 20 minute research survey will help to evaluate leadership capacity and internal financial management capacity while assessing the current level of access to financial products, services and resources. My intent is to provide important recommendations to Prospera Credit Union (Prospera), my research sponsor, that look beyond traditional non-profit funding activities to allow for the consideration and potential development of mutually beneficial financial resources to the nonprofit sector. Meeting this objective may help build stronger, healthier and more self-sustaining non-profit organizations while also developing the social and corporate objectives of Prospera. Your participation is very important, as your responses will form the basis of these recommendations. My research relationship with the research sponsor, Prospera, may present perceived issues of conflict associated with access to financial information where research participants are actual clients of Prospera, presenting moments where there is a concern from research participants that financial information about a client organization may be disclosed. To ensure this situation does not arise, I assure research participants that the provision of data is participant based and that I do not require, nor desire, any non-profit based account information from the project sponsor. I have also personally discussed this issue with my project advisor and project sponsor to make sure this concern has been addressed and is properly managed. You are not obligated to take part in this research project. If you do elect to take part, your responses will remain confidential and information collected will be presented as aggregate data only. You are free to withdraw at any time with no prejudice. Similarly, if you choose not to take part in this research project, your decision will be respected and maintained in confidence. The final report will be housed at Royal Roads University and will be publicly accessible. For the on-line Questionnaire, information will be recorded on-line through Survey Monkey. Because Survey Monkey is a US company subject to the Patriot Act, you need to be aware that in the event that your survey response is processed and stored in the United States, you are advised that its governments, courts, or law enforcement and regulatory agencies may be able to obtain disclosure of the data through the laws of the United States. The risk is low and is restricted only to the time that the data is retained on the survey site. On July 31st, 2006, I will download the data file to my own computer and all responses will be removed from Survey Monkey, thus erasing it permanently from the server site. If you would like to contribute to this important research project, please click the following hyperlink and you will be directed to the questionnaire: http://www.surveymonkey.com/s.asp?u=857762194034

Financial Resources and Non-Profits 143 Thank you in advance for your participation! Sincerely, Stacey Crawford Master of Arts in Leadership and Training 2005-1 Ph. xxx-xxx-xxxx Stacey.crawford@community.royalroads.ca

APPENDIX C – INTERVIEW CONSENT FORM Interview Participant Free and Informed Consent Form Partnership Strategies for Financial Stability in the Non-Profit Sector 1. Purpose

Financial Resources and Non-Profits 144 The purpose of this study is to explore and examine emerging leadership and financial challenges associated with the operation of enterprising non-profits. The research will evaluate leadership capacity and internal financial management capacity while assessing the current level of access to financial products, services and resources. My intent is to provide recommendations to Prospera Credit Union that look beyond traditional non-profit funding activities to allow for the consideration and potential development of mutually beneficial financial resources to the non-profit sector. Meeting this objective may help build stronger, healthier and more self-sustaining non-profit organizations while also developing the social and corporate objectives of Prospera Credit Union. 2. Process An outline of the complete process will be reviewed with participants prior to signing this agreement:  A Letter of Invitation to participate to be provided via e-mail through the contact database of the Fraser Valley Centre for Social Enterprise.  The purpose of the study is included (above).  A time-frame of approximately 30 minutes for the Questionnaire is required.  45 minutes for individual interviews is scheduled. The interviews will be scheduled based on participant availability.  A second follow-up discussion will occur to validate findings, which will be sent prior, and is scheduled for an approximate duration of 15 minutes. This is outlined in Item 3, below.  Assurance to research participants that the provision of data is participant based, and that I do not require, nor desire, any non-profit based account information from the project sponsor, should your organization be a member of the financial institution.  I intend to act as interviewer utilizing a tape recorder and taking notes for in-person interviews, and note-taking only for phone interviews  If you are participating in an in-person interview, I will ask if you are comfortable being recorded. If there is no agreement, we will rely solely on my notes.  Audio tapes will be personally transcribed by me. I will keep the tapes in a locked cabinet until November 30th, 2007. I will ask for your permission to destroy the tapes at that time.  I will assign pseudonyms to the data collected to ensure your anonymity. Only I will have access to the data.  You are assured confidentiality with what you share.  If you feel uncomfortable at any time, you have the option to decline to participate without prejudice.  If you are under the impression that standard ethical research protocols are not being adhered to at any time throughout this study, and you are not comfortable talking with me about your concerns, please feel free to contact Dr. Gerry Nixon, Committee Chair, School of Leadership Studies, Ph. xxx-xxx-xxxx; Dr. Wendy Rowe of the Research Ethics Board, Ph. xxx-xxx-xxxx; or Dr. Marilyn Hamilton, my Faculty Project Supervisor, Ph. xxx-xxxxxxx . 3. Data Summary  The completed summary of the tape recorded interview and hand-written notes will be shared with participants approximately two weeks after the final interview. I will then

Financial Resources and Non-Profits 145 arrange a mutually agreeable time for the follow-up discussion to go over the summary with the participants to verify the content, providing opportunity to further discuss, change, add or delete anything you deem necessary. This will take approximately 15 minutes.  The results of the study will be included in my final report to Royal Roads University in partial fulfillment of a Masters Degree in Leadership and Training. My final report will also be shared with Karen Laing, 2nd Vice President – Board of Directors, Prospera Credit Union who will be using the outcomes of my report to inform Prospera’s strategic planning process regarding corporate social responsibility. I am also planning to offer a brown bag session for interested employees and non-profit staff upon project completion.  Upon project completion, I will provide you with a copy of the analysis and results section of my final report, or a copy of my full report, if requested.  The final report will be housed at Royal Roads University and will be publicly accessible. 4. Contacts 1 • Researcher: Stacey Crawford, Ph. xxx-xxx-xxxx 2 • Royal Roads Research Ethics board: Dr. Wendy Rowe, Ph. xxx-xxx-xxxx. 3 • Project Faculty Supervisor: Dr. Marilyn Hamilton, Ph. xxx-xxx-xxxx. 4 • My affiliation with Royal Roads University can be confirmed by contacting Dr. Gerry Nixon, Committee Chair, School of Leadership Studies, Ph. xxx-xxx-xxxx. 5 I, ____________________, hereby consent to participate in this interview with the above set guidelines and I will only provide my initials or first name for anonymity and confidentiality reasons. A copy of this consent form was provided to me. Any questions I had have been answered to my satisfaction by the researcher. I have read the foregoing agreement before affixing my signature or initials below, and warrant that I fully understand the contents thereof. __________________________ Signature or Initials / Date

APPENDIX D – INTERVIEW QUESTIONS Interview Questions All percentages rounded to the nearest whole number

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A.(Q. 15) In the on-line questionnaire, half of the respondents (50%) identified

“Entrepreneurial” as the second most important leadership quality within a non-profit organization. 1. What does being entrepreneurial mean to you? 2. Do you think that your non-profit organization is acting in an entrepreneurial manner? Why/Why not? 3. Why do you think being entrepreneurial was identified by NPO’s as being so important? 4. Can you provide an example of how your organization has acted entrepreneurially? 5. Where in your organization does the leadership for entrepreneurial activities originate?
B. (Q. 6 & 9) In the on-line questionnaire, 62% (nearly 2 in 3) say funding levels have

decreased over the past ten years, and 68% say their programs or services have been negatively impacted as a result. 1. Will the current levels of funding received by your organization allow your NPO to meet its service goals in five years? 2. If not, what steps will your organization take to meet the service levels? If so, what steps have you taken to assure the sustainability of your service delivery? 3. Are these changes in funding levels limiting the services that could be provided by your NPO?
C. (Q. 25) The most commented on financial development needs within non-profit

organizations included financial management training, the need for help with business or financial planning activities, and the development of entrepreneurial or innovative revenue generating activities to offset the unpredictability of current funding sources. 1. If your financial institution were to provide financial management training to your organization, who would take the training and what would your expectations of this training be? 2. If you could make one change within your organization to make it more financially self sufficient, what would it be? 3. Who does your organization rely on for financial direction or advice? 4. In what way could your financial institution help you develop or sustain an innovative revenue generating strategy?
D. (Q. 26) 97% of respondents identified government funding as a current source of support,

yet this figure decreases by 44% when respondents consider it as a future funding source. 1. Is there a desire to move away from dependence on government funding within your organization? Can you explain the reasons why? 2. If so, what new or existing sources of funding would you pursue? How would this direction be determined?

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3. If your organization lessened its dependence on government funding, at what

level of the organization would this decision be made?
E. (Q. 14) Approximately 60% of all questionnaire respondents said they conduct

organizational planning or an operational review at least once, or multiple times, a year. Conversely, approximately 40% conduct these activities no more than every three to five years, or as required. 1. In your organization, what are the most significant challenges in developing an operational plan? 2. How does operational planning influence your organization’s success? 3. Whose responsibility is it within your organization to determine operational risk? What tools are used to make this determination? 4. How does this planning help your NPO judge operational risk? 5. Can you provide an example of a decision that was made that involved financial risk within your organization? What made that level of risk acceptable? (Q. 21) The questionnaire showed that 40% already have an operational loan or mortgage, and 38% stated that it might be appropriate or that they would seriously consider a loan under the right circumstances. 1. Does your organization currently have a loan or mortgage? What made that financial decision acceptable to the organization? 2. How do you think your financial institution views your NPO and your ability to manage your financial resources? Why do you think your financial institution thinks of you in this way? (if negative perception) What could your NPO do to change this perception? 3. If no, under what circumstances would it be appropriate for your organization to take a financial risk involving a loan?
F. G.(Q. 15 & 16) Vision was identified as a top three leadership trait, but was the lowest

scoring trait demonstrated by ED’s when asked to rate their ED leadership capacity within five different leadership situations. However, ED’s did rate themselves higher in this capacity than Board members and staff. 1. When you look ahead five years, do you think that your organization will maintain its current course or will it need to adjust its approach in order to reach its long-term goals? 2. What resources could your financial institution provide you with to help you achieve your long-term goals? 3. Is shaping a vision an expectation of your role as ED? 4. What are the expectations of the ED to make these goals a reality? 5. What leadership role does the Board play in achieving the vision? 6. How do current demands on your time influence your movement towards these goals?

Financial Resources and Non-Profits 148
7. How will you know if you have succeeded? Does the organization have a

strategic plan with measurable accountability?

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