Cui Bono? Public and Private Goals in Nonprofit Organizations

• Published date: 01 August 2018
• Date: 01 August 2018
• Author: Carrie R. Oelberger
• DOI: 10.1177/0095399716659735
• Subject Matter: Articles

Administration & Society

2018, Vol. 50(7) 973 –1014

© The Author(s) 2016

DOI: 10.1177/0095399716659735

journals.sagepub.com/home/aas

Article

Cui Bono? Public

and Private Goals in

Nonprofit Organizations

Carrie R. Oelberger1

Abstract

Who benefits (cui bono) from nonprofit organizational structures and

practices? I draw on interviews, observation, and archival data from 25

grantmaking foundations to examine the mechanisms by which “charitable”

institutions are designed to serve the private interests of internal members.

I develop a framework to analyze how both public and private goals

inform organizational design, exploring the dual, continuous, and dynamic

nature of this process. This framework enables scholarship on nonprofit

organizational behavior to examine private interests in a uniquely robust

manner. Furthermore, it provides tools to study organizations’ evolution

through varied functions and forms over time.

Keywords

private goals, private interests, organizational design, grantmaking foundations,

charitable organizations, nonprofits, routines, practices

Who benefits (cui bono) from nonprofit organizational structures and prac-

tices? As scholars are moving away from essentialized understandings of the

public and private sectors (Bryson, Crosby, & Stone, 2006; Mair, Mayer, &

Lutz, 2015; Seibel, 2015), research has turned to the question of what it

means for an organization to be public (Moulton, 2009; Perry & Rainey,

1University of Minnesota, Minneapolis, MN, USA

Corresponding Author:

Carrie R. Oelberger, University of Minnesota, 301 19th Avenue South, Minneapolis, MN

55455, USA.

Email: coelberg@umn.edu

659735AASXXX10.1177/0095399716659735Administration & SocietyOelberger

research-article2016

974 Administration & Society 50(7)

1988; Rainey & Bozeman, 2000). I investigate these questions utilizing

insights from organizational sociology and scholarship on goal orientation,

analyzing who benefits from an organization’s structures and practices. I dis-

tinguish between a private goal orientation that serves the interests of internal

members of the organization and a public goal orientation that aims to serve

external constituents, emphasizing that this is not a dichotomous organiza-

tional attribute, but a dual, continuous, and dynamic descriptor. To investi-

gate these questions, I turn to the nonprofit sector.

Nonprofit organizations occupy a unique third sector with diverse resource

dependencies, arising mainly from private donations and labor, but subsi-

dized by government exemption of certain public tax obligations to encour-

age charitable activity (Anheier & Seibel, 1990). Questions of who benefits

from nonprofit behavior are therefore salient and have long been a source of

intense deliberation regarding the tensions between private resources and

public goods (Clotfelter, 1992; Hall, 2006). This debate is particularly salient

for the §501(c)(3) category of “charitable” nonprofit organizations, which

receive the most generous tax benefits and limited federal oversight (Hayes,

1996; Herzlinger, 1996; Kramer, 1981), and which also enjoy legitimacy and

trust among the public (Hansmann, 1987; Steinberg, 1986; Weisbrod, 1977).

For example, in selecting child care, health care, and education, people are

more likely to patronize nonprofits because they trust that the organizations

will use their resources for public benefit (Drevs, Tscheulin, & Lindenmeier,

2012; Handy et al., 2010; Leviten-Reid, 2012). However, though the official

goals of nonprofit organizations are publicly oriented, they are also often

multiple, vague, and conflicting (for an overview, see Rainey & Jung, 2015).

The ambiguity of nonprofits’ official goals, coupled with low levels of exter-

nal accountability and a loose regulatory apparatus, lends them a particular

malleability to be shaped by controlling forces within their organization

(Salamon & Anheier, 1996). This setting can result in nonphilanthropic goals

being advanced through nonprofit vehicles (Ott, 2000; Rothschild, 2013),

with, in some cases, the formal structure serving as a drape around an organi-

zation’s informal goals (DiMaggio & Anheier, 1990).

In studying goal orientation in the nonprofit sector, an alternative type of

nonprofit organization offers a useful comparison. Country clubs, homeown-

ers associations, community financial institutions, trade associations, and

sports clubs are all “mutual benefit” nonprofit organizations.1 Their nonprofit

status acknowledges their associational role within U.S. society, but the

Internal Revenue Service (IRS) provides them with less public support, as

they primarily serve internal organizational members.2 Therefore, when the

features of a mutual benefit organization arise within a charitable nonprofit, it

strikes the observer as abnormal. For example, we expect a charitable

Oelberger 975

nonprofit that provides tutoring services to children will not offer employment

and networking opportunities to the family and close friends of the founder.

Similarly, we expect that a human rights organization will not hold its profes-

sional development conference at a five-star beach resort in the Bahamas,

which would seem to serve the goal of taking a luxury vacation rather than the

goal of strengthening their substantive efforts. With limited organizational

resources, energy, and time, privately oriented activities enacted by publicly

mandated charitable organizations hold the potential for displacement of the

organization’s public goals. Moreover, effective management of these dual

goals requires extraordinarily astute staff who are able to attend to the highly

sensitive relational components of private goals, while also thinking both

responsively and strategically about the philanthropic goals of serving their

beneficiaries. Finally, privately oriented practices undermine the trust, tax

benefits, and moral legitimacy granted to nonprofits by the government and

the general public as a result of the charitable guarantee (Hansmann, 1987).

To date, however, both the public and scholarly literature have largely

overlooked the possibility that a charitable §501(c)(3) nonprofit organization

might orient its work internally, in the service of private goals. In an effort to

move scholarship in that direction, Gordon and Babchuk (1959) proposed a

typology that classified both instrumental and expressive goals for voluntary

organizations. Building on this insight, Frumkin (2002) has highlighted the

supply-side nature of ideas about social problems with resources from volun-

teers, donors, and other social entrepreneurs. While adding necessary com-

plexity to our understanding of this diverse sector, these perspectives both

maintain the assumption of a public, external target for a nonprofit organiza-

tion’s work, either through the instrumental efforts at social entrepreneurship

or more expressive, faith-based work.

To begin to address this gap, I draw upon three scholarly antecedents from

organizational sociology. First, I analyze operative, rather than official, goals.

Acknowledging the official goal of nonprofit organizations—to contribute to

the public good—I use the concept of operative goals to designate the ends

sought through the actual operating policies of the organization (Perrow,

1961). The operative goals framework has strong utility in organizations

where there is a disconnect between assumed ends and witnessed means cou-

pled with difficulty in gaining access (Ermann, 1978).

Second, I identify the orientation of an organization’s operative goals, draw-

ing from Blau and Scott’s (1962) criterion of cui bono—who benefits? I ana-

lyze the relationship between the ends for which an organization exists—the

operative goals—and the means utilized to advance these goals. Specifically, I

examine the manner in which an organization is designed, through both struc-

ture and practices, developing a new framework to assist in this process.