Managerial Control and Strategy in Nonprofit Organizations: Doing the Right Things for the Wrong Reasons?

• Author: Lee D. Parker,Basil P. Tucker
• DOI: http://doi.org/10.1002/nml.21082
• Published date: 01 September 2013
• Date: 01 September 2013

Managerial Control and

Strategy in Nonprofit

Organizations

Doing the Right Things for the Wrong

Reasons?

Basil P. Tucker, Lee D. Parker

University of South Australia

This article presents the second stage of a study that engages

with the debate that has occurred within the nonprofit literature

about the propensity and relative merits of nonprofit organiza-

tions adopting for-profit approaches to management. Specifi-

cally, this qualitative investigation examines the ways in which

nonprofit organizations use management control when imple-

menting their chosen strategies. Although this topic has been

the subject of considerable attention in the management

accounting research, it has rarely been explored within a non-

profit context. This is surprising not only because of the consid-

erable social and economic impact of this sector, but also

because of the apparent trend toward sectoral convergence in

many structural and processual respects, including strategic

behaviors and approaches to control. Based on interviews with

CEOs and senior executives in thirty-two Australian nonprofit

Correspondence to: Basil P. Tucker, University of South Australia, School of Com-

merce, UniSa Business School, GPO Box 2572, Adelaide, South Australia, 5001,

Australia. E-mail: basil.tucker@unisa.edu.au

NONPROFIT MANAGEMENT & LEADERSHIP, vol. 24, no. 1, Fall 2013 © 2013 Wiley Periodicals, Inc 87

Published online in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/nml.21082

We extend our appreciation to the anonymous reviewers and editor Duncan Neu-

hauser for their assistance in developing this article. This article has also benefited

from constructive comments from who attended the BAA Annual Conference, held

in Cardiff, Wales, from March 30 to April 1, 2010, and the research seminar pres-

entation at the School of Commerce, University of South Australia, in March 2011.

In addition, we thank Professors Helen Thorne, Kim Langfield-Smith, David Otley,

and David Marginson for their valuable comments and suggestions in relation to

this research. We gratefully acknowledge the support provided by CPA (Australia)

and the Institute of Public Administration Australia/University of Canberra Public

Administration Research Trust Fund for their generosity in providing partial finan-

cial support for this study.

88 TUCKER, PARKER

Nonprofit Management & Leadership DOI: 10.1002/nml

organizations, we find that the relationship between strategy

and control in nonprofit organizations is similar to that in for-

profit organizations, but quite different reasons underlie

nonprofit organizations’ exercising of management control.

Keywords: accountability, Australia, nonprofit

A

RECURRENT OBSERVATION APPEARING in the nonprofit literature

is that the lines dividing for-profit and nonprofit organiza-

tions are becoming increasingly blurred (Stone, Bigelow,

and Crittenden 1999; Herman and Renz 1999). Nonprofit organi-

zations now operate in an environment in which they compete

for resources and are required to prove as well as to improve their

effectiveness (Speckbacher 2003). This has resulted in a greater

perceived need for them to determine their “‘best” strategic direc-

tion (Stone et al. 1999) and to control their efforts in pursuing this

direction (Herman and Renz 1999). In response, strategizing in

nonprofit organizations has become more sophisticated (Brown

and Iverson 2004), and control practices to improve efficiency and

productivity (Beck, Lengnick-Hall, and Lengnick-Hall 2008;

Lindenberg 2001) in supporting strategy have been increasingly

adopted within this sector.

A considerable body of knowledge about the ways in which

strategy and control combine has been accumulated and published

within the management accounting literature. The vast majority of

this research has been primarily grounded in the for-profit sector.

Although research on the similarities and differences between

for-profit and nonprofit organizations is vast (Heinrich 2000), the

question of how strategy and control combine within a nonprofit

context has rarely been explicitly considered, despite the consider-

able social and economic impact this sector has on most Western

economies. Surprisingly, perhaps, the contribution of management

accounting research in informing this question has been limited.

Motivated by this apparent lacuna in our knowledge, this article

is the second from a study that examined the planning and control

processes of a sample of Australian nonprofit organizations. The

first article, “Uncharted Waters: Exploring the Relationship between

Strategy Processes and Management Control Systems in the Non-

profit Sector,” which also appears in this issue, aimed to explore to

what extent the relationship between management control systems

(MCS) and strategy in nonprofit organizations follows that found in

for-profit organizations. Following from the first article, the funda-

mental aim of this article is to provide insights into how the

control–strategy relationship as observed in for-profit research may

apply within a nonprofit context. Such an investigation is impor-

tant; if nonprofit and for-profit sectors are fundamentally different,