Strategic Planning in Third-Sector Organizations

The third-sector organization has evolved as an increasingly important influence on contemporary America. This type of organization is one of three relatively distinct organization groups in American society. Organizations operating in the "for-profit" sector comprise the first group while the second and third groups are, respectively, the government sector and other nonprofit organizations. The three-sector classification of organizational groups is useful to the extent that it recognizes a distinct division in the nonprofit sector (i.e., government and other). A network of around one million organizations, the third-sector contributes an estimated $228.2 billion to the national economy. Approximately 90 million Americans volunteer services to these organizations, with charitable contributions in the United States totaling around $130 billion (Business Week, 1995; Economist, 1991). For purposes of this study, the "third-sector" term will be constrained to include only those nonprofit organizations having a voluntary status. Third-sector organizations are experiencing a fundamental shift in environmental conditions (cf. Wilson, 1992; Oliver, 1991; Scott and Meyer, 1991; Wolch, 1990; Young and Sleeper, 1988). Harvey and McCrohan (1988) identify five categories of environmental threats to the third-sector: (i) social, (ii) political, (iii) donor support, (iv) economic, and (v) competition. Underlying each of these "threats" is an increased demand for third-sector services (e.g., homelessness, substance/domestic abuse, unemployment), coupled with decreased support (e.g., less government subsidy, tax law changes regarding deductions, underemployment, donor skepticism). Almost two decades ago, Hofer (1976) and Wortman (1979) could foresee such environmental concerns and noted the lack of strategic management studies in such organizations. Since that time, strategic planning appears to be receiving increased, yet still limited, attention in both third-sector practice (e.g., United Way of America, Red Cross, Boy/Girl Scouts (Webster and Wylie, 1988)) and in the management literature (Stone and Crittenden, 1994). The objectives of this research are twofold. First, researchers have questioned the fit between current strategic planning models and third-sector organizations and have suggested that a modification of the corporate strategic planning model or the development of a new planning model based on contingency theory would be more appropriate (Nutt, 1984; Bryson 1989). As such, we develop a model of strategic planning for third-sector organizations. In the new model, we retain the terminology used in the corporate model, while adapting the interpretation of the terms to suit third-sector organizations. For example, performance is measured in the for-profit sector through financial results of the firm. The performance measures utilized in the third-sector model focus upon growth in funding and membership. Second, researchers have found variations in the level of planning activity in the for-profit sector (e.g., Gluck et al., 1980). The logic of examining planning processes along a continuum or in distinct stages is based on the recognition that not all companies need or will use the same planning apparatus. Thus, the current research determines the uniqueness of various phases of third-sector planning and identifies the organizational characteristics most closely associated with each phase. The article is organized as follows. The first section discusses, briefly, the planning literature as it relates to third-sector organizations. The following section describes the methodology utilized in the research. The newly developed, third-sector model of strategic planning is then discussed. Following the presentation of the model, levels of planning in the third-sector are examined. The final section concludes with a brief discussion of the four stages of strategic planning in third-sector organizations and an overview of the implications of this research to practitioners and not-for-profit researchers. …