Disconnect in the Hollow State: The Pivotal Role of Organizational Capacity in Community‐Based Development Organizations

Introduction Observers have long discussed the concept of public goods being provided through nonpublic actors and nonprofit organizations. Hall (1994) provided an extensive overview of the historical development of the nonprofit sector and the interdependence of government and nonprofit organizations. That interdependence has been noted by others (Salamon 1987; Smith and Lipsky 1993). Brudney (1987) observed that "nonprofits actually deliver a larger share of the health and human services financed by government than do public agencies themselves" (6). Wolch argued that the collection of nonprofit organizations charged with delivery of public goods constitutes a shadow state, an implementation network that "is administered outside traditional democratic politics ... charged with major collective responsibilities previously shouldered by the public sector ... in the purview of state control" (1990, 4). The provision of many social services occurs within a framework that has been termed the "hollow state," an approach to policy implementation that relies upon private or nonprofit organizations to deliver certain public goods (Milward, Provan, and Else 1993). As such, the "hollow state" is an organizational model suggested by Milward, Provan, and Else to describe a system of third party governance (1993, 310-19). Discussions of the hollow state refer to the contemporary context of a decline in federal funding and direct service provision, a focus upon privatization, and a perception that policies can be more efficiently delivered and effectively tailored in a community context (Milward 1994, 1996; Smith and Lipsky 1993; Kettl 1988). The "hollowness" of this system is dependent upon the degree to which services are implemented by nongovernmental organizations(1) and measured along a variety of dimensions including the control retained by one or more public agencies, the degree of delegation to nonpublic actors, the effectiveness of coordination, and mechanisms to evaluate the delegated service delivery. When nonprofit organizations receive contracts or grants to deliver public goods or services, the delegating agency assumes a sufficient level of capacity to implement the project or deliver the service. However, if the nonprofit community-based organizations are too limited in capacity to carry out their grants or contracts, then a disconnect occurs in the hollow state. This disconnect may manifest itself either in the disparity of capacity between the public and nonprofit sectors, or in the lack of capacity in community-based nonprofit organizations. The State of the Hollow State The ongoing debate over the utilization of alternative methods for delivering public goods often centers on the economic and political advantages of community-based delivery and the potential for innovation (Savas 1982, 1987; Donahue 1989; London 1996). Researchers focusing on nonprofit organizations charged with implementation, such as community-based development organizations (CBDOs), have considered the effects of political, legal, and fiscal environments as well as the level of fiscal support or incentives provided to nonprofits by the public sector (Bratt 1989; Lipsky and Smith 1989-90; Vidal 1992; Salamon 1981; Scrivner 1990; Leland 1996; Goetz 1992). However, questions regarding accountability (Gilmour and Jensen 1998; National Center for Nonprofit Boards 1996) and undue influence by public and private sector entities over the operations and philosophy of nonprofit organizations have been raised (Salamon 1981, 1995; Lipsky and Smith 1989-90; Smith and Lipsky 1993). Issues related to nonprofit management and governance have also received scholarly attention (Brudney 1990; Kearns 1994, 1996; Bardach and Lesser 1996). Specific nonprofit organizational elements such as leadership (Houle 1997; Henton, Melville, and Walesh 1997; Heimovics, Herman, and Jurkiewicz Coughlin 1993) and service delivery and organizational performance (Knauft, Berger, and Gray 1991; Lipsky and Smith 1989-90) have been examined. …