How Managerial Practices Impact Perceived Organizational Effectiveness: A Study of Corporate Foundations.
Author(s): Theresa Gehringer1. Introduction
Organizational effectiveness in NPOs has always been among the most important topics discussed in nonprofit research (Forbes 1998; Liket and Maas 2015; Tran 2020). Most nonprofit scholars have focused either on the conceptualization and operationalization of effectiveness or have studied specific components that influence effectiveness, such as board performance (Liket and Maas 2015). However, researchers note that many studies have long focused on specific quantitative indicators, such as the overhead ratio among financial measures, for reasons of comparability and simplification (Forbes 1998; Lecy et al. 2012). In response to this criticism, scholars adopted socially constructed measures (Tran 2020) and evolved one-dimensional indicators into multidimensional frameworks of potential drivers of effectiveness (Lecy et al. 2012; Liket and Maas 2015; Shilbury and Moore 2006; Sowa et al. 2004). For example, previous studies have analyzed how centralization (Tran 2020), board involvement (Minciullo and Pedrini 2020), and knowledge-transfer methods (Minciullo and Pedrini 2014, 2015) relate to an organization’s effectiveness. Although these findings provide interesting insights into particular drivers, relatively few efforts have been made to analyze how management practices may increase an organization’s effectiveness at large (Herman and Renz 2004; Renz and Herman 2016; Herman and Renz 2000; Minciullo and Pedrini 2014). One study by Liket and Maas (2015), found a broad set of management practices at the program and organizational levels that have the potential to positively influence organizational effectiveness and are supported by both academia and practice. However, research to date has not tested the theoretical framework or identified which of the proposed practices is most relevant and how these practices are actually related to effectiveness (Willems et al. 2014; Liket and Maas 2015). This study seeks to address this gap by applying a multidimensional framework of management practices to the context of charitable foundations. As Willems et al. (2014, p. 158) argue, one potential advantage of these multidimensional measures is that they “help researchers gain a more holistic view of effectiveness, such that they could make better inferences about the complexity of the real world” by taking influencing factors at different levels into account. This study also responds to the call for additional empirical research that validates existing theories in nonprofit studies (Lecy et al. 2012; Liket and Maas 2015).
In addition to the drivers of effectiveness, socially constructed effectiveness measurements have recently received considerable attention in nonprofit management research (Mitchell 2015; Tran 2020; Willems et al. 2016). Stakeholders’ perceptions of organizational effectiveness are usually assessed by surveying external stakeholders, such as funders or beneficiaries, or leaders from within the organization, such as nonprofit leaders or staff (Balser and McClusky 2005; Mitchell 2013; Tran 2020; Willems et al. 2016). Lee et al. (2023) found that internal and external stakeholders have conflicting perspectives on how to measure performance, which creates tensions that organizations need to pay particular attention to resolve. This study seeks to contribute to the understanding of leader-perceived organizational effectiveness. To do so, this study surveys leaders from within organizations in three European countries (Germany, Liechtenstein, and Switzerland).
Scholars have investigated organizational effectiveness across different NPOs, such as community foundations (Ostrower 2006a, 2007), social enterprises (Grieco et al. 2015), international non-governmental organizations (Tran 2020), and national Olympic sporting organizations (Shilbury and Moore 2006). Very few studies have examined organizational effectiveness in other charitable organizations, such as charitable foundations set up by corporations (Minciullo and Pedrini 2014; Rey-Garcia et al. 2018; Yang and Babiak 2023). Corporate foundations present an interesting object of study, as they are a manifestation of institutionalized corporate philanthropy that is “increasingly applied in practice” and is “increasingly visible in the philanthropic sector” around the globe (Roza et al. 2020b, p. 2). One of their defining characteristics is their hybrid organizational nature. Previous research related this nature to the fact that corporate foundations possess diverse roots in the business sector, especially in their founding company, and at the same time, as NPOs, and they are part of civil society (e.g., Minciullo 2016; Rey-Garcia et al. 2018; Walker 2013). However, more recent research has found that hybridity manifests itself in the more complex interplay of 15 different characteristics along four themes (establishment, organizational capabilities, purpose, and outcome). Different patterns of these result in hybridity on a strategic, organizational, or contextual level (see Gehringer 2021 for a more detailed definition). In particular, corporate foundations are under pressure from their corporate founders and stakeholders to increase transparency and accountability regarding the effective use of shareholder money for public goods (Balser and McClusky 2005; Lecy et al. 2012; Minciullo and Pedrini 2014; Yang and Babiak 2023). This article aims to contribute to the study of corporate foundations by examining the relationship between certain management practices and organizational effectiveness as perceived by their leaders.
Overall, this study offers a fine-grained understanding of the antecedents of organizational effectiveness in NPOs with hybrid organizational structures from a leadership perspective and allows for a more informed discourse among academics and practitioners in the field of nonprofit effectiveness and hybrid organizations.
2. Theoretical Background
2.1. Conceptualization of Organizational Effectiveness in Nonprofit Organizations
This section highlights the complex, multidimensional, and context-dependent nature of organizational effectiveness in NPOs and explains how it is conceptualized in the literature.
A substantial proportion of the nonprofit literature focuses on how organizations improve their performance and achieve effectiveness. Organizational effectiveness has been defined as “the balanced input and output achieved through the combination of processes, projects, and programs implemented by the nonprofit organization to reach its predefined goals” (Willems et al. 2014, p. 1650). Although effectiveness and efficiency are often conflated and used interchangeably, they are different in that “effectiveness takes a much broader perspective on nonprofit performance by looking beyond internal financial performance to other internal and external factors that demonstrate the nonprofit’s impact” (Berrett and Sudweeks 2023, p. 15). Despite the variety of studies on this topic, scientific evidence on how organizational effectiveness is constructed, impacted, practiced, or measured is lacking (Lecy et al. 2012; Liket and Maas 2015; Willems et al. 2014). The scholarship appears to lack a shared understanding of organizational effectiveness (Lecy et al. 2012), which leaves it “an elusive and contested concept” (Renz and Herman 2016, p. 274). Consequently, comparisons among NPOs are problematic (Mitchell 2013), and attempts to measure organizational effectiveness are becoming increasingly complex (Liket and Maas 2015; Mitchell 2013).
The elusive and contested nature may have been caused by the various conceptual angles and approaches researchers have used to operationalize and evaluate nonprofit effectiveness (Forbes 1998; Lecy et al. 2012; Tran 2020). The most notable have been the goal-attainment model of effectiveness, the multiple constituency theory, system resources (see Lecy et al. 2012; Renz and Herman 2016 for a discussion of these), agency theory (Minciullo and Pedrini 2020), and the reputational approach (Liket and Maas 2015; Willems et al. 2016). For example, the latter “recognizes the fact that an organization’s reputation for effectiveness may be perceived differently by different actors” (Tran 2020, p. 137). Thus, it represents the view that an organization’s effectiveness cannot be assessed objectively, but lies in the respective perceptions of multiple stakeholders, such as nonprofit leaders, staff, or clients, irrespective of their differences (Liket and Maas 2015; Balser and McClusky 2005).
The view of non-profit organization leaders is considered particularly valuable because their positions give them access to internal information on strategic decisions and operational activities that are not equally available to external stakeholders (Herman 2016; Mitchell 2015). However, leaders’ perceptions of effectiveness remain under-researched in the nonprofit literature, with some notable exceptions (Herman and Renz 2000; Minciullo and Pedrini 2020; Tran 2020). The same circumstances also apply to closely related research areas. According to a recent qualitative study, research on nonprofit managers’ perceptions of efficiency is lacking (Berrett and Sudweeks 2023). Previous studies have identified nine dimensions within which top leaders of nonprofit organizations typically define an organization’s effectiveness (Mitchell 2013). Recent research shows that these nine dimensions are suitable for obtaining an overall measure of organizational effectiveness in foundations (Minciullo and Pedrini 2020). As the authors explain, each of the following nine dimensions must be considered when assessing organizational effectiveness from a manager’s perspective: material resources, flexibility, innovation, expertise, contacts, staff or associates, stakeholder satisfaction, goal achievement, and evaluation. Due to the absence of a standardized approach to measure organizational effectiveness (Liket and Maas 2015) and the difficulty in effectively operationalizing it (Tran 2020), this study follows Minciullo and Pedrini (2020), who proved that their approach is a suitable evaluation method for studying organizational effectiveness in the context of non-profit organizations, particularly corporate foundations.
2.2. Antecedents of Organizational Effectiveness
To examine the potential factors that influence organizational effectiveness, this study drew on a multidimensional conceptual model and a self-assessment survey of best management practices developed by Liket and Maas (2015). Their framework is the only model known to identify a comprehensive set of potentially effectiveness-enhancing management practices at the program and organizational levels. Previous studies confirmed a positive relationship between the presence of distinct practices and higher levels of organizational effectiveness (Forbes 1998; Herman and Renz 2000, 2004; Renz and Herman 2016). However, earlier studies have mostly focused on the individual drivers of organizational effectiveness, such as governance issues, including the effect of board structural characteristics and board leadership (Yang and Babiak 2023), board involvement (Minciullo and Pedrini 2020), and knowledge-transfer methods (Minciullo and Pedrini 2014, 2015). Other drivers concern general organizational characteristics and practices, such as “organizational climate, organizational structure, and the presence of unionism” (Forbes 1998, p. 190) or successful stakeholder management, through which organizations are perceived to be more effective (Balser and McClusky 2005). Evaluating organizational effectiveness using individual factors can provide useful indications but does not adequately address the complex, multidimensional, and context-dependent nature of organizational effectiveness, as discussed in the previous section.
According to Liket and Maas (2015), relevant practices at the program level involve three themes. First, an important practice for effectiveness is to consider inputs from different stakeholders in the design of programs. Second, ensuring beneficiary participation in decision-making processes at any point, and thus promoting ownership, positively influences effectiveness. Third, stakeholder participation in the evaluation and monitoring activities examining the positive and negative impacts of programs is suggested to influence organizational effectiveness.
Relevant practices related to organizational characteristics concern three themes (Liket and Maas 2015). First, a focus in terms of a clear vision and specific mission, a specified group of beneficiaries, and a defined geographical area of impact are likely to positively influence organizational effectiveness. Second, the way in which a strategy is developed, for example, with the consultation of beneficiaries or with attention to risk analysis, seems to influence an organization’s effectiveness. Third, board independence and a clear division of responsibilities and power between the board and the organization’s executive body may be strongly related to organizational effectiveness.
The comprehensive set of practices developed by Liket and Maas (2015), and the self-evaluation survey derived from it, may serve as a suitable effectiveness framework for this study for two main reasons. First, the authors used a multistep research process to identify the potential influences of organizational effectiveness on finding support in both academia and practice. They compared 52 determinants identified in an extensive body of academic non-profit literature with 36 determinants defined by an expert group of nonprofit leaders in the Netherlands. Thus, the final set of practices, spanning nine thematic areas and combining different stakeholder perspectives, responds to the need to consider various antecedents, unlike one-dimensional determinants. Second, the self-evaluation questionnaire for NPO leaders that was developed based on these management practices is particularly valuable because it allows for an immediate review of the extent to which organizations have adopted these practices. The comprehensibility and completeness of the final questionnaire have already been verified by the authors through a pilot study of 554 Dutch health-focused organizations. The study by Liket and Maas (2015) offers important results in exploring the causal connections between these management practices and leader-perceived organizational effectiveness (see Section 2.1).
However, a given set of best practices may not be universally applicable to all NPOs or equally valuable to them (Ostrower 2006b; Willems et al. 2014). Therefore, researchers point to the need to distinguish between different types of organizations, such as ordinary charitable and corporate foundations (Herman and Renz 2008). Ostrower (2007) argued that the variation in foundation approaches and practices requires the concept of effectiveness to be broken down from its general level and acknowledges that its context-dependent and relative nature is of greater practical use for different foundation types. Studies on U.S. foundations show that fundamental differences in attitudes and practices concerning effectiveness arise between community foundations and other grant-making foundations (Ostrower 2004). These were identified in different areas, such as grant-making, monitoring, evaluation, and communication. For example, twice as many community foundations (41%) as corporate foundations (21%) performed self-assessment activities, such as analyzing the needs in their field. Community foundations (68%) communicated more actively and diversely than corporate foundations (17%). While grant-making corporate foundations and NPOs share a common goal of making a positive impact on society, they differ in several key aspects (Roza et al. 2020b; Salamon et al. 2003). For example, average NPOs typically rely on a variety of funding sources like donations from individuals, corporations, and other organizations, as well as revenue from programs or services they provide. While some larger nonprofits may have significant funding and capacity, many smaller organizations operate with limited resources and depend heavily on volunteers and community support. Corporate foundations, on the other hand, are typically funded by a for-profit corporation and, hence, have a more stable inflow of resources at their disposal. They may also benefit from the expertise, networks, and other resources of their founding company. Furthermore, corporate foundations often align their philanthropic activities with the mission or values of their founding corporation. They may focus their grant-making activities on areas that are related to the corporation’s business interests or target issues that are important to its stakeholders. The missions of NPOs are typically defined by the specific cause or issue they aim to address, covering a wide array of social, environmental, and community needs. Overall, these differences confirm the need to distinguish organizational effectiveness between different types of organizations (Herman and Renz 2008; Ostrower 2007).
Furthermore, Liket and Maas (2015) emphasized the sector-specific and cultural dependency of their identified set of practices, pointing out that it is neither complete nor stable. Context in particular plays a crucial role in determining the effectiveness and capacity of an organization. Various factors, such as cultural and social norms, the political environment, economic conditions, the legal and regulatory framework, the technological landscape, and the operating community, contribute to the context, which can either promote or hinder an organization’s effectiveness. For instance, the cultural and social context in which an organization functions may affect its ability to attract talented individuals, engage stakeholders, and implement programs efficiently. Therefore, it is essential for NPOs to customize their practices according to the environment, conditions, and stakeholders they operate within to ensure their organizational effectiveness (Liket and Maas 2015; Renz and Herman 2016). In response, the author expects corporate foundations to carry out selected practices from a broad set of management practices, reflecting their hybrid organizational nature (Gehringer 2021). Thus, the author further expects that, of the selected practices, only certain practices are of relevant importance in driving organizational effectiveness in corporate foundations. Accordingly, the following hypothesis was tested.
H1.
There is a positive relationship between the presence of distinct management practices and organizational effectiveness.
Furthermore, Liket and Maas (2015) consider transparency a core element of particularly effective organizations. Previous research notes that transparency and disclosure enable stakeholders of NPOs, such as beneficiaries or donors, to hold the organization accountable and verify that it is complying with its legal obligations and financial responsibilities (Lee et al. 2023). To signal transparency and accountability, NGOs consider reporting and financial accounting to be the most important instruments (Goncharenko 2021). Similarly, Berrett and Sudweeks (2023) found that one way nonprofit leaders define efficiency is through being accountable to various stakeholders, for example, by means of reporting. Accessibility, the extent to which stakeholders can easily access information, transparency, and the degree of clarity and comprehensibility of information were identified as the best practices for NPO reporting activities (Gordon et al. 2010). Therefore, transparency, conceptualized as reporting information and publishing it online, as well as being accessible to various stakeholders, is also listed as an important element in potentially effectiveness-enhancing management practices (Liket and Maas 2015). Therefore, this study hypothesized the following:
H2a.
Online reporting is positively associated with organizational effectiveness.
H2b.
Foundation accessibility is positively associated with organizational effectiveness.
3. Materials and Methods
To test the hypotheses developed above, this study focuses on a subtype of private charitable foundations: corporate foundations. While charitable foundations have been widely studied, corporate foundations are a globally rising yet underexamined phenomenon in the non-profit literature (Gehringer 2021; Roza et al. 2020a). The following sections describe the data collection, samples, and measures applied.
3.1. Data Collection
Survey data were collected from the managing directors of corporate foundations in three Western European countries: Switzerland, Liechtenstein, and Germany. Switzerland has the second-highest foundation assets, accounting for 13.3% of its gross domestic product (GDP) (Johnson 2018). By contrast, Liechtenstein has a rather small number of public benefit foundations, but its density is 20 times higher than that of Switzerland (Regierung des Fürstentums Liechtenstein 2020; Eckhardt et al. 2017). Germany has the highest number of registered public-benefit foundations in Europe and the third highest foundation assets among 24 high-income countries and Hong Kong (Hasel and Burkhardt 2024; Johnson 2018; McGill 2016).
The three countries being considered have several factors in their favor. First, these countries have a rich and long history of philanthropy and are known for their active civil societies and enabling environments (Anheier 2001; Bethmann and von Schnurbein 2015b; Hummel et al. 2020; Mews and Boenigk 2015). A country’s enabling environment comprises legislative, taxation regulation, economic conditions, and societal and political frameworks, and is considered essential for its philanthropic organizations’ effectiveness. The selected countries rank among the highest in enabling environments in the Global Philanthropy Environment Index (Indiana University Lilly Family School of Philanthropy 2018). Second, they have some of the largest or medium-to-large foundation sectors in the world and are home to corporate foundations from some of the most well-known and important companies (Anheier 2001). For example, in Switzerland, corporate foundations from companies such as Roche, Novartis, UBS, Cartier, Nestlé, Sonova, and JT International play significant roles in addressing social, cultural, educational, and environmental issues. Third, Switzerland and Liechtenstein are recognized as international financial centers. Therefore, examining corporate foundations based in these countries can help us understand global philanthropy and the effectiveness of the philanthropic sector across borders (Gehringer and von Schnurbein 2020). Finally, each of these countries has a vital foundation sector, in which corporate foundations are perceived as important and well-integrated elements. They benefit from the same positive public perception and tax advantages for their donors as other charitable foundations (Gehringer and von Schnurbein 2020). Following Minciullo and Pedrini (2020), eligible corporate foundations had to be (1) charitable, (2) have one or several corporate founding bodies, (3) from whom they were legally independent, (4) and received the majority of their endowment or annual income. The same criteria for inclusion were used across all countries.
Since none of the countries have a publicly accessible register of charitable foundations, and thus, of corporate foundations, information on individual foundations is difficult to obtain. Potential survey participants were sought using a purposive, non-probability sampling approach.
While purposive sampling has many advantages, certain limitations of this sample-selection method need to be addressed upfront. First, this type of sample-selection method is prone to researcher bias because the researchers exclude or include prospective sample objects based on the selection criteria defined by the researchers themselves, thus limiting external validity. Second, class biases arise when relying on non-published membership lists and official records, such as companies with the highest financial turnover, to select research subjects. This causes relevant research subjects to be underrepresented because, for example, they are established by small- and medium-sized enterprises that are not included in the country’s list of top companies. Third, the time and cost of systematically finding corporate foundations within the entire population of charitable foundations and verifying their eligibility for good internal validity are significantly higher than those with more traditional sampling methods.
The Swiss Register of Commerce was used to identify foundations in Switzerland, and for Germany and Liechtenstein, national umbrella organizations for charitable foundations were used to identify possible respondent organizations in their membership directories.
In Switzerland, the Register of Commerce provides basic data on charitable foundations but does not allow a search by foundation type. To find this specific type of foundation, the names and addresses of the 500 companies and 15 banks with the highest financial turnover were compared with entries on foundations because corporate companies often share the name of their founding company and are registered under the firm’s address. The study focuses on these largest companies in terms of financial turnover, based on the assumption that they, in contrast to small- and medium-sized companies, can permanently provide the financial resources for a corporate foundation. Presumed foundations were subjected to a desktop search for confirmation and further supplemented with the directors’ contact information. This resulted in a sample size of 200 Swiss foundations. In Liechtenstein, the umbrella organization, the Association of Liechtenstein Charitable Foundations and Trusts, identified 11 corporate foundations among its members of charitable foundations. The small number of suitable foundations is only partly due to the smaller size of the foundation sector, but mainly due to the lack of a public register of charitable foundations and, thus, transparency. For Germany, the non-public database of the Association of German Foundations with over 30,000 entries of foundations for all legal forms was accessed (Hasel and Burkhardt 2024). A total of 1617 corporate foundations met the criteria for belonging to the corporate foundation type, but only 197 were contacted for the study. This significant reduction was necessary because a substantial number of foundations had no digital contact possibility, e.g., email addresses (621), and a substantial number of the foundations were not a member organization of the umbrella organization (799) and, therefore, not permitted by the German Data Protection Law to be contacted for a survey (Bundesministeriums der Justiz und für Verbraucherschutz 2017). An email address was essential, as the survey period coincided with the German government’s first COVID-19 lockdown measures. Delays in postal delivery and long absences from offices were anticipated. For this reason, foundations that were members of the umbrella organization but only had a postal address were not considered for the study.
3.2. Sample
The final sample of 408 corporate foundations consisted of 200 from Switzerland, 11 from Liechtenstein, and 197 from Germany. Initial contact was made through personalized e-mail to the foundations’ managing directors, asking them to complete a web questionnaire and explaining the aim and intent of the study in detail. The questionnaire was accessible from February to May 2020, and corporate foundations were reminded to participate after four weeks (Dillman et al. 2014; Dillman 2000).
Table 1 summarizes the total number of charitable foundations, an estimate of the number of corporate foundations, and the actual number of contacts for each country. Among the responses, 40 questionnaires were considered complete (at least 80% of all questions answered), and four were considered partial (50–80% of all questions answered). Another 13 were classified as breakoffs owing to incomplete data and were excluded from the analysis.
Thus, with 44 usable questionnaires, an 11% participation rate was achieved. Although study participation was relatively low, it is comparable to previous studies on this type of foundation (e.g., Corporate Citizenship 2013; Minciullo and Pedrini 2020; Minciullo 2016).
The characteristics of the 44 foundations that participated in the survey are presented in Table 2. The corporate foundations in the final sample were founded between 1962 and 2017, with an average age of 21.63 years. Furthermore, 37% of the foundations had activities in at least one country other than their country of origin, and 74% had their registered office in the same location as the founding company’s headquarters. The foundations had an average number of 6.09 persons on their boards of trustees. A total of 82% followed the recommendations of the governance code. Regarding size, the foundations had, on average, 3.22 full-time equivalent (FTE) employees and spent EUR 2.84 million for grants and projects.
Up to 78.0% of the foundations in the final sample conducted grant-making activities (see Table 3), as both grant-making (39%) and mixed foundations (39%) give financial contributions to other organizations in order to accomplish their purpose. Furthermore, the foundations indicated that they were active across a variety of thematic areas (see Table 3), using the ICNPO scale (Salamon and Anheier 1996) to assess the 12 thematic areas in which a foundation was active. Most foundations indicated that they pursue activities related to education and research (87.8%), culture and recreation (46.3%), and health-related issues (39%).
The final sample can be considered reasonably representative, as its characteristics are largely comparable to the characteristics of the population of charitable foundations in Germany and Switzerland (von Schnurbein et al. 2018). For example, similar to the foundations in the sample, 60% of the German and 71% of the Swiss foundations were established after the 1990s. The sample can also be considered representative of the thematic area of activity, which is comparable to the three most popular fields of activity of the Swiss and German foundations: culture, health, education, and research. In terms of geographical focus, the corporate foundations in the sample operate more internationally (37%) compared to previous research, which found that 22.6% of the 10,716 Swiss foundations have international activities. However, the representation of the sample should be treated with caution, as the available studies on the foundation sectors in Germany and Switzerland have shown different approaches to data collection and analysis.
3.3. Measures
The survey was structured into three sections and broadly captured responses related to the effectiveness-enhancing management practices adopted by corporate foundations, the foundations’ organizational effectiveness, and the foundations’ main characteristics.
Independent variables
Liket and Maas (2015) identified a broad set of potentially effectiveness-enhancing practices at the program and organizational levels that determine the organizational effectiveness of an NPO. The self-assessment survey was transformed into a new multi-item scale and adapted to the corporate foundation context. For example, several scales were extended to a 5-point Likert scale (1 = not at all; 5 = completely) to obtain more differentiated answers than the original yes/no scale would have allowed. The respondents were asked about the presence of practices related to focus, strategy, foundation board, design of foundation activities, and activities related to monitoring and evaluation.
Liket and Maas (2015) considered transparency, conceptualized as (a) reporting and online-publishing practices and (b) an organization’s accessibility to its stakeholders, to be a core element of their set of particularly effective organizations. These two independent variables needed to be singled out from the rest of the management practices, as they were calculated as sum indices because their original yes/no scales were not altered.
Dependent variables
To measure the foundations’ overall organizational effectiveness, an established multi-item scale was used based on Minciullo and Pedrini (2020) and Mitchell (2013), and one item was adapted to the context of corporate foundations. The first item, resources, was divided into two items to reflect the importance of resource dependency on the founding company and the independent distribution of these resources by the foundation. The first item is, therefore, the acquisition of resources (e.g., securing a solid financial footing and/or large-scale funding). The second item is the use of resources (e.g., proportion of money allocated to programs). The remaining eight items read as follows: flexibility (e.g., being quick in responding, adapting to change), innovation (e.g., pushing the envelope, creativity, pioneering, and getting there first), expertise (e.g., acquiring substantive knowledge in an issue area), contacts (e.g., making contacts for networking and collaboration), staff or associates (e.g., hiring and retaining quality people and a well-trained staff), stakeholder satisfaction (e.g., of recipients, the founding company, and other constituents), goal achievement (e.g., achieving measurable progress toward the foundation’s goals), and evaluation (e.g., using detailed frameworks and timelines for outcome evaluation).
The respondents were asked to rate on a 5-point Likert scale (1 = not at all; 5 = completely), how effectively they perceived their corporate foundation in each of these ten different dimensions. For example, survey participants had to rate from 1 to 5, “As a foundation we are effective in terms of: Acquisition of Resources (e.g., securing a solid financial footing and/or large-scale funding)”.
Control variables
Finally, five control variables were included to control for organizational characteristics that have been identified in previous research as potential influencers of effectiveness (Minciullo and Pedrini 2020, 2014; Rey-Garcia et al. 2018; Pedrini and Minciullo 2011; Bethmann and von Schnurbein 2015a). First, the way a foundation operates can fundamentally affect its approach to effectiveness. Respondents could choose between three modes: grant making, operating their own programs, and mixing. Second, an organization’s age is an indicator of its experience in implementing certain practices. Age was operationalized in terms of the year in which the foundation was established. Third, internationalization describes the geographic scope of the foundations’ activities. Previous research suggests that organizations with an international presence are perceived as being more effective because they are part of a larger and more diverse network. This international network allows organizations to exchange experiences with a broad group of stakeholders, reduce external uncertainty, and respond better to environmental changes (Mitchell 2015; Willems et al. 2016). This idea is in line with the notion that an organization’s effectiveness is not solely dependent on its own actions (Renz and Herman 2016). Instead, perceived effectiveness depends on the effectiveness of the other organizations it is connected to and the degree of their interaction (Willems et al. 2016). The larger and more international the network, the more effective it is in achieving organizational goals (Renz and Herman 2016). Internationalization was assigned a value of 1 if activities were within the borders of the country of origin, and 0 otherwise. Fourth, compliance with a governance code indicates efforts to reduce agency problems and to follow certain control mechanisms. A value of 1 was assigned if the foundation complied with the governance code, and 0 otherwise. Fifth, a foundation’s size indicates the organization’s ability to access resources that may be essential for financing and implementing specific management practices (Mitchell 2013). Size was operationalized using the number of full-time equivalent employees.
To answer the research question and test the three hypotheses, the data were subjected to a principal component analysis (PCA) and OLS regression. Owing to the extensive number of items, two PCAs were performed for potentially effectiveness-enhancing practices and overall organizational effectiveness. Subsequently, OLS regression was used to test the effects of effectiveness-enhancing practices and the five control variables on the overall organizational effectiveness. All analyses were performed using the IBM SPSS Statistics version 26.
4. Results
The first PCA regarding effectiveness-enhancing practices suggested a four-factor solution (see Table 4), with each eigenvalue larger than one (Kaiser 1960). Substantial intercorrelations between individual items, a Kaiser–Meyer–Olkin (KMO) value of 0.625, and a significant Bartlett’s test (?2 = 184.832, p < 0.000) demonstrated the suitability of the data. The four factors explained 75.57% of the variance, of which factor 1 accounted for 29.98% of the variance, factor 2 accounted for 17.97%, factor 3 accounted for 17.29%, and factor 4 accounted for 10.32%. Table 4 shows that items No. 21_2 and No. 21_4 had cross-loadings on factor 4. Due to the higher loadings on factor 4, both items were assigned to factor 4.
The first factor concerned practices related to beneficiaries’ involvement, including three items that surveyed the extent to which they were consulted in the design, implementation, and monitoring of the foundation’s activities. Cronbach’s a for this factor was 0.877, and all factor loadings were above 0.80. The second factor concerned practices related to the involvement of a specific stakeholder group, namely, experts. Three items of the questionnaire belong to this factor, with a Cronbach a of 0.807 and all factor loadings above 0.80. The third factor concerned activities that involve the foundation’s founding company in certain practices, combining two survey items, with a Cronbach’s a of 0.569, and all factor loadings were above 0.70. PCA identified a fourth factor concerning monitoring and evaluation practices, with three items indicating whether the evaluation of the foundation’s activities included intended positive and potentially unintended negative effects on beneficiaries, other individuals, and the environment. Cronbach’s a for this factor was 0.632, and the factor loadings were above 0.50.
Considering the description of the items in the related literature (Liket and Maas 2015) and the survey, the four factors were labeled beneficiaries, experts, founding company, and monitoring and evaluation.
A second PCA was conducted to analyze the overall perception of the effectiveness of corporate foundations, aimed at determining the suitability of including all ten items in a single factor, or if individual items should be excluded. Substantial intercorrelations between the individual items, a KMO value of 0.758, and a significant Bartlett’s test (?2 = 206.730, p < 0.000) demonstrate the data’s suitability. While the Kaiser (1960) criterion suggests a two-factor solution with eigenvalues larger than one, the comparatively low percentage of explained variance of factor 2 (13.30%) and Cattell’s scree test (Cattell 1966) supported the decision for a single solution. The single factor included all items that load positively on the factor, and, thus, excluded items 1–3 of factor 2 (see Table 5). Although item 9 loaded slightly higher on factor 2, it was still included in factor 1 because the difference in factor loadings was not substantial, and the item fits both factors almost equally well. This item had an even higher factor loading than the other factor items, such as item 4 (0.476).
The final calculated single-factor solution has a KMO value of 0.840, and a significant Bartlett’s test (?2 = 139.349, p < 0.000) with 58.11% explained the variance and all factor loadings above 0.50.
These figures indicate that these items are suitable for representing effectiveness in a single-factor solution. This factor contained seven of the ten original items (see Table 6) and is labeled organizational effectiveness. Following this, an OLS regression was performed to explore the possible relationships between the four identified factors, the five corporate foundation characteristics, and the dependent variable.
Table 7 shows that experts (0.000) and monitoring and evaluation (0.016) had significant positive effects on organizational effectiveness. The relationship between organizational effectiveness and orientation towards the founding company (0.154) and beneficiaries (0.451) was positive but not significant. Regarding transparency, reporting and online publication practices showed a positive effect (0.268), and the second variable, accessibility, had a negative effect (0.961) on the dependent variable. But, neither was significant. Furthermore, three foundation characteristics had a significant positive effect on organizational effectiveness: the model of activity (0.008), age (0.066), and internationalization (0.093). These findings imply that foundations with a grant-making model of activity, longer years in operation, and more international activities achieve higher perceived organizational effectiveness. However, following the recommendations of a governance code (0.874) showed a negative but not significant effect, and size showed a positive but not significant effect on organizational effectiveness. The model was significant (F(11,22) = 6.284, p < 0.001), and the model fit was adequate (adjusted R2 = 0.638).
The results of the analysis support H1. Thus, corporate-foundation leaders focus on certain management practices associated with higher perceived organizational effectiveness. However, the results do not support H2a. and H2b.
5. Discussion
This study’s findings show that corporate foundations associate practices with three stakeholder groups—beneficiaries, experts, and the founding company—and the scope of their monitoring and evaluation. Thus, effectiveness in these foundations is mainly stakeholder- and evaluation-driven and not aligned with specific task areas. These findings support previous research showing that effectiveness is socially constructed (Tran 2020) and is perceived differently by different stakeholder groups. (Liket and Maas 2015; Balser and McClusky 2005).
Moreover, only 11 of the 26 items were found to have potential value in contributing to organizational effectiveness. These belong to two of the original nine thematic areas: design of foundation activities and monitoring/evaluation. On the one hand, this result confirms Liket and Maas’ (2015) call for a multidimensional approach with a broad and comprehensive set of management practices. On the other hand, it strengthens the author’s argument that, depending on the context, only selected practices are important to drive organizational effectiveness.
The three stakeholder groups are particularly relevant for corporate foundations, either because they demand transparency and accountability as funders or because they are critical of the legitimacy of the foundation’s activities as beneficiaries and experts. Therefore, corporate foundations should concentrate on participatory activities in three respects (design, implementation, and monitoring/evaluation of foundation activities) rather than carrying out a comprehensive set of diverse potential effectiveness-enhancing practices. Additionally, to prove their effectiveness, they must focus primarily on monitoring and evaluating activities. One way to interpret this result is to remember the increasing pressure on foundations for professional impact measurements to show what the foundation has achieved, for which pure output calculations or storytelling reports are no longer sufficient (Balser and McClusky 2005; Lecy et al. 2012; Minciullo and Pedrini 2014; Yang and Babiak 2023). Instead, comprehensive assessments of the intended positive and unintended negative effects on immediate stakeholders and the organizational environment are required.
The significant positive influence of two factors, experts and monitoring/evaluation, on perceived effectiveness can be explained by two elements. Expert consultation allows corporate foundations to draw on specialized expertise, such as funding topics, partnerships, or processes, which enables them to improve or scale up their work efficiently and objectively. More than any other proposed practice, monitoring/evaluation of foundation activities allows future decisions, such as strategies or foundation goals, to be based on accurate data within a structured feedback process.
Contrary to previous research assumptions (Ebrahim 2016; Sowa et al. 2004; Willems et al. 2016), no significant positive effects of reporting/online publication activities or accessibility on organizational effectiveness were observed. Corporate foundations, as hybrid organizations, are involved in a tight network of actors from different sectors, in particular from their founding companies. Thus, they face higher expectations, demonstrating that using corporate funds for philanthropic purposes is justified. Therefore, they must apply greater sensitivity to communication practices than other charitable foundations. Further activities do not appear to bring about any additional gains that counteract the subjectivity inherent in effectiveness.
Previous research has proposed a broad set of 26 best management practices encompassing nine thematic areas that may positively impact the organizational effectiveness of nonprofit organizations (Liket and Maas 2015). The theoretical advances made by this study concern the validation and reduction of management practices to those that have the most positive impact on effectiveness in nonprofits. Regarding the research object, this study helps to better understand the increasing phenomenon of corporate foundations from the inside out. In addition, this study relates the practices implemented by an organization to its overall effectiveness, thus taking a novel approach to guide the theoretical debate on how to best evaluate and measure organizational effectiveness.
6. Conclusions
This study builds on a multilevel conceptual model of potential influences on organizational effectiveness and applies it to the corporate foundation context. Thus, by adopting a process approach to effectiveness, this study contributes to the debate on how this type of charitable foundation practices organizational effectiveness. The objective was to answer the research question: which management practices drive organizational effectiveness in corporate foundations? The findings highlight the role of experts and monitoring/evaluation practices, which, depending on the foundation’s model of activity, age, and internationalization, increase its overall organizational effectiveness.
This study has certain limitations. Due to resource constraints, it was necessary to limit the geographic context of the study to three countries. Thus, broad generalizations and transfers to other nonprofit sectors should be made with caution, as different institutional settings may significantly influence foundational approaches and practices of effectiveness (Roza et al. 2020b). In addition, data collection in this study was limited to a specific group of charitable foundations. Therefore, future research on perceived organizational effectiveness should examine the transferability of the conclusions to other types of nonprofit organizations by replicating the analysis with other types of samples. Furthermore, only one way of data collection was employed. Other methods, e.g., a paper-and-pencil survey, may have resulted in higher participation (especially in Germany), as it allows contact with all foundations regardless of missing e-mail addresses or data-protection regulations.
It is well known that low response rates are not a reason for challenging the quality of studies and research findings. In addition, the resulting sample can be described as being representative of organizations that fit under the final sampling parameters of the study. However, the results of this study must be generalized with caution, as the difficulty and novelty of examining organizational effectiveness practices in these foundations led to a survey design with a potentially common method bias. As the author was aware of this issue, pre-testing of the questionnaire and the anonymity of the respondents were ensured to deal with potential bias as thoroughly as possible. Furthermore, the effectiveness of NPOs is difficult to operationalize, and therefore, has been critically discussed among researchers. Commonly accepted measures of organizational effectiveness are missing to date (Minciullo and Pedrini 2020). Also, notwithstanding the notable empirical relevance of such a multidimensional model, there are caveats to claiming certain practices as “best” (Renz and Herman 2016). Since the perception of what is “best” changes over time with application, the desire for new practices with greater differentiation between more and less effective organizations strengthens (Herman and Renz 2008; Renz and Herman 2016). Finally, the poor quality of financial and organizational figures is a considerable challenge for data analysis, and future research should consider additional data-collection methods when investigating how these resources influence the effectiveness of corporate foundations.
Despite these limitations, the results of this study inform research on effectiveness and performance measurement, in which the determinants of nonprofit effectiveness and appropriate tools to evaluate them remain highly debated. The results of the study indicate that, as an alternative to singular determinants of effectiveness, multidimensional concepts of management practices offer a promising approach to gaining an understanding of how NPOs can actively improve their organizational effectiveness. This raises interesting questions for future studies. Regarding the methodological approach, implementing the survey in additional European countries, such as Denmark, the Netherlands, Poland, and France (Gehringer and von Schnurbein 2020), could validate and strengthen the results. Choosing countries that require NPOs to file annual reports and financial statements with the public or relevant state authorities may help to obtain a better data basis for the analysis. Regarding the theoretical implications, scholars could enrich these findings by examining experts who can positively influence the effectiveness and the way in which they support foundations, for example, formally through a seat on an advisory board. Understanding whether any changes in perceptions and practices occur over time, for example, due to isomorphic pressure (DiMaggio and Powell 1983; Dolnicar et al. 2008), is another research avenue. Furthermore, according to Mladenova (2022), the concept of organizational capacity for change can be a useful tool for organizations to effectively navigate through continuous and adaptive changes. This idea aligns with the notion that organizational effectiveness is not a final objective and that building long-term capacity for change is crucial for implementing multiple overlapping change processes. Further research could explore the implications of this concept in the context of corporate foundations and their organizational effectiveness. Finally, scholars could investigate the implications for the founding firm, such as whether and how positive effects result from a corporate foundation with higher perceived effectiveness and for the foundations themselves, such as whether such practices lead to organizational change and innovation.
Foundation managers can draw important lessons from this study. First, the questionnaire used in this study can be useful as a self-assessment tool to identify areas where improvements in management practices are needed. Taking an active role in assessing practices for effectiveness and setting goals for improvement encourages reflection, dialog, and adaptation and, thus, supports a culture of continuous learning. Second, program-outcomes assessments should not be the only measure of organizational effectiveness, as they are limited in their scope. Instead, foundation managers should support a broad set of promising practices with the most positive impact on effectiveness and that match their practices to the context-specific circumstances in which they operate. Third, the study reinforces the importance of network effectiveness and the dependence on the effectiveness of other organizations and individuals. Foundation managers should, therefore, consider and strengthen their network effectiveness by allowing their various stakeholder groups, especially experts, to participate more actively. Finally, foundation managers should understand that effectiveness is not a stable construct and is evaluated differently by different stakeholder groups. Investing in robust monitoring and evaluation systems and processes provides corporate foundations with data and evidence for more informed and effective decision-making.
Generally, the research findings are relevant to other types of nonprofit bodies in the studied countries, especially those with hybrid organizational structures. Although corporate foundations are a specific type of charitable foundation, they are well-integrated philanthropic actors in the nonprofit sectors of the studied countries. In fact, they are similar to other charitable foundations in many ways, such as age, model, size, and thematic area of activity. Being more accountable and transparent towards stakeholders is key for any NPO seeking to enhance its organizational effectiveness and social impact. Knowledge of the practices that are particularly likely to foster effectiveness may help nonprofit leaders focus on relevant activities rather than on a wide range of management practices.
Institutional Review Board Statement
Not applicable.
Informed Consent Statement
Informed consent was obtained from all subjects involved in the study.
Data Availability Statement
The data presented in this study are available upon request from the corresponding author.
Conflicts of Interest
The author declares no conflicts of interest.
Disclaimer/Publisher’s Note: The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of MDPI and/or the editor(s). MDPI and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content.
Acknowledgments
The author thanks the Association of German Foundations and the Association of Liechtenstein Charitable Foundations and Trusts e.V. for their help in compiling the sample of CFs. The author also acknowledges the constructive feedback of two anonymous reviewers.
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Tables
Table 1: Total number of charitable foundations and corporate foundations.
| Switzerland | Liechtenstein | Germany | Total | |
|---|---|---|---|---|
Total number of charitable foundations | (2019) 13,293 | (2014) 1392 | (2019) 23,230 | |
Corporate foundations total estimate | ~200 | ~11 | 1617 | |
Corporate foundations in sample | 200 | 11 | 197 | |
Answers complete (>80%) | 21 (from both countries) | 19 | 40 | |
Answers partial (50–80%) | 3 (from both countries) | 1 | 4 |
Table 2: Descriptive statistics of sample characteristics.
| N | Mean | SD | Median | |
|---|---|---|---|---|
Age | 40 | 21.63 | 13.92 | 17.50 |
Internationalization | 41 | 0.37 | 0.49 | - |
Headquarter | 39 | 0.74 | 0.44 | - |
Board size | 44 | 6.09 | 2.48 | 6.00 |
FTE employees | 36 | 3.22 | 7.42 | 1.00 |
Governance code | 39 | 0.82 | 0.39 | - |
Grants paid out (million EUR) | 32 | 2.84 | 5.80 | 0.65 |
Table 3: Descriptive statistics of sample characteristics.
| Total Sample | |
|---|---|
Model of activity (%) | |
Grant making | 39.0 |
Operating own programs | 22.0 |
Mixed | 39.0 |
Area of activity (%) | |
Culture and Recreation | 46.3 |
Education and Research | 87.8 |
Health | 39.0 |
Social Services | 24.4 |
Environment | 29.3 |
Development/Housing | 12.2 |
Law/Advocacy/Politics | 9.8 |
Phil. Intermediaries/Voluntarism Promotion | 4.9 |
International | 24.4 |
Religion | 2.4 |
Professional Associations/Unions | 9.8 |
Table 4: Results of the first exploratory factor analysis regarding effectiveness-enhancing practices.
| Construct | ItemNo. | Factor Loading | Item Text | Mean | SD | Median | Eigen-Values | % ofVariance | Cumulative % |
|---|---|---|---|---|---|---|---|---|---|
Beneficiaries (a = 0.877, CR = 0.905, AVE = 0.760) | 18_2 | 0.909 | Beneficiary consultation in design of activities | 3.23 | 1.43 | 3.50 | 3.298 | 29.986 | 29.986 |
19_2 | 0.885 | Beneficiary consultation in implementation of activities | 3.48 | 1.46 | 4 | ||||
20_2 | 0.819 | Beneficiary consultation in monitoring/evaluation of projects | 3.27 | 1.45 | 4 | ||||
Experts (a = 0.807, CR = 0.791, AVE = 0.656) | 18_1 | 0.863 | Expert consultation in design of activities | 3.75 | 1.14 | 4 | 1.977 | 17.972 | 47.958 |
19_1 | 0.846 | Expert consultation in implementation of activities | 3.84 | 1.12 | 4 | ||||
20_1 | 0.834 | Expert consultation in monitoring/evaluation of projects | 3.16 | 1.31 | 3 | ||||
Founding company (a = 0.569, CR = 0.740, AVE = 0.491) | 19_3 | 0.879 | Founding firm consultation in implementation of activities | 2.45 | 1.32 | 2 | 1.902 | 17.291 | 65.249 |
21_3 | 0.735 | Evaluation of the activities includes intended positive and potentially unintended negative effects on founding firm | 2.57 | 1.33 | 2.50 | ||||
Monitoring and evaluation (a = 0.632, CR = 0.905, AVE = 0.581) | 21_1 | 0.818 | Evaluation of the activities includes intended positive and potentially unintended negative effects on beneficiaries | 3.95 | 1.23 | 4 | 1.136 | 10.328 | 75.577 |
21_2 | 0.686 | Evaluation of the activities includes intended positive and potentially unintended negative effects on other people | 3.15 | 1.33 | 4 | ||||
21_4 | 0.578 | Evaluation of the activities includes intended positive and potentially unintended negative effects on the environment | 2.93 | 1.22 | 3 |
Table 5: Effectiveness dimensions (rotated component matrix with a two-factor solution). Note. a: Cronbach’s alpha; AVE: average variance extracted; CR: composite reliability.
| Item in Survey | Factor Loading | a | AVE | CR | |
|---|---|---|---|---|---|
| 1 | 2 | ||||
No. 1_ Acquisition of Resources | 0.733 | 0.701 | 0.587 | 0.810 | |
No. 2_ Use of Resources | 0.802 | 0.875 | 0.581 | 0.905 | |
No. 3_ Flexibility | 0.762 | ||||
No. 4_ Innovation | 0.476 | 0.364 | |||
No. 5_ Expertise | 0.738 | 0.376 | |||
No. 6_ Contacts | 0.816 | ||||
No. 7_ Staff | 0.827 | ||||
No. 8_ Stakeholder | 0.811 | ||||
No. 9_ Goal Achievement | 0.494 | 0.581 | |||
No. 10_ Evaluation | 0.737 | ||||
Eigenvalues% of variancecumulative % | 4.83448.33648.336 | 1.33113.30761.643 |
Table 6: Results of the second exploratory factor analysis with single-factor solution. Note. a: Cronbach’s alpha; AVE: average variance extracted; CR: composite reliability.
| Construct | Item No. | Factor Loading | Item Text | Mean | SD | Median |
|---|---|---|---|---|---|---|
Perceived organizational effectiveness(a = 0.875, AVE = 0.581, CR = 0.905) | 4 | 0.595 | Innovation (e.g., creativity, pioneering) | 3.81 | 1.20 | 4.00 |
5 | 0.819 | Expertise (e.g., acquiring substantive knowledge) | 3.74 | 1.12 | 4.00 | |
6 | 0.804 | Contacts (e.g., networking/collaboration) | 4.02 | 1.01 | 4.00 | |
7 | 0.887 | Staff (e.g., quality people/a well-trained staff) | 3.14 | 1.28 | 3.00 | |
8 | 0.784 | Stakeholder satisfaction (e.g., recipients) | 3.84 | 0.998 | 4.00 | |
9 | 0.692 | Goal achievement (e.g., measurable progress) | 3.65 | 0.897 | 4.00 | |
10 | 0.718 | Outcome evaluation (e.g., using frameworks) | 2.35 | 0.997 | 2.00 | |
Eigenvalues% of variance | 4.06758.107 |
Table 7: OLS Regression. Note. * p < 0.1. ** p < 0.05. *** p < 0.01.
| Dependent Variable | ||
|---|---|---|
| Organizational Effectiveness | ||
Independent variables: Effectiveness-enhancing practices | Experts | 5.411 *** (0.000) |
Monitoring and Evaluation | 2.608 ** (0.016) | |
Founding company | 1.476 (0.154) | |
Beneficiaries | 0.769 (0.451) | |
Reporting and online publication | 1.135 (0.268) | |
Accessibility | -0.050 (0.961) | |
Control variables: foundation characteristics | Model of activity | 2.936 *** (0.008) |
Age | 1.937 * (0.066) | |
Internationalization | 1.758 * (0.093) | |
Governance code | -0.160 (0.874) | |
Size (FTE employees) | 0.195 (0.847) | |
Adjusted R2 | 0.638 | |
F statistic (df = 11; 22) | 6.284 |
Author Affiliation(s):
Center for Philanthropy Studies (CEPS), University of Basel, 4051 Basel, Switzerland; [email protected]
DOI: 10.3390/admsci14050096
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| Author: | Gehringer, Theresa |
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| Publication: | Administrative Sciences |
| Geographic Code: | 4EXLI |
| Date: | May 1, 2024 |
| Words: | 9976 |
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