Existential Angst and Identity Rethink: The Complexities of Competition for the Nonprofit

Abstract

This article explores the concept of competition as perceived by the nonprofit organization (NPO). Based on a series of case studies, the article examines the NPO’s response to competitive analysis within a strategic planning process. The findings suggest that despite behaving competitively, both for funding and in the marketplace, the NPO’s direct, mindful encounter with a distinctly market orientation engenders a reinterpretation of the concept of competition, aligning it with a nonprofit, value-centric mindset. In parallel, the imposition of competitive demands on the NPO may trigger a counterreaction in which the nonprofit launches a reexamination of its organizational identity. This process, in which the NPO may question the justification of its very existence, can generate significant emotional turmoil. The case study findings suggest that the outcome of this process may be the reinforcement and amplification of the organization’s social orientation.

Keywords

nonprofit competition identity nonmarket strategic planning

“In our organization there is no definition of competition. The word competition characterizes the difference between us and a business operation. Here there is no such terminology.” These words, from a senior manager at one of the leading social impact organizations in the Israeli nonprofit arena, illustrate the dissonance that characterizes nonprofit organization (NPO) attitudes to competition. The same organization competes for government funding and private contributions, while investing significant efforts in ensuring its continued dominance of the sector that it leads nationally. Previous research shows that nonprofits find themselves increasingly engaged in competition with other nonprofits over scarce resources (Bunger, 2013; Froelich, 2012; Graddy & Wang, 2009; Kaplan, 2001; Young & Salamon, 2002). Privatization of governmental social services also triggers competition against for-profit suppliers when responding to governmental tenders. Nonetheless, despite the apparent inevitability of competition, and the operational necessity to compete effectively, nonprofits seem, in parallel, to adopt attitudes that negate competition.

The article explores this tension, focusing specifically on the response of NPOs to the explicit, articulated requirement to adopt a market mindset and to behave competitively, as expressed in the competitive analysis phase of the strategic planning process (SPP). Competitive analysis, and the development of strategies to address competition, is frequently practiced as part of SPP methodology. Based on a qualitative multi-case study approach, the findings suggest that the direct encounter with competitive practices leads nonprofits to reinterpret, and even deny, competitive activity, allowing the organization to maintain its identity as a value-oriented enterprise, while nonetheless engaging in competitive behaviors typical of a market context. To be sure, this competitive behavior is selective, with the nonprofit appearing to mitigate the more overt expressions of competitive behavior. The case studies also suggest that the mindful confrontation with explicit notions of market competition may trigger a reexamination of organizational identity, a process that seems to culminate in the reinforcement of the nonprofit’s social commitment and orientation.

Theoretical Perspectives

Nonprofits focus on a social mission rather than profit generation (Brainard & Siplon, 2004; Moore, 2000; Moxley, 2004). Baines (2010) argues that the NPO is subject to and operates within the bounds of a unique and distinctive set of philanthropic social values, such as the commitment to sharing and helping, activism and participation, democracy and justice, support of the weak and the disadvantaged, mutual aid and the pursuit of social good. Given the dominant role of social mission in the nonprofit sector, the NPO must protect this orientation to maintain its identity and execute its social role (Brainard & Siplon, 2004).

According to Weisbrod (1978), NPOs emerge in response to economic needs resulting from government or market failures (Salamon, 1987). By way of contrast, noneconomic theories attribute the development of the NPOs to sociopolitical developments (Salamon & Anheier, 1998). Gidron, Bar, and Katz (2003) note that sociopolitical theories are especially relevant to Israeli nonprofits, the context of the current study. These authors argue that the third sector in Israel emerged from the nonvoluntary charities and services that were characteristic of autonomous Jewish communities in the diaspora. In the pre-state Yishuv community, the nonprofit sector was largely sectorial. Post-state, these nonprofit activities were generally subsumed under the state’s centralist socialism. The sector only reemerged in the 1970s, initially with a pluralistic, individualistic orientation that, more recently, has reverted to a largely sectorial framework. Unlike the diaspora framework, which pivoted around autonomous communities, the nonprofit sector in contemporary Israel is actively involved in the broader society and economy, with NPOs required to manage complex interdependent relations with both government and market environments.

Despite the need to deal with competitive pressures, nonprofits tend to exhibit ambivalence toward the notion of competition: “The sector has long been uncertain about the role competition should play in its development. At best, it regards competition as a necessary evil” (Racine, 2003, p. 308). Racine criticizes nonprofits that disregard competition, urging them to adopt an approach based on “coopetition,” a hybrid of competition and cooperation. Similarly, in their analyses of high performance managerial systems in NPOs, Brinckerhoff (1998) and Letts, Grossman, and Ryan (1998) acknowledge that the rules of competition apply to nonprofits, and encourage NPOs to compete actively in the market.

However, not all students of the nonprofit sector accept this approach. Indeed, a short time after publication of Letts et al.’s (1998) study, one of its co-authors, William Ryan (1999), contended that while adherence to the rules of the marketplace works for for-profits, it can be damaging for NPOs, as “nonprofits may be retreating from their mission in order to gain market share” (p. 136). In a review of the Brinckerhoff and Letts et al. studies, Renz (2001) warned against the “business is best” mantra. Other writers have also noted that competitive behavior, commercialization, and alliances with the business sector can cause NPOs to lose sight of their core mission and weaken their commitment to civic-democratic values (Anheier, 2000; Eikenberry & Kluver, 2004; Katan, 2008; Martínez, 2003).

Some scholars have argued that NPOs prefer cooperative rather than competitive behavior (Austin, 2000; Cornforth, Hayes, & Vangen, 2014; Domański, 2011; Starnes, 2000). In a study of third-sector organizations in Poland, Domański (2011) found that the level of competitiveness is low, and that they prefer a cooperative approach. Chetkovich and Frumkin’s (2003) study of the Red Cross identifies two types of competitive strategies: efficiency and differentiation. The efficiency strategy, based on reduced costs, was deployed in the blood bank division, but created dissatisfaction among management. Managerial concern was that a cost-effective policy might reduce the quality of products and services, while also impacting core activities such as blood provision to rural hospitals. Managers of another division, which was supported by donations, had little need to deal with profits and margins. In this division, they adopted a strategy of differentiation, avoiding a competitive market orientation by focusing on the distinctiveness of their mission. Similarly, Bielefeld and Murdoch (2004) found that the differentiation strategy was preferable for the nonprofit sector. Suárez and Hwang (2008) argued that nonprofits driven by a social mission tend to lobby rather than compete: “lobbying serves as a direct nonmarket form of competition for resources” (p. 100). Froelich (2012) suggests there is a tendency to avoid rather than confront competition: “nonprofit leaders tend to focus on maximizing service delivery while maintaining financial viability, not on coping with new competition.”

In summary, the literature suggests that nonprofits tend to adopt three possible approaches to competition: compete actively; shun competition, fearing it may dilute social mission; or compete and cooperate simultaneously (Racine, 2003). The findings of the current study suggest that this typology may not adequately capture the complexity of this phenomenon. By way of analogy, the study echoes Anheier’s (2000) argument that NPOs are “ill understood” (p. 11) and that their unique complexity makes it necessary to develop a completely new model of governance for this sector. Specifically, the current study explores apparent contradictions and incongruities in the attitudinal and behavioral dimensions of the nonprofit’s response to competition, while identifying strategies that the organizations use to mitigate and resolve the extant dissonance.

SPP

The methodology of the SPP in NPOs largely imitates the methodology used in for-profits (Brown & Iverson, 2004; Bryson, 2004). The business origin and for-profit orientation of the SPP contrasts with the social mission and values which define the NPO (Moore, 2000; Moxley, 2004; Young, 2001b). Indeed, there is a tendency for the NPO to view the business orientation introduced via the SPP as a potential threat to the vitality of the organization (Strichman, Bickel, & Marshood, 2008).

Using a formal, structured methodology, the SPP engages the organization in reflexive analysis and long-term planning. The analysis of competition, and the development of business models that enable the organization to compete effectively, are fundamental components of the SPP (Brown & Iverson, 2004). As widely practiced, the assessment phase of the SPP will typically explore the organization’s external and internal environments (Bryson, 2004), including competitive landscaping; strengths, weaknesses, opportunities, threats (SWOT) analysis; competitive positioning; and niche mapping (Bryson, 2004). Given the centrality of competition in the SPP, strategic planning provides an opportunity to further explore the NPO-competition nexus in the context of a structured business process in which the organization is pushed out of its comfort zone and forced to confront the competitive issues that otherwise, in day-to-day operations, the NPO may try to avoid (Froelich, 2012).

Research Setting

The SPP serves as a trigger for the nonprofit’s reflection on its competitive orientation. As such, this research setting provides a fruitful context for exploring the fundamental dilemmas and complexities that underlie the nonprofit’s need to preserve its social mission while, in parallel, competing in the market, both for service users and funding. The research focuses on the conduct of an SPP in five Israeli nonprofits. These organizations address a range of social needs (the names of organizations and interviewees are aliases): the “Family Tradition” organization deals with religious education and welfare; “The Volunteer” focuses on the empowerment of volunteers from socially disadvantaged backgrounds and peripheral communities; “Technology Advances” used offers technology educational programs to improve life skills and reduce social gaps; “Food Rescue” provides a food redistribution service as part of its mission to enhance nutrition among the needy; and “Special Needs” offers educational, therapeutic, and legal services to people with disabilities. In addition to having performed an SPP, the criteria for selection of the case study organizations included the time interval from SPP completion until data collection, demographic parameters, and domain of activity. The strategic planning criterion was based on subjective self-definition, as defined and reported by the organizations themselves. Importantly, all the organizations also reported that the SPP methodology, as implemented by the strategic planning consultants, required the organizations to analyze the competition and to plan their competitive strategy. The time interval criterion required that data collection in the organization began no more than 2 years following finalization of the formal strategic planning phase. This ensured that the process was relatively fresh in the minds of the interviewees. The demographic criteria were based on a scale determined by “Middot,” a monitoring organization in the Israeli nonprofit domain. I chose to focus on organizations ranked as medium to large NPOs with large budgets. By avoiding huge or tiny organizations, the explanatory role of size was neutralized. The activity domain criterion was also used to neutralize this factor as an explanatory variable. All the organizations studied are service providers. The only variance allowed was in the specific type of services provided. Table 1 provides a profile of each of the organizations.

Table 1.

Profiles of Case Study Organizations.

	Family Tradition	The Volunteer	Special Needs	Food Rescue	Technology Advances
Year founded	1992	2004	1980	2003	2000
Employees	220	33	320	70	200
Budget (US$M)	$5M	$7M	$8M	$5M	$8M

The case study organizations operate in environments that are competitive, both for funding and in the service marketplace itself. For example, a primary area of activity for Family Tradition is the development of Jewish identity. Family Tradition is one of about 40 nonprofits in Israel that are active in this space. The Volunteer encounters competition from a small number of nonprofits that implement programs for the development of young leadership in Israel in the socially disadvantaged periphery. Technology Advances is one of a number of organizations, such as Bikes, Karev Educational Initiatives, and One Lesson, that provide educational programs to promote work opportunities for underprivileged sectors of the population. Food Rescue is one of four food banks in Israel. The food charity sector in Israel consists of more than 400 organizations, 24% of which operate nationally, and 93% cooperate with others. Most of these organizations focus on food distribution. A few months before the SPP, Food Rescue’s management reached out to their largest competitor, proposing a merger to strengthen the common cause and reduce costs. Negotiations failed, and each organization continues to operate independently. In the case of Special Needs, more than 500 organizations offer services to handicapped people. Some of the organizations address the general handicapped population, while others focus on specialized populations such as the blind, the deaf, and autism. Special Needs also promotes legal rights for people with disabilities in cooperation with 60 other nonprofits. The coopetition in this sector is illustrated in Special Needs’ description of this activity on its website. The website elaborates on the organization’s role and achievements as the lobbying representative for this coalition of nonprofits, without actually naming or sharing the credit with any of the coalition member organizations.

The competition faced by the organizations was clearly and immediately recognized by the third-party consultants who were hired by the organizations to lead the SPP. As will be discussed in the findings, the organizations themselves consistently deny the existence of competition. As such, the perception of the consultants is instructive in that it provides an independent, third-party perspective on the level of competition with which the organizations need to deal. For example, Rama, the consultant that led the process at Family Tradition,

If you take an area such as education, a social service organization like Family Tradition is actually competing in its target market against business organizations that operate educational programs . . . and they utilize all their highly advanced marketing tools, with all their branding, and they produce impressive marketing materials, and they can allocate budget and resources.

Similarly, Dan, the consultant to The Volunteer, “They don’t understand that they are in a competitive situation . . . Competition is a dirty word in the nonprofit sector, but there is competition and lots of resources are wasted due to their failure to acknowledge that.” Indeed, as the findings show, all of the consultants demanded that their client organizations explicitly analyze and proactively confront their competition.

The funding environments were also competitive. As detailed in Table 2, government support is a key source of funding for all but one of the organizations. However, in Israel, government funding does not guarantee funding stability or eliminate competition. A recent study of NPO funding in Israel (Burde, Rosenfeld, & Sheaffer, 2017) demonstrates that the financial vulnerability of Israeli NPOs results from their high level of dependence on government funding. Hager, Galaskiewicz, and Larson (2004) also note that NPOs dependent on government funding are more vulnerable than those that utilize other funding sources. This resonates with a comment from Rama, the Family Tradition consultant: “Family Tradition bases its operation on governmental and municipal funding . . . From the funding point of view, everything has become so much harder.” Similarly, says Liz, the CEO of Special Needs, “There are a lot more organizations in the disabilities space . . . It’s become much more difficult to obtain funding . . . Our funding sources like the fact that there are multiple organizations operating in a given sector.”

Table 2.

Funding.

	Family Tradition (%)	The Volunteer (%)	Special Needs (%)	Food Rescue (%)	Technology Advances (%)
Government	57	60	23	0	58
Service fees	31	1	18	2	2
Private contributions	3	39	52	98	34
Other	9	0	7	0	6

Note. Funding data relate to 2014.

Competitiveness for funding also amplifies marketplace competitiveness because one of the key parameters for government and private funding is service volumes. In response to a question about the importance of reporting and transparency in achieving municipal funding, Shalom, the CEO of Family Tradition, responded, “That’s secondary. The main criterion is activity volumes: the more, the better.” Liz, the CEO of Special Needs, agreed, “Everything is measured. What interests donors is how many people are affected. They want to see a broad influence. When there is broad influence they see leverage for their contribution.” The importance of market coverage in winning funding is reflected, for example, in the emphasis on service volumes in the organizations’ investment presentations and other fundraising collateral.

Data and Method

I applied an inductive approach, using multiple case studies to facilitate empirically based theory building. In the inductive approach, the theory emerges from the data, ensuring a reasonable level of validity, testability, and interest (Eisenhardt & Graebner, 2007). By enabling analysis of the same phenomenon in multiple empirical settings, the multi-case study approach can reduce the risk of exceptional singularity to which an individual case study is potentially vulnerable, and, thus, facilitates better grounding of analytical generalizations (Ozcan & Eisenhardt, 2009; Yin, 2003). Eisenhardt and Graebner (2007) argue that the multi-case research technique is so reliable and powerful that it can be compared with a series of laboratory experiments.

The present study is part of a broader research project that explores strategic planning in NPOs. In line with all my findings in the broader study, the patterns of organizational response to competition emerged from my analysis of these data. I did not enter the study, or the analysis phase, with any hypotheses. Indeed, the specific subject of competition did not even appear in the interview guidelines or pre-prepared questions. Even as the theme emerged consistently from the interviews, I did not add new a priori questions to prompt discussion of this topic. All the references to competition were initiated by the interviewees. In response to the interviewee commenting on competition, I did ask follow-up questions. Despite the absence of prompting, 83% of the interviewees proactively volunteered comments relating to competitive issues. This suggests an authentic concern with competition among nonprofits, and the importance of its inclusion in the nonprofit research agenda. Moreover, the fact that informants volunteered a denial of the existence of competition highlights the sensitivity of the issue, and the importance they attach to differentiating the NPO to which they belong from for-profits.

Data Collection

The data comprise interviews and archival material. The archival material consists of the strategic plans, presentations, meeting memos, and various summary documents from the process. The usage of archival material is recognized as a means of triangulation (Forster, 1994), as well as a primary source.

The interviews were semi-structured, in-depth, face-to-face interviews, and were conducted with managers and employees involved in the SPP, representatives of the boards, members of the organizations, and external strategic consultants engaged by the organizations. All told, 58 interviews were conducted across the five participant organizations: Family Tradition, 7 interviews; The Volunteer, 8; Special Needs, 21; Food Rescue, 12; and Technology Advances, 10. All the interviewees had participated actively in the SPP. As a result, the interviews focused on senior members of the organizations. As active participants, they were all knowledgeable about the process, and were also involved in the subsequent implementation of the strategic plan. The number of interviews varied according to the specific circumstances of each organization. For example, in Family Tradition, a relatively small number of interviews was required because the SPP involved a limited level of participation and was conducted over just 3 months. In Special Needs, significantly more interviews were required because the process was complex and continued actively over 42 months.

The interviewees were asked about their experiences relating to the process of strategic planning. The interview plan included questions such as, Why did you undertake an SPP initiative? What were the external factors that affected the decision to undertake the process? What sources of information did you use? Did you adjust the SPP model to your organization? What actions did the organization take during the process? As noted, none of the questions related directly to nor even mentioned competition.

Data Analysis

The analysis was conducted in two complementary stages (Eisenhardt & Graebner, 2007; Ozcan & Eisenhardt, 2009). Stage 1 focused on the individual organizations. In stage 2, I identified common themes and developed theoretical generalizations. The stage 1 analysis began with a “beginning-to-end” review of all the interviews and archive materials for all the organizations (Shkedi, 2010). The analysis then turned to the individual organizations, starting with two detailed readings of the materials. This was followed by a third detailed reading, during which I created a written summary, in a few sentences, of the main themes of each interview (Lieblich, Tuval-Mashiach, & Zilber, 2010). This provided the basis for a summary of the interviews of the organization as a whole, which I interspersed with relevant quotes from archive material, as well as my own reflections. I then categorized the data in table format. At this stage, I asked a colleague to comment on the proposed categorization. His comments led to the deletion of one category, and to the refinement of other categories. The revised tabulated summary data, together with the full text summaries of the interviews, served me as the input for stage 2.

In stage 2, the focus turned to the identification of common attributes and recurring themes across the organizations. The thematic comparison was inspired by the technique of “replication logic,” as proposed by Eisenhardt (1989). I conducted the comparison using a series of tabulated cross-organizational summaries as the primary tool of analysis. The process involved iterative cycling through the per-organization summaries, the cross-organizational summaries, and the theory of NPOs, competition in NPOs, and organizational identity. During stage 1, with its focus on the individual organizations, I could not predict which common themes might emerge. However, this constant iterative process, through stage 2, helped to identify common themes and to generate the theoretical direction.

Findings

The SPP differed across the five organizations. As detailed in Table 3, these differences included, for example, SPP focus, the selection and role of consultants, scope of the project, and duration. Despite these differences, our findings reveal similarities in the behaviors, attitudes, and responses to competition. These common themes are presented in the next sections.

Table 3.

Characteristics of the SPP.

Organization	Consultants	SPP objectives	Duration
Family Tradition	Consultancy group, specializing in branding and marketing for social organizations.	Vision Marketing plans	3 months
The Volunteer	Strategic consulting firm, specializing in business sector.	Vision formulation of targets Budget Working plans Organizational structure	8 months
Special Needs	Organizational consultant (social worker). Financial consultant (pro bono).	Formulation of targets Budget	27 months
Food Rescue	Organizational consultant, specializing in corporate social responsibility. Marketing consultant, specializing in business sector.	Vision Formulation of targets Budget Working plans	18 months
Technology Advances	Strategic consultant, specializing in business sector. Organizational consultant, with experience in nonprofits. Branding firm. Consulting firm, specializing in financial and managerial development of nonprofits.	Vision Formulation of targets Budget Working plans Organizational structure	12 months

Note. SPP = strategic planning process.

Responses to Competitive Discourse and Practices

The SPP exposed all the organizations to discourse relating to competition. However, the methodology used to address competition differed across the organizations. In Special Needs and The Volunteer, competition was analyzed formally, using the SWOT technique. In the other organizations, the competitive analysis was approached in a less structured manner, one that in hindsight, may reflect caution borne of an awareness of the sensitivity of the topic. The interviewees reported that the consultants would insist on the management team adopting a business viewpoint, asking them, among various tasks, to list competitors and articulate competitive positioning. Some viewed this positively: “As an NPO we have certain worldviews which we stick to, but it was a unique opportunity for us to obtain a new viewpoint” (Vered, manager, Special Needs). Others felt more threatened: “They tried to turn us into businessmen. We are rehabilitation professionals, not business people” (Lorraine, manager, Special Needs). The consultants reported that they explained the importance of competitive analysis in terms of business-centric conceptual frameworks and reasoning.

The background of the external consultants hired to lead the SPP projects also varied from organization to organization. The previous experience of the strategic consultants for The Volunteer and Technology Advances was restricted to business organizations only. This was their first project in the nonprofit sector. While The Volunteer used only the strategic consultant, Technology Advances also added an organizational consultant with experience in nonprofits. The consultants leading the projects at the Family Tradition, Special Needs, and Food Rescue organizations all had experience in both the business and nonprofit sectors.

The interviewees in all the organizations belittled or dismissed the existence of competition. This finding applied to all the organizations, regardless of the mix of consultants or the methodology used for competitive analysis. The case study organizations seemed to reject the validity or applicability of the notion of competition. Didi, the CEO of The Volunteer, denies the very existence of competition: “You know what, we don’t really have competitors.” Randy, a board member at Food Rescue, refutes the applicability of competition to the organization: “We don’t need to relate to competition. Let’s leave it. . . . what is competition? We see no need for competition.” Nechama, a senior manager at Technology Advances, also downplays the importance of competition: “Here the role of competition is less significant . . . many times a so-called competitor becomes a partner.” By way of contrast, Family Tradition does not try to refute the existence of competition, preferring instead just to avoid it: “We have decided in general that we won’t compete against anybody” (David, senior manager).

One of the standard questions in the interviews required the respondents to identify the key focal points of their SPP project. Beneficiaries were the most frequently mentioned, with interviewees also citing their own organizations and society as a whole. However, in responding to this question, and despite the explicit inclusion of competitive analysis in all the SPP processes, not one of the interviewees mentioned competitors, or even a more neutral reference to “other organizations,” as a target focus of their strategic planning.

A related perspective is offered by the consultants that led the SPP projects. Liran, the consultant for Technology Advances, came to the project with many years of strategic planning experience for business organizations. However, this was his first SPP project in the nonprofit sector. In discussing the response of the organization to the analysis of what he called “the competitive zone,” Liran noted,

Here [among the nonprofits] there is no sense of let’s call it, war, like there is in the business organizations . . . The passion in a business organization stems from a purely economic stance . . . In the third sector, the passion is not economic. The motives are somehow different.

Dan, the consultant for The Volunteer, also came from a purely business background, and was also surprised by the response of the organization to the competitive discourse: “When it comes to businesses, competition is war . . . [for The Volunteer] the competition is not about money . . . it’s a different type of competition, but we still need to speak in terms of competition.”

Mapping Market Opportunities

The search for suitable market niches is an almost standard element in the SPP methodology. Each of the case study organizations conducted this mapping process, in one form or another, as part of their SPP project. One of the recurring themes that emerges from the niche mapping process, across the various organizations, is the pursuit of a vacant niche in which the organization can fulfill its social mission, based on its specific field of expertise. Zohar, the manager of the youth movement at Technology Advances, also emphasizes the need to find vacant niches: “The mapping that we did, for example in the subject of minorities, provided the information that there is a vacuum there and that is where our organization can enter.” While the identification of market voids is not unique to nonprofits, the NPO articulates this approach in a value-centric framework: “We do what is good and necessary for the Beersheba population that is not done elsewhere. Whenever there is somebody else that takes care of a certain problem, it’s fine from our point of view” (Shalom, CEO, Family Tradition). A recurring theme in this context is that the organizations were only interested in providing services that were not provided by other organizations. From the point of view of the NPO, there seems to be no justification for entering a field if this social mission is already taken care of:

We ask ourselves what is our big contribution. If we look at a segment where we would be doing things others already do . . . no, we’re not going to do that. We’d be just another organization that does it. It’s not what we want. So what! There are plenty of things to do. We’ll do something else. (Vered, vice president, Special Needs)

Didi, the CEO of The Volunteer, expresses a variant on this theme: “If there is another organization that does excellently something similar, there is no need to get involved in it, that is the competitive zone.” The focus here is on the word “excellently.” He clarifies this point, emphasizing that the mapping process also takes into account the quality and efficiency of the solution provided by other organizations in the field: “I just have to know that those others perform the mission excellently.” Here, the criterion is not niche vacancy, but the extent to which the social need is being fulfilled.

The Existential Perspective

In mapping market niches, the organizations asked themselves whether there is a justification for their existence. From my point of view, this existential self-questioning was unexpected, and my interview plan did not include any questions on this. All the participating organizations reported similar phenomena, albeit in different ways. Lia, a vice president at Technology Advances, reported on the organization’s efforts to map service niches that they could fulfill: “Is there still a social gap manifested in the digital gap that justifies the existence of Technology Advances?” Liora, the CEO, also framed the discussion in existential “to be or not to be” terms:

The legitimacy of the question, and the possibility that the answer might be that we have to close down, did not raise any difficulty from my point of view. We would have closed down with honor . . . I hope I am being sincere enough with myself.

Similarly, Devora from The Volunteer described how the team discussed whether there is an unfulfilled need that justifies the existence of the organization: “We said it many times that if we are not useful we will close down this organization. This organization does not exist just for the sake of being an organization. This organization exists to lead something.” In Food Rescue, there was also no escaping the existential question: “Every meeting we started with ‘why are we here?’ and then we proceeded to analyzing our plans” (Mandy, consultant). Mandy also noted that the demand for fulfilling a unique need was framed at the departmental level: “Every department had to discuss and map the department’s mission and singularity.” In Family Tradition, they asked themselves whether they will close down if they fulfill their social mission. However, the organization’s members regarded the question as too theoretical given the “infinite” scope of their educational goals.

In four of the five organizations, the analysis of competition spilled over into an examination of the organization’s self-identity and mission. The Volunteer, for example, framed its evaluation of target service opportunities in terms of organizational identity: “Analyzing the competition zone meant in fact searching what’s unique about us” (Dana, manager). The market mapping exercise at Technology Advances also evolved into a reevaluation of core identity:

Before the strategic planning process there was a sense of oh, there are so many opportunities that exist out there and we did not know what we want to focus on, what we really want and what is our true self. We had to find out before we started discussing these opportunities and needs. (Lia, vice president of business development)

In the same context, Lia added that they found themselves addressing the most fundamental of questions: “What is our truth as an organization?” At Special Needs, too, the competitive analysis transitioned into a reassessment of “core values”: “The organization was interested in a better definition of its core activities, of what the organization wants to focus on and how we define our organizational identity” (Vered, manager).

These internal debates, in which the organization aspired to justify its existence and define its unique contribution, triggered an emotional response. Once again, this phenomenon was strong enough to be reported, in all the organizations, without prompting from the interviewer. For example, Liora, the CEO at Technology Advances,

Have I told you about the emotional difficulty we had in accepting that our role is confined to supporting just the first step in technology training for our clients? I don’t know if an employee in an industrial organization could care nearly as much; say if a breakfast cereal company re-defined the target market for its corn flakes product.

Shalom, the CEO at Family Tradition, also reported that “the existential question caused upheaval.” At Special Needs, Vered captures the emotional intensity of these mapping-cum-identity discussions:

Our biggest fear of each of us was, I can tell you I was worried, but not just me, when we had to choose our core issues, if I am, that is, my service, is or isn’t within these limits. I was stressed not only because of my unit; I was stressed because of Special Needs’ identity, its ability to continue to fulfill its organizational credo, my credo, otherwise why would I ever be here?

The end of this comment suggests that the competitive analysis, and its expression in the mapping of core service niches, was emotionally loaded, even blurring the distinction between organizational and self-identity. This theme was manifest in many of the interviews, as in the response of a senior manager at Special Needs, as reported by Menahem, one of the consultants to the SPP project:

She suddenly realized that her children, her services are her children, all her projects one day will not be there, they will die, not just she herself, but her children will die too, it is a death fear, who can take it?

These comments manifest a tight link, in the thought patterns of the participants, between the emotional turmoil that they experienced and the specific perceived risk of competitive analysis. This appears to represent a distinct thread in the logic of the NPO’s response to strategic planning, separate from the interviewees’ angry and more generic resistance to the consultants’ insistent demand that the NPOs be managed like a business.

Discussion

Complexity of the Nonprofit’s Approach to Competition

As discussed in the literature review, a number of previous studies have argued that competitive market activity exposes the NPO to significant risk and, as such, nonprofits tend to avoid competitive activity (e.g., Austin, 2000; Cornforth et al., 2014; Domański, 2011; Starnes, 2000). The evidence from the current study suggests a more complex and nuanced pattern of behavior. This complexity is expressed in the dissonance between competitive behavior of the NPO, as opposed to the organization’s attitudes toward competition. All of the organizations in the study engaged in competitive behavior. None are monopolies, and none have the privilege of operating in a unique niche. Nonetheless, the organizations consistently deny the presence of competition, while also aspiring to a stringent market-targeting criterion defined by the organization’s ability to address unique unfulfilled needs. Superficially, at least, there appears to be a disconnect between the symbolic presentation of the organization as a distinctly nonmarket entity, and the material patterns of competitive market behavior displayed by the organization in both the funding and marketplace contexts. I will revisit this apparent disconnect in the “Concluding Remarks”.

The expressed preference for vacant niches is, of course, not unique to nonprofits. We expect and observe the same behavior in for-profit organizations. Our findings suggest that the difference is less in the behavior itself, and more in how the organizations frame this behavior. For the business organization, identification of an unfulfilled need may, in some cases, optimize the business opportunity, but the presence of competitors does not disqualify the niche. Indeed, for some businesses, the existence of competitors reduces the risk of new initiatives by affirming market demand. However, the case study data show that in the way that nonprofits explain and rationalize their behavior, the presence of competitors that fulfill the relevant social need would disqualify the niche. In two of the organizations, there was evidence of a less stringent version of this approach, one that allows not only unfulfilled needs, but also underserviced needs where the quality of existing service does not meet appropriate standards of excellence or efficiency.

The complexity of the NPO’s conceptualization of competition is also reflected in the type of analysis they conducted in the SPP. The case study NPOs did not engage in the kind of competitive analysis that is standard practice for market-oriented business organizations: There was no attempt to gather information about other organizations that were active in their target sector, nor did they endeavor to identify weaknesses, ways to out-position them, win market share from them, or defeat them. While, in practice, the case study organizations do compete, often in crowded sectors, the competitiveness is mitigated by a more passive, less aggressive approach. This tendency was articulated, for example, by Randy, a board member at Food Rescue: “We do the best job we can and it will be clear what we can contribute.” Randy’s comment seems to express a willingness to compete, via service differentiation, with other food rescue organizations, but to do so tacitly, eschewing the overt, proactive marketing and positioning of the organization’s differential capabilities that would characterize a more explicitly competitive approach.

Competitive Analysis as a Trigger for Reevaluating Self-Justification

The study also demonstrates that the overt encounter with competitiveness, as expressed in the SPP, may trigger a fundamental reexamination of the nonprofit’s justification for its continued existence. Across all the case studies, the NPO’s attempt to locate vacant or unique service opportunities opened up introspective existential debate. While the business organization might ask “In which niche can I be successful?”, the NPO’s commitment orientation to social good seems to transform the question into, “In which niche can I justify my existence?”

The findings also suggest that the practice of competitive analysis may trigger a process in which the NPO revisits and reassesses its core identity. The notion of organizational identity refers to distinctive and enduring elements of an organization’s central character (Albert & Whetten, 1985; Whetten, 2006; Whetten & Godfrey, 1998). In distinguishing identity from other concepts such as culture or image, Whetten (2006) argues that identity answers the question “Who we are as an organization?” (p. 221), drawing the boundaries of acceptable action, and manifest in “their deepest commitments—what they repeatedly commit to be through time and across circumstances” (p. 224).

I posit that the nonprofit’s outward-bound analysis, focused on locating market niches in which the organization can make a unique contribution, may sometimes turn inward to focus on what makes the organization unique. As a result, the organization’s tangible search for a unique or underserviced need can serve as the catalyst for a much broader, and largely intangible, exercise in which the nonprofit tries to forge a core identity that will provide the ideological justification and conceptual infrastructure for the organization’s existence. While speculative, it may be possible to explain the logic of this phenomenon as follows: (a) strategic planning requires the NPO to analyze the competitive landscape; (b) given its commitment to growing social good, the NPO reinterprets this to mean the identification of service niches where it can make a unique contribution; and (c) this requires the NPO to revisit its definition of what it stands for as an organization. In other words, the NPO’s orientation to social good acts as a catalyst to transform the explicit, articulated encounter with competitiveness into an exploration of the organization’s core identity.

Our findings show that this is typically a grueling, emotionally draining process in which the nonprofit wrestles with its self-justification. This finding aligns with previous studies of the emotional arousal and disagreement that identity work can engender (Alvesson & Willmott, 2002; Jehn & Mannix, 2001; Voss, Cable, & Voss, 2006). Whetten (2006) argues that the emotional reaction to organizational identity issues derives from the obligatory nature of identity directives, and the tendency for the tenets of identity to be perceived as truth claims and moral imperatives.

The emotional intensity of this process may be related to two other phenomena observed in the case studies. As noted, in their strategic analysis of competition, the case study organizations, driven by their commitment to social good, set themselves a challenging standard for justifying their continued existence; namely the provision of unique value to the community. In defining an outcome that was potentially terminal for the organization, or for specific projects, they raised the stakes, creating a situation in which the perceived risk and emotional collateral of the process was dramatically increased. Moreover, the findings also suggest that for at least some members of these social organizations, their personal identity and sense of worth overlap with the principled values of the organization to which they have dedicated themselves.

Strengthening Legacy Identity

The final contribution of this article relates to the resilience of the nonprofit, and its ability to retain its original values, in the face of exposure to a market orientation. Earlier findings suggest that the encounter with a market orientation and competitive conduct, as expressed in the SPP, may threaten the nonprofit and cause loss of mission (Eikenberry & Kluver, 2004; Katan, 2008; Martínez, 2003). The current study seems to demonstrate an inverse result: The exposure to competitive, market-centric patterns of thought may actually strengthen the social orientation of the NPO. As noted, the competitive analysis triggered a reevaluation of organization value and identity. The resilience of the nonprofit’s social orientation was demonstrated in the outcome of this process: Each of the organizations expanded their social mission, transitioning from a localized service-specific operation to a social leadership role (Sharp, 2012, pp. 98-101). Special Needs, for example, expanded their mission from support for children with disabilities in Israel, to changing how Israel society relates to people with disabilities, both legally and attitudinally. Similarly, Family Tradition broadened its educational goals from the local city level to a national program. All the organizations underwent similar transitions and, remarkably, each of the organizations also assumed a new role of legislative lobbying.

Young (2001a) found that NPOs tend to avoid multiple or hybrid identities. My findings also demonstrate an inclination toward a singular identity approach, but one that amplifies rather than diminishes the legacy identity. Legacy amplification is not a trivial outcome. In contrast to views that would emphasize the risk that market-oriented practices create for the nonprofit, the current article suggests that the nonprofit is capable of a robust response and vigorous defense of its core values. Following Herlin (2015), who argues that the maintenance of social identity requires the nonprofit to engage in nonmarket behavior, the current findings suggest that, under threat, the nonprofit responds to the market-based challenge by amplifying its social identity.

Concluding Remarks

The current study builds on previous studies that have documented the tendency of the nonprofit to deny the necessity to compete, or even the existence of competition in their reference environment. Drawing on a series of case studies conducted in the context of a strategic planning exercise, I have identified a closely related set of behaviors that highlight the fundamental, underlying complexity of the nonprofit’s response to competition: First, the nonprofit exhibits an apparent disconnect between material practices, which are characterized by engagement in competitive funding and marketplace scenarios, while presenting, at the symbolic level, claims that competition does not exist and, in competitive analysis procedures, insisting that, as a social organization, there is no justification for operating in market segments where they would be competing with other organizations. Second, the nonprofit appears to mitigate overt, proactive competitive behaviors, preferring to compete passively, for example, by simply providing better service. Third, the demand for competitive analysis and behavior may trigger an introspective process of existential self-justification and the reexamination of organizational identity. Fourth, the reevaluation of identity tends, at least for some employees of the NPO, to be characterized by an intense emotional response. This response may be the outcome of an observed overlap between personal identity and the social cause to which the NPO is dedicated. Finally, contrary to the view that the encounter with competition harbors risk and is liable to dilute the social identity of the nonprofit, such encounters may trigger a process that eventually reasserts and strengthens social identity.

How is it possible to make sense of this complex phenomenon? In particular, given the competition faced by the organizations, both for market share and funding, how can we understand the organizations’ consistent denial of this competition? Is this a straightforward case of self-denial or self-deception? One possible approach would be to ascribe these attitudes to an underlying anti-capitalist social-democratic sentiment. However, this explanation cannot explain the rejection of competitiveness in conservative organizations, such as Family Tradition. A more parsimonious approach would pivot on the nonprofit’s aspiration to social good: “In a business organization you have to maximize profit whereas here you have to maximize impact towards target populations” (Dana, manager, The Volunteer). Viewed through this prism, the so-called competitors in any given marketplace can be viewed as fellow contributors to the common good, rather than as zero-sum competitors striving to expand territory and power. As such, the nonprofit, true to its aspiration for the common good, may actually view other organizations in a given market space as partners or fellow travelers, rather than competitors.

This approach can be contrasted with the notion of decoupling. Decoupling, defined as dealing with “situations where compliance with external expectations may be merely symbolic rather than substantive, leaving the original relations within an organization largely unchanged” (Fiss & Zajac, 2006, p. 1175; see also Edelman, 1992; Westphal & Zajac, 2001), has been widely documented in the organization’s attempt to deal with contradictory logics, and is generally presented as a pragmatic and at times manipulative behavior, directed toward and intended to influence external stakeholders. In the case of nonprofits, there could be also an aspect of compliance to stakeholder expectations, but the emotionally intense response to the encounter with competition suggests that the denial of competition, and even of the need to compete, is primarily a response to core, internal needs. The denial of competition, as expressed in the “fellow travelers” mindset, can satisfy the organization’s sense of loyalty to its social mission. If this explanation is correct, the denial of competition may represent an instance of coupling, in the sense of aligning and connecting with the organization’s core identity, rather than decoupling.

However, while potentially explaining competitive denial, these approaches beg the question of the apparent dissonance between the symbolic and material expressions of competitiveness, as manifest in the gap between the nonprofit’s denial of competition and its competitive behavior in practice. To provide a more integrated view, I would like to suggest that these material and symbolic variables allow the organization to define an individualized, nuanced model of competitiveness, what we might term its “competitive quotient.” The NPO encounters tension between the need to compete and the risk to organizational identity that competitiveness inherently bears for the nonprofit. The case studies suggest that the nonprofit addresses this tension not by eschewing competitiveness, but by manipulating the symbolic and material expression of competitiveness in a way that will allow it to compete effectively without placing the organization’s idealistic socially oriented mission at risk. This approach, which emphasizes the nonprofit’s ability to flexibly manage the complexity of competitiveness across a broad continuum of nuanced options, can be contrasted with a view of competitiveness as a binary competitive-noncompetitive dichotomy. This echoes the findings of Chetkovich and Frumkin (2003), who suggest that organizations are able to manage the tension between mission and margin by preferring competitive options such as differentiation strategies, that are more aligned with the nonprofit’s ethos, as opposed to pricing strategies that are perceived as more relevant to the for-profit arena. Similarly, in the current study, we can view the nonprofit’s selection of a characteristic competitive mix, delineated in our findings as mitigated competitive behavior, amplified social mission, and the exclusion of competitive motifs from the organizational narrative, as an attempt to balance the conflicting needs of a socially committed organization in a competitively challenging environment.

Limitations and Future Research Directions

The conclusions of this study should be viewed as an expansion of the palette of competitive behaviors that the NPO may exhibit, rather than one whose internal logic is deterministic, or that represents a pattern of behavior that would necessarily have universal applicability. The qualified framing of the conclusions stems from the limited geographical and cultural limitation of the study setting. It will be necessary to extend the research to additional geographies to assess the relative frequency of the noted phenomena.

NPO attitudes to market behavior, and specifically competitiveness, may indeed be sensitive to cultural context. For example, strategic planning is widely practiced in the NPO sector in the United States (Bryson, 2004). By way of contrast, Domański (2011) shows that, in Poland, for example, organizations try to avoid undertaking strategic planning. Nonetheless, while acknowledging this potential limitation, the point should not be overstated, pending further study. The challenges to the NPO, as reflected in strategic planning and the introduction of “alien” business concepts, have also been broadly documented in the U.S. context, and this despite the widespread acceptance and supportive environment for strategic planning in the U.S. nonprofit sector (Hwang & Powell, 2009).

Implications for Practitioners

The study findings have a number of implications for practitioners. In the specific context of strategic planning, consultants and managers that are leading SPP initiatives at nonprofits will benefit from an awareness of the variant range of potential responses to the discussion of competition. The range of responses includes the possibility of vigorous anti-competitive sentiment, but might also include complex nuanced behaviors that harbor apparent contradictions between, for example, anti-competitive declarations and competitive bidding for government funds. Strategic planning practitioners should also be prepared for the possibility that the competitive mapping exercise may devolve into competitive avoidance. Moreover, engagement in competitive analysis may trigger organizational turmoil, involving an intensely reflexive and emotionally draining process of self-redefinition that extends far beyond the apparent boundaries of the competitive mapping exercise. More generally, while the NPO may finesse complex response paradigms that selectively admit elements of competitive behavior, managers and consultants should recognize the possibility that the NPO may be unable to accept a worldview in which competitive or market behavior is the dominant paradigm. Finally, management’s concerns that the nonprofit should be protected from exposure to market forces and competitive environments, for fear of the threat such influences may represent to the organization’s social mission and core identity, may be counterbalanced by the apparent robustness of the NPO in responding to challenges to its nonmarket value-centric orientation.

Footnotes

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Author Biography

Ziva Sharp teaches Organizational Behavior, Sociology, and Qualitative Research at the Ben-Gurion University of the Negev and Haifa University. She holds a PhD (2012) from the Ben-Gurion University. Her research interests include nonprofits and institutional theory.

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