Managing the Magic: Conditions of Decoupling in the US Nonprofit Sector

Organizations in the nonprofit sector have seen ongoing rationalization in the past decades. Rational organizations, as suggested by Weber (1904), base their decisions and actions on method, not intuition. Professional managers, for instance, take the place of activist leaders, and performance metrics and strategic planning are used to document organizations’ impact on society (Hwang and Powell 2009). Such rational practices are often associated with fair hiring processes and efficient, expertise-based decisions instead of arbitrary and value-laden judgment (du Gay 2000, Perrow 1986). Yet, some organizations still rely heavily on values, charisma, emotions and other enchanted elements of organizational life. In the nonprofit sector, which serves as the empirical context of this study, passion and compassion are the fuel that keeps volunteers running, funders whipping out their wallets, and executives forgoing high corporate salaries (Hall, Millo, and Barman 2015). How rational organizations manage the magic that presumably gives way to disenchanting managerial reforms is a conundrum.

This setting of the rationalization of U.S. charities provides general insights into how organizations navigate controversial reform trends. Organizations often present symbolic commitments to reforms without actually changing everyday procedures and practices. In this context, neo-institutional theory highlights varying degrees of “decoupling” between talk and action in response to external reform pressures (Orton and Weick 1990; Meyer 1977). Complementing established theory, I argue that the direction of decoupling also matters: facing complex institutional environments, many organizations in fact underemphasize compliance vis-à-vis audiences (Snellman 2011). In other words, organizations exposed to controversial reform trends (or “complex environments,” cf. Meyer and Scott 1983; Thornton et al. 2012) may have to present inconsistent accounts of their commitment to reform. This study illuminates the conditions under which we should expect certain types of inconsistency between organizational accounts. I argue that strong external pressures to approach social change methodically in spite of the inherently value-driven nature of the nonprofit sector have led to a decoupling of symbolic commitments to reform: internal practices on the one hand, and outward-facing communication as presented on organizations’ websites on the other.

This argument is supported by comparing survey data and quantiative content analysis of websites of 175 nonprofit organizations representative of all 501(c)(3) public charities in the San Francisco Bay Area. I juxtapose rare longitudinal data on the organizational practices and a novel discourse-based measure of nonprofit rationalization based on website data. The results of my study show that inconsistency between the adoption of rational practices and rational discourse is frequent, especially if an organization faces commercial audiences and has tangible goals. Environmental factors, such as being rated externally or having abstract constituencies, are better predictors of the direction of decoupling than such internal features as leadership and workforce professionalism. The paper contributes to a better understanding of the conditions of decoupling in complex environments, the reliability of publicly available text data for predicting organizational behavior, and the interaction of disenchanted and enchanted elements in formal organizations.