Voluntas (2011) 22:470–493 DOI 10.1007/s11266-011-9183-7 ORIGINAL PAPER Accountability as a Managerial Tool in Non-Profit Organizations: Evidence from Italian CSVs Ericka Costa • Tommaso Ramus Michele Andreaus • Published online: 25 January 2011  International Society for Third-Sector Research and The John’s Hopkins University 2011 Abstract The long-term performance of NPOs is based on their ability to link and maximize social value as defined in their mission. This involves legitimacy obtained from stakeholders influenced by and influencing NPO activities, and their operational capacity or economic efficiency. Thus, NPOs have to utilize multiple level accountability systems which should be compatible with their multiple objectives and stakeholders’ claims. The accountability system of an NPO should focus on its operational capacity, because in order to maximize its efficiency, an NPO has to measure its resource use, cost structure, and financial structure. Legitimacy obtained from stakeholders is also integral. If an organization is considered a social contract between multiple stakeholders, it has to consider the social economic effects of its activities and it has the duty to account for them. However, since the mission of an NPO is to create and distribute social value to a certain specific group, its social value creation has the most important role and an NPO should measure the social value it has created. This article analyzes the accountability system of a specific type of Italian NPO called Centri di Servizio per il Volontariato (CSVs)—namely centers which provide services for voluntary associations. The aim of the research is to verify if the accountability system adopted by CSVs satisfies their need for multiple level information (operational, legitimacy, and social value) and accomplishes their stakeholder claims, and to determine its impact on the definition and implementation of their strategy and on their long-term performance. The research E. Costa (&)
M. Andreaus Trento University and Euricse, Via Inama, 5, 38100 Trento, Italy e-mail: ericka.costa@unitn.it M. Andreaus e-mail: michele.andreaus@unitn.it T. Ramus Bergamo University and Euricse, Via dei Caniana, 2, 24127 Bergamo, Italy e-mail: tommaso.ramus@unitn.it 123 Voluntas (2011) 22:470–493 471 was carried out using the action research model, and the findings are based on the analysis of a sample of 64 CSVs situated throughout Italy. Résumé La performance sur le long terme des organisations à but non lucratif dépend de leur aptitude à relier et à maximiser la valeur sociale définie par leur mission. Cela fait intervenir la légitimité acquise auprès des parties prenantes, qui sont influencées par et qui influencent les activités mais aussi la capacité opérationnelle ou l’efficience économique des organisations à but non lucratif. Ainsi, les organisations à but non lucratif doivent recourir à des systèmes de responsabilité à plusieurs niveaux, à la fois compatibles avec leurs divers objectifs et avec les revendications des parties prenantes. Pour maximiser son efficience, une organisation à but non lucratif doit évaluer l’utilisation de ses ressources, sa structure de coûts et sa structure financière; son système de responsabilité doit donc se concentrer sur sa capacité opérationnelle. La légitimité acquise auprès des parties prenantes est aussi primordiale. Si une organisation est considérée comme un contrat social entre plusieurs parties prenantes, elle doit prendre en considération les effets socio-économiques de ses activités et rendre des comptes à leur propos. Cependant, la mission d’une organisation à but non lucratif étant de créer et de distribuer de la valeur sociale à un groupe spécifique, la création de valeur sociale constitue l’élément le plus important; une organisation à but non lucratif doit donc mesurer la valeur sociale qu’elle a créé. Cet article analyse le système de responsabilité d’un type spécifique d’organisations à but non lucratif italiennes nommé Centri di Servizio per il Volontariato (CSVs). Il s’agit de centres proposant des services aux associations bénévoles. L’objectif de l’étude est d’une part de vérifier si le système de responsabilité adopté par les CSV comble leur besoin de niveaux multiples d’informations (opérationnelles, légitimité, valeur sociale) et réalise les revendications des parties prenantes, et d’autre part de déterminer l’impact de ce système sur la définition et la mise en œuvre de leur stratégie ainsi que sur leur performance à long terme. L’étude a été menée en utilisant le modèle rechercheaction et les conclusions se basent sur l’analyse d’un échantillon de 64 CSV réparties dans toute l’Italie. Zusammenfassung Die langfristigen Leistungen von Nonprofit-Organisationen hängen von ihrer Fähigkeit ab, ihren laut Organisationszweck definierten Sozialwert zu verknüpfen und zu maximieren. Darin eingeschlossen sind die von den Interessensgruppen, welche von den Aktivitäten der Nonprofit-Organisationen betroffen sind und diese beeinflussen, übertragene Legitimität sowie die betriebliche bzw. wirtschaftliche Effizienz der Organisationen. Folglich müssen die Nonprofit-Organisationen mehrstufige Rechenschaftssysteme anwenden, die mit ihren diversen Zielen sowie mit den Ansprüchen der Interessensgruppen vereinbar sind. Das Rechenschaftssystem einer Nonprofit-Organisation sollte sich auf ihre betriebliche Kapazität konzentrieren; denn um ihre Effizienz maximieren zu können, muss eine Nonprofit-Organisation ihre Ressourcennutzung sowie ihre Kosten- und Finanzstruktur messen. Die von den Interessensgruppen übertragene Legitimität ist ebenso von grundlegender Bedeutung. Wenn eine Organisation als ein sozialer Vertrag zwischen mehreren Interessensgruppen betrachtet wird, so 123 472 Voluntas (2011) 22:470–493 muss sie die sozialwirtschaftlichen Auswirkungen ihrer Aktivitäten berücksichtigen, und sie hat die Pflicht, für diese Rechenschaft abzulegen. Da die Aufgabe einer Nonprofit-Organisation allerdings darin besteht, einen sozialen Wert zu schaffen und diesen einer bestimmten Gruppe zur Verfügung zu stellen, ist die Schaffung des sozialen Wertes die wichtigste Funktion einer Nonprofit-Organisation, und sie sollte diesen messen. Dieser Beitrag untersucht das Rechenschaftssystem einer spezifischen Art italienischer Nonprofit-Organisationen namens Centri di Servizio per il Volontariato (CSV-Organisationen). Es handelt sich hierbei um Zentren, die Freiwilligenvereinigungen Dienstleistungen bereitstellen. Ziel der Studie ist es nachzuprüfen, ob das von den CSV-Organisationen angewandte Rechenschaftssystem ihren Bedarf nach Informationen auf mehreren Ebenen (Informationen über betriebliche Leistung, Legitimität und Sozialwert) deckt und die Ansprüche ihrer Interessensgruppen befriedigt. Weiterhin wird der Einfluss des Rechenschaftssystems auf die Definition und Implementierung ihrer Strategie und auf ihre langfristigen Leistungen untersucht. Die Studie wurde mit Hilfe des Aktionsforschungsmodells durchgeführt, und die Ergebnisse beruhen auf der Untersuchung einer Stichprobe von 64 CSV-Organisationen in Italien. Resumen Los resultados a largo plazo de las OSAL se basan en la capacidad para vincular y maximizar el valor social tal y como se define en su misión. Ello implica la legitimidad conseguida de las partes interesadas influidos por e influyentes en las actividades de las OSAL, ası́ como su capacidad operativa o eficiencia económica. Ası́, las OSAL tienen que utilizar sistemas de contabilidad multinivel que deberı́an ser compatibles con sus múltiples objetivos y las reclamaciones de las partes interesadas. El sistema de responsabilidad de una OSAL deberı́a centrarse en su capacidad operativa porque, para aprovechar al máximo la eficiencia, una OSAL debe medir el uso que hace de los recursos, la estructura de costes y la estructura financiera. La legitimidad obtenida de las partes interesadas también es esencial. Si una organización se considera un contrato social entre varias partes interesadas, debe tener en cuenta los efectos económicos sociales de sus actividades y tiene el deber de responder por ellos. No obstante, dado que la misión de una OSAL es crear y distribuir valor social a cierto grupo especı́fico, su creación de valor social tiene la función más importante y una OSAL deberı́a mediar el valor social que ha creado. En este trabajo se analiza el sistema de contabilidad de un tipo especı́fico de OSAL italiana llamada Centri di Servizio per il Volontariato (CSV), es decir, centros que ofrecen servicios para asociaciones voluntarias. El objetivo de la investigación es verificar si el sistema de contabilidad adoptado por los CSV satisface la necesidad de información multinivel (operativa, legitimidad, valor social) y responde a las reclamaciones de sus partes interesadas para determinar su impacto en la definición y la aplicación de su estrategia y sus resultados a largo plazo. La investigación se realizó utilizando el modelo de investigación de acción y los hallazgos se basan en el análisis de una muestra de 64 CSV de toda Italia. 123 Voluntas (2011) 22:470–493 473 Keywords Accountability
CSVs (Centers which provide Services for Volunteer Associations)
Effectiveness
Mission
Stakeholders
Value creation Introduction Non-profit organizations (NPOs) have emerged as important actors both for promoting social values and civil integration and for creating a strata of global civil society which can often influence the practices and policies of national and international governments. This increased importance and influence of NPOs has heightened demand for more transparency and accountability both internally and externally so that stakeholders can more easily assess the impact of the activities developed by NPOs. However, in NPOs, the accountability systems and the performance measurement seem to be more complex than in for-profit companies mainly for two reasons. First, while the mission of for-profit companies is mainly to focus on profit maximization and stockholders are the primary stakeholder, NPOs usually have a socially oriented and ethically based mission and they deal with multiple and competitive stakeholder demands (Ebrahim 2003a). Second, in for-profit companies value creation, economic performance and long-term survival are mutually self-reinforcing but this link does not exist in an NPO because financial sustainability does not guarantee the achievement of the organizational mission nor vice versa (Moore 2000). These pressures are particularly challenging for those NPOs which are facing strong environmental and market changes because they have to re-direct their accountability strategies toward different types of stakeholders and new stakeholders’ claims. Like other NPOs, those in Italy are also facing a rapidly changing environment (Borzaga and Fazzi 2000, 2010) and have to redirect their strategic priorities and accountability systems according to the new needs and requests of their stakeholders (Nicholls 2009). This article aims at analyzing a specific type of NPO found in Italy, namely Centri di Servizio per il Volontariato which we have translated as Centers for Services for Voluntary organizations and thus the abbreviation we use thereafter is CSVs. Our investigation involves the study of how their accountability system affects mission achievement and the different ways this system could be used as a managerial tool. The article is structured as follows. First, it analyzes the features that distinguish non-profit and for-profit organizations from a managerial point of view by investigating the makeup of an NPO accountability system and what the role of stakeholder management should be. Then the objective and the research method utilizing a survey of 64 Italian CSVs will be presented. The findings will be outlined and discussed and finally some conclusions will be drawn. Literature Review To date numerous contributions in the literature on NPOs have focused on defining them and the reasons for their existence from an economic point of view (Hansmann 123 474 Voluntas (2011) 22:470–493 1980; Ben-Ner and Van Homissen 1991; Weisbrod 1975; Rose-Ackerman 1987; Borzaga and Mittone 1997). On the other hand, the internal functioning of NPOs has received less attention so far even if over the last decade the increasing request for efficiency, effectiveness, and competition from markets has urged NPOs to heighten their economic and social performances (Sawhill and Williamson 2001). As a result, progressively more literature has been written with the aim of helping NPO managers to better manage their organizations (Herman and Renz 1999, 2008) but as Forbes (1998) notes these studies are characterized by different theoretical perspectives and objectives which make their integration rather difficult. In order to define the managerial peculiarities of NPOs, this article introduces the features which distinguish them from for-profit and public organizations because these elements impact on the management of NPOs, on their strategy definition, and on the accountability system they should adopt. From the work of Paton and Cornforth (1992) and Leat (1993), it is possible to highlight the problems which arise when trying to find clear indicators of success as the main managerial feature of NPOs (Kanter and Summers 1987; Bowen 1994; Sawhill and Williamson 2001). Since in an NPO there is no price mechanism to aggregate and classify the needs of all the stakeholders, which are by definition ‘‘any group or individual who can affect or is affected by the achievement of the organization’s objectives’’ (Freeman 1984, p. 46), the NPO mission is the most useful metric that can be used in judging past performances and assessing future actions (Bryce 1992). Moreover, NPOs typically operate in complex and dynamic environments (Balser and McClusky 2005) and they have to meet the needs of multiple stakeholders because their final goal consists in producing social value, which is a vague and broad concept that impacts differently on different stakeholders who themselves are or should be able to influence its definition and evaluation. Since it is not easy to define clear strategies and indicators of success in NPOs, it is also difficult to identify accountability systems that are able to report both internally and externally on organizational efficiency, defined in economic terms as ‘‘the amount of resources used to produce a unit of output’’ (Etzioni 1964, p. 8), and effectiveness, i.e., ‘‘the extent to which the organizations are able to achieve their goals’’ (Thompson 1967, p. 14). Because of these difficulties, in order to identify suitable accountability systems for NPOs, it is necessary to clarify the definition of accountability adopted in this article and precisely define the stakeholders NPOs have to be accountable to. Accountability to Whom? Numerous definition of accountability has been proposed by scholars and researchers. For example, according to Cornwall et al. (2000), accountability has both an external dimension and an internal one because it is about being held responsible by others and about taking responsibility for one’s own conduct. In Gray et al. (1996), accountability can be defined as ‘‘the duty to provide an account (by no means necessarily financial) or reckoning of those action for which 123 Voluntas (2011) 22:470–493 475 one is held responsible’’; accountability involves a promise to perform and a moral or legal responsibility to provide an account for it. Both these definitions suggest that accountability involves two different but correlated responsibilities: (i) the duty to undertake certain action and (ii) the duty to provide an account for those actions. Therefore, before discussing the accountability instruments that should be adopted by an NPO, we should discuss to whom an NPO has to be accountable. By considering NPOs as mission-oriented and multi-stakeholders organizations, both Moore (2000) and Ebrahim (2005) suggest that theoretically they should be accountable to multiple stakeholders and generally it is not clear who should be morally and/or legally considered as the principal.1 In this sense, donors or funders are not the primary stakeholders in NPOs like shareholders are in for-profit oriented companies, and their alignment with the organizational objectives does not singularly guarantee the achievement of the organization’s goals nor the satisfaction and consequent support of others stakeholders. In fact, long run survival of an NPO is based on its ability to maximize the social value created as defined in the organizational mission and as perceived by the multiple stakeholders influencing and influenced by the NPO. From these considerations, three linked aspects emerge: – – – While in for-profit enterprises the economic bottom line and the organizational mission align, in NPOs there are at least two different bottom lines; the first regards the economic dimension of the activity, while the second is related to the social dimension. A for-profit organization which is able to maximize its economic performance is also reinforcing its mission achievement; in contrast, there is no automatic relationship between increments of achievement in the organization’s mission and financial performances in NPOs. An NPO which is accountable only to donors for its economic and financial performance risks incurring what Kramer (1981) calls ‘‘goal deflection’’ or ‘‘the displacement of the ends by the means’’ because as Frumkin and Clark (2000, p. 160) suggest ‘‘efficiency must be a means toward the end of greater mission fulfillment.’’ As a consequence, NPOs should develop different and more complex accountability systems to satisfy the competing claims of multiple stakeholders and as such research studies have proposed diverse accountability models for NPOs and NGOs. Najam (1996), when referring to NGOs, argued that these organizations should be primarily accountable to: (i) patrons, (ii) clients, (iii) themselves, underlying the ‘‘difficulties they face in prioritizing and reconciling these multiple accountabilities’’ (Najam 1996, p. 350). While Najam focuses his attention on the stakeholder to whom an NPO should be accountable, both Avina (1993) and then Brown and Moore (2001) stress the different types of constraints an NPO faces and the different accountability systems that follows from this. Avina (1993) indicates that NPO accountability concerns 1 Principal-agent theory (Alchian and Demsetz 1972). 123 476 Voluntas (2011) 22:470–493 functional accountability and strategic accountability, where the former is related to resource use and resource impact and the latter focuses on the impacts that the organizational activity has on society and on other organizations. Utilizing the NPO strategic relationship between social value, financial performance, and organizational survival proposed by Moore (2000), Brown and Moore (2001) suggest a new approach to accountability for NGOs. In Moore’s strategic model (2000), success in the non-profit sector depends on a threefold strategy that simultaneously links social value creation, sustainable support by donors and founders, and organizational survival: value creation refers to the social value to be produced by NPOs in terms of mission achievement; sustainable support could be achieved by NPOs if donors and founders judge them economically and morally valuable and finally organizational survival focuses attention on the existence of sufficient know-how and ability within the organization. Using this approach, Brown and Moore proposed a multiple level accountability model which aimed at linking and balancing simultaneously all the cited dimensions because every different dimension requires different kinds of accountability. Assuming that NPOs are accountable to multiple principals and that accountability is relational in nature, Ebrahim (2003a, b, 2005) and Christensen and Ebrahim (2006) underline the problems encountered when balancing competing accountability claims and mechanism, as well as responding to upward accountability concerns of donors and lateral and downward accountability claims. In order to solve this challenges and to avoid accountability myopia, Ebrahim (2003a, 2005) suggests that NPO accountability should be based on the ethical mission of the organization, thus varying with the type of organization being examined and should not overemphasize rule following. Since the mission has an ethical dimension that empathizes the internal motivations of actors, it saves NPOs from the risk of privileging the accountability relationship with one type of stakeholders, namely funders, because of its greater power (Ebrahim 2003b). Moreover, NPOs should avoid the risks of adopting accountability processes based on rule-following operational behavior because this could cause the so-called goal deflection (Kramer 1981) and inconsistency in measuring organizational effectiveness (Ebrahim 2005). Finally, Matacena (1999, 2007) developed another accountability model for a particular set of NPOs, namely social enterprises (Borzaga and Defourny 2001). This framework was then set up and empirically tested by Bagnoli and Megali (2009). This model suggests a three-level accountability process which considers the social effectiveness dimension (the ability to achieve social goals), the institutional (respect of legal and self-imposed rules), and the economic and financial to evaluate the performance measurement and the long run sustainability of the activity. Introducing Social Responsibility Even if NPOs are based on a social mission, they can be managed in a socially irresponsible (Cornelius et al. 2008) or unethical manner (Fassin 2009). Since the NPO mission ‘‘is of a very specific nature […] because it is linked to a particular 123 Voluntas (2011) 22:470–493 477 perspective and […] it is oriented towards a specific target group’’ (Bouckaert and Vandenhove 1998, p. 1074), an NPO could be managed in a social irresponsible way by pursuing the social mission for the wellbeing of a particular stakeholder without considering the wellbeing of other stakeholders and of society at large. More precisely, by following its social goal, an NPO could also directly or indirectly impact negatively on society in terms of lower or worst employment, environmental pollution, and less income creation. As a consequence, just as in a for-profit company, an NPO has to manage and interact with its stakeholders in order to align their requests and purposes with the social contract that the NPO has with all its stakeholders and to respect all the stakeholders’ legitimate needs (Donaldson and Preston 1995). In terms of accountability, this implies that NPOs should be not only accountable to stakeholders for the financial sustainability and for the social impact of their activities as defined in their mission, but also for the impact they have on stakeholders and society at large in carrying out their social mission. The Three Dimensions of Accountability in NPOs In the previous paragraph, the main NPO accountability models have been briefly presented. These models underline the need for NPOs to adopt multiple-stakeholder oriented accountability strategies but they are only partially useful when prioritizing NPO strategies and stakeholders’ demands. More importantly, introducing CSR into the discussion involves more complexity and ambiguity in the accountability system because it increases the issues and the stakeholders to whom an NPO should be held responsible. In order to partially solve this complexity, it is possible to restart from the managerial peculiarities of NPOs and from the proposed definition of accountability. If the institutional purpose of an NPO is to maximize social value creation as defined by its mission and if accountability is the duty to provide an account of those actions for which somebody is held responsible, NPOs are primarily accountable to their stakeholders for the social value they create. Furthermore, NPOs must also fulfill socially responsible and economic purposes in order to reinforce the achievement of their mission, as suggested by Andreaus (2007). Figure 1 shows that an NPO has three responsibilities—economic, social, and mission—and it should be accountable to its stakeholder for all of them considering that: – Economic sustainability is a means to an end: being financially responsible and accountable is a condition that has to be respected, but it remains an instrument to better achieve the institutional purpose of the social value maximization as defined in the mission. For this reason, the emphasis of the accountability system should not only be on tangible and financial variables but primarily on the social value created and NPOs should give major importance to the demands from mission stakeholders rather than demands from stakeholders interested in economic sustainability. 123 478 Voluntas (2011) 22:470–493 Fig. 1 The strategic and accountability hierarchy in NPOs (Source: Andreaus 2007) – – Social responsibility is a moral end: being socially responsible to all the stakeholders is a moral purpose not automatically achieved just because the mission is socially oriented (Cornelius et al. 2008). Therefore, NPOs should consider integrating social responsibility into their strategies and be accountable for this. Social value creation is the institutional purpose: an NPO is effective if it is able to maximize the social value associated with the achievement of the organizational mission and goals. Therefore, an NPO should be accountable for the coherence of its activities with the values underlying the mission and its fulfillment. Value Creation Accountability and Stakeholder Engagement The model proposed by Andreaus (2007) focuses attention on three dimensions— economic, social, and mission. While the economic dimension can be straightforwardly defined by any organizations or NPO because it is clearly measurable by comparable key performance indicators, the other two dimensions refer to intangible aspects and therefore are not so easily defined nor measured. With respect to the mission dimension, these problems have forced NPOs to change their focus from long-term objectives to short-term and from activities hard to estimate to easier ones (Anheier 2005), but the same considerations could also be developed with regard to the social responsibility dimension. In terms of strategy definition, the negative effect of the difficulty in defining clear accountability models is twofold because: (i) only activities with a long-term focus can significantly impact on mission/social responsibility achievement and (ii) there is a risk that performance 123 Voluntas (2011) 22:470–493 479 measures attract efforts to areas that are more easily assessed but which need less resources or which do not have a high impact on stakeholders. The mission-oriented nature of NPOs and their multi-stakeholdership are the two features most influencing and complicating the definition and the development of coherent strategy and accountability related to social value creation in terms of mission and social responsibility fulfillment. In short, NPOs must deal with the competing demands of multiple stakeholders (Ebrahim 2003a, b). Therefore, stakeholder analysis and engagement should be a fundamental managerial and accountability instrument for NPOs because: – – – – – effectiveness depends on the ability of the NPO to satisfy the moral value which engages the stakeholders involved in the achievement of the NPO mission. effectiveness is a ‘‘portfolio of performance dimensions, assessed by a portfolio of evaluators’’ (Balser and McClusky 2005, p. 299). since NPO effectiveness is not precisely measurable, it is a social construction and it depends on stakeholders’ perception and, in particular, on the most influential stakeholders (Herman and Renz 2008). stakeholder management allows managers to ensure that the strategic and operational direction of an NPO addresses stakeholder perception (Fletcher et al. 2003). strategic management of stakeholders implies not only addressing stakeholders’ expectation but also guiding them toward a common and shared interpretation of the organizational mission and toward their alignment with NPO values, capabilities, and objectives (Balser and McClusky 2005). Research Design Within the theoretical framework that it has been developed, this article will discuss the weaknesses and strengthens of the accountability system of a particular type of Italian NPO—the Centers for Services for Voluntary organizations (CSVs)—and it will suggest that the main weaknesses could be related to an incorrect definition of the strategic and accountability hierarchy and, consequently, to a stakeholder engagement process mainly focused on financial stakeholders rather than on the mission, which thus limits CSV mission achievement, social value creation, and legitimization. The Centers for Services for Voluntary Organizations (CSVs) in Italy Centers for Services for Voluntary associations (CSVs) are voluntary organizations recognized under Italian law by Voluntary Work Law 266/91. The law obliges Banking Foundations to destine part of their profits to the setting up of CSVs, which in turn provide services for voluntary sector organizations to sustain and enhance their activity (Article 15, comma1). The Ministerial Decree 8th October 1997 further states that 1/15 of the total return of the Banking Foundations has to be 123 480 Voluntas (2011) 22:470–493 devoted to special funds at Regional level for which a Managerial Committee (called Co.Ge.) is held responsible. This Committee has the duty to allocate or distribute the available funds in the following way: if there is only one Regional CSV, this receives the complete fund allocation and if more than one, funds are allocated accordingly. The same Ministerial Decree (08/10/1997) states that one of the criteria for the allocation of the funds is related to the provisional and final annual balance sheet drawn up by the CSVs. The law does not indicate what type of balance sheet has to be drawn up and according to the requirement of each Regional Managerial Committee often CSVs provide an economic and financial balance sheet similar to that defined by law for the profit enterprises (art. 2425 and 2425 Italian Civil Code). The Ministerial Decree incites the Managerial Committee to check the economic and financial balance sheet of the CSVs and also verify ‘‘regularity and compliance with their rules, excluding any control over the specific activities of each center.’’2 CSVs were first set up in 1996 and by 2006 there were 77 homogeneously placed throughout Italy. They represent a significant number of Italian voluntary associations or rather 19.5% of all voluntary work in Italy (ISTAT 2005). At the end of 2006, CSVs employed 858 people made up of 160 voluntary operators (18.6%) and 698 paid employees (81.4%). Since 2003, the national networking for CSVs is guaranteed by the National CSV Coordination Association (called CSV.net), which is an independent body that links and informs CSVs on the activities carried out and interfaces institutionally for them with diverse interlocutors. In the 10 years since their foundation, CSVs have become well-established NPOs with regard to their internal organizational structure (comprising financers, auditors, managers, and workers) and their ability to interact with local and national external agents. This internal and external organizational complexity implies that CSVs have relationships with a large number of stakeholders as summarized below: – – – – – Funding Stakeholders: organizations which provide funding for the CSV activity in the form of donations, notably Banking Foundations as required by law. Auditors/Controlling Bodies: external bodies which inspect and regulate the activity. Networking Bodies: local and national organizations and CSV.net with whom the CSVs can actively engage to protect the interests of the voluntary associations the CSVs represent, as well as the voluntary workers in the CSVs. Partners: other NPOs and local bodies who are not directly involved in the CSV activity but collaborate and co-operate with them. Mission Partners: voluntary associations—CVS members or non—and NPOs the CSVs work closely with to maximize the social value of the product. 2 The original texts of the law are in Italian, all the translations into English are by the authors of the paper (sometimes an adaptation was needed). 123 Voluntas (2011) 22:470–493 481 Method The analysis of CSVs is the direct result of a collaborative project between the ISSAN research institute3 and the CSVs in order to map out the characteristics regarding their governance and accountability and, as such, propose programming strategies. This collaboration occurred through the need of CSVs to find managerial and organizational solutions to increase the social value of their product and services. The ISSAN–CSV collaboration can be classified as action-research (Lewin 1948). Utilizing the action-research model, the collaboration developed as follows: – – – First stage: The first step was to analyze demographic, organizational, and managerial features of CSVs. The study was mostly based on internal documents from CSV.net but also contained data from previous surveys, the Internet, the Italian National Bureau of Statistics (ISTAT), and a review of publications. Second stage: This stage of the analysis is not based on a statistical sample but on survey data from all the CSVs (77 in all). A structured questionnaire was prepared, pre-tested, restructured, and then sent by mail to all the CSVs in Italy. 64 of the CSVs returned a completed questionnaire (redemption rate 83%). Third Stage: The results of the survey were shared with the CSV’s personnel (chief officers, volunteers, or other managers) during meetings, conference calls, and e-mail, and three focus groups with ISSAN researchers and CSV personnel were set up.4 Findings and Discussion The Limitations of CSVs’ Accountability Systems and Their Impact on the Activities Carried Out As defined in their institutional mission, CSVs must sustain and enhance voluntary work by providing support, training, counseling, and developing a solidarity culture (Decree 8th October, 1997). As with every mission, there is space for interpretation: on the one hand, it could be restrictive by limiting intervention to a simple provision of professional counseling but on the other, it could be more complex if considered under the auspices of the strategic development of the Italian Third Sector. 3 ISSAN—Istituto Studi Sviluppo Aziende Nonprofit (Institute for the study and development of nonprofit organizations) is a member-based associative university research and training centre supported by the University of Trento. The institute carries out multidisciplinary theoretical and applied research, provides training, disseminates acquired knowledge through the promotion of seminars and conferences, and is also involved in publishing. In 2008, ISSAN was incorporated into Euricse, the European Research Institute on Cooperative and Social Enterprises which aims at promoting knowledge development and innovation in the field of cooperatives, social enterprises, commons and non-profit organizations. For further details and information, see www.euricse.eu. 4 The final report ‘‘Organizational and Accountability Models’’ is available on www.csvnet.it. 123 482 Voluntas (2011) 22:470–493 Although their mission should be interpreted proactively, CSVs are finding it difficult to provide answers to the new needs of voluntary associations and the result is that only a few CSVs understand their role, and often there is only a weak correlation between the institutional mission and the work carried out (Cenpro 2003). These problems are not caused by misunderstanding the needs of the voluntary organizations and the changes taking place in the voluntary sector but on the difficulty found in implementing strategy and plans in keeping with the relative interpretation. In particular, one of the main reasons CSVs find it difficult to interpret their mission proactively is linked to the role that the accountability system plays within these organizations. Based on the approach outlined by Andreaus (2007), the accountability system should verify both the economic-financial and socio-consequential commitment toward the stakeholders involved in the organization’s activity and toward the stakeholders influenced by the activity. Besides these dimensions, the accountability system should account for the ability to attain the creation of social value, which is the institutional orientation of every NPO and of CSVs. The Economic and Financial Accountability System in CSVs Table 1 shows that 60 CSVs of 64 depend almost entirely for economic support on the Banking Foundations (more than 70% of total financial resources), because they are the only bodies who can be relied upon to provide monetary funds. Other possible financers (donors, public bodies, clients, CSV members, and others) only marginally contribute to the economic aspect of the CSVs. Banking Foundations must finance CSVs by law and thus their participation in the purposes laid down in the CSVs’ mission is limited and is subordinate to the attention they pay to maintaining the economic-financial equilibrium in NPOs. For these reasons, the CSVs place great importance on verifying the conditions underlying their economic-financial management as their legitimization by financers depends upon it. As a consequence, most CSVs apply various economic-financial tools of analysis before, during and after the realization of projects. Table 2 shows that in terms of those used when setting up a project 94% of CSVs define their Table 1 CSV financial contributors Contributors Percentage of financial resources 0% 0–34% 35–69% 70–99% 99–100% Banking Foundations 3 0 1 41 19 Donors 59 3 0 0 2 Public bodies 37 27 0 0 0 Clients 61 3 0 0 0 CVS members 41 23 0 0 0 Other 42 21 1 0 0 123 Voluntas (2011) 22:470–493 Table 2 Number of CSVs that consider economic-financial variables before launching projects Table 3 CSVs that consider economic-financial variables during and at the end of projects 483 Variables considered Number Percentage (out of 64) Definition—economic resources 60 94 Economic budget 57 89 Financial budget 56 88 Economic feasibility 53 83 Variables evaluated Number Percentage (out of 64) Redefinition of resources 45 70 Monitoring—operative phase 60 94 Monitoring—economic-financial 58 91 economic and financial resources for project development and a high number allocate an economic budget (89%) as well as a financial one (88%). Finally, 83% carry out a complete economic-financial feasibility study before launching their projects and activities. Focusing on economic-financial variables for a project does not stop at the programming stage but continues in the overall monitoring as they progress; Table 3 shows that 91% carry out this analysis and 94% monitor the feasibility of each single operative phase. The data demonstrate the elevated attention given to economic-financial variables by CSVs and how the accountability system is thus developed in a suitable manner to provide internally and externally the information required to verify the financial equilibrium dimension. These findings confirm what Najam (1996) highlighted when he stated that the economic-financial accountability system is the most often used by NPOs because it is the simplest to understand, to develop, and to manage. Investigating the reasons for this attention to the economic and financial dimension highlights the need to explore the CSV relationship with its Managerial Committee (Co.Ge). In fact, the analysis of the questionnaires demonstrates that 50 CSVs of 64 (78%) realize the importance of the Co.Ge. and 37 are looking for more interaction with their Managerial Committee. The Co.Ge. appears to influence the implementation of the activity of the centers and as a consequence the accountability mechanism. CSVs are thus required to present a detailed economic and financial report to the main funder. In other cases (19%), the Managerial Committee collaborates with CSVs and each of them feels free to adopt different forms of accountability. From the focus group feedback, it emerges that ‘‘there are no reference points, not from the Centre or from the Foundations […] Each CSV is set up independently at the local level because the law does not provide the same ‘picture’ for everyone. By law Co.Ges and CSVs are separated, this is what the law says. […]. So what 123 484 Voluntas (2011) 22:470–493 happens in terms of accountability? As always it is something new. There is a Co.Ge which asks its CSV to produce a statement of a purely accounting nature and at the opposite end of the scale CSVs that did not really know what they had to do and so did not even ask.’’ (focus group, interviewee 1) When the Managerial Committee imposes the reporting model on CSVs, they have to carry out ‘‘duplicate’’ accountability: ‘‘an internal balance sheet according to own criteria and in addition another type of report because the others [Co.Ge] impose it on us. This is a bit too much.’’ (focus group, interviewee 2) CSR and Social Value Creation Accountability System in a CSV5 While the economic and financial control system in a CSV has been fully developed, the accountability systems encounter problems when trying to find precise quantifiable indicators for the social value creation related to the organization’s mission and the socio-consequential objective. This issue has become increasingly important over the past few years, as emerges from the focus groups. ‘‘The controlling bodies [Co.Ge] are asking ‘How do CSVs spend the money?’ So there should be accountability based on the value of the activity and CSV.net has tried to do that. And this accountability system needs to be based on the evaluation of the activities and on the mission achievement defined by law.’’ (focus group, interviewee 3) Despite these emerging needs, the accountability practices on social impact and social values creation are still limited. In particular, the social accountability system in CSVs is underdeveloped both quantitatively and qualitatively, and therefore, it is an inadequate system to account for the ability of CSVs to satisfy their socioconsequential dimension. In quantitative terms, the number of social reports as a first proxy to evaluate how different forms of accountability are used by CSVs has been considered. From the start of the research in 2005, only 35 CSVs of 64 drew up a voluntary social report as the law does not make it compulsorily. This number has improved, from 8 in 2003 to 15 in 2004. These data indicate the low level of formal importance given to social accountability within CSVs, especially if it is compared with the amount and complexity of information gathered by the economic and financial accountability system. The first indirect indicator of the qualitative limits of the social accountability system in a CSV as an instrument providing internal and external information is the number of social reports produced by consultants and not by the workers in the CSVs. Of the 35 CSVs which published a social report in 2005, only 12 drew it up entirely internally. The same number did likewise using internal resources as well as consultants, while 11 exclusively or predominately used external consultants. The 5 The analysis system for CSR accountability in CSVs is limited by the fact that at the closure date for the empirical part of the research project the writing of guidelines for a Social Report of CSVs was underway. In June 2009, ‘‘Guidelines for the social reporting in voluntary organizations’’ were published. 123 Voluntas (2011) 22:470–493 485 fact that only 12 CSVs of 64 drew up social report using internal personnel seems to suggest that the accountability system is not an integral part of the control management system in CSVs and is thus more a communications instrument rather than a transparent accountability tool. Further practices have been developed in specific contexts, for example, ‘‘the first experiment was carried out by the CSV in Tuscany with a quantitative model built up to evaluate the effectiveness of the activities. I repeat that this experience is a first attempt. Afterwards we did some constructive thinking to create an evaluation system of the activities based on the mission laid down by the Ministerial Decree.’’ (focus group, interviewee 1) Moreover, the data from questionnaires and the focus groups did not highlight the importance of monitoring the socio-consequential path between CSVs and stakeholders. This variable appears not only to be little analyzed by the internal accountability systems but also of little importance to CSV managers. One reason for this scarce attention by CSV managers to the socio-consequential dimension could be linked to the presumption, widespread within NPOs (Bouckaert and Vandenhove 1998; Andreaus 2007), that pursuing a social outcome is enough to be considered socially responsible even if this consequentiality is not necessarily the case (Bouckaert and Vandenhove 1998; Rusconi and Signori 2007). This assumption seems to be confirmed by analyzing the motives attached to why CSVs consider it useful to publish a social report which is mainly linked to: (a) the analysis of the objectives of the mission and (b) communication for the financers (see Table 4). The first reason indicates an interpretation of the social statement as an accountability tool for the social value produced rather than the socio-consequential path, while the second highlights the need pointed out in the literature (Najam 1996; Moore 2000) to become legitimate for the financers not only regarding the financial balance but also the coherence in the activities for which the funds were obtained. Regardless of the importance given to various objectives found in the social report, from Table 4 it is clear that all the CSVs state the need to account to the internal and external stakeholders regarding the attainment or not of their institutional objectives. However, the definition of these objectives and of parameters and means of analysis of an intangible like social value is complicated and as a result CSVs find it difficult to find non-rhetorical or descriptive indicators which are able to account rigorously, punctually, and comparably regarding their mission attainment. For example, even if 94% of CSVs outline their objectives before embarking on a project and 94% assign the various objectives to a person responsible, only a smaller percentage (72%) consider a redefinition of the objectives or monitor the attainment of partial results. In addition, only 70% redefine their resources based on the results obtained and 56% monitor satisfaction of the end-users and possibly then modify the objectives (see Table 5). This data highlight the problem CSVs have in using an accountability system linked to social value creation as an effective managerial tool which might be able to maximize the efficiency of the entire organization. 123 486 123 Table 4 Use of a social report by CSVs (score from 1 = min to 4 = max) Overall reporting No answer (%) No importance (%) 1.6 6.3 Little importance (%) 1.6 Important (%) Very important (%) Average Median Mode SD 39.1 51.6 2.38 3 3 Min Max 0.66 0 3 Reporting activities 1.6 1.6 1.6 37.5 57.7 2.54 3 3 0.38 0 3 Communication to external stakeholders 1.5 0 1.5 42 55 2.54 3 3 0.28 1 3 Communication to the Co.Ge. 1.6 1.6 5 39 53 2.46 3 3 0.45 0 3 Communication to the banking foundation 1.6 0 0 39 59.4 2.60 3 3 0.24 2 3 Objective analysis 1.6 0 1.6 35.9 60.9 2.60 3 3 0.28 1 3 Planning tool 1.6 0 9.4 51.5 37.5 2.29 2 2 0.40 1 3 Corporate governance instruments 1.6 3 18.7 43.7 33 2.08 2 2 0.65 0 3 Voluntas (2011) 22:470–493 Voluntas (2011) 22:470–493 Table 5 CSVs that use controller social value creation variables 487 Controlled variables Number Percentage (out of 64) Revision—outline of objectives 46 72 Determination—partial result 46 72 Redefinition of resources 45 70 Redefinition of end-users 36 56 Negative Consequences in Terms of Strategic and Managerial Initiatives Generally, when no clear definition of objectives and the variables to evaluate exists and when the accountability system is more orientated to controlling monetary rather than social variable, NPOs tend to prefer short-term projects because these need less managerial or economic investment and control (Ebrahim 2003a). This imbalance in the CSV accountability systems in favor of the economic-financial dimension has negative consequences in terms of strategic and managerial choices: – – Project time span reduction: the difficulty in defining clear strategies forces CSVs to propose short-term projects. In 2006, for example, 70% of the 603 projects developed by CSVs lasted less than 1 year, and only 6% for more than 2 years and thus able to satisfy the strategic requirements actually needed by the non-profit sector. Limited impact of the projects: the services offered by the CSVs tend to be somewhat traditional—administrative, advice on statutes, financial aspects, etc.—and as such they are services which tend to impact less and less on the quality of the voluntary work.6 Table 6 demonstrates how the two types of services which produce most social value, and thus the underpinnings of the voluntary sector are also those which play the least part in CSV activity (i.e., support and promotion of voluntary activities, planning, and consulting). On the other hand, consulting and logistics services are the most delivered by CSVs even if they are of the least social value and unable to satisfy CSV user needs. The Stakeholder Management Approach to Define the Strategic Priority in CSVs Given that this imbalance in CSV accountability systems determines strategic and managerial problems, it needs to be adjusted by placing more importance on an accountability system linked to the attainment of the CSV social mission which is not only a requirement but the final purpose for the long-term survival of each NPO. In NPOs, stakeholder engagement is of primary importance both in the strategic planning stage and in the accountability stage because mission achievement depends critically on the stakeholder’s perception of it (Herman and Renz 1999; Balser and 6 Speech by Professor Carlo Borzaga, The development of CSVs, ‘‘Let’s Talk About It’’ Conference, Rome 13/11/2007. 123 488 Voluntas (2011) 22:470–493 Table 6 Services provided by CSVs 2003–2006 Year 2006 2005 2004 2003 Services No. of services % No. of services % Logistics 70,080 8 64,717 60 40,338 3 39,321 Communications 20,181 38 14,577 -19 17,888 77 10,095 No. of services % No. of services Administrative consulting 136,738 38 99,113 3 95,977 78 53,857 Training 55,143 33 41,350 -24 54,335 87 29,076 Support and promotion of voluntary activities 4,478 33 3,366 5 3,194 67 1,907 Planning consulting 1,887 -30 2,705 67 1,624 22 1,329 McClusky 2005). For these reasons, stakeholder engagement can help CSVs to overcome the current strategic and accountability problems. On a scale from 1 (minimum) to 4 (maximum), Table 7 shows the level of influence CSV activity has on its stakeholders and highlights a variance and limited standard deviation for all the six categories of stakeholders investigated. Analysis of the data demonstrates that the stakeholders most greatly influenced by CSV activity are the mission stakeholders or rather NPOs, members and nonmembers, communities, and the voluntary sector. The average level of impact for these stakeholders is 3.34. This data correspond with the characteristics of the CSV because the users, or direct beneficiaries, are the voluntary organizations and presumably the entire voluntary sector. Human resources, the partners, and the networking bodies were given a score of 3 meaning that these stakeholders could be considered to have ‘‘average/high impact.’’ The two stakeholder categories which are least impacted are the controlling bodies—an average of 2.4—and finally the funding stakeholders or rather the Banking Foundations with 1 or no impact (see Table 7). This stresses the lack of impact CSV activity has on the foundations which implies that they provide finance for the centers because they are under obligation to do so by law and not because they share the CSV mission. Table 7 Analysis—impact of CSV mission on stakeholders Financers Control bodies Networking bodies Human resources Partner Mission partner Average 1.923 2.447 2.893 3.037 2.686 3.346 Median 1.750 2.500 2.875 3.125 2.875 3.500 Mode 1.000 2.750 3.000 3.125 2.750 4.000 SD 0.861 0.796 0.654 0.623 0.752 0.584 Variance 0.741 0.633 0.428 0.388 0.565 0.342 123 Voluntas (2011) 22:470–493 489 Fig. 2 Influence and involvement of stakeholders in CSV activity Following the landmark definition of stakeholders proposed by Freeman (1984), Fig. 27 distinguishes between prominent and other stakeholders: – – Prominent stakeholders: situated in the first quadrant, they show a high level of impact on CSVs as well as involvement. They are the employees, collaborators, voluntary workers, member/non member voluntary associations, and controlling bodies. Other stakeholders: overlapping the third and fourth quadrant, they display little involvement and average ability to influence CSVs. They are local, regional, and provincial networking bodies, Third Sector bodies and other non-profit entities, and the community where CSVs operate, the funding bodies and CSV.net. From the analysis of the relationships between CSVs and stakeholders presented so far, there are stakeholders who are able to weigh upon the CSV activity much more than others but these stakeholders are not always the ones most influenced by the CSVs or whose motions are in line with the CSV mission. As a result, CSVs must redefine the relationships with their stakeholders on the basis of the institutional mission they are pursuing. 7 Quadrant I contains the stakeholders with the highest influence on determining strategies and most involvement in activity management: quadrant III contains the least influential or involved. Quadrant II contains those most involved in operations but not able to influence strategic decisions while quadrant IV shows influential stakeholders but not involved. 123 490 Voluntas (2011) 22:470–493 Starting from the influence of stakeholders on CSV activity, the most important stakeholders at the moment are: – – – the controlling bodies the human resources some mission stakeholders, i.e., the voluntary associations. To maximize social value creation and to obtain legitimization, CSVs strategy definition in the short term should satisfy the motions brought by these three stakeholder categories, while in terms of accountability systems CSVs should be accountable to these stakeholders by engaging them in the entire accountability process. If in the short-term CSVs must satisfy the requests of the stakeholders which are most influential in the sphere of activity, in the long-term they must increase the weight of stakeholders capable of supporting them in following their institutional mission. Conclusions Most of the mainstream literature on NPO accountability systems stresses the relational dimension of the accountability process and the importance of developing systems which are able to answer multi-stakeholders’ competitive claims and to assess not only financial sustainability but also long-term social value creation, by adopting stakeholders’ dialog and engagement strategies. In particular, NPOs’ ability to satisfy the requirements of all the stakeholders depends, among other things, on their ability to develop accountability systems which can account both internally and externally on: (i) the twofold dimension involving the economic and socio-consequential dimensions and (ii) the attainment of the objective to maximize the social value produced. If an NPO is unable to develop an accountability system with a view to prioritizing these three dimensions, it could find it more difficult to define its organizational strategy. In fact, an unbalanced accountability system relating the economic, socio-consequential, and mission dimensions does not permit NPOs to completely comprehend their strategic priorities nor why and toward whom they are responsible. Utilizing the aforementioned assumptions, this study has examined how the accountability system can affect the effectiveness and the mission achievement of NPOs. The article has highlighted that CSVs’ accountability systems are predominately orientated toward the economic-financial dimension rather than the social aspect because of the difficulty encountered when precisely defining quantifiable variables for the social activities of the CSVs and because of the pressure from funders (Banking Foundations) and controlling bodies (Managerial Committee or Co.Ge). In strategic terms, the imbalance in the accountability system determines limits when defining the strategic priority of CSVs. In fact, these organizations are more likely to be oriented to the development of short-term projects, which are easily 123 Voluntas (2011) 22:470–493 491 quantifiable in monetary terms, but this reduces the social impact of their activity and their overall effectiveness. These findings have allowed us to empirically contribute to the literature on NPO accountability (Najam 1996; Ebrahim 2005). When NPOs are more devoted to rulefollowing and to upward financial accountability rather than effectively assessing their social value creation, they face difficulties in defining effective strategies and in prioritizing long-terms goals, thus incurring the so-called goal deflection problem (Kramer 1981). This article also contributes to the literature on NPO management by stressing the importance of stakeholder engagement and dialog in order to limit the accountability pressure of funders and to favor NPO legitimacy and their positive evaluation by stakeholders (Balser and McClusky 2005; Herman and Renz 2008) regarding organization effectiveness. In particular the article advocates that in order to solve their accountability weaknesses CSVs should develop stakeholder engagement practices, because only through the dialog and the involvement of the stakeholders, an NPO has the possibility to increase the efficacy of its accountability system and reduce pressure from financiers. Thus, in the monitoring and reporting stage of the project, CSVs should involve the main stakeholders and through active dialog encourage them to participate in the evaluation process to determine the performance obtained and reduce any ambiguity resulting from the intangibility of the services produced. Finally, this research also contributes to the growing literature regarding the role of Corporate Social Responsibility in NPOs (Cornelius et al. 2008) by suggesting that in order to be effectively socially responsible, NPOs should try to satisfy the claims of all the stakeholders directly and indirectly involved in the value creation process. Limitations and Further Research This article has focused on the development of a theoretical framework which is able to link the various accountability objectives for NPOs and then it has verified how they can be applied in practice, namely by studying CSVs. The limitations of the research lie in the complexity to find a link between the increase in the coherence of the accountability systems adopted by CSVs and the model proposed, and the improvement in the accountability system and managerial performance in CSVs. Future research could be carried out to address these limitations. Moreover, future research could analyze the role of Corporate Social Responsibility in the NPO management discussion in more depth. 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