Breaking Good? Managerial Practices in Nonprofits

1 Introduction

The nonprofit sector is marked by profound diversity. In this respect, it is no different from the public and business sectors. It encompasses fields of activity as varied as sports and religion, and organizations that range from large social service providers with multiple divisions and thousands of employees, to research institutes, volunteer-based brass bands, social movement organizations, and quasi-military emergency aid organizations. Nonprofit sectors also differ widely across countries and cultures, display highly diverse patterns of interaction with other societal sectors, and vary considerably in their resource dependencies. Despite this heterogeneity, nonprofit scholars continue to search for commonalities across organizations and to emphasize the distinctiveness of the sector – sometimes even invoking the notion of a “holy grail” of nonprofit exceptionalism. From this perspective, nonprofit organizations (NPOs) must be managed and governed differently from businesses and government agencies, with any perceived “contamination” across sectors often viewed with suspicion.

This suspicion is all the more striking given that nonprofit scholars have not reached consensus on a definition. A commonly shared denominator is that NPOs are formal organizations that prioritize nonfinancial goals, with financial objectives serving primarily as means to achieve these broader ends. Many scholars draw on the structural–operational definition (Salamon and Anheier 1996), which characterizes NPOs as private, non-profit-distributing, self-governing, and voluntary organizations. Even this definition, however, remains contested. The non-distribution constraint, in particular, is debated: economic theory suggests a continuum between monetarily and non-monetarily motivated activities (Valentinov 2008) and even its original proponents later relaxed the criterion in response to critiques that the conceptualization was too narrow, particularly among European scholars (Salamon and Sokolowski 2016, p. 1515).

Nonetheless, scholars generally agree that nonprofits, the nonprofit sector, and their fields of activity – such as those classified in the ICNPO framework (Salamon and Anheier 1996) – are phenomena deserving sustained scholarly attention. More importantly, nonprofits are widely regarded as essential actors in advancing the common good, fostering democratic societies, promoting fairness and justice, and supporting the inclusion of marginalized and disadvantaged groups. Nonprofits are also widely regarded as important actors for the common good, for democratic societies, and for the promotion of fairness, justice, and inclusion of marginalized groups. The precise ways in which they contribute to these goals are theorized in the extensive literature on the societal roles of nonprofits (Maier et al. 2025).

Unlike many other scientific communities, nonprofit scholars often display a strong normative commitment to their field of study. As a result, they are far from neutral observers, and research on the “dark sides” of nonprofits remains comparatively rare (exceptions are e.g. Ben-Ner 2022; Machin and Ruser 2023; Van Deth and Zmerli 2010). Against this backdrop, it is not surprising that considerable attention has been devoted to the diffusion of business-like logics into NPOs, particularly in the context of the broader wave of new public management (e.g., J. Alexander 2000). The present article provides a concise review of this stream of research. First, it traces the origins of the community’s skepticism toward particular sets of organizational practices. Second, it seeks to conceptually integrate the diverse logics and labels – such as managerialism, marketization, and business-likeness – that are used to describe these practices. Third, it summarizes the empirical findings on the effects of such bundles of practices. This review does not claim to be systematic – several such syntheses already exist (Maier et al. 2016; Stock and Erpf 2023; Suykens et al. 2019) – but rather reflects a structured attempt to distill central insights from the literature. Finally, the article concludes by highlighting key lessons learned and outlining avenues for future research.

2 The Distinctiveness of Nonprofit Organizations

“Functional dilettantism” has been described as a core characteristic of NPOs, which are seen as permanently failing in their operations. Yet this failure is understood to serve a deeper societal function. More than 30 years ago, Wolfgang Seibel (1992) advanced this verdict on third-sector organizations. Drawing on Max Weber, Seibel argued that organizations inevitably face a choice between bureaucratization and dilettantism. He distinguished among efficiency-oriented business organizations, bureaucracy-driven public organizations, and the realm of organizational dilettantism, which he regarded as a necessary component of the organizational landscape. From this perspective, NPOs fail both in terms of governing procedures and control mechanisms, but this failure is “functional” insofar as it provides a non-rationalized niche – a padded space within the otherwise rationalized “iron cage”.

Seibel’s notion of nonprofit singularity – although immediately criticized by economists (Wagner 1993) and only rarely adopted outside the German-speaking research community – nonetheless resonated with broader debates in the field. Similar concerns emerged in many other strands of research, often framed as prophecies of decline should NPOs become either overly business-like or excessively bureaucratic. This critique has been sustained primarily by two strands of argumentation: one rooted in political science, the other in organization studies.

From a political science perspective within third sector research, nonprofits are regarded as the organizational backbone of civic engagement and, by extension, as crucial contributors to civil society. This sphere beyond market and state (Zimmer and Freise 2007) is characterized by membership associations in which volunteering and civic participation play a central role, enabling individuals to engage in decision-making and contribute to societal development. Consequently, any tendencies of NPOs to adopt business-like or bureaucratic modes of operation are viewed with particular concern, as they may jeopardize the sector’s contributions to communities and democracy (Skocpol 2003). When NPOs are governed by managerial metrics, their civic contributions risk being devalued or marginalized, since – unlike service delivery outcomes – they are not easily quantifiable. This tension manifests in various domains, including social services, social work, and education (e.g., Anderson and Cohen 2018; Bode 2011; Eikenberry and Kluver 2004). Moreover, it has especially detrimental effects on the participation of members and beneficiaries in the co-production of services, thereby reducing both inclusiveness and service quality.

The second major source of skepticism arises from sociology and its broader critique of organizational rationalization. While normative management literature emphasizes the value of strategic planning, implementation, and control methods (M. Meyer 2020; Stone et al. 1999), institutional theory remains widely skeptical, portraying organizational rationality as “myth and ceremony” that primarily serves to legitimize nonprofits rather than to increase their effectiveness (Dart 2004b; Hwang and Powell 2009; J. W. Meyer and Rowan 1977; M. Meyer et al. 2013). From a managerial perspective, instruments such as the Balanced Scorecard (BSC) are promoted for NPOs under the assumption that “what you measure is what you get”: chosen metrics are expected to shape organizational behavior and outcomes. In this view, a comprehensive BSC – encompassing financial, customer, internal process, and learning and growth perspectives – seeks to align measures with strategic goals and foster continuous improvement (Kaplan 2001). Organizational research, however, cautions that “you only get what you measure.” Overreliance on quantifiable indicators risks narrowing organizational attention, reducing extra-role behaviors, organizational citizenship, and commitment among employees and volunteers, and ultimately diminishing societal contributions that are difficult to capture through performance metrics (Beaton 2021; Dart 2004a; Mitchell 2018; Willner and Heller 2024).

Exogenous dynamics have also fueled this line of research. It is widely acknowledged that market logics have expanded into an increasing number of societal domains (Abramovitz and Zelnick 2018; E. A. Alexander et al. 2018; Berman 2012; Sanders 2015), and scholars from various disciplines have examined how the boundaries between the corporate world, the public sector, and civil society appear to be blurring (Bromley and Meyer 2017). Along with these logics, organizational practices originating in the business sector have also diffused into the nonprofit sphere. From the perspective of those emphasizing nonprofit distinctiveness, this development raises concerns about mission drift and a reorientation of NPOs toward roles more closely aligned with market principles – particularly the delivery of services in areas such as health care, arts and culture, sports, or social welfare as private goods. In turn, other nonprofit roles, including advocacy and voice, inclusion and community building, and the preservation of specific cultural patterns (Maier et al. 2025), risk being marginalized as organizational attention shifts toward market-conforming functions.

3 Organizational Practices, Goals, and Rhetoric

Over time, some degree of order has emerged in the previously fragmented landscape of concepts. Within the research on managerialism, Johan Hvenmark’s systematic literature review identified three key dimensions: managerialism as an ideology, management practices within organizations, and managerialization as the process through which such ideologies and practices gain ground. Building on Ray Dart’s (2004a) dimensions and our own systematic review (Maier et al. 2016), I propose a framework that distinguishes between organizational practices, organizational goals, and organizational rhetoric.

Organizational practices: The most comprehensive theoretical concept in this field is organizational rationalization (Hwang and Powell 2009). This framework encompasses not only business-like management and governance practices (often subsumed under managerialism), but also bureaucratic procedures and forms of substantive professionalism (Freidson 2001). In this regard, Hwang and Powell (2009) differentiate between managerial professionalization – the employment of staff with business and management expertise – and professionalism in substantive fields such as medicine, education, or social work, which may in some cases conflict with business-like practices. In addition, participatory and democratic practices represent another important dimension (Adobor 2020; Hohensinn et al. 2023; Hvenmark 2010; Terzieva et al. 2024).

Related concepts extend this perspective. Corporatization denotes changes in governance structures, either through remodeling according to the corporate model or through the integration of several organizations under a holding corporation (e.g., J. A. Alexander and Weiner 1998; Horwitz 1988; Turner and Wright 2022). Marketization refers to the spread of market-type relationships with stakeholders or, from a macro-level perspective, to the gradual penetration of market mechanisms into national welfare systems (Eikenberry and Kluver 2004; Salamon 1993). Such processes may or may not involve direct monetary exchange – for instance, when volunteering is framed as an instrumental trade of work for personal gratification. Marketization often entails consumerism, which constructs beneficiaries as sovereign consumers, as well as commodification, whereby services are redefined and delivered as marketable goods (Roy et al. 2021).

Organizational goals: Rational organizing assumes that practices serve specific goals. Yet these goals may shift, sometimes in problematic directions, as reflected in the widely discussed concept of mission drift (Ebrahim et al. 2014; Marshall B. Jones 2007; Ramus and Vaccaro 2017). While mission drift is generally framed as a cardinal sin for nonprofits, mission shift is understood as a legitimate adaptation to changing environments (Suykens et al. 2025). Two specific manifestations of mission drift are commercialization – an increasing reliance on revenue from sales of goods and services (Cordes and Weisbrod 1998; Guo 2006), and conversion, where organizations change their legal status (e.g., from nonprofit to for-profit), thereby transferring control over assets and liabilities across sectors (Godderis and Weisbrod 1998). Both processes can be subsumed under economization, a broader concept capturing the extent to which NPOs become driven by monetary concerns (Jäger and Beyes 2010).

Organizational rhetoric: From a theoretical standpoint, rhetoric and practices are difficult to separate, since many organizational practices are themselves communicative. For-profit discourse within nonprofits, for example, can be regarded as a form of social practice (Mautner 2005). Nonetheless, certain communicative practices warrant distinct attention as potential indicators of mission drift. These include the use of narratives (Karner et al. 2024; Topal 2008) and visual communication (Dhanani and Kennedy 2023; Van den Bosch et al. 2006), both of which can signal deeper transformations in organizational identity and purpose.

4 Empirical Evidence: From Dusk Till Dawn

From the 1970s onward, management scholars began to engage with nonprofits and soon produced a wave of normative management literature – first led by U.S. management gurus (e.g. Drucker 1990; Kotler 1975), later followed by European contributions (e.g. Schwarz et al. 1995 pionieering in the German speaking community). Despite attempts to tailor management approaches to the specificities of nonprofits, these works did not immediately gain the full trust of third-sector researchers, among whom management scholars remained a minority. In practice, the diffusion of management practices into nonprofits was largely driven by the rise of New Public Management (NPM) (Ferlie 1996), which carried a negative reputation in the field. Against this backdrop, early empirical studies examined corporatization in U.S. hospitals (J. A. Alexander and Weiner 1998; Weiner and Alexander 1993) and the responses of human service organizations to NPM requirements and budgetary pressures (J. Alexander 2000).

Building on the theory of street-level bureaucracy (Lipsky 1980), research on managerial practices in human services highlighted the risks of undermining professional identity, client-centeredness, and autonomy (Bloxham 1993; Clarke et al. 2000; Moore 1998). These early studies painted a largely pessimistic picture, epitomized by Eikenberry and Kluver’s (2004) widely cited critique: marketization – through commercialization, contracting, performance measurement, and consumer-oriented practices – reshapes nonprofits in ways that threaten their civic and democratic functions. Intended to foster efficiency and sustainability, these practices often privilege market logics over nonprofit distinctiveness. Key risks include mission drift toward service provision as private goods, the erosion of civic engagement and volunteering, reduced inclusiveness and equity as paying clients are prioritized, and the weakening of advocacy and community-building roles.

To summarize research from the first two decades of the new millennium, two systematic reviews are particularly instructive (Maier et al. 2016; Suykens et al. 2019). Both reviews underline the ambivalent consequences of professional and managerial management for nonprofits’ societal roles. With regard to service delivery, managerial practices can enhance efficiency and accountability, but they often lead to standardization, “creaming”, and a focus on measurable outputs, thereby reducing inclusiveness and responsiveness to local communities. The effects on advocacy and voice are predominantly negative, as managerial logics shift organizational attention toward service provision and funder requirements, undermining nonprofits’ political and community-oriented functions. Likewise, professionalization frequently weakens community building and participatory structures, as volunteers, members, and beneficiaries are marginalized in favor of managerial staff and consumer-oriented relationships. Taken together, the literature suggests that professional management pushes nonprofits toward the role of efficient service providers, while eroding their broader civic, advocacy, and community-building functions.

Up to the 2020s, this research base exhibited several limitations. Studies were predominantly U.S.-focused, heavily qualitative, case-based, and context-dependent, with relatively little large-scale, quantitative, or comparative work. This methodological bias contributed to fragmented and sometimes inconclusive evidence on the effects of professional management. More recently, however, a new wave of quantitative studies has begun to address these shortcomings and to provide a more optimistic outlook on management professionalization (Hersberger-Langloh et al., 2021; Horvath et al. 2018; Suykens et al. 2023; Terzieva et al. 2024). Table 1 summarizes these contributions. Collectively, they advance the field in three ways: first, by analyzing large and in some cases representative random samples; second, by extending empirical evidence beyond the U.S. to include European contexts (Austria, Belgium, Switzerland); and third, by moving beyond managerial practices alone to also examine, for instance, democratic practices.

These new studies paint a considerably brighter picture of the relationship between organizational practices and nonprofits’ performance and societal contributions. First, strategic planning has been shown to strengthen nonprofits’ resilience and financial stability, particularly in times of crisis (Horvath et al. 2018). Second, the application of professional management methods and the development of coherent strategies improve organizational performance and – contrary to earlier predictions – reduce the likelihood of mission drift (Hersberger-Langloh et al., 2021). While this finding may seem surprising in light of long-standing warnings that management would divert missions toward revenue-generating or easily measurable goals, a closer look reveals that mission fidelity presupposes the existence of a clearly articulated mission, typically established through collective strategy processes. Moreover, professional management is not only positively associated with service delivery but also with advocacy, community building, and civic engagement (Suykens et al. 2023; Terzieva et al. 2024). In other words, it supports the full range of societal roles – something that commercialization does not achieve (Suykens et al. 2023). Still, commercial revenues appear to have no significant negative effects on societal roles. The positive contribution of managerial practices across all societal functions is further corroborated by the fourth study, based on a larger dataset and a distinct methodological approach (Terzieva et al. 2024). Finally, evidence extends beyond professional management to include democratic practices: these strengthen community building, though they may – perhaps due to inefficiencies – negatively affect service delivery (ibid.). Additional analyses based on Austrian data also show that managerial and democratic practices are positively related to the endorsement of democratic participation by members and beneficiaries (Hohensinn et al. 2023).

5 Discussion and Conclusion

This review highlights the ambivalent yet increasingly nuanced effects of managerial and professional practices in the nonprofit sector. While early scholarship emphasized risks such as mission drift, bureaucratization, and the erosion of civic functions, more recent evidence suggests that professional management can enhance resilience, reduce mission drift, and strengthen service delivery, advocacy, and community building. At the same time, democratic practices remain crucial for preserving inclusiveness and the civic functions that distinguish nonprofits from market and state organizations. Rather than a simple trade-off, the emerging picture is one of complementarity and dynamic balance between managerial and participatory logics.

The findings also underline the need to move beyond dichotomies such as “business-like” versus “distinctively nonprofit.” Nonprofits appear capable of selectively adopting managerial tools in ways that reinforce, rather than undermine, their broader societal contributions. This process depends on context, organizational capacity, and the ability to align formal management structures with informal, participatory practices. What matters is not whether nonprofits professionalize, but how they do so, and to what extent they maintain clarity of mission, openness to stakeholder participation, and adaptability in complex environments.

Moreover, the evidence suggests – albeit with some caution – that deliberate organizational practices of almost any kind, whether modeled on business management, organizational democracy, or professional standards of bureaucracy, tend to produce greater societal contributions than dilettantism or family-like modes of organizing.

There are, of course, limitations that constrain the lessons for nonprofit management and highlight areas for further inquiry. Most empirical data have been collected from executives and key informants, a bias not always sufficiently acknowledged, although more recent studies have addressed this methodologically. Perspectives from staff members, volunteers, and street-level workers remain underexplored. Qualitative studies indicate that there might be a different perception (Willner and Heller 2024). To date, studies have focused largely on “objective” performance while neglecting these subjective, individual dimensions.

For research and policy, the key implication is that nonprofit governance should embrace professional and deliberate practices that are strategically embedded. Future studies should investigate the interplay between managerial and democratic practices using comparative and longitudinal designs to capture contextual variation and long-term outcomes. For policymakers and practitioners, the challenge is to strengthen frameworks that enable “smart” management without stifling participation or overburdening organizations with administrative requirements. Ultimately, the resilience and societal value of nonprofits will hinge on their ability to combine professionalism with democracy, efficiency with inclusion, and structure with openness.