Effective governance in nonprofit organizations: A literature based multiple stakeholder approach

Nonprofit organizations (NPOs) are increasingly required to become (more) effective. This review summarizes and integrates the results of studies focusing on NPOs’ governance effectiveness. It proposes an extension of stakeholder theory to NPOs concerning governance involving diverse stakeholder groups. What makes this paper innovative is that it aims to identify more than effective board governance, and takes the perspectives of multiple nonprofit key stakeholders into account. This approach is particularly valuable as numerous researchers argue that the likelihood of NPOs being perceived as effective increases when they manage to align the, possibly very diverse, expectations of stakeholders on good governance. We consequently focus on the relationship between (1) the needs and objectives of key stakeholders and (2) (expected) governance (structures) in NPOs. The stakeholders we consider are government, beneficiaries, private donors, board members, management, volunteers, and non-managerial staff members. Results not only show the lack of attention some stakeholders have received in the literature, but also the governance related conflicting needs and objectives between stakeholder groups. In addition, even in the same stakeholder groups it is not rare that opposing findings are reported. Several studies indicate the (unforeseen) negative impact on (being accountability to) other stakeholders when NPOs try to be responsive to the needs and objectives of a particular stakeholder group. The value of this review lies in the fact that it reveals both the complexity of and the need for stakeholder management in NPOs, if they want to be perceived as (more) effective by their numerous stakeholders, and related to that gain insight in how to improve their governance practices. Numerous directions for further research are suggested.