The Unquantifiable Costs of Working with Nonprofit Organizations : The Role of Cost Logics in K–12 Schools

Problem Definition: Cost-effective resource allocation policies are important for public-sector and nonprofit organizations. Yet, for some allocation decisions in this context, quantifying costs is difficult, even impossible. Academic/Practice Relevance: Behavioral researchers have studied the cognitive challenges of cost evaluation in the lab. We complement this body of work with a contextualist study of cost evaluation in the field, studying the costs on K—12 schools working with nonprofit partners. We ask: (1) How do schools evaluate unquantifiable costs? (2) Are some cost-evaluation methods more effective than others? Methodology: We conduct a multiple case study of nine schools (varying in type—public, charter, Catholic—and level of socioeconomic need) and the 81 nonprofit organizations working with them. We collect and analyze multiple types of data (interview, survey, and archival) from multiple sources (principals, teachers, school staff, and nonprofit liaisons) at multiple points in time. Results: We find that schools have different cost logics, or sociocultural schemas, for evaluating unquantifiable costs. We identify a cost-fixed logic at the charter schools and a cost-adaptable logic at the Catholic and public schools. We find that the cost-fixed logic is associated with more school–nonprofit relationship failures because schools with a cost-fixed logic see unquantifiable costs as constrained, and consequently end nonprofit relationships when costs exceed the budget. Differently, schools with a cost-adaptable logic in most cases see their capacity to incur unquantifiable costs as flexible and thus are generally willing to incur more or different unquantifiable costs over time, which helps sustain nonprofit relationships. Managerial Implications: When costs are unquantifiable, people may develop cost logics to inform decision-making. Even when cost logics reflect sociocultural beliefs rather than economic budgets, they can be effective and efficient ways to make operational decisions